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    Published on: March 11, 2019

    by Kevin Coupe

    There was a really interesting piece in the New York Times the other day about women’s college hockey that, to be honest, I had not noticed until it was brought to my attention by MNB reader Thomas Gordon. (To be clear, I didn’t see the story because I’m not very interested in hockey; it matter not a bit that it was about women’s sports.)

    The story was about Holy Cross and how the women’s hockey team there - which averaged 20 wins a season for the past decade while winning six conference championships - this season finds itself with a record of 1-28-3. The story notes that “the Crusaders have been shut out in 11 games and have been held to one goal in 14 others. They failed to score on their first 43 power-play opportunities after scoring at a 30 percent clip last season.”

    It wasn’t because all the good hockey players graduated, though; in fact, this year’s co-captains are three seniors who have had considerable success.

    It was because Holy Cross moved up to play as a Division I team.

    The Times makes the point that while it has been frustrating for the teammates, three things have happened.
    One is that any sense of complacency that the team had from dominating in its longtime division is gone. Faced with better competition, they’ve learned that the process of getting better never ends, and in fact depends on continually raising the stakes and facing greater challenges.

    Second, the team recognizes that what they are doing is a long-term project … that getting good enough to excel in a higher division could take several years. Many of the people on the current team may not be around to enjoy that when it happens, but they understand the nature of what they’re doing.

    Finally, remarkably enough, they have learned to enjoy the game despite the losses.

    The Times writes that “what this season isn’t providing in victories, it is providing in perspective, as well as an appreciation for the course the team is charting for the future.”

    Sam Girard, one of the senior co-captains, puts it this way: “I look at hockey so much different now. I enjoy the competition every time we play. I wouldn’t trade this for the world.”

    Remarkable, I think. And my idea of an Eye-Opener.
    KC's View:

    Published on: March 11, 2019

    Sen. Elizabeth Warren (D-Massachusetts), who is running for the 2020 Democratic presidential nomination, on Friday said that she is in favor of new regulations that would require the breakup of Amazon, as well as other giant technology companies such as Apple, Facebook, and Google.

    Warren’s proposal, if implemented, would mean that Amazon could no longer operate an online marketplace on which other companies could sell their products and also be a retailer on that same platform. Ironically, Warren made the initial announcement of her proposal in a speech in Long Island City, New York - the very neighborhood where Amazon had planned to put half of its vaunted HQ2 project until changing its mind because of community pushback about the impact of such an enormous development and the tax incentives offered tio persuade it to choose that location.

    The New York Times described the proposal this way:

    It “calls for the appointment of regulators who would “unwind tech mergers that illegally undermine competition,” as well as legislation that would prohibit platforms from both offering a marketplace for commerce and participating in that marketplace.

    “Ms. Warren’s plan would also force the rollback of some acquisitions by technological giants, the campaign said, including Facebook’s deals for WhatsApp and Instagram, Amazon’s addition of Whole Foods, and Google’s purchase of Waze. Companies would be barred from transferring or sharing users’ data with third parties. Dual entities, such as Amazon Marketplace and AmazonBasics, would be split apart … Ms. Warren’s plan creates two tiers of companies that would fall under the new regulations: those that have an annual global revenue of $25 billion or more, and those with annual revenue of $90 million to $25 billion. The upper tier would be required to ‘structurally separate’ their products from their marketplace. Smaller companies would be subject to regulations but would not be forced to separate themselves from the online marketplace.”

    The Times notes that “the announcement reverberated on Friday from New York to Silicon Valley. Pressure for elected officials to place additional oversight on mega-tech companies has been building for months, particularly after revelations that companies such as Facebook may have violated customer privacy agreements. Ms. Warren is also sending a political warning shot across the Democratic primary field, where decisions on how much to embrace or reject Silicon Valley and its wealthy donors could become an important dividing line among candidates.”

    And the Washington Post writes: “Warren’s proposal illustrates the tech industry’s political fall from grace as policymakers grapple with the ills posed by Silicon Valley — from job losses threatened by the rise of automation to the spread of malicious falsehoods online. In recent years, members of Congress have grown frustrated with the privacy mishaps at Facebook, which is now facing the prospect of a multibillion-dollar fine for mishandling its users’ data. And the concern is bipartisan: A key federal watchdog agency in the Trump administration just this month commissioned a new task force to study if big tech had become too big.”
    KC's View:
    I am sympathetic to the notion that giant companies can be seen as stifling competition from smaller entities; they have have so many resources, so much brainpower, and so much access to capital that they make it difficult for a smaller company to compete. I get it.

