THE ENTERPRISE
We just finished a Thanksgiving weekend when Americans came out in force to hit the shopping malls early Friday morning. Whether they bought in proportion to their numbers will remain to be seen, because reports are mixed, but the people were out there. Once again, the retailers that offered the most neck-snapping, eye-bulging deals had the longest lines and the strongest early traffic. Advertising and price cuts still drive traffic.
The economy keeps chugging along. We are in a respite between the high automobile gas prices (now reduced to "reasonable levels" at under $2.50 a gallon) and the impact of high heating gas prices (which will kick in after the recent cold snap, but with a month's time-delay in the billing cycle). Don't be surprised if late Christmas retail traffic sags, as consumers discover that less money is left for shopping after paying the latest utility bills.
MICROSOFT'S NEW BRAIN TRUST
If you were out of touch with business news or stranded on a remote island, you may not already know that a man named Ray Ozzie joined Bill Gates and company at Microsoft. If that name sounds familiar, Ray Ozzie is the creator of Lotus Notes (among other important and innovative software back in the late 1980's and early 1990's). Microsoft bought Groove Networks, and happily absorbed Groove's network software into its Office suite. It was even more delighted to absorb Groove's founder, Ray Ozzie into a top creative management position.
Write this one down. Ray Ozzie is a brilliant creative guy--perhaps at the genius level when it comes to realizing what can be done next with computers, software and networks. While Google is gloating about its IPO and eBay is ecstatic about its market multiples, the behemoth of Redmond (WA) is going back to work creating like it used to. Watch Microsoft go; it's spurt will start in about 6-12 months.
PRICING LEVERAGE AND INFLATION
Pricing and inflation go together like turkey and dressing or mashed potatoes and gravy at Thanksgiving dinner. Suppliers are gaining some traction in passing on commodity and energy cost increases. When the same goods or services sell for more money, that is called inflation. It's coming. Experts are guessing 4%, held down to that level by the clout of mega-customers and Chinese competition. I wouldn't be surprised to see if go a bit higher temporarily.
All of the indices are misleading because the pull-back in gas prices has hidden the already existing inflation. A spike could be written off as driven by winter heating fuel costs but the inflationary pressures will be much broader than that. But don't worry too much. We've had lots of experience in dealing with periods of moderate inflation, and the Fed has managed to get the interest rate all the way up near 4% before it has to rethink its philosophy, as Greenspan steps down. The new Fed head Bernanke will earn his stripes early in his term based on his next decisions.
TREES DON'T GROW TO THE SKY--BUT DO GROW TO THE HORIZON
I've said for a long time, only Wal*Mart can stop Wal*Mart. It's own missteps (and perhaps government intervention) will limit Wal*Mart's growth, but Wal*Mart won't collapse under its bigness. It has faltered under the pain of a thousand cuts, but it is still a big, powerful and competent retailer. The fearsome menace of China will also limit its own potential by "fouling its own nest." Pollution has been a big problem there for decades, but now the industrialization of China is so pervasive the pollution has become a big social issue. The unrest is already brewing; watch it grow. China is too big and too powerful (and too governmentally controlled) to let anything its growth, but it will get slowed and tripped up occasionally.
"I JUST DON'T UNDERSTAND..."
There are several things I just don't understand:
How we can develop so many complex, powerful and realistic video games, and not innovate more in our basic consumer products. Some of the things I'm using in my house haven't changed much in years. Kitchen appliances are cheaper, but a coffee maker that makes one cup at a time doesn't seem much like a big innovation to me. Mine could do that years ago. I just put in one cup of water and one scoop of coffee.
How can we come up with such creative ways to pirate music and movies but not make it a lot easier to get through to the cable company without going through 7 menu choices and then waiting on hold for 10 minutes while being told every 15 seconds how important we are to them. I don't believe that. Do you?
And how can we come up with so many clever, but mischievous people hacking into systems and stealing our identification or writing viruses that just mess up everybody's lives. I remember when mischief was soaping windows or Tee-Pee-ing trees, not shutting down corporate computers and airline reservation systems. I guess that no matter how smart the honest people are, there are a smart group of miscreants and criminals who are just a little bit smarter--or at least more reckless and ruthless--until authorities catch up with them. In this case, the ubiquitous nature of Internet has made it harder, not easier to find and stop them.
FREEDOM!
Perhaps this is the curse of our free society. That freedom is something I enjoy a lot. I know we'll figure these things out, because we always do. After all, I am writing this while sitting watching a streaming video of a Tennessee Lady Vol basketball game being played in St. Thomas, Virgin Islands, while listening to the streaming audio of the Lady Vol commentator on a Knoxville, TN radio station. Some people would say that's progress....and I guess it is.
Maybe this Thanksgiving, I'll stop trying to understand it all and just give thanks for all of the wonderful things we do have in the US, including our freedom. And I'll say a prayer of thanks for all of those brave Americans who have fought and died so my family and I can enjoy our Thanksgivings. I guess, in perspective, we have it pretty good. Happy Thanksgiving.
Best, John
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