Friday, January 27, 2012

Social Contracts...

If you read the business section of any large newspaper, any business magazine, or online news service you’ll notice that Apple Computers is all the rage.  Why shouldn’t it be?
Their revenues in 2011 were $108B (a 166% increase in one year), their profits before taxes (EBITDA) were $35.6B (up 184%) or roughly $400K of generated profits per employee.  They have a market cap over $400B and $98B in cash (yes that is "B" as in billion).

Why is Apple performing so well?...didn’t anyone tell them that we’re in a great global recession?

Simply put...Apple is creating products that people want to buy...note I said "want to buy" not need to buy.

There are other gigantic multinational companies who offer consumers products that directly compete with the Apple iPhone including Samsung, HTC, LG, and Nokia, who offer both the Google Android and Microsoft mobile operating systems.  The Amazon Kindle and Barnes & Noble’s NOOK tablet computers are priced much lower than the Apple iPad.

Therefore, consumers do have viable choices from well known companies offering high-quality products at very competitive prices.

Nor are smart phones and tablet computers considered basic necessities such as food, clean water, housing, clothing, gasoline, and/or electricity. 

No one needs to buy a relatively expensive Apple product...but yet they do.

I read an interesting article in the New York Times this past Sunday (click
here for the link) about Apple.  The authors take Apple to task for exporting American manufacturing jobs to factories overseas despite their record profits.  Apple currently employs about 43,000 workers in the United States and another 25,000 workers overseas. However these figures pale in comparison to the estimated 700,000 engineers, assemblers, managers, and supply chain specialists who are employed, primarily in Asia, by contractors who ultimately build Apple products.

These Asian factory workers earn a small fraction of the wages earned by a comparable U.S. worker. With 12-hour work days, on-site dormitory housing, communal bathrooms, and company dining facilities, the life of a typical contract worker is in stark contrast to the lifestyle enjoyed by their American counterparts.

The authors’ main focal point of the article was that Apple was making obscene profits on the backs of cheap foreign labor instead of creating jobs in America.

Apple’s primary defense to these accusations is that there are simply not enough educated, trained and willing workers in America to adequately staff their factories and that the labor cost-content in a typical portable computer is relatively low.  When the iPhone product line was staffed, 8,700 Chinese engineers were hired in 15 days.  Company analysts claim that it would have taken Apple nearly 9 months to hire the same amount of engineers in the U.S. and Apple simply didn’t have the time to wait.

The real interesting fact is that when Apple did have manufacturing here in the U.S. (in Elk Grove, CA), a typical $1500 Apple computer had about $22 of direct labor costs in it while the same machine being made in Asia had $6 of direct labor costs so although the labor costs were lower, the overall impact of the labor costs were negligible. 

Most, if not all, electronic components (parts used in the manufacturing of phones and computers) are manufactured in Asia.  It makes logistical sense to assemble the finished product within the same proximity of the component factories rather than transporting the parts back to North America for assembly.

According to experts, the fundamental problems with manufacturing high-tech electronics in America are more about raw material and supply chain logistics, the time it takes to complete a production cycle, and lack of highly qualified workers than wages.

At the end of the article I noticed that there were over 700 comments by readers.  The overwhelming majority of the comments chastised Apple for making obscene profits by exploiting low-cost labor.  These people were visibly angry at Apple.  They called for the boycott of Apple and all Apple products or to perhaps add a large import duty to the cost of the foreign made products.  They wanted to force Apple to move their manufacturing back to the United States or face serious consequences. 

I chuckled at the naivety of the commentators.

I thought to myself, "Where do they think LG, Nokia, Motorola, Samsung, Toshiba, Samsung, Sony or any other global electronics company manufactures their products...go ahead and boycott Apple and instead buy a Chinese made Kindle or LG phone...that’ll teach them". 

I suppose that the government can add a large import duty to all electronic products manufactured abroad, but that only means it will cost the average consumer more money for an electronic device as the cost of the import duty will surely be passed onto the consumer...of course with the tax receipts flowing into the government’s coffers. 