    But I am not persuaded that Warren’s approach is the right one, and I’m certainly not convinced that it has much chance of becoming law, even if she were elected President, simply because there would be too much opposition to such a heavy-handed regulatory approach.

    Let’s take the case of Amazon. There was a time, actually not so long ago, when Amazon was a small company, facing off in one category - books - against giant retailers such as Barnes & Noble and Borders. It succeeded because it had a better, more progressive idea that resonated with consumers.

    Those same consumers, as it happens, tend to give Amazon very high marks for prices, customer service, etc … and the last time I checked (and to be sure, I am not a lawyer), I thought antitrust law primarily existed to protect consumers. Break up Amazon, and the result could be higher prices and less product availability, not to mention lower customer service standards.

    Is Whole Foods really better off not being owned by Amazon? As I recall, Whole Foods had a bunch of problems leading to rampant speculation about it being acquired by a range of other companies. Amazon just beat everybody to the punch.

    I’m not sure where this all would stop. Before Amazon, many retailers saw Walmart as having an unfair size advantage because of its size. Before Amazon, a lot of small bookstores saw Barnes & Noble as a category killer with unfair advantages.

    I do think - and have said here for a long time - and new definitions for what “unfair competition” means need to be drawn up for a 21st century business environment. I’m good with that. And when big companies - I’m looking at you, Facebook - can be shown to have ignored the best interests of their customers and even lied to them about how they use their data, for example, then I think the regulatory response needs to be tough, swift and customer-centric.

    As I said above, I don’t think this has much of a chance of becoming law. It may be that Warren is just making a point and trying to draw a philosophical distinction between her opponents and her.

    If that’s the case, I’m okay with the discussion. It needs to be open and nuanced, and it is what the public deserves.

    I do wonder if Warren’s proposal will create a quandary for some people who under most circumstances would never even consider supporting her, but will - because of their own competitive issues - find something to like in this particular suggestion.

    Published on: March 11, 2019

    The Wall Street Journal has a story about so-called “zero-waste grocery stores,” defined as retail businesses in which everything that is sold comes without packaging. Such a place is Nada, in Vancouver, British Columbia: “No plastic around that cucumber. Toothpaste in glass jars. Herbs do not come pre-portioned in a plastic container. Customers take a sprig or two, exactly what they need.”

    The writes that “one store won’t end plastic pollution. According to the Environmental Protection Agency, the average American generates more than 1,600 pounds of trash a year. But Nada is starting a conversation and a trend. There are zero-waste grocery stores in Brooklyn, Denver, London and Berlin, and dozens more specializing in beauty and household products.

    “In many ways, these stores are the progeny of the natural food co-ops that sprouted in the 1970s. But the women - and they are almost all women - opening zero-waste stores now understand that to succeed they have to build in convenience. There are no mandated work hours or membership fees. If you don’t have your own container you can buy or borrow one that’s been cleaned and sanitized.”
    KC's View:
    Is this going to become a major trend? Probably not. Is it likely to remain the very definition of a niche business? Almost certainly.

    But … it is ideas like these that move things forward a bit, that begin to address real problems - and I view Americans generating 1,600 pounds of trash a year per person as a problem - that many of us don’t think about, much less do things to address.

    I’m sure there will be health department issues and all sort of other problems that will serve as barriers to growth. But still I say, good for them. I applaud their idealism and willingness to put some muscle behind it.

    Published on: March 11, 2019

    The Wall Street Journal has a story about how food delivery companies - ranging from Instacart to Shipt, GrubHub to Postmates - all are engaged inn a kind of high-stakes race, all seeking “to convert customers first lured by discounts into habitual, high-value users.”

    Because that’s where profitability lies.

    To develop sustainable businesses, the story says, food-delivery companies “need high-frequency, repeat customers - driven by force of habit at least as much as by bargains - as rivals race to amass the widest possible user base before focusing on making each individual order profitable.

    “Many have a way to go. Six percent of the 1,750 consumers surveyed recently by Cowen & Co. said they ordered restaurant delivery daily. Frequency is up since 2017, but current daily users are dwarfed by the 36% of customers who reported ordering delivery once a month or less. Supermarket deliveries are even less frequent, as only 4% of people order groceries online at least weekly, according to a recent Gallup poll of 1,033 adults.”
    KC's View:
    Let’s face it … isn’t creating consumer habits the goal of pretty much every retail format?

