Supply and Demand, All You Need to Know

The old adage “Fool me once shame on you, Fool me twice shame on me!” might have far more consequences than most care to ponder. In financial markets or for that fact, any vehicle that has the aura of “You can get rich” attached to it, does not adhere to the same principles or rules that one assumes to be in play. Everyone believes that the law of supply and demand works for all markets the same way. Guess what? They’re wrong. Let me show you why.

Basic assumption: Create a widget, as more consumers buy pricing goes lower because of savings or efficiencies in manufacturing, distribution, and so on. More brands come in to compete based solely on the “I can work on smaller margins than you can.” mentality, which drives prices down even further. A great example is the flat screen TV revolution. Remember when they were $3000.00 or you go home with nothing? Supply and demand model at work as most understand it. However, let’s use something else that flies in the face of what you think to be true all the time. Financial products.

Here’s where everything gets turned upside down. I’ll use the stock market for this example. As a stock comes to market there are the early adopters, the first ones in. They get in with the assumption that their purchase is at the bottom of the price curve, or the discounted end, and the supply is sharply limited. As a demand from others begins to take place in their wanting to purchase, supply begins to get added to the market. (adding shares to be sold to the public) Guess what? Prices don’t go down, they go UP! The more they produce, the higher they go. Why? Because it’s not a widget based formula, it’s an emotional based formula. And the two are not the same. It’s counter intuitive for most to grab hold of which is why it can be so financially devastating to the unsuspecting investor. The higher it goes in price, the more people want in on the deal. Double, triple, quadruple the offering and it seems you can’t make enough supply to feed the emotional buy in…Till it hits the wall!

The wall I refer to is that point when everyone who could buy, did buy. And here is where the wall meets the fan. And it’s usually not pretty. If you now want to cash in those profits you have to sell, but now you’re surrounded by hordes of bag holders just like yourself looking to get someone to take their bag first before you have a chance to sell yours. Now the rule of supply and (No) demand comes into play. And because it’s all emotionally based, panic starts to creep in feeding upon itself with a rush not to be the last person holding a bag. The final result usually ends with not only many people holding bags, but they now have to pay some refuse company to take it away. Remember Enron? There were people still trying to sell their bags after the company declared itself out of business. That falls into the “Greater Fool Theory” and that’s for another column.

So when trying to grasp different theoretical models just keep this in mind. The difference between the two models is this. If your wrong or early in buying a TV you still may have the TV to watch, but if you’re wrong or early in financial products, you may not have any money to pay the cable bill. And the models worth watching are on cable.

At least that’s what I hear others say.


© 2011 Mark St.Cyr  All Rights Reserved

Protests at Home or Abroad…and What it means to Your business.

This is not about whose right, wrong, or anything else of that nature. This is about your business. Doesn’t matter what you do, whether you’re a CEO of a large global corporation, or an employee with an entrepreneurial mind-set. Either way you have to look at these events in a very different manner than most. No, not to capitalize on them, but how to avoid possible financial ruin or other disruptions because of them.

As we’ve seen over the last few weeks things can change at any time, and for many reasons that seemed near improbable. The problem for many in business, is they can find themselves smack dab in the middle of protests, fighting, looting, and a host of other things that one never dreams of happening, till it does!

Many coveted retail or office locations are right in the heart of any city and that’s usually where any gathering or protests will be. What happens to your business, your employees, your retail stores, your customers if for no reason than just being at the center causes damage to your infrastructure, or people?

We are seeing today like at no other time in history technology has enabled connectivity en mass. If you’ve been following the news as of late, you can’t help but be awed in the speed and power of such demonstrations. But I need you to change your thought process and water cooler subject from, “Have you seen the news?” to “Do we have a contingency plan for our business if disrupted?” Trust me, I’m not trying to be callous. The reason for the events are for others to discuss, I want you to be pragmatic in how you can protect either your people or business. If a protest broke out in front of one of your locations would you or could you shutter it down? Who would be in charge of such an undertaking? Would you be reliant on the cleaning crew to make sure the doors were locked? Would you send senior staff, or a combination there of? I hope you’re getting my point. If you have, or are in business, you can no longer leave such a discussion as, “I’ll cross that bridge when I come to it.” because what is being demonstrated is there may be No bridge!