Organizing boycotts and levying surtaxes will do absolutely NOTHING to create domestic jobs.  These factories are simply not coming back to the United States.  Once again, it’s not about direct labor costs.  

The New York Times article did cause me to reflect however about the social contracts that we have engaged with any large company.

Exactly where do Apple’s corporate/social responsibilities lie?

In my opinion, Apple has three main responsibilities:

  1. They must not break any laws.  This includes international, sovereign, state, and/or local laws pertaining to environmental regulation, intellectual property, child/slave labor, worker safety and anti-corruption.  Each sovereign country has its own set of laws and standards and adherence to these laws and regulations are paramount.  This responsibility includes monitoring and enforcing these standards upon their sub-contractors and manufacturing partners.

  2. They are responsible to earn profits for their shareholders (owners).  Apple is a widely-held public company meaning that its "owners" are you, me, and anyone who has a 401K, IRA, pension and/or mutual fund account.  There are nearly 920 million shares of Apple stock held by hundreds of thousands of institutions and individuals.  Company profits are typically returned to investors in the form of a dividend; however, Apple has used its profits of the past to reinvest in new products and technologies which has caused its current profits (and stock price) to soar and create wealth for its shareholders.  They also have a responsibility to pay taxes on their profits.  Apple paid a bit over $8B in taxes last year or approximately 31% of their profits.

  3. They have a responsibility to create great products and new technologies that are safe and that people want to buy.  If they made dangerous or lousy products (like they did in the late-90’s), then no one would be willing to purchase them.  Apple products sell for a premium price because they are well-designed and well-made with quality components (like their scratch-proof glass screens versus a cheaper plastic screen).
Apple (or any other company) is no more responsible for creating American jobs than Americans are responsible for purchasing their products.  That’s simply not a part of the contract.

If a company meets its responsibilities, as stated above...then they have fulfilled the social contract (in my opinion).

That’s responsible capitalism at its very core...

and I’m happy to support it...

Thank you very much for your support of OptiFuse where we support responsible capitalism and hope that you do as well.

Friday, January 20, 2012

What is the Big Idea?

The title of "genius" might be bestowed upon a person with incredible intellect. Some might speak of a genius as a creator, someone who develops something from nothing, such as a great artist or musical performer. Still others may consider the great visionary whose talent is foreseeing the world five, ten or twenty years from now, a genius.

Regardless of your definition of term "genius", there is one common trait among all geniuses...phenomenal focus and internal drive to make themselves (and perhaps the world) better.

Such a man was Steve Jobs.

For Christmas, this past December, I was presented with a copy of his authorized biography.  The book was a good glimpse into Steve Jobs the visionary and Steve Jobs the person.

I must confess only recently, after years of spurning Apple products, I am now a convert. I so enjoy my iPhone and iPod.  They make my life more productive and enjoyable.
Steve Jobs, the visionary, is responsible for changing the world. He was responsible, in part or in whole, for creating and/or developing: 

  • One of the first and all-time best-selling desktop personal computer - Apple II.
  • The Macintosh computer using the first graphical mouse driven computer operating system. (although he actually stole or "borrowed" the idea from Xerox).
  • Pixar Studios (although he originally bought Pixar for their hardware and software not their ability to create ground-breaking animation - rather it was John Lasseter who was in charge of creating content such as Toy Story).
  • The Apple IPod - allowing people to store and play up to 1000 songs on a portable device.
  • iTunes - Giving consumers the opportunity to legally download individual songs to their portable music device.
  • The Apple Store - a revolutionary retail store, completing the total vertically integration of design, manufacturing, and distribution of all Apple products.
  • Tunes store - creating the first digital hub that connects all personal computing devices in one place.
  • The iPhone - creating the first truly integrated "smart" phone using apps to drive content.
  • The iPad - The first commercially successful tablet computing device.
As much as I am a fan of Steve Jobs the technology guru, I am in no way a fan of Steve Jobs, the person. He had an intense focus in building Apple that didn’t allow for failure. It is widely reported that he spent a great deal of his life ignoring his family, sometimes not seeing his oldest daughter for years at a time.