    That said, I completely get this, but also think it underlines the dangers of outsourcing the delivery business to companies with their own agendas.

    If Instacart becomes the habit, won’t Instacart remain the habit … even if it supposed to be representing other retailers? And aren’t those retailers running a significant risk of being disintermediated from their own customers when these habits kick in?

    Published on: March 11, 2019

    The new York Times has a story about how Nick Caporella, CEO of the National Beverage Co., which makes LaCroix sparkling water, decided to take an unusual approach when commenting on a 40 percent drop in profit during the last quarter.

    He blamed “injustice.”

    The Times writes that “in a news release, Mr. Caporella said that National Beverage was ‘truly sorry for these results’ and that ‘negligence nor mismanagement nor woeful acts of God were not the reasons.’

    “‘Much of this was the result of injustice!’ he added, without any explanation of what exactly he meant.”

    Later on, a company spokesman provided An explanation, that Caporella was “referring to a lawsuit filed against the company in October in Cook County, Ill., on behalf of a customer. The suit claims that LaCroix, which National Beverage markets as ‘all natural,’ has artificial ingredients, including one used by exterminators.”

    The spokesman added, “Without any valid test results, somebody makes a complaint and says a brand has ingredients like cockroach insecticide — that’s injustice … You’re guilty without being proven so, without due process.”

    Elsewhere in his press release, Caporella said that “managing a brand is not so different from caring for someone who becomes handicapped … Brands do not see or hear, so they are at the mercy of their owners or care providers who must preserve the dignity and special character that the brand exemplifies.”

    The Times notes that Caporella owns nearly 73 percent of National Beverage, which means he had a very personal stake in the company’s plummeting profits.
    KC's View:
    Two suggestions.

    First, get this guy Caporella some media training.

    In the meantime, tell him to be quiet.

    I happen to be a LaCroix consumer, and I never believed the allegations, and so my consumption habits never changed, But it was LaCroix’s responsibility toi make the case to consumers - and the media - for why this was a bogus accusation.

    Whining about injustice - and comparing brand management to caring for a disabled person - is just plain stupid and tone-deaf. (I’m guessing Caporella never has actually cared for someone disabled, or he never would’ve made that comparison.)

    When my kids were growing up and they’d complain about something being unfair, I had a consistent response: “Life is unfair. Get used to it.”

    I have no sympathy for someone who manufactures fizzy water, but who thinks of these problems in such grandiose terms.

    Get over yourself. Self-pity and whining doesn’t get you anywhere.

    Published on: March 11, 2019

    The New York Times reported over the weekend that Amazon is negotiating to acquire a minority share in the YES Network, teaming up with the New York Yankees, which would become the majority shareholder in the regional sports network that televises the vast majority of its games.

    The ownership of YES is in play, the story notes, because of Disney’s acquisition of most the assets of 21st Century Fox, which has been YES’s majority shareholder. Regulators approved the deal with one of the conditions being that Fox had to sell off its 22 regional sports networks. (Disney owns ESPN, which already makes it a major player in sports broadcasting.)

    The Times writes that “for Amazon, owning a piece of YES could be a boon to its Prime program (which costs $119 a year), especially if that membership included access to those games. That, in turn, could add more revenue, as Prime members tend to buy more on Amazon than casual online shoppers.

    “Amazon’s motivation becomes clearer when considering the fact that growth in the number of Amazon Prime members in the United States has slowed recently. It hit 97 million members last year, up from about 90 million in 2017, according to an estimate from Consumer Intelligence Research Partners.”
    KC's View:
    I must admit that I take this personally. The Yankees are, much as I hate to admit it, a first-class organization that does most things right. (YES is a perfect example of that - it has helped fund contending teams and make the owners a lot of money almost from conception.) They don’t need Jeff Bezos.

    Now, there’s a baseball team in Queens - not far from where he was originally planning to build HQ2 - that could use a little Bezos magic (and money). For Bezos to go to the Bronx and have a relationship with the Yankees just breaks my heart. That said .. this makes total sense. The Yankees have as much of a national fan base as any baseball team, and so making their games available for streaming to Prime members is a really good idea, illustrative of how Amazon continually tries to drive value to Prime members.