As professionals one must always hope for the best, but plan for the worst. That’s not to say you create some committee derived, bullet pointed, and bound code book that must be signed off by top staff and the cook who carries the secret decoder ring. What is far more important is that you have an honest roundtable discussion with either yourself, or some pertinent staff members that can theorize some sort of outline. It needn’t be perfect because situations such as these are always fluid, but it’s far easier to direct the water if you have an understanding where the banks might be.

If technology can demonstrate how fast it can bring about disruptive change, than the same must be viewed on how you can use technology to step aside of that disruption and try your best to protect your people, or your property.

Not only might you be thankful for being ahead of the crowd, but so might everyone else that depends on your products, or services. And that’s smart business.



© 2011 Mark St.Cyr  All Rights Reserved

Sorry to See, but there it is!

First let me start with one of my axioms:

Death of a Business……

“First, the business forgets its customer…….

Then, the customer forgets the business.” ……..Mark St.Cyr

Over a year ago, I wrote an article about my experience with a bookstore chain that I had been a “customer” of for years. The experience in my last visits were not only frustrating, but as time past seemed down right comical. Now it’s just a sad tale of squandered business opportunities for the retailers of books. ( Here are the direct links to the original articles… Article Part 1 ….. Article Part 2 )

Today it was announced the book store chain Borders was filing for bankruptcy. Although I’m saddened, I’m not surprised. Are you? Since I wrote the original articles over a year ago I have not been back to visit or buy another book. Not only have I not purchased anything in the store, I have not bought anything online with them either. As a matter of fact, I receive more discounts or coupons that I can use today than when I was an active customer. Not only do I not use them, I no longer even visit their website. I just don’t care. What’s really the final illustration of this point? I’m stating this as I hold a gift card in my wallet that was a gift that I have yet to redeem. I really could care less. Some may be asking themselves “ that shouldn’t make you stop reading?” Point is..I haven’t. I’ve read, and purchased dozens of books since my last visit there, just not with them, and remember, I have a gift card in my wallet.

Say what you want about hard economic times, format changes, changes in taste, changes in what ever. The change that made a great retailer change from profitable to insolvent was the change in strategy from a customer driven focus, to just some policy driven focus.

The glaring lesson to be learned from their story is it looks like they kept the customer service manuals either in the mystery, or science fiction section. But we all know how this thing turns out in the end. To bad it’s now an obituary.


Consistent Inconsistencies

Say what you will about the economy, say what you will about the stock market, say whatever you like about my warning calls, but what you can’t say is “I have no clue.” Have we now entered Bizarro World, or has everyone lost the ability of critical thinking?

I am stunned at how people will verbally contort themselves into rationalizing what they don’t understand into what they believe must be true. It’s as if 2008 never happened, it’s as if everything is back to normal. They’re acting as if ” only they get it..everyone else is too dumb.” If you pose a question to ask a legitimate point in reference to their statements, you might as well have insulted their mother, because that’s how you’re going to be treated. Lucky for me, I’ve seen this movie before.

Being on the forefront or cutting edge of anything is not for the faint of heart. Having an opinion is one thing, but having or creating plans of advice that are actionable or workable is quite another, and for that you need verifiable data. All this brings me back to a statement I wrote in Harry Potter tongue in cheek fashion. “That which shall not be spoken…The numbers don’t add up!

A few years back I was asked to speak and participate on a panel. Attending were some of the largest companies in the U.S. who were rolling out new marketing ideas and commercials that were to splash across all forms of media nation wide that year. At the time, everyone in attendance was giddy about recent sales and market share. Things looked very compelling from an outside view, however what they were no longer interested in talking about was the doldrums they had been in for years before this event. Before the event many were barely profitable, and even more had closed or gone bankrupt, but all were now convinced the “Good Times” were here again and the past be damned. I thought that was foolish, and said so. The response to my statement? ….(insert cricket chirps here.)