He took joy in publicly berating employees and subordinates. Jobs selfishly refused to share development credit with others who were also instrumental and essential in creating much of Apple’s success.  He was ruthless in his persuit of the next big idea, couldn’t stand incompetence and was impatient with others (even his peers).

He tended to see the world in a binary manner where all people were lumped into two categories: awesome or idiots. All products were either amazing or crap. There were no shades of grey for Steve Jobs.

Nonetheless, Steve Jobs was a truly visionary who had the uncanny ability to make observations, find a significant void, and develop a clear path in creating a product or service to remedy the situation. It was never about the was about creating incredible life-altering products. This one man’s existence has altered the way the entire planet lives.

I was recently on a long solo bike ride and had the opportunity to reflect upon the accomplishments in my own life. I have never been considered a genius or a visionary. I am at peace with that assessment.

As I rode a bit further, I began thinking about problems that face the world today and what are the opportunities to make a huge and lasting difference on a global scale.  Maybe perhaps in the same way Steve Jobs may have thought.

After a few hours of thinking, I came up with two great world problems (opportunities) that if they could be solved, would effectively change the lives of millions of people. Now I don’t have many of the answers to overcoming the technology and/or geo-political barriers, but it’s early in the process and the project has really only just begun.

Today, I wanted to share one of those ideas with you. Who knows, perhaps you might have some great ideas or thoughts of your own that you may want to add to the discussion. I believe that there many untapped creative minds out there who may just need an idea to focus upon.

Here is that idea.

It concerns the most basic and abundant molecule found on the planet....water.

Although 2/3 of the earth’s surface is covered in water, sea water is not drinkable due to the high concentration of salt (on average about 3.5%). In most places around the globe (outside North America and Western Europe), clean fresh water is scarce. Diseases such as cholera, E- coli, dysentery and typhoid are transmitted through poor water supplies and kill millions of people each year.

Sea water can be desalinated using a distillation process (turning the water into steam and then cooling the steam to create fresh water). A great amount of energy is needed to complete the distillation process...however this may be a community’s only way to create potable water for its citizens.

In order to create economies of scale, desalination facilities are large public works projects built and controlled by government or quasi-government agencies. These desalination plants are expensive to build and expensive to operate, many due to the energy needed to complete the process.

My idea then is to develop a small-scale low-cost distillation machine that could perhaps use solar technology to produce a few gallons of clean water each day from dirty or sea water. Think of it as a personal water machine.

Sound impossible?

Prior to the first personal computer being built in 1976, computers were extremely large main-frame machines built and operated by governmental or quasi-government agencies. They were large, extremely expensive to build and to operate, and required a great amount of electrical power and cooling.

Thanks to visionaries, like Steve Jobs, we now have powerful personal computing devices that fit into our shirt pockets. Today’s portable computers function as a phone, a music player, an internet portal, a gaming device, a digital camera, and GPS.

I’m not really sure where the idea of a "personal water machine" will go...

...but perhaps it’s a big idea worthy of some consideration.

Any thoughts?

Thank you very much for your support of OptiFuse where we understand that big ideas make the world a better place to live for all of us.

Friday, January 6, 2012

Believing in Faith...

Whether you think you can or think you can’’re correct ~ Henry Ford

Last week I found myself driving on a long road-trip from San Diego to Wyoming to visit family and do some skiing for the holidays. Sixteen hours of driving, each way, gave me plenty of time to be alone with my thoughts.

Sometime between Provo and Mesquite, in the early dawn of New Year’s Day, I was listening to the radio when the host began talking about the current state of the economy and how low consumer confidence was causing the recession to deepen. 

I took a moment to ponder the word "confidence" and reflect on its meaning.

The word comes from the Latin root confide and is a compound word. In Latin, con means "with" and fide means "faith" or "trust". When someone is sincere in a business deal we speak of a "bona fide" offer. When we speak of being faithful to wedding vows, we say that person exhibits "fidelity".

Confidence therefore is all about having faith and trust, whether that faith is in the economy, in other people, or in oneself. It is the belief that one will stand by his/her word.