    Published on: March 11, 2019

    This particular “Worth Reading” story really has nothing to do with business, bbut I want to recommend it to you anyway.

    It is by Kara Swisher, the technology writer and New York Times columnist, who did a piece the other day prompted by the death of actor Luke Perry, who was only 52 when he had a stroke that killed him.

    Swisher had one, too. When she was 49. She happened to be in Hong kong, getting ready to run a conference at which people like Jack Ma (of Alibaba) and Al Gore (of the internet) were speaking.

    And she may only have survived because when she texted her brother, a doctor, about not feeling well, he immediately recognized the symptoms, called her up and said, “Get to a hospital now. You’re having a stroke.”

    Swisher writes, “That’s because when it comes to strokes, time is critical. You have to get the blood flowing back to the part of the brain that is not getting it.

    “So I listened, for once, sidelining the obstreperous little sister, and took a car to get an emergency M.R.I.

    “There it was on the screen: evidence of a transient ischemic attack, often called a mini-stroke.”

    The doctors at the hospital were clear. If she’d ignored the symptoms, she might have been permanently incapacitated. She might have died.

    It is a thoughtful piece, I think … and not just because I have two friends who suffered strokes at young ages, one in his late forties and one in his late fifties. One got through it without any problem, but the other saw his life change forever.

    It sounds like Swisher’s life changed forever, too, even though she suffered no long-term effects. She quotes the Buddhist teacher Frank Ostaseski, who once said that death is “a secret teacher hiding in plain sight.”

    I recommend this column highly, and you can read it here.
    KC's View:

    Published on: March 11, 2019

    • The New York Times reports that the Federal Bureau of Investigation (FBI) “is investigating whether employees of one of Walmart’s technology contractors obtained sensitive information by monitoring email accounts at the retail giant, including those of several executives.”

    When filing for a search warrant, the FBI “accused the Compucom employees of sifting through internal Walmart correspondence in search of information that could give the firm an edge over competitors. In at least one instance, the filing says, the Compucom employees obtained information that may have helped the firm submit a winning bid.

    “A spokesman for Compucom, which was acquired by Office Depot for $1 billion in 2017, said the company was cooperating in the investigation.”

    Walmart has said that it “terminated its contract with Compucom and has put in place ‘new tools to improve our monitoring process’ of I.T. contractors in light of the incident.”
    KC's View:

    Published on: March 11, 2019

    …with brief, occasional, italicized and sometimes gratuitous commentary…

    Gizmodo reports that the US Food and Drug Administration (FDA) “announced on Friday that it is lifting an import ban that prevented a brand of genetically modified salmon - dubbed ‘Frankenfish’ by some - from reaching U.S. shopping selves … The FDA originally cleared AquaAdvantage salmon, which is genetically engineered to grow year-round and thus reach the market twice as fast as unmodified salmon, in 2015 following a lengthy, years-long review … However, Congress passed a law in 2016 mandating the formation of labeling guidelines informing customers that the fish was genetically modified - standards that weren’t finalized until late last year.”

    Just label it. Be clear. Be unambiguous. Be obvious. But also be educational … explain to consumers why this is a good thing for them. Tell the story. Own the narrative. And then let shoppers decide based on real information.

    • The Wall Street Journal reports that Costco “said it has raised starting wages for store workers to $15 an hour, as a tight U.S. labor market continues to drive fierce competition for hourly staffers.

    “Executives at the Issaquah, Wash.,-based retailer, which has around 245,000 workers, said Thursday the company raised its minimum hourly wage for U.S. and Canadian staff from $14 this week. It is the second such increase in less than a year at the company, which raised its hourly minimum from $13 last June. Costco will also increase pay for supervisors and has started offering paid parental leave for hourly employees, said chief financial officer Richard Galanti.”

    Costco always has been a good employer, but it is amazing how better they can be when they have to, because labor has gotten so tight.

    • The Associated Press reports that “unions representing thousands of Stop & Shop workers in Massachusetts and Rhode Island are voting to authorize a strike if a contract dispute with the supermarket chain drags on … Members of Local 328 of the United Food and Commercial Workers’ union voted unanimously in favor of the authorization Sunday in Foxborough, Massachusetts. Three other UFCW locals have also voted to authorize a strike. Another chapter representing Stop & Shop workers, Local 919, is slated to meet later Sunday.”

