Saturday, October 28, 2006

The Entrepreneurs Expected Value (ev) & Customer Service

Poker players understand expected value, too few business people do.

If you watch people on TV play poker, or play poker yourself, you probably understand ev.

Most often it is expressed after a bad beat forces a player out of a game, and he states "well, that's poker," and walks away.

The difference is in business you can plan your bad beats - and your eventual triumph resulting from them.

If you play regular ring poker there will be many times the odds are in your favor, and you will still lose. If you are measuring one game or a nights play - it can look real bad. It can stay bad for a long time before you regress to the norm and things average out. The key is not to look at individual games - but at all the games you will play in your life as one long poker game.

If your odds on winning a hand are 51% and you play it to lose as little as possible if you lose and to win as much as possible if you win - then even if you lose you win. On average, over that one life long poker game.

Businessmen far to often look at each sale as a complete game. Your total product cost is ten dollars, your advertising cost to bring in 10 potential customers is fifteen dollars. If a sale results in a twenty five dollar transaction - how many customers must you convert to reach a profit?

That was a trick question.

In most businesses a current customer is far more likely to re-buy your product, or buy other products, or buy a more expensive product than someone brought in new from advertising.

Your new customer is worth whatever they will buy from you for the rest of their life. Customer service is a profitable life long business game.

It is easy to discover the ev of a poker play. To discover the value of a customer you will have to observe and measure your existing customers. There is obviously hidden value in good customer service, but what is it really worth?

You may find that on average each new customer will buy that same item from you three times a year, and one out of four will buy a seventy five dollar upgrade. Now what were those ads worth, and how many customers do you need to acquire?

You may also find that one out of twenty customers will be in the market for a several thousand dollar back end sale - what kind of customer service will that justify?

Your customer service, customer retention, and consistent customer contacts may be the easiest way to increase your revenues.

Customer service, integrity, and predictable returns are all part of looking at the entrepreneur's ev. An entrepreneur is someone that helps people for profit.

(That is usually much more satisfying than pleasing a boss for profit.)

Most businessmen never get past thinking about that one first sale. In that above question, what kind of profit will you expect in the next year if you convert one potential customer out of twenty into that first sale?


Wednesday, October 25, 2006

Social Emotional or Individual logical

The answer to which of these you fall under is yes.

Most can logically make decisions when they are alone. Few can make logical decisions that oppose the group, and almost none consistently.

We harbor both viewpoints within the same persona - each denying the other in turn. The rationalization process has us willingly accept information that we could with proper distance regard as foolish.

It is not so much that we don't desire to have an open mind, it is that we would have to be able to hold two contrary opinions at the same time - difficult even if both are true.

The classic demonstration is of a soldier in a foxhole being told to join the attack. He is safer if he just ducks his head and stays where he is. He is aware of the social context however. If everyone ducks their head there will be no battle - he knows that will not happen. If only some respond they will be defeated - and his side's defenses will decrease exposing him to more danger with a counter-attack. If everyone attacks - some will die, but overall his odds improve beyond the weakened attack. the combination results in most soldiers attacking most of the time.

When discussing politics most followers of the party line know their arguments are silly and emotional claptrap at best, any party line is. They chose to attack the other party with this silly tripe because it is the best trade off between admitting they are manipulated fools and accusing the other party of being manipulated fools. So they attack.

What if they gave an election and everyone stayed home? The same thing as if they gave a war and nobody came. Unfortunately it won't happen.

There is another option if you have a shade of dignity and are not a manipulated fool.


Saturday, October 21, 2006

Do You Believe In Media Bias? What about Scientific error?

Bias from Fox or CNN?

If you say both - congratulations. If you picked just one I know what party you back - go away, you bore me.

You know I'm not democrat or republican. I was e-mailed a historical foot note taken from material provided by the NY Times for teachers.

I went to the archive for these historical notes and glanced down the daily selection. There is obviously a bias, review it yourself. The media strives to monopolize your ears so that you will not open your eyes.