Having a confidence in oneself is not conceit (a love of oneself) but rather the ability to overcome fear and persevere even when the odds of success are long. Every human being suffers from fear at one time or another but it is our confidence in ourselves that allow us to conquer our fears and be successful despite of our fears. 

By continually fighting past our own fears, we can inspire others to confront their own fears and become a stronger person. Leaders are successful not necessarily because they have all the right answers or are absent of fear but rather because they inspire others to become better people and live higher quality lives.

Not too long ago I was having a discussion with an employee at OptiFuse. We were facing a difficult situation and he asked me what the right answer was in order to solve the problem. I explained to him that I didn’t have any crystal ball to consult with in order to come up with the "right answer" to our particular problem but that I was confident that he would arrive at a potential solution. My confidence in his decision making capabilities gave him his own confidence to try to solve the problem.

We are all born with certain talents. From these talents, we are taught and develop a variety of applied skills. Throughout our lives different situations arise that cause us to use our talents and skills to solve problems. Whether we succeed or fail at solving these problems, we gain practical experience. Finally, when we combine our talents, skills and experience we have valuable knowledge and know-how.

Knowledge itself is not enough to become successful. Confidence, goals, and perseverance are the catalysts that help us to use our knowledge to become truly successful.

Confidence comes from fully recognizing and understanding our God-given talents. We need to be introspective and catalog our personal assets and potential liabilities. We should work to develop and hone our talents and minimize our shortcomings.

Confidence also is derived from successful accomplishments. When we first start out in a new venture we are bound to fail. We slowly begin to succeed which leads us to competence. As our skills and experience grows, we begin to master that which we once failed. 

Rarely does one start a new venture without experiencing some level of failure.

I learned to ski many years ago and have grown to be proficient in the sport (I am far below the level of mastery but can still tackle double black diamond runs on occasion). 

While on vacation last week, I decided that I wanted to forgo skiing in order to learn to snow board. I thought that this would be a relatively easy task due to my skiing and skateboarding (as a teenager) experiences.

My brother-in-law, Jeff, who is an excellent snowboarder, gave me a few quick lessons on how to turn and stop. He is a good teacher not because he has snowboarding skills, but rather because he demonstrates the patience needed to transfer his knowledge and skills to his willing student. He also instills confidence in his students as he encourages and coaches them to success.

As I rode up the chair lift to the top of the beginner slope I felt a sense of nervousness in the anticipation of trying something new and a certain fear that I might actually seriously hurt myself. At the same time, I felt a certain confidence knowing that I have begun and succeeded with new ventures in the past and was looking forward to learning a new skill.

Getting down the mountain on that first run proved to be most difficult. I must have fallen at least 15 times (sometimes in a most spectacular time actually doing a cart wheel as I fell forward). When I arrived at the bottom of the hill sometime later, I was out of breath and beaten up. 

Jeff saw me and asked if I wanted to trade my snowboard in for some skis. I told him no and went to queue up at the lift.

As I made my second, third and subsequent attempts, I began to find my balance. My ability to turn, stop and change direction improved. I fell less times. My skills improved each time I went down the mountain and by the end of the day, I found that I was actually becoming somewhat proficient.

Although my body ached by the end of the day (due to the many crashes I had experienced throughout the day and the muscles I seldom used), I was elated that I had experienced something new that day (as well as finding a new appreciation for those people who have actually mastered and excelled at the sport).

A rich life comes from learning new things and acquiring the knowledge to create success and become a better person.

Faith in yourself is the first step to achievement. Faith in yourself will help you to begin new ventures and to try new experiences. Faith in yourself helps you keep going when you’ve failed or fallen down. Faith is believing that you’ll succeed no matter what comes your way.

Thank you very much for your support of OptiFuse where we truly believe that we will succeed by helping our customers to succeed.

Tuesday, January 3, 2012

Understanding the WHY...

People don’t buy what you do...they buy why you do it... ~ Simon Sinek

I was recently talking with a good friend of mine who works for a large corporation that builds phone chips. She explained to me that the company only allows so much vacation time to be accrued and that she needed to use at least five days of vacation in the next few weeks as not to lose soon-to-be newly earned vacation time.

So I asked her where she planned to go on vacation and she replied, "I’m going to Northern California".