    The union says that Ahold Delhaize-owned Stop & Shop wants to “degrade the quality of life” of employees with inadequate offers on insurance, pensions and vacation time; Stop & Shop says its offer “would ensure full-time associates continue to be among the highest paid food retail workers in the region.”

    • We reported here recently that Tesla has decided to move to an online-only sales model, and would close a number of its stores around the country, using just a few of them as showrooms but not actually taking orders there; the decision was seen as an effort by the ambitious but seemingly overextended company to cut costs, which would then allow it to meet its goal of selling its new Model 3 electric sedan for $35,000.

    Well, not so fast.

    Fortune reports that Tesla has as much as $1.6 billion in lease obligations, and the mall landlords from whom it has been leasing space seem to have little inclination to let Tesla off the hook.

    In a securities filings, the Journal writes, Tesla warned “of the risk that its ‘various non-cancellable operating lease agreements’ could lead to legal battles should the company seek to terminate them.” Which would mean, at the very least, that Tesla and its often-unpredictable CEO, Elon Musk, may not be able to save as much money as hoped.
    KC's View:

    Published on: March 11, 2019

    Dan Jenkins, the Sports Illustrated writer turned novelist, has passed away at age 90 after suffering heart and renal failure, as well as a broken hip.

    Jenkins was one of several writers at SI - other included Roy Blount Jr. and Frank Deford - who brought an uncommon literary sensibility and erudition to their magazine pieces. But Jenkins really hit the big time with “Semi-Tough,” his novel about pro football as seen through the irreverent and politically incorrect eyes of quarterback Billy Clyde Puckett; the book was turned into a movie with Bury Reynolds (naturally) as Billy Clyde.

    He also wrote the novels “Dead Solid Perfect,” “Baja Oklahoma,” and “You Gotta Play Hurt,” as well as nonfiction books such as “His Ownself: A Semi-Memoir.”
    KC's View:
    I don’t know how many young people know who Dan Jenkins is, and to be honest, I’m not even sure how “Semi-Tough:” holds up as a novel; I remember reading the paperback sometime in the mid-seventies. But I also remember laughing as hard as I’ve ever laughed while reading a book … it was just so amazingly observational and and subversive in its view of professional sports. (In fact, I can remember vividly - 40 years later! - the scene in the book that literally made me cry I was laughing so hard. I can’t recount it here, partially because I’d never do it justice, and partially because the prose was not even close to being PG-rated.)

    Published on: March 11, 2019

    Got a number of reactions to last week’s FaceTime commentary about business lessons from baseball’s spring training.

    One MNB reader wrote:

    A Babe Ruth quote you once shared (years ago) has stuck with me through my career:  “Yesterday’s home run doesn’t win today’s ballgame.”

    Consistent tenacity and relentless execution!

    MNB reader Brian Burnham wrote: 

    Kevin, I agree, that is why I am over in Jupiter FL. watching the Cardinals, nothing beats a good spring training game when you get to watch the stars for 3 innings and then the young guys for the rest of the game.

    It is fun to see the young guys finally make it to the big show and say I saw him play for the past couple years in Florida.  Or going out to watch practice on the back fields and seeing the heroes of the past working with young kids and how they are hanging on to every word of advice they get.

    Plus the weather is a whole lot better here than in Iowa.

    And, from MNB reader Dave Wolcott:

    Yes, there is something about spring training that holds the promise of energy and excitement.  As someone who lives in the Phoenix area I always look forward to everything spring training brings (30 minutes from watching all 15 teams!  You should check it out one year!).

    Your comments about Sandy Koufax reminded me of one of my favorite quotes by Tony Dungy in his book “Quiet Strength” (unfortunately I use it often during internal meetings when we have come off the rails, lost sight of the important things that drive success).  He was talking about Chuck Noll’s philosophy on what it took to be successful and said, “Champions are not made by doing extraordinary things, champions are made by doing the ordinary things better than anyone else”.  This philosophy can help in our business.  Like you said, focus on the small things - hitting/throwing, blocking/tackling, producing/selling differentiated products, delighting/providing flawless service to our customers.  Thanks for reminding me of this important business/life lesson!

    My pleasure.

    You are lucky to be in a place where so much spring training baseball is easily accessible. I’ve done the Cactus League once … with my brothers and my dad, and I wrote about it here.
    KC's View: