Money and Value

The concept of money and value has been turned on its head, if not destroyed.  Money now costs nothing and banks around the world are even charging customers to store it rather than paying interest.  In our country earning from “interest” is so low as to be avoided as an investment alternative. Rather it is a preservation or convenience strategy. Thus, money seeks value rather than interest—things that have intrinsic worth, and as money cheapens, the value alternative will rise in comparison. Since it is hard work to invest in land, buildings, commodities, etc.,  the equities market “businesses” are the “value” opportunities that most of us pursue.  This is true for individuals, retirement planners, venture capitalists, and even other businesses. Sense money is virtually free, the competition for equities is rabid and the Stock Market is breaking record after record.  The problem, of course, is “musical chairs”— everything is going along great until the music stops and some are left without a chair.

You are safe and will be one of the lucky ones with a chair if you have invested in enterprises with long term value.  But how do you know?  How do you know which companies will succeed for the long haul?

What is important? Is it the dollar value of hard assets owned by an enterprise?  It is the Present Value of the organization’s future income stream? Is it the appraised, or replacement value, of the company’s intellectual property? In my book The Language of Excellence, I explained how Moore’s Law influences value today.  How future value is no longer related to any of the traditional determinants.

Here is the Chapter on Moore’s Law:

Moore’s Law

Moore’s Law is an uncontrollable rate of decay in the value of existing things.

The conventional concept of Moore’s Law is that the power of technology doubles about every two years, but there is a worm in the apple, so to speak. Existing technology is like the apple in the graphic. Moore’s Law is like the worm inside eating away at its flesh. Moore’s Law means that for existing technology there is an uncontrollable rate of decay in economic value.

Technology is so embedded in products and services today that the reach of Moore’s Law extends deep into our economic system, shortening the life cycle of any given product or service. The consequence is that the long-term economic value of any given thing—product, process, or service—is near zero. The enduring value of a thing is in its ongoing capacity to evolve—moving from one life cycle to another. Without that capacity to continually improve and replace, it will have a short life and quickly wind up in the graveyard of outdated ideas, products, and companies.

In the mid-’60s, when I began my career as a CPA, having intangible assets on a balance sheet was not a good thing. Bankers deducted goodwill and other intangibles to arrive at “net tangible book value.” The financial world was all about hard assets and discounted cash flow. Your business was worth its hard assets and some multiple of its profit stream. Today some of our most highly valued public companies have no hard assets to speak of, and some have yet to earn a profit. Perceived value is increasingly concentrated in a company’s intellectual property. There is real danger, however, concerning the preservation of that economic value.

We understand the productive life of a brick-and-mortar building. But what is the life of highly valuable intellectual property? Investors who approach the value of intellectual property on the same level as traditional hard assets with predictable lives are in for a rude awakening due, in large part, to the destructive aspect of Moore’s Law—that worm eating away at existing values. It is not the current state of a company’s intellectual property, but the company’s capacity to maintain, evolve, and innovate that determines the real long-term value of a business.

Moore’s Law is based on an observation made in 1965 by Gordon Moore, cofounder of Intel. He observed that the number of transistors per square inch on integrated circuits had doubled every year since the integrated circuit was invented. Moore predicted that this trend would continue for the foreseeable future. In subsequent years, the pace slowed down a bit, but data density still doubles approximately every eighteen months. As price falls and capacity increases in the future, the value of previously existing technology declines.

I have admittedly stretched the application of Moore’s Law to convey its more general influence now that technology has become a direct, or indirect, component of most goods and services. Moore’s Law focuses on the engineering and manufacturing of integrated circuits, but it follows that as integrated circuits go, so goes the products, processes, and methods that depend on them.

The view of Moore’s Law as an uncontrollable rate of decay in the value of existing things is an important concept. It explains why the economic value of an enterprise, or its loyalty bond with its customers, is increasingly related to its capacity to innovate and evolve. Value rests in the capacity to stay current and competitive, rather than in the tangibility or current state of existing products or services.

Given the uncontrollable rate of decay due to Moore’s Law, long-term economic value rests entirely on the ability to evolve.

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For signed copies of books by Tom Collins, go to TomCollinsAuthor.com. Unsigned print and eBook editions are available from Amazon, Barnes & Noble, and other online bookstores. Audio versions of The Claret Murders and Diversion are available from iTunes, Audibles and Amazon. eBook editions are also available through Apple iTunes’ iBook’s Store and Smashwords.com.
Published by I-65 North, Inc.

TWO CERTAINTIES

Perhaps the most important model in my book, The Language of Excellence,  is the one for TWO CERTAINTIES. The term “death and taxes” in the flip chart image is often quoted as the two certainties in life voiced by Benjamin Franklin. The graphic pairs Franklin's common sense terms with the words “change” and “judged” because change and judged are better descriptions of the two certainties as faced by businesses. For deliberate long-term success, an enterprise must have an understanding and acceptance of the two certainties— (1) we either purposely change to improve, or natural forces erode and change us for the worse, and (2) what we are is determined through the judgment of others.