As I have stated over, and over again, I hope the economy is on the right track. I hope that the happy feelings that some are feeling never leave, however I can’t drink the “KoolAid” If all was well then why must the Federal Reserve continue with QE2 or else all Armageddon will happen? (there’s now talk of QE3!)  If everything is just ducky, then why was a drop in unemployment looked upon with skepticism? If all is just grand, why are we worried about Municipal Bonds or States defaulting? Another point to remember is the SEC in their investigation of the so-called Flash Crash found nothing nefarious or mechanically wrong that triggered it, so the possibility of it happening again is still on the table. (most have forgotten or ignored that one.)  All this is just scratching the surface, but it’s falling on deaf ears or worse, closed minds.

No one knows the future, and those who say they do should be viewed with a skeptics eye. But what you can’t ignore is data as if it never happened, that’s just stupid in my book. As for that conference I was asked to speak at? Weeks later their market fell apart, their profits fizzled, and a few made headlines in some of the largest corporate bankruptcies in the U.S.

So much for avoiding the punch bowl I guess.


Why Leaders Matter, and Followers Just follow

Leading is a hard job. Leading during tough times is even harder. Cross both of those with a leader with vision, and you have rare talent indeed.

Steve Jobs of Apple doesn’t follow, He Leads….Rupert Murdoch of News Corp. doesn’t follow, He Leads. Apple has become the second largest company per market cap in the United States. News Corp. is dominating media market share, and profitability while everyone else is near insolvency, or even worse, irrelevancy. All currently being done in the so-called worst of times to be in business.

The continuous pounding over the air waves and papers of the economy not doing all that well, unemployment high, government actions being scorned in the business world, doesn’t seem to be effecting these two greats like the rest. Want to take a guess why? It’s because…They Lead, They Take Control, They Find a Way or Make one!

Just about everyone on television and around business tables scoffed at the iPad. All fell into that “group think” and laughed about its funny name and how it would be a flop. As some of you that have followed my work know, I was not among them. As I stated right here on this blog back on March 6, 2009, “I believe not only will the iPad not be a flop, but it will be revolutionary!” I also had written a response to some comments from one of my articles in …CEO Network on some complaining about being a CEO in these tough times. I wrote December 6, 2009… “Rupert Murdock the famed business mogul is currently in the so-called “worst of times” when every other business is hoping, and praying that revenues wont fall, or that the turmoil is subsiding enough for them to make the case why they shouldn’t be fired, Mr Murdock is taking the boldest of action stating in no uncertain terms to such juggernauts like Google and others that if you want to carry anything linked to his business, you’ll have to PAY…or stop linking to it…Period!” No other leader had dared make such a declaration.

It is apparent to me today on this February morning 2011 that one of the most important themes dominating business today is, How can we get in on that?

If that’s your most important question, you’re not in the Leader category.


Wet Blankets…More useful than most think!

Wet blankets can apply to its obvious namesake, but it can also apply to a moniker  such as “That guy is a wet blanket.” Most will avoid the so-called wet blanket like the plague. In most cases I totally agree. There is no sense in hanging around or being influenced by someone who’s nothing more than a doom and gloomer. The caveat that needs to be applied for many is this…are they truly the… Doom and gloom personality type?..or …They counter point everything I say type?

Try this thought experiment, what would happen to a company that was made up of no one else but pure sales people? I can hear many of you saying “YES!” but would it really be as wonderful as we might think? Sales people either by nature or nurture are the most optimistic among us. They have to be, if they weren’t, they would be burned out in a heartbeat. That said, salespeople can also justify using every last resource a company has to make a sale. Sales people can project how they will make it all back on the “next” sale. But would that be good all the time, and unbridled in its usage?

There are times when we need someone to say “lets just think this through”, There are also times when someone needs to say “we’ve already spent enough.” Then there are the important times when someone must say “did we get paid yet, and did the check clear?” All wet blanket statements, all needed at certain times for the good of everyone.

Keeping the flame lit in the go-getters heart is important for both a company, and the person. Letting a flame turn into an uncontrolled wild-fire that threatens to consume every last resource is not in anyones best interest. It’s always been a balancing act, it’ll always be a balancing act. Without proper controls, burnout happens both with people and with resources.

Stoke the fire, keep the precautions handy, you’ll need both.