The Race to the Bottom...

I recently found myself at Best Buy to purchase a new iPad cover. 

 

While meandering up and down the aisles, I saw a young lady scanning price tags of televisions on her smart phone.

 

I was curious as to what she was up to, so I stopped and asked her...  

 

She brazenly told me that she was checking Best Buy’s pricing against similar items that she can purchase
less expensively from a retailer on the Internet.  She bragged that she expected to save about $50 (on a $600 TV).

 

 ... plus she didn’t need to pay the sales tax if she bought it from a site outside California.

 

I then asked her... why do you need to come to Best Buy if you’ve already decided to purchase the TV from an online e-tailer?...

 

She explained that she wanted to look at the televisions in the store... because there was no practical way for her to see what she was buying via the Internet... this way she could compare and contrast features and screen quality... and then make her actual purchase later.

 

Now I’m fairly certain that my experience with this girl wasn’t an isolated incidence by any means.  People do this every day.

 

My good friend Mark operates a small business that sells fitness equipment.  

 

He has told me, in the past, that this type of shopper is a regular occurrence in his retail store.

 

I asked him how he can try to combat this type of shopping... and he told me that frankly he had stopped trying.

 

Instead, he tells me that he has now tried to embrace the customer by offering them something that they can’t buy on the Internet... his knowledge and know-how.

 

As it turns out, most of the fitness equipment purchased on the Internet needs to be assembled and serviced.  Additionally, there are many various accessory items that are not included with their purchase such as ground mats (you’d hate to ruin your new hardware floors) and convenience items such as drink stands and personal fans.

 

The installation... the service... and the accessories are all high margin profit centers for Mark.

 

He welcomes price shoppers into his store with open arms so that he can establish a relationship with the customer... not to sell them equipment... but rather to sell them his after-sale support.

 

Mark’s competitive advantages are knowledge - how to correctly assemble and service complicated fitness equipment and his know-how - what add-on items are required / wanted to make the equipment more useful.

 

We see this same thing in our business almost every day.

 

A customer will tell us that our prices are too high as compared with buying similar products in China.

 

I try to explain to the customer that OptiFuse is not trying to compete with the pricing that China (or anywhere else for that matter) can offer.

 

The customer, upon further investigation, will soon discover (perhaps not until it’s too late) that their supposedly low purchased cost from China isn’t all that low once they weigh all of the factors.

 

The neglected considerations might include:

• The difficulty in finding high quality manufacturers
• Ocean or airfreight costs
• Local transportatin and port handling fees
• Import duties
• The cost of an import bond (required by U.S. Customs)
• Wire transfer and other banking fees
• The time-cost of money (most factories require cash-in-advance)
• Language difficulties
• Lead-time to get parts (typically 10-16 weeks)
• Maintaining quality standards (your first article samples might be okay... but what about future orders)
• The need to place large minimum orders

Not long ago, I actually had a former customer contact me requesting a favor (this customer left us after many years of great service to purchase parts directly from a source in Asia).

 

Apparently, this customer had prepaid a considerable amount of money to the vendor for some component parts, but now the vendor appears to have absconded with their money.

 

I asked the customer what they wanted me to do about it?

 

They pleaded with me to use our company’s network to assist them to locate the people responsible for the theft and then to help them to locate a more reputable company to work with (still refusing to do business with us directly).

 

I respectfully declined... I have better things to do with my limited resources.

 

The new millennium has brought us a new economy... an economy of no-frills airlines, 99¢ stores, Internet shopping, and club stores where you’re required to purchase a years’ supply of something in order to save a few pennies.

 

Today everyone appears to be looking for bargains...

 

...but are those things that we end up with truly bargains?

 

Is it a bargain to buy a plane ticket for $200 only to have to pay another $100 for baggage and other airline imposed fees?

 

...or so much food that it spoils before we can eat it all?

 

...or a cheap car that we buy that ends up spending more time in the shop than on the road?

 

Many times... what we think is a bargain ends up costing us more in the end... even if it’s not money... but in time, grief and aggravation...

 

Maybe the pendulum is starting to swing a bit to the other side.

 

Finally there are some companies embracing the fact that some people are fed up with inferior products and/or service.

 

Recently my wife and I went to a new luxury movie theater, Cinepolis, where the chairs reclined and restaurant quality refreshments and adult beverages can be brought directly to you by a server.

