Never Stop Learning

Economic and Social Issues of Poverty (and why Minimum Wage should be eliminated)

I don't know where I'm going with this post yet so bear with me if we wander a bit...

I often find it funny to see politicians speak of poverty solely as an economic issue.  New legislation could be introduced which could create the 'perfect storm' of economic conditions for lower class people and there still would be poverty.  To follow me, you'll have to work under the agreement with me that we are a product of our environment.  This could be the topic of a whole other blog post, but basically the argument is that if young Scotty is always told that he will not be successful, that its impossible to be successful, and that no one in his family was ever successful so he can't be successful- Scotty will not be successful, in whatever terms 'successful' may be. This argument is made by several personal development books such as Think and Grow Rich.

The fact that we are, to a significant degree, a product of our environment is the social side to the poverty problem.  The power of the 'self-fulfilling prophecy' principle far surmounts any economic conditions that may encourage fiscal growth of the lower class.

Now that I've made it clear that I believe no economic legislation will single handedly solve financial problems of the lower class, I feel more comfortable to present the following economic logic:

Minimum Wage Should Be Eliminated

You've come with me this far and you're pot committed with this blog post so keep following me.  Here's what I got:  The incremental gain an individual receives from minimum wage is materially less than the incremental increase of goods and services that is brought on because of the additional expense minimum wage causes to businesses.

A hypothetical example:  John, who is getting paid minimum wage as a gas station attendant, has less buying power than if his boss didn't have to pay him minimum wage.  If John was only paid the market rate for his job, let's say it would be $4/hour, he would have more buying power because of the decrease in the goods and services he buys(milk, bread, gas, cable, cell phone bill, etc).  While he would be getting paid less, his cost of living would be even less because business owners will only pay the market rate for labor rather than an institution placed on businesses by the government(minimum wage). The incremental gain an individual receives from minimum wage is materially less than the incremental increase of goods and services that is brought on because of the additional expense minimum wage causes to businesses.

-Counterpoint:  The cost of goods and services will not decrease because businesses will take the labor expense savings and pad their bottom line.

-Ahhh, but the beauty of a completely market based economy!  Competition will force prices down to their proper points.

-Counterpoint:  Not all businesses employ minimum wage people so there is no decrease in the price of goods and services in that instance.

-While, say a consulting firm, may not employ minimum wage people, it's vendors(the payroll company, workers comp company, janitorial service, building owner, website hosting company, insurance company, healthcare provider,  computer manufacturer,  internet service provider, furniture company, office supply vendor, energy provider, and so on) do employ minimum wage employees.  And the consulting firm's vendor's vendors do as well.  The expense savings will be passed on, again, due to competition.

Following the common economic logic that all demand is derived demand(meaning all demand, even B2B demand, is derived by the consumer) the lowered price of B2B goods and services will impact the everyday consumer.

Its important to note that we're operating under several assumptions(some that haven't even come to mind yet):

   -A significant majority of the lower class have minimum wage jobs or compensation that uses minimum wage as a benchmark.

   -The market rate for most minimum wage jobs would be lower than the minimum wage.

I want to make it clear that I don't believe this would solve poverty or a quickly growing income gap in our country.  This is far more of a social issue than an economic one, but I do believe, however, that it would give the lower class more purchasing power.  As far as the social issue is concerned, I believe that more of a bottom up/grassroots approach is needed to see progress.  By this I mean, organizations, people, and a value system that puts growing generations in a positive environment.  This could come in the form of organizations such as Big Brothers/Big Sisters or parent outreach programs.  This is, again, based off the self fulfilling prophecy principle.

Here's where I get stuck- how do we fund these types of programs while increasing the purchasing power of the lower class via eliminating the minimum wage.  Especially when the government is not incentivized to decrease tax revenue(lower taxable wages = lower tax revenue for the gov).  Or am I missing something here??

The point of this blog post is not to push my opinion on anyone.  It is just an expression of the learning process.  In order to never stop learning you have to test different theories-so don't hold me to this.  But I need more counterpoints, thoughts, insights in order to further test the theory.  You've seen all I got so far.

So please comment and/or pass this on to someone who would interested in this conversation...

 

The 6 Things Great Consultants Know About Brainstorming

Every successful Consultant knows that what lines their waist when engaging clients is a tool belt.  Its the Consultant's job to know when to pull the tool out and how to use it.  Just like persuasion architecture, six sigma, and Porter's five forces, brainstorming is a tool.

The goal of brainstorming is quantity of ideas, not quality.  Its a great way to get every member of a group involved in a meeting and to elicit as many ideas as possible in a short time period.  Follow these simple rules:

1.  Assign a facilitator of the meeting
    Someone to keep time and maintain focus in the meeting. (some people make careers out of doing          just this)

2.  Assign a recorder for the meeting
     This person's job is to write everything down word for word.  Don't fall in the trap of listening for a         minute and then summarizing the conversation.  Idea's get left out and people become less motivated     to participate.

3.  Repition is okay- just write it down

4.  Set a time limit of no longer than five to ten minutes.
    Some of the most productive brainstorming sessions have come during a 2 minute time limit.  Never     cut the session short of the time limit.  tHere may be a lull in the ideas generated at some point             during the brainstorming and the temptation is to stop the session and start evaluating ideas.  It is         much better to wait the time out--usually 15 seconds of silence will start another rush of ideas.

5.  DO NOT discuss during brainstorming.
    This kills the brainstorming session.  It goes against the objective of the exercise.

6.  DO NOT judge ideas during brainstorming
    Remember quantity, not quality-everything goes in a brainstorming session.

That is all...

Color and Branding

We've spent about 3 months working on the re-branding of eBoost Marketing, a digital marketing consultancy, and as we are finishing off the project it is now time to decide colors.  Color is obviously an important decision because it will be apparent in every touch point of our brand.  I thought it may be a good time for a quick guide to the psychology of color.  This will only be useful if you've decided what image you want to project for yourself or your business.

RED

strong emotions / warmth / love / anger/ danger / boldness / excitement

ORANGE

spicy / cheerful / sunny / low cost / affordability / cheap

YELLOW

attention grabbing / comfortable / upbeat / lively / new/ unusual / cowardly

GREEN

durability / reliability / environmental / luxurious / renewal / optimism / well-being

BLUE

calming / constancy / loyalty / reliability / honor/ melancholy / boring

PURPLE

power / royalty / elegance / artificial / overwhelming

GRAY

conservative / traditional / intelligent / expensive / serious / dull / uninteresting

BROWN

relaxing / confident / casual / natural / reassuring / earthy

BLACK

sophistication / elegance / sex / formality / strength / illegality / depression / morbid

WHITE

cleanliness / purity / innocence / quality / simplicity / classic / sterility / disposable

Thinking About Business Problems

" Unfortunately, when academic ideals meet business realities, business realities usually win. Businesses are full of real people, with real strengths and weaknesses and limitations. These people can do only so much with the finite resources available in their organizations. Some things they just cannot do, whether for political reasons, lack of resources or inability.

As a consultant, you bear the responsibility for knowing the limitations of your client; if your client is your own employer—or your own business—that responsibility is doubled. Knowing those limitations, you must make sure that any recommendations you make fit within them. "

-Ethan M Rasiel on Thinking About Business Problems
The McKinsey Way

651 Views

The 5things Video with Johnny and Nick beat out Robert Scoble’s Podcast for number of views (651 – 574) on VeoTag!

 

We’re pretty sure that the fact our video has been up since last year and Scoble’s since last month has nothing to do with the numbers…

a quick Why? to Never Stop Learning

The winning company will not be the first one to start or the one with the best initial strategy, but the one that learns the fastest. The company that re-evaluates every month rather than yearly has the potential to learn 12x faster than it's competitor. Strategy is a hypothesis and the goal is to adapt as quickly as possible.

Everyone wants results, right? So then measure results to get results, right?  Wrong. The results are lagging indicators. By the time you notice that the lagging indicators are off the mark it will be too late. Assess leading indicators such as your company's ability to learn in order to adapt the strategy.

Never Stop Learning=How To Win

5 reasons to change the way you budget marketing, now.

Theoretical approaches to establishing a marketing budget are seldom employed. In smaller firms, they may never be used. This is the case with most of our clients. Often the conversation of budgeting comes up during the courting process so it is difficult to persuade them to change their budgeting method or to start using one.

 

They are many top down approaches where budgets are established at the executive level and then distributed to different departments or products. Some top down methods include the affordable method, arbitrary allocation, percentage of sales, and competitive parity. 

The most commonly used method is percentage of sales. The purpose of this post is to highlight the common pitfalls even large corporations slip into when budgeting using percentage of sales.

 

With this method, management will either take a percentage of the sale dollars(advertising budget=20% of sales) or assign a fixed amount of the unit product cost (advertising budget per product= $5 on a $10 product). Most companies use this method whether they recognize it or not because it has some minor advantages. It is easy to implement and seems logical to most business owners. 

Percentage of sales also has very serious disadvantages: 

1. The first disadvantage is the premise(sales) for which the budget is established. This reverses the cause and effect relationship between marketing and sales. It also forces business owners to think of marketing as an expense of sales rather than an investment- completely disregarding communication objectives.
2. It ignores communication objectives. No matter what model you follow: AIDA (attention, interest, desire, action), Hierarchy of Effects (awareness, knowledge, liking, preference, conviction, purchase), Innovation Adoption Model (awareness, interest, evaluation, trial, adoption), or the Information Processing Model (presentation, attention, comprehension, yielding, retention, behavior) there are communication objectives that have to be accomplished before getting someone to buy your product or service. The percentage of sales approach does not account for the investment required to get past the attention, awareness, and interest steps.
3. Percentage of sales is not strategically flexible. The competitive landscape may call for an aggressive marketing push, especially in drag race situations. The word from management after identifying this critical need is often, “its not in the budget.”
4. There may be severe misappropriation of funds. Products with low sales have smaller promotion budgets ensuring the product will always have low sales. On the other hand, products with high      sales have excess budgets, when that extra money could be allocated elsewhere. This becomes a critical mistake when launching new products or beginning to sell to an underserved market.
5. Decreases is sales will lead to decreases in marketing budget- the moment when it needs to be increased the most. Continuing to cut the budget will spiral sales downwards.

 Top Down approaches are often not linked to objectives and the overall strategy of the organization. Percentage of sales sets a budget without objectives in mind. The more effective approach is to consider objectives and budget appropriately in the same series.

 Steps to better budgeting:

1. Isolate communication objectives
2. Determine strategies and tactics
3. Estimate the required expenditures
4. Monitor using leading and lagging indicators
5. Reevaluate to stress high priority objectives 

While it seems very elementary in concept, it is hardly executed in practice. The bottom up approach allows the objectives to drive the budget. 

While I understand that it is not our money we’re spending, this is one of the more frustrating topics with clients. Hopefully this post illuminates the severe problems with percentage of sales budgeting and the accompanying mentality frequently adopted by management.

How to Get the Most of Your College Experience

How to get the most out of your college experience: DON’T GO TO CLASS.

Instead of going to class go to networking events, get involved, start a business, visit office hours if you want to learn something from your professor.  How much can you retain from canned lectures and 100 word power point slides? Textbooks can only teach so much. With textbooks you can be sure of one thing: that what you are reading does not represent the newest thought in your field of study and by the time you get a job it will most likely be irrelevant (unless you’re a history major).  Why learn from a digital marketing textbook  when its outdated by the time its printed?  Drop the textbook for a night and network where the rich people and business owners hang out.  A 19 year old at a 40+, CEO-only event impresses people whether you know what you’re talking about or not. Trust me.

 If you have to go to class make sure to meet and make friends with all of your classmates. Might as well get used to making friends with strangers, because like it or not, that’s what most undergraduates will find a job in: sales.  Hell, everyone works in sales, something you can’t learn in a textbook, in class, or from your professor.

So who are the ones that get the most out of their college experience? We evaluate performance based on GPA, but what did the summa cum laudes spend most of their college life doing? I didn’t tell my parents I skipped class for client meetings or for brainstorming sessions with entrepreneurial friends because they probably would not have understood. For the ones who have already graduated: Which has a higher correlation to success? Your graduating GPA or how many powerful people know you?

Can I get an Amen?

Students in Free Enterprise

Last week a team of students from SDSU competed in the Students in Free Enterprise (SIFE) U.S. National Competition in Dallas, Texas.  SIFE establishes student teams on university campuses with the goal of creating economic opportunity for other people. 

From my first SIFE experiences, I quickly learned that SIFE is not just another organization on campus.  SIFE is a global non-profit organization with millions of participants that is funded by Fortune 500 companies and partners businesses with universities to create REAL economic opportunity for other people. 

The SDSU SIFE team traveled to Dallas after winning the regional competition in Seattle, Washington.  By the end of their travels, the team brought home 4 trophies, $4500, and experiences to last a lifetime.

CONTINUE READING:  Students in Free Enterprise

 

Needs Assessment Methodology

New post on Booststrapping about our Needs Assessment methodology, Keniche Ohmae, and his 3C Method.   Check it out here.

P.S. I know I have 35 more tips on Sales Management to give, but there's so much other fun stuff to learn out there!