When Amazon’s CEO Jeff Bezos quipped recently that “your margins are my opportunity” he laid down a general rule that governs Amazon’s success, namely the drive to work with technologies trend toward scale. Until the arrival of digitization, electric technology worked alongside the concept of mass, like all center-margin based economies, efficiencies possessed no means to create, sustain and drive interior components of autonomy and redundancy. Mass meant ever larger scale with more inputs. The drive hued away from miniaturization, towards a commanding center. It mimicked the driving contours of modernity; large, abrasive concentric movements whose only sin was compartmentalization. Digitization and miniaturization have reversed the process.
Now, all components can be heterogeneous, autonomous, moving in eccentric modes that sustain spheres of autonomy that would have crashed previous mediums. What the drive toward smaller scales has meant is something previous leadership couldn’t handle, now you’re competing against yourself or worse yet, your own government.
Let me put it this way, if you don’t demonstrate that your efficacious with your resources; if you fail to drive trends that sustain autonomy, you’re dead. Raising prices kills you. If your business is still working from a 20th century ethos, your finished. Showing that you procure new capital for new problems is the immediate future. When Andy Kessler wrote The High Cost of Raising Prices, he rang a bell, tolling a sound only new entrepreneurs implicitly know. Everyone else fell over dead from their own margin.
So instead of finding new efficiencies in new procured models of interaction, the U.S. Postal Service just raised prices. That was after watching mail drop in volume. People stay home now after work, streaming favorite movies instead of wading through movie lines for tickets, rude people and terrible service. What have movie houses done, they raised prices. When ESPN realized that breaking sports news was consumed on Twitter instead of obscenely priced cable, they just fired everyone. No executive movement in the C-suite to jostle better service? What did most companies do over the last eight years of our soft recovery? They found mergers or acquisitions. Or they folded. No drive to create new velocities in their brands? No new capital procured? How about the stock market; huge sell-off’s when companies miss quarterly numbers. Why didn’t Disney reform how ESPN worked? It was easier to kill it off than reconfigure old capital. Remember the parable of new wine in old skins? Is the Wall St. Journal getting killed by Bloomberg radio or subscribing terminal? Instead of pursuing what worked under Robert Bartley, its U.K. led management has sought buyouts and layoffs with a much smaller paper for circulation.
Each of these entities lost sight of customer trends. Most clearly had no grasp of new relations emerging from new technology.
Why couldn’t newspapers figure out that classifieds remain a cash cow, only killed off by Craigslist. Its because those that ran newspapers really believed that people bought for editorials. They didn’t. They still don’t. Why couldn’t Microsoft discern that raising prices on its software would expose them to being crushed by tablets or phones?
The self-refercing ethos of the above named companies are legion.
IBM never accommodated itself to the social impact of digital technology, or other more nimble competitors like Salesforce, that’s why its failing. Companies throughout the U.S. are dying because C-suite management thought in terms of accounting see previously wealthy companies failing from culture clashes from forced mergers and acquisitions. 3M and News Corp. are great examples of this. With private equity circling, engaged investors are witnessing imperiled capitalism.
The fact is, companies have to learn that customers and markets are active environments. Kessler was right, Empires are lost on rising prices.
So what’s the fix?
The source of enduring growth resides in supply side policy mix favorably balancing the trends toward autonomy, digitization and liberty. Without a return to a strong capitalist ethos we’re only going to see companies, fiefdoms and kingdoms die off from cannibalism. Its already happening, its been on for a decade already. Remember Mark Cuban’s policy admonition regarding IPO’s; that was the canary in the coal mine.
Its called confiscatory taxation. That’s why we need a policy mix of tax, monetary, and fiscal reform from the House.
Don’t worry, an engaged fury called the Republic is awakening.