I wrote the The Language of Excellence as a teaching aid. I discovered by accident that when all members of an organization understand the implications of important management and leadership concepts, magic happens within that enterprise. It is as if someone pulls back the curtain and turns up the lights. Suspicions disappear, replaced by unity.

To learn about the behavior of change, to gain an understanding of the rule of the fewest, to be able to put a name to observed phenomena such as the life cycle and suboptimization tears down the iron curtain between “management” and “employees.” A team arises—a competent team, one that shares a core set of beliefs and a common sense of direction—eager to help write their own playbook.

I want to clarify that I claim no origination credit for the concepts in The Language of Excellence. They are a compilation of ideas collected, distilled, reshaped, blogged, and even tweeted during fifty years of on-the-job training and a lifetime of reading and listening to the great minds of business—people like Peter Drucker, W. Edwards Deming, Nancy Austin and Tom Peters. The use of graphics and trigger words that bring those visual images to mind was inspired by usability improvements contributed by icons in graphical user interfaces (GUIs), by the power of Tom Peters’s model of excellence, and by the effectiveness of Model-Netics, the graphic image-laden management training courses of American General during my brief tenure with the company.

The concepts inside The Language of Excellence, like the Two Certainties apply to life as well as business. The book is one of the best gifts one could give to a young professional. It can be invaluable to the entrepreneur starting a new business or to a seasoned executive frustrated by the difficulty of steering an unresponsive corporate ship.

The Language of Excellence teaches the skills for long-term purposeful success. The concept of the Two Certainties conveys that for that long-term success, you must learn to deal with and manage change, and you must accept that you and your accomplishments are what others perceive them to be. 

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For more about The Language of Excellence at a discounted price for bulk purchases go to http://www.tomcollinsauthor.com/language-of-excellence/. For signed copies of books by Tom Collins, go to TomCollinsAuthor.com. Unsigned print and eBook editions are available from Amazon, Barnes & Noble, and other online bookstores. Audio versions of The Claret Murders and  Diversion are available from iTunes, Audibles and Amazon. eBook editions are also available through Apple iTunes’ iBook’s Store and Smashwords.com.
Published by I-65 North, Inc.

Exceptional Customer Care—The Mystery Ingredient

I recently sold a vacation home and selected Allied to move furniture from Florida to Tennessee. They were a class act. I will not go into everything that made the organization stand out. I will just focus on the driver and his helper. We were not present when they picked up the furniture, but we met the truck when it arrived at the storage facility we had selected to house the items until needed. Throughout the unloading process, my wife and I were struck by the courtesy (politeness) both men showed to each other. Of course they were nice to us—the customer—but why to each other?

I have always talked about common courtesy as a job requirement in any organization.

Common Courtesy

Customers accept nothing less. If they do not get it, then when they have an alternative, and eventually they will, they will take it. However, this was different. It was common courtesy kicked up a notch—it was “kindness.” Both men showed kindness and concern toward each other and to us. It was something more than just common courtesy.

I decided to do a little research and it lead to a book by Ed Horrell, The Kindness Revolution: The Company-Wide Culture Shift That Inspires Phenomenal Customer Service. Lydia Ramsey, a business etiquette expert, writing about Horrell’s book said:

“From the rampant indifference that we all encounter on a daily basis, he recommends that companies, large and small, switch to an attitude of kindness. He's not suggesting that the boss simply tell everyone “to be nice.” He states that kindness starts at the top and penetrates every level of the organization. When everyone within a company treats everyone else with courtesy, respect and compassion, that attitude automatically gets passed on to the customers.”

Tom Peters, a writer on business management practices, states flatly that there are only two ways for an organization to achieve long-term durable success. One has to have exceptional customer care and practice constant innovation.

It may well be that “kindness” is the mystery ingredient. I recall the first planning session that I held with the new Juris team. The startup company at that time had only nine employees. When asked what kind of company they wanted us to be, the answer was “We want to be a company that likes its customers and is liked by them.”

How does one achieve exceptional customer care, common courtesy, kindness, and customers who like you? As a leader, you have to practice it yourself. You have to verbalize it and reinforce it through constant communication. It has to be a performance standard. It has to be a “core belief”—a fixed unshakeable point on the moral compass of the organization.

I was not surprised when, upon completing the unloading job and shaking hands with us, the driver said, “When they ask you how we did, I hope you can give us five stars.” That is right; the company measures and rewards performance.

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Tom Collins’ books include his book on leadership, The Language of Excellence, and his mystery novels including Mark Rollins’ New Career, Mark Rollins and the Rainmaker, Mark Rollins and the Puppeteer and the newest mystery, The Claret Murders. For signed copies, go to the author’s online store. unsigned print and ebook editions are available from Amazon, Barnes & Noble, and other online bookstores. For an audio editon of The Claret Murders go to http://amzn.com/B00IV5ZJEI. The ebook edition for the iPad is available through Apple iTunes’ iBookstore.