March 2018

Like many entrepreneurs, I am increasingly ambivalent about electronic communications. I use them every day in my business activities. But I am also buried by inbound communications from strangers wanting me to do something for them. I hate being rude, but I can’t keep up. This week I had the moment that made me ask if I am really obligated to try.

I took at a look at my LinkedIn page and noted the many unsolicited connection requests I get, and how many of them suggest meeting for coffee so the sender can “pick my brain.” The commonalities in approach and tone struck me as orchestrated and formulaic. Well, a quick Google search revealed that they most likely were both of those things.

I was astounded by the number of self-proclaimed experts who offer advice on how to write emails that will be answered, how to use LinkedIn to get a meeting to find the next job and generally how to use social media or email to get a business benefit from a stranger you perceive as useful. The experts assert that most people hate to to be rude so they are likely to respond to an unsolicited communication if it sounds friendly. So, they advise taking advantage of people’s better natures to get them to respond to what they might otherwise immediately dismiss as junk mail.

Was my desire to be a good person being used against me as a tool for someone else’s business development?

I reached out to a broad group of entrepreneurs (I knew them all personally, I promise!) to ask them about my reaction. They told me they were often in the same position and that I should stop feeling bad about not responding to everyone who sent me a message. Janet Van Pelt, chief executive of CourseMaven, an educational software business, put it succinctly: a stranger cannot unilaterally create an affirmative obligation for you to respond.

Moreover, they all felt it was OK for me to consider these requests annoying, since we all earned our livings from personal expertise and our networks. My entrepreneur friends told me they viewed most networking and advice-seeking messages with suspicion as just thinly veiled attempts to get something valuable for free. A few considered such requests presumptuous.

But what about people who are legitimately trying to meet with me to start an exchange of mutual value? My colleagues suggested that they tended to filter messages by whether the sender was referred from an existing relationship of trust or whether the sender’s personal circumstances resonated in some way. Sid Banerjee, founder and viceChairman of Clarabridge, a data analytics firm, captured the consensus view, saying “if they’re introduced through someone I know and care about – I’ll consider it. Otherwise, it has to be interesting to me or I ignore.”

At the end of my conversations, I ended up feeling somewhat better. There was a clear differentiation to be made between acceptable behavior in the real world and online. I would never ignore a polite approach from a stranger on the street or at an event, even if I would ultimately say “thank you, but I am not interested.” Yet that level of courtesy is apparently unnecessary online.

Still, this left me with a nagging question: how did we get to a point where a person’s desire to be open to new relationships and opportunities is overwhelmed by a constant stream of electronic requests. I suppose one could take the view – “Oh poor you, that’s the price of being in the public eye.” But I think that misses the point.

We have seen how the ease of electronic communication has cheapened and devalued information so that the value of facts has been undermined. I think that a similar thing has happened to making new contacts to expand personal opportunities. I am sure that some of the many requests that I receive are from people I would ordinarily like to meet, but there are just too many requests for me to spend the time to figure it out. I am another casualty in an arms race for attention.

I expect that this cycle will mean that broadly available online networks will eventually be of little use in establishing meaningful connections. I am not sure whether this will result in an online sea of software bots talking to each other while those of us with things to do are otherwise engaged or a return to making connections by engaging in long term and valuable relationships.

But in the meantime, don’t expect a networking response from me online if I don’t know you. I feel bad about that, but apparently, it’s the only reasonable thing to do.

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Over the last few weeks, I have been interested to see how consumers have caused businesses to take overt political positions on social issues even when doing so alienates other potential clients. Business leaders are finding this new environment challenging, to say the least.

But businesses cannot run from this fact, says Richard Levick, the founder of Levick, a public relations and crisis management firm. The Supreme Court has expanded corporations’ rights to exercise freedom of speech and businesses have taken advantage of that expansion. Levick believes that with the right of free speech comes accountability.

Businesses now have what Levick calls a “corporate personality” that goes beyond the brand. The corporate personality reflects how a business conducts itself in commerce, and it is something that consumers can and do evaluate.

Beth Johnson, founder of RP3 Agency, a creative advertising firm, agrees with this observation about accountability, although she isn’t sure that you have to go as far as imputing a personality to a business. CEOs should focus on the reality that their business “will always be associated with the company you keep.” And not just for controversial associations. She sees every association as potentially relevant, since any association can have meaning for a particular customer.

The most recent example of businesses being aware of the issues of association and accountability is what has happened since the Parkland tragedy. Some businesses have severed their associations with the National Rifle Association and weapons manufacturers, ending corporate affiliation or marketing arrangements. Other businesses with relationships with the NRA or weapons manufacturers did not end or modify the relationships. Whether a business changed its relationships or didn’t, its actions did not receive universal approval; some people are very displeased. But these businesses felt that they had to make a choice and were willing to alienate at least some potential customers.

Interestingly, some businesses didn’t just curtail marketing or co-branding arrangements; they actually limited the revenue they could receive from their operations. Certain retailers unilaterally determined to limit access to certain firearms. At least one retailer stopped purchasing a manufacturer’s popular outdoor products because a sister company is a weapons manufacturer. Again, a choice to please some consumers while alienating others.

