Widening The Moat

Every day, in countless ways, the competitive position of each of our businesses grows either weaker or stronger.  If we are delighting customers, eliminating unnecessary costs and improving our products and services, we gain strength.  But if we treat customers with indifference or tolerate bloat, our businesses will wither.  On a daily basis, the effects of our actions are imperceptible;  cumulatively, though, their consequences are enormous.
When our long-term competitive position improves as a result of these almost unnoticeable actions, we describe the phenomenon as “widening the moat.”  And doing that is essential if we are to have the kind of business we want a decade or two from now.  We always, of course, hope to earn more money in the short-term.  But when short-term and long-term conflict, widening the moat must take precedence.  If a management makes bad decisions in order to hit short-term earnings targets, and consequently gets behind the eight-ball in terms of costs, customer satisfaction or brand strength, no amount of subsequent brilliance will overcome the damage that has been inflicted.  Take a look at the dilemmas of managers in the auto and airline industries today as they struggle with the huge problems handed them by their predecessors.  Charlie [Munger] is fond of quoting Ben Franklin’s “An ounce of prevention is worth a pound of cure.”  But sometimes no amount of cure will overcome the mistakes of the past.
—     Warren Buffett
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Yo-yo Management

We neither understand the adding of unneeded people or activities because profits are booming, nor the cutting of essential people or activities because profitability is shrinking.  That kind of yo-yo approach is neither business-like nor humane.
—     Warren Buffett
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The Question Is Courage

Personal autonomy and democracy are under assault from surveillance capitalism.  And yet today’s tech industry is largely unregulated, having emerged in the midst of an era of deregulation and defunding of enforcement agencies.  This has allowed tech giants to behave as unelected governments.  Their communications systems have become central to our way of life, as the impact of this week’s Facebook, Instagram and WhatsApp outage underscores, but they have their thumb on the scale, amplifying content that triggers fear and outrage because doing so maximizes profits.
…
The sad truth is that the unregulated tech industry produces products that are unsafe.  Congress has faced the challenge of dangerous products in the past.  When the food and medicine industries were unsafe, Congress created the Food and Drug Administration.  When petrochemical companies dumped toxic waste indiscriminately, Congress approved a series of environmental laws.  Just like tech companies today, the affected industries claimed they would not be able to operate with regulation, but that turned out to be wrong.  Now we need something like an FDA for technology products, designed to prevent harmful technologies from coming to market.  For qualifying products, it would set safety standards, require annual safety audits and certification as a condition for every product, and impose huge financial penalties for any harms that result.  There should also be amendments to Section 230 of the Communications Decency Act to create better incentives for Internet platforms.
Congress also needs to protect people’s privacy from relentless surveillance.  My preference would be for Congress to ban surveillance capitalism just as it banned child labor in 1938.  (The many industries that employed child labor complained then that they could not survive without it.)  At a minimum, Congress must ban third-party use of sensitive data, such as that related to health, location, financial transactions, web browsing and app data.
The third area for legislation is competition, where Congress needs to update antitrust laws for the 21st century.  The six-hour outage of Facebook, Instagram and WhatsApp illustrated for many one downside of monopoly:  absolute dependence on a service.
…
All of this may be true in Mark Zuckerberg’s mind, but the design of Facebook’s business model suggests that growth and profits are the only factors driving “the company we know.”
Based on the evidence of the past five years, one might say that Internet platforms have launched an attack against democracy and self-determination.  It is a battle they will win unless voters and policymakers join forces to reassert their power.  We have been losing the battle since 2016, but I would like to believe that this week was a turning point.
We have the power.  The question is whether we have the courage to use it.
—     Roger McNamee
From the article:  “Facebook Will Not Fix Itself“
Appearing in:  Time Magazine; dtd: 25 Oct / 1 Nov 2021
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Two Eff’n Right

Efficiency is doing things right;  effectiveness is doing the right things.
—    Peter Drucker
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The Same Goes For Countries And Elected Leaders

If each of us hires people who are smaller than we are, we shall become a company of dwarfs.  But, if each of us hires people who are bigger than we are, we shall become a company of giants.
—     David Ogilvy
Founder of Ogilvy & Mather’s
(a famous marketing company)
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The Imposition Of Position

Rank does not confer privilege or give power.  It imposes responsibility.
—    Peter Drucker
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In Business And In Politics

The toughest thing about the power of trust is that it’s very difficult to build and very easy to destroy.  The essence of trust building is to emphasize the similarities between you and the customer.
—   Thomas J. Watson
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Up Again

If you stand up and be counted, from time to time you may get yourself knocked down.  But remember this:  A man flattened by an opponent can get up again.  A man flattened by conformity stays down for good.
—   Thomas J. Watson
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But What Are You DOING About November?

Plans are only good intentions unless they immediately degenerate into hard work.
—    Peter Drucker
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100th Day

A manager develops people.  Through the way he manages he makes it easy or difficult for them to develop themselves.  He directs people or misdirects them.  He brings out what is in them or he stifles them.  He strengthens their integrity or he corrupts them  He trains them to stand upright and strong, or he deforms them, whether he knows it or not.
—    Peter Drucker
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Training Shoulders

He isn’t a real boss until he has trained subordinates to shoulder most of his responsibilities.
—    William Feather
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Or You Don’t

You either believe people are fundamentally good or you don’t.  If you do believe they’re good, then as an entrepreneur, a team member, a team leader, a manager, or a CEO — or a government leader — you should act in a way consistent with your beliefs.  If people are good, then they should be free.  Too many organizations and managers operate as if, absent some enlightened diktat, people are too benighted to make sound decisions and innovate.
—    Laszlo Bock
Google’s head of human resources, (senior vice president, people operations)
From his book:  “Work Rules!“
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Consensus Is Only One Side