This is a try to tie together Bush & Nixon and make it seem just a historical note - it is politicking in a blatant way by a source that would claim to be neutral.

Do you see any negatives in the selected columns about Democrats? What about the years of protests and violence about the Vietnam war that Kennedy started with military advisers, and Johnson escalated with great vigor -against strident protests. There is no mention of the anti-war riots and police violence at the
Democratic National convention in Chicago.

The parallels to today's growing anti-war protests would seem newsworthy. You need to maintain your disbelief but may need broaden it to contain your current opinions.

You have often seen a major media outlet pointing out the parallels of the Mideast and Vietnam. Did they ever mention that the Vietnam war was started by democrats - and ended by a republican - Nixon?

Politics is dirty - and newspapers are still used to carry out the trash.

Both parties are very dirty, both do not care about people - only the power and money they can suck out of them. Neither one will fix the problems facing our nation. We know this - why debate if one might cause a little different type of pain as they destroy the country?

To paraphrase myself:

Most political news reports, and blogs, are insidious invidious invective seemingly written by scheming fourth graders hoping to influence gullible third graders. -- Allan Wallace

In fact Geo. Washington may have been the last ethical president. George Washington held a unique political qualification, he did not want the job.

On a different note.

I was reading about Franklin's Autobiography edited by a decedent of Franklin when I remembered that Franklin had fought inoculations. I doubt the related editor spent much time on Franklin's errors - his many truly wonderful accomplishments would be much better fare. I can't complain, as a Wallace I enjoyed the movie Braveheart.

Franklin fighting small pox inoculations reminded me that Washington might have died from over bleeding - they took something like three pints of his blood trying to heal him of his fever. It is amazing that germ theory was such a recent development.

"An important scientific innovation rarely makes its way by gradually winning over and converting its opponents: What does happen is that the opponents gradually die out." - Max Planck, pioneer of quantum theory

And I would add - the opponents might have been right - and it will take generations to reverse scientific errors introduced.

We are still in the dark ages, at least I expect future historians to view us as such.


Friday, October 20, 2006

Debt Addiction In California

Not just the people -- California itself is in trouble.

Our billions of dollars of bond issues are to pay for current expenses. Billions in debt for maintenance of state vehicles for instance. Services are breaking down, and I have heard "public servants" using the word "citizen" as a swear word.

A business in money problems would cut back - Californian's could easily do better with 50% less government. Instead the government keeps growing. It now exists only to feed itself as a parasite on the taxpayers and their children.

No financial adviser would tell you to put breakfast on your credit card and pay it off with minimum payments. California is doing that - with thirty year bonds.

Politicians are not robbing from the rich to give to the poor, they are stealing the children's future life style to buy themselves votes and power.

A standard measure of the quality of an economist is how much they focus on short term results. Politics is like eating candy - quick pleasure - long term risks. Economics should be like going to the dentist - occasionally short term pain creates long term good results. A good economist focuses on the mid and long term ramifications of current actions.

There is no stomach in California for even thinking or talking about the long term - it's all about now. California's legislature is following the politicos favorite economist -- John Maynard Keynes of "In the long run we will all be dead."

A government of, by, and for the proposition "eat , drink, and be Merrie, for tomorrow we die."

We are part of an empire in rapid decline.


Tuesday, October 17, 2006

Imagine There's No People - The Earth Without Man

My sister is a very intelligent and well informed gal, she sent me this link to a graphic on how the earth would shape up if man were eliminated.

This is my response:

I reviewed it quickly.

But as I understand it methane is largely a by product of animal waste - so it will not be gone unless all animals are gone. I'm sure some of the other science is likewise enthusiastically presented -
I know, thats not the point.

Thomas Malthus proved in the late1700s that the earth could not support its then current population - similar scientists and economists are still proving the same thing. Some century the may be right - just not this one. There is plenty of food - just lousy government controlled methods of distribution. Again - not the point of the graphic.

The point seems to be earth will be better without everyone else, I'm sure the author would like to preserve
their little tribe - maybe. This may be the environmentalist religion's (I consider that graphic a partial statement of faith) version of the Jehovah Witness' 144 thousand - a few selected individuals will remain. How do they plan to de-select the rest of humanity?

If I were able I would concoct a similar time-line of what could be accomplished if people were not shackled with unreasonable societal constraints, laws, and regulations.

Man's ingenuity and God's direction can clean up this mess much faster - and all done in enlightened self interest.

A first step from my admittedly extremist viewpoint is to disassemble the too BIGS, big government, big corporations, big unions, big education, etc. I happily can be an optimist because I believe the end of the industrial age is doing this.

Individuals empowered by technology can and will define solutions to the pressing problems now faced.

Love and blessings,


Make A Decision

Nothing will happen as long as you remain uncommitted to accomplishment - you have to decide to act.

"It had long since come to my attention that people of accomplishment rarely sat back and let things happen to them. They went out and happened to things." -- Leonardo da Vinci

You can continue to stumble forward without a goal - or you can make life happen.

Decide two things right now.

  1. I will discover a driving why in my life that will not let me rest and evade accomplishment
  2. I will discover a need in others that is important for me to meet.

And then decide to do what is ethically and lovingly possible to accomplish the goals you will discover.

For your life to have meaning, for you to discover fulfillment, you have to first decide and then dedicate yourself to something larger than yourself.

At our center we all are selfish - so meet your own needs and wants. Then go beyond your needs and wants to help others.

You have the power of choice, as Voltaire said "Man is free at the moment he wishes to be."

To actually exercise that choice:

Make a decision!


Wednesday, October 11, 2006

Dire Predictions and the New Realities

John Greer starts and ends with peak oil, but the route he takes in between exposes a dream picture hung in front of a window to hide poverty.

Greer does a great job of entertaining with analogy as he points out what he calls Hallucinated Wealth.

He got me thinking along the same lines.

The "let them eat cake" economic statistics and political pronouncements hide and disguise the unraveling real economy. Crashes of one bubble lead to the immediate inflation of the next bubble. Each bubble is of necessity created a bit larger and more unstable than the prior one.

The old saying that a broken clock is right two times a days is frustrating those of clear vision. They pronounce the end of a bubble and position themselves to profit from the pop, and frequently do make huge profits.

The problem is encountered in retaining the profits. Because their clear vision has shown them the bubble rests on a house of cards, they expect the bubble's burst to blow down the weak structure supporting it. They then bet accordingly.

A new bubbles emergence lifts the weakened house of cards structure and the new imbalance comes into play.

Greer's analysis is good and worth considering. My potential disagreement would come in the effects to be wrought by the collapse of the industrial age - or as he views it the slow decline back to an agrarian society.

I think there will be disruptions along the route to the Netcohort Society. I also believe that scarcity does not have to be a cause of decline, but necessity will once more become the mother of invention. The delay of minor necessity by government intervention and reality cloaking only increases the size of disruptions along the route.

Such as price controls that lead to scarcity without a financial incentive to solve the problem.

In the late 1700s Thomas Malthus talked about earth's population overcoming its ability to feed itself. At this point the inventions and revelations leading to the industrial age were already in place. Industrial farming had the capability to feed a growing world.

While the capabilities to feed a world are in place, government interventions still prevent distribution of edible wealth.

In 1801 when Jacquard invented the first programmable production tool, the seeds were planted for an era beyond the industrial age. That this new era has been delayed so long is the result of factors buried within the industrial age itself.

Industrialization promotes the satisfaction of wants on a general scale. Specific needs are not addressed as the economies of production are in huge runs of one size fits all solutions. Huge bureaucracies became the norm, as size enabled the efficient methods of central control.

This has been a bad fit for human society as individualism and seeking of personal satisfaction is at the core of humanity. Greer's comments (remember John Greer) on peak oil correspond with the deflation, or a possible implosion, of the industrial age.

We do not have to return to a past era now that the declining age is weak.