In some instances, they are forced to take these actions by consumers. Levick believes that because people are now so politically engaged, a business should be proactive and assume that everything it does will eventually be known and reflected on by consumers through their own political prisms. Levick sees this as an opportunity to better connect with consumers and create more loyalty. He calls this process “mercantile activism.” Mercantile activism is not political action to make changes. It is taking a political position to reassure and attract consumers.

How will businesses choose which political positions to take? Levick suggests that business leaders will need to watch political conversations and balance the size of constituencies for various viewpoints. They will need to make strategic choices and balance the commercial benefit of embracing some, while turning off others.

Does this mean that business leaders should now be watching public opinion polls? Johnson doesn’t believe we are at that point yet. However, she does think that “CEOs need to understand that these days consumers feel that one of the ways they can make a difference is with their wallets.”

All of this creates a very challenging moment for businesses. For years they have been able to pursue regulatory policies and social policies in their self-interest without any real accountability to their customers. This would appear to no longer be the case, at least for highly charged social issues like gun ownership.

The question is how much more broadly this phenomenon will spread. Will the consumers’ use of their collective buying power affect businesses’ campaign contributions and lobbying? Will it lead them to pay attention to their customers’ interests as much as to their own? Will they start thinking of the two as parallel instead of as opposed to each other? Could Americans resolve their frustration with political gridlock by voting with their dollars and supporting businesses whose values they respect?

These are questions that are worth watching. Maybe the democracy we cherish will ultimately be saved by consumer spending.

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Last week, the Trump Administration proposed tariffs on imported steel and aluminum and the resulting public discussion suffered from a “forest-tree” problem. International trade economics are just the trees. The forest – the big picture – is that this is just one more data point confirming the Trump Administration’s anti-growth world view.

Although we take growth and an increasing standard of living as expectations for a well-functioning economy, neither are an absolute certainty. In fact, for most of economic history, economic growth was slow or nonexistent.

Technology changed that. In a common business pattern, new technologies are invented and brought to market by small, new businesses. Some of these technology products and services will be such high demand that sellers can change premium prices and earn high profits. Those profits are the fuel that lets them compete successfully with established competitors.

At some point, even if there is a period of intellectual property protection, a sophisticated technology product will become progressively less unique, as new sellers enter the market offering similar products. Eventually, enough new sellers enter the market so that their products won’t differ very much, if at all (personal computers are a good example of this move from new and high priced to cheap and undifferentiated). Their products’ fungibility limits each seller’s ability to charge a high price, because their respective products are no longer special. This lack of specialness means businesses in a commodified market must drive out or acquire enough competitors to allow them to raise prices by limiting supply. Or they can become more efficient than their competitors so that they can remain profitable at lower market prices. In either case, commoditization rewards scale and efficiency and not introducing new or competing technologies.

This cycle of technology introduction and commoditization has shaped the world economy since the late 18th century. With each new technology wave – steam power, electrification, oil and natural gas, automobiles, aviation, software and telecommunications are some examples – new businesses generated stupendous profits and wealth and eventually turned into commoditized industries.

U.S. businesses led substantially all technology adoption cycles and industrial development from the late 1800s through the 1970s. National wealth increased dramatically. Other countries participated in new technology industries as followers; they competed on the basis of efficiency, relying on lower wage costs and less stringent regulation.

From the United States’ perspective, this cycle has changed in two significant ways since the 1980s. First, many fewer revolutionary technologies have reached the market. Many things hailed as new are just iterative, not world-changing, and don’t command extraordinary prices or generate extraordinary profits. Second, the United States originates less of the new technology than it used to, as Japan and China in particular have taken leadership roles in many technology areas and are positioning themselves to lead emerging opportunities. Meanwhile, commoditized industries have increasingly dominated the U.S. economy. This introduces into the political process a strong bias in favor of preserving their market power and expecting policy makes to adopt policies that discourage new entrants or alternatives. Meanwhile, the focus on protecting the status quo means helping U.S. companies beat foreign competition at its own game, either by lowering wages and lessening regulation at home or by allowing them to build products abroad and bring them back to the United States for sale.

The commoditization of our existing technology industries has very much shaped the viewpoint of what business wants from government. The voices for protecting what we have, rather than creating what’s new, are very loud.

Tariffs, lax environmental regulations, policies to depress labor costs, tax changes that favor passive income and other current policy positions now promoted by the Trump Administration all are a consistent part of a world view that favors existing and commoditized industries. They are touted as policies that will allow the economy to recover the high growth rates that prevailed at an earlier time. But they are not designed to recreate the conditions that actually created that growth. Instead, they are largely designed to protect the status quo.

History shows that the U.S. economy grew fastest when it was at the leading edge of new technological waves. Adopting policies that hinder this growth, whether by imposing tariffs that lead to retaliatory tariffs on our most desirable exports, by not funding basic science, or by adopting tax and regulatory changes that favor existing industries will not take us forward.

Looking backward to the time when our now-commoditized industries were dominant will not help them regain their former glory. The cycle of technology cannot be reversed. Failing to examine where our growth comes from and adopting policies to promote the status quo can only be explained by ignorance or a willful decision to avoid an inconvenient truth.

Either way, looking backward is not a strategy for success. It is a strategy for stagnation.

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