Noting that I was originally from Northern California, I asked her why she chose that particular destination and what was she planning on doing once she got there.

She responded to my question by telling me that she didn’t have any set plans but that it was one of her life-long goals to go there.

So I asked her whether or not she was planning on flying or driving there. She said that she hadn’t really made up her mind yet.

I thought to myself, here’s a person who has "life-long" ambition to do something but has no idea why she set the goal in the first place, how she wanted to do to achieve her somewhat goal, and what her plans were to achieve it. She just knew that she was going to do something that was goal-worthy.

Compare this to a person who may have a similar goal. Larry is a good friend of mine who also happens to be a wine aficionado. He has never actually been to Napa Valley but has been collecting wine from the region for many years. His goal is to visit several of his favorite wineries in order to learn more about their wines and possibly discover some smaller wineries in Napa that do not have a large distribution network. He has contacted several of the establishments and arranged private tours and tastings with the owners and wine makers. He will fly into San Francisco International, hire a car and driver, and stay at a local inn affording him the opportunity to spend as much time in the area as possible.

Larry’s goal is formulated around his "why". He knows exactly "why" he is going, he has determined "how" he will achieve his goal, and has formulated a plan of action as to "what" he needs to do to make it actually happen.

January 1st is fast approaching and with it, a laundry list of New Year’s resolutions we make each year. We want to lose weight, learn a new skill, go to the gym, read more, spend more quality time with our families, make more sales calls, break 90 on the golf course, save more money, go back to school, and/or an endless variety of other worthwhile goals.

We create a plan of what our end results might be and how we’re planning on achieving these goals. Some of us even take the time to write down our goals (we know that we’re 4 times more likely to achieve our goals when they are written down and measured).

We have the "what" and "how" parts down pat...

The point that we ultimately miss is the "why"...

Why do we want to lose weight?...make more sales calls? more money?

Do we want to lose weight to look more attractive and perhaps younger? prove to other people that we have some self-control and will-power? put less strain on our muscles and joints leading to less body aches and pains?...because our spouse and/or kids asked us to?...because we are looking for more self-esteem?

I met a man named Simon Sinek several years ago when I was attending classes at MIT in Boston. It was the first time I had heard his concept of the Golden Circle of motivation - Why, How and What.

As he explains the concept, most individuals and organizations spend a great deal of time developing ideas, products, and services from the outside of the circle and move inwards. They will tell you in great detail what it is that they do (the What). Some of these individuals and/or companies will tell you what their formula for success (the How) but rarely will they explain to us why they do it. Maybe perhaps it’s because they really don’t know themselves why they do what they do (making a profit is not a "Why" but rather a result of the "What").

Take, for an example, a typical car manufacturer. They make a vehicle that gets good gas mileage (the What). They will tell you that they achieve this using a hybrid gas/electric engine (the How). However most car companies fail to tell us a compelling reason why buying hybrid vehicle might be a good choice when we go car shopping.

They start with the what...and tell us the how...and never quite get to the why.

Contrast this approach with a different that starts inward and works out...
"We (the car company) are committed to a clean planet and to the elimination of fossil fuels. Therefore today we only build cars using electric hybrid engines that uses less gas and creates less carbon emissions..."

It’s a completely different approach...we know Why the car company makes low emission vehicles...

(Click HERE to watch Simon’s short but incredible TED presentation about the concept of "Why")
As we begin this New Year...instead of doing the same old thing of making typical New Year’s resolutions perhaps we should take a few additional minutes to consider a different approach and focus a bit on our "Why".

Why am I trying to lose weight?

Why do I want to spend more time with my family?

Why do I want to go back to school and learn some new things?

Why does it matter that I spend more time volunteering next year?

Why should I make more sales calls?

If we can understand the underlying "Why" for our goals and resolutions, then perhaps we can establish some real action plans that might actually work for us this next year...and many more still yet to come...

Achieving your resolutions is hard...but maybe this year they might seem just a bit easier with the proper motivation.

Thank you very much for your support of OptiFuse where we sincerely hope that the new year brings you health, happiness, laughter, prosperity and knowledge.