The individual is being empowered by technology. Technology is similarly empowering small and mobile Netcohort teams to craft solutions on a small scale while retaining the incentives necessary to inspire creativity.

In is not just the industrial age that is passing, it is the age of HUGE that is dying. Internationally powerful corporations, governments, systems - they are all finally obsolete. Of course their death throes will be dangerous.

If we must have a historical model to describe the future let's return to the Renaissance.

The Netcohort will travel to the most accommodating location to practice their economic mercenary arts. These creative solution finders already function in a similar fashion just as the free lances and condotta were selected to work under their own captains.

The peak of resource based cheap energy may be upon us - but it does not necessitate a return to a drab and overworked existence.

The future may be quite bright.


Friday, October 06, 2006

Direct To Desktop Communications

I love it when a new media technology like direct to desktop communication first appears.

Read this short story on a new communications tool, perhaps even a new media. This is about communications that, unlike marketing e-mails, may get read. This is based in permission marketing, and permission marketing is powerful.

Yesterday I listened to a recorded conversation between two knowledgeable greats of direct marketing. They discussed the old pre-Internet and e-mail days, and how things had both changed and stayed the same. There was a lot of good information and some amazing insights.

The successful direct mail guy was now using print media to send leads to his web sites. He mentioned how everything is always changing, and you have to be able to adapt, he said his new marketing campaign had streaming video.

Okay so far, nothing new.

The other guy, who started on the net and was starting to expand the value of his list with off line marketing dropped a one line bomb shell. He said with the difficulties that had increasingly plagued e-mail, he was sending his clients messages direct to their desktop - and avoiding depending on e-mail. Then the conversation moved on.

What was that?

Direct to Desktop? Communications direct to a prospects or customers desktop and minimizing the hassles of using e-mail?

I wanted to know more.

I've found out a bit more, or I should say the information found me, and a program based on direct to desktop publishing starts this morning.

This may not be the whole story, but you never know everything when a new technology hits. Those who used the early TRS80 and Apple II personal computers had no idea of where it might lead - but they were well ahead of the pack when powerful change came.

Direct To Desktop communications, we may just be seeing a part of it, but the part we see may make a huge difference. This may keep growing, and you will be here on the first day. Take a look, and see what the future might hold.

A simple name - a simple concept, perhaps a powerful new, new, thing.

Take a look at direct to desktop communications, this is worth moving on.




Tuesday, October 03, 2006

Do As I Say - Not As I Do

It always seems easier to give advice than to take that advice and apply it to yourself.

I don't think it is just me, one definition of an expert is "a know-it-all from out of town."

We usually won't listen to someone we know well , or to ourselves.

A case in point, and what caused me to think about this. I've just finished creating an e-course for entrepreneurs about Internet niche marketing.

The course is for Bastiat Free University, and includes many great ideas. The summary points out what you need for a profitable business niche. The profitable niche list went something like this - but with more explanation:

  • A niche populated with highly enthusiastic prospects
  • that have a serious problem
  • that no one is addressing properly
  • that you are enthusiastic about
  • and that has money they will spend for your product or service

The e-course is more involved than that, but you get the idea. In fact I've talked about and taught these basic concepts for years. That is the rub - I ignore them when they are inconvenient. Like now ....

Bastiat Free University is a case in point.

  • it's a niche mainly populated with unenthusiastic students
  • who are burned out by public schools
  • that no longer trust educators (with cause)
  • that I am enthusiastic about
  • and that I'm offering for free
  • and it may take decades before individuals are really ready for a better educational system.

Bastiat Free University needs a purple cow, any suggestions?

I know how to create great cash flow with applied knowledge in areas like niche marketing. Yet I am putting in my time on a project that may not succeed in my lifetime. As someone said " I would rather spend my life working without success for a good cause that will eventually prevail, than succeed supporting a lesser cause that is doomed to eventual failure."

I guess it comes down to how I personally define success -- not by dollar signs, but by positive action.

and I'm having a great time.


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