The Japanese are among the most competitive people in the world;  otherwise they could not have achieved their recent economic successes.  Consensus was established to keep the society cohesive and to control excessive competition, which would cause friction and make tireless rivals of the people in the isolated areas.  So the comment that Japan is a society of consensus is only one side of the story.
—    Mitsuyuki Masatsugu
From his book:  “The Modern Samurai Society“
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The Not-So-Modern Samurai

Today I am home ill with what seems to be an ear infection.  Every few years, I get this swollen sensation on the right side of my head.  It feels like my head has a weighted balloon attached to the right side.  When I turn my head, stand or look quickly in any direction, I get a light-headedness and it feels like my vision / brain is continuing to move after my head (or eyeballs) have stopped.  Several years ago I had to go to the ER to get seen by a doctor about this condition.  Then, I also had an associated fever, which I fortunately don’t have this time.  In any case, I take some decongestants and my vertigo pill and I kind of spend the day in a half-stupor of fatigue and dizziness.
This morning I completed a book I’ve been reading off and on for several years now.  Our local library system has an annual shelf clearing book give-away each August and they have about 800 to 1,000 boxes of books which are set out for anyone to take what they want – as much as you can carry, and come back tomorrow.  Today’s book was one of these and I picked it up about three years ago.  It has mostly sat in my car waiting to be read.  I would grab it whenever I had a doctor / dentist visit to have something to read in the waiting room.  Unfortunately, if you don’t wait much, you don’t read much, so this has taken quite a while to get through.
The book is titled: “The Modern Samurai Society: Duty and Dependence in Contemporary Japan“, (1982©) and was written by Mitsuyuki Masatsugu.  The book attempts to explain contemporary (circa 1982) corporate Japan in terms of the historical legacy of the Samurai (“samurai” means “one who serves”) society which held sway in Japan for several centuries.  The samurai tradition fell out of favor with the coming of the industrial revolution in the last half of the 19th century.  (As an aside, part of this transition was portrayed in the Tom Cruise movie: “The Last Samurai“.)  In essence, it attempts to explain Japanese business management techniques to non-Japanese.
To Masatsugu, successful Japanese management stems from eight factors which incorporate two features from Japanese culture.  The eight factors (guiding principles) to success are:
1) Paternalism;
2) Guaranteed lifetime employment;
3) Seniority-based promotion;
4) In-company unions;
5) Periodic transfers;
6) Overtime work as a safety valve;
7) Enriched welfare program;  and,
8) A selective retirement system.
The two features which Masatsugu believes to be uniquely emphasized in Japanese society are:
1) Diligence – the duty each individual has towards their country in general and towards their company in particular.  And,
2) Dependence – a recognition that even though the employees are individuals, they must work together to surpass non-Japanese companies.
Like any “valid” theoretical explanation, management theories must meet a minimum of two criteria: does it accurately describe what is currently happening, and two, does it have predictive value either for when external conditions change or when internal structures are abandoned (or both).  In this book’s case, we now have the benefit of thirty-two years history to see that Masatsugu’s proposal was pretty spot on.
Since the book’s release Japan has suffered both a housing boom collapse and an economic drought now approaching the middle of its third decade.  The housing collapse happened in the 1980’s and the start of Japan’s economic drought (I hesitate to call it a collapse as Japan has only recently been surpassed by China as THE economic power in Asia) occurred in the 1990’s.  In fact, the 1990’s is sometimes referred to in Japan as “the lost decade” because there was so little economic growth.
Specifically, Masatsugu suggests the structure of Japan’s economic strength is based on these principles and if any one (or combination) fails, the entire structure will waver and ultimately collapse.  Masatsugu predicts the gradual incorporation of western management will bring about an economic failure.  He leans towards the abandonment of guaranteed lifetime employment and seniority-based promotion when “times get hard”.  Masatsugu says that in past times, management held to principle and the economy eventually turned around.  He cautions that future management might not have the fortitude to withstand to pressure to abandon principle in an effort to meet “western style” quarterly objectives.  We now know Japanese management has moved away from guaranteed lifetime employment, seniority-based promotion and selective retirement.  All of these actions have had a detrimental effect on business (and societal) productivity in the U.S. over the last 40 years.  It will be interesting to see if the same happens in Japan and how long it will take to happen (if it does).
I doubt very much that this book could be written in today’s “politically correct” world as it has several racist and sexist comments which, in context, seem common sense, but are actually inculcated cultural biases.  For example, women are generally considered unequal to men in the business world, because…  Wait for it…  Because they are!  (Well, except when they aren’t.)  In the author’s view, a woman can be one of the main reasons a man succeeds in business.  But, a female can never succeed in Japanese business on her own.  In all, though, these are trivial reasons to be critical of a book which I believe is overwhelmingly a valuable (if dated) insight into Japanese business culture.  Highly recommended!
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Knowledge And Doubt

Wisdom means acting with knowledge while doubting what you know.  It entails striking a balance between arrogance (assuming you know more than you do) and insecurity (believing that you know too little to act).  It requires asking for help and asking questions, as well as giving help and answering questions.  With an attitude of wisdom, managers can do things now, but still keep learning along the way.
—    Jeffrey Pfeffer and Robert I. Sutton
[Quoted from the Stanford Social Innovation Review, Spring 2006
The article is titled:  “Act On Facts, Not Faith“
It can be found online at:  http://www.ssireview.org/articles/entry/act_on_facts_not_faith/
—    KMAB]
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