 

The cost of admission is about $10 more than that of a "regular" multiplex with small uncomfortable seats and over-buttered popcorn...

 

While it is true that both crowds saw the same movie... the cinematic experience of Cinepolis has now raised the bar to a point where the real bargain was not saving $10 but rather creating a truly memorable experience for me and my wife.

 

I must not be the only person who believes in service as the house was packed with patrons...

 

I suspect that there will be more of these types of service companies forming in the future... to support those people who understand that life isn’t a race to the bottom (or bottom line)...

 

There will always be patrons willing to pay top dollar to receive top service and/or product quality.

 

If you’re in business... you should be thinking about what you can offer to your customers other than low prices...

 

... if not... you’ll find yourself in a race to the bottom... a race that you’d rather not win...

 

Thank you very much for your support of OptiFuse where we always give our customers more value for their money. 

Opportunity Costs...

"Life is a gift, and it offers us the privilege, opportunity and responsibility to give something back by becoming more."

~ Tony Robbins
                      

I’m friends with the owner and president of a small company that manufactures  replacement windows near our office. His name is Steve.

 

Steve and I met each other at a local Chamber of Commerce mixer last spring and realized that we had a lot in common both personally and professional so naturally we became friends within a short while.

 

While enjoying a cup of coffee one morning at a local diner, Steve mentioned to me that his business has been doing exceptionally well over the last few years and he was thinking of expanding his operations.

 

He detailed several new initiatives that included expanding his sales staff, buying a new building, and purchasing a new piece of relatively expensive production equipment.

 

After careful consideration, Steve has decided to make the purchase of machinery his first priority.

 

Steve explained to me, "I’ve done the math and it appears that we’ll break even for the first two years, but then it’ll start giving us a good return after that".

 

I was elated for Steve and his growing business... he definitely must be doing something right.  

 

At the same time, Steve appeared to me to be more of an operations person than a numbers guy, so I wanted to ask him a few more questions about the new equipment purchase.

 

I asked him some basic questions, like how much was the purchase price?... , was he planning to pay cash or was he planning to finance his new acquisition?... how much more work could this new machine produce over and above what his current machinery could produce?...

 

Steve’s long-time business philosophy was that he would always pay cash for anything that depreciates and finance anything that would appreciate. So in the case of this new machine, he would be paying all cash.

 

I was curious as to why he thought that the new equipment would be just a break-even proposition the first two years.  He replied that he currently didn’t have enough business to actually keep his old equipment and new machine working all the time but that after a few years, he hoped to be able to grow his sales to a point where the equipment would be running more efficiently.

 

He also explained to me that by buying the device with cash, there wasn’t any great urgency to use the machine at full capacity as it wasn’t costing him anything while it sat idle.

 

I think that Steve is a good businessman and I somewhat like his idea of purchasing depreciating assets with cash, however, I think that perhaps he is forgetting one significant point.

 

An idle piece of machinery does indeed cost him money... in that he could have alternatively used the cash to create a better return to his company somewhere else.

 

His real cost comes from "lost opportunities" that they might have occurred by putting his cash into another area that could give him a higher yield on his investment; at least in the short run.

 

Since his factory was not currently running at full-capacity, I suggested to Steve that perhaps he reconsider the option of hiring additional sales staff.  In this way, he could build a larger client base (and demand) prior to actually purchasing the additional machinery.

 

Steve thanked me for my input, but his mind was already made up.

 

As I drove back to my office, I thought a bit more about the concept of lost opportunity cost.

 

Every person, household, and/or company has a finite amount of resources available to them. These resources could be money, time, space, credit, or manpower (womanpower).

 

Every day, we, as individuals and/or leaders, need to allocate those limited resources to maximize our returns.

 

It’s a simple concept...

 

If we spend our time or money doing one thing... it is at the expense of doing something else.

 

But here’s the rub... how do we know... ahead of time... which investment will pay off more than another investment?

 

I’ve heard countless people exclaim that their lives would be so much different if they had only bought Microsoft stock at $5 or Apple shares at $11.25 (did you know that exactly 10 years ago today you could have bought Apple shares at the bargain price of $11.25?... today it closed a few pennies short of $500 with a 2:1 split in 2005... so for every $11.25 invested in October 2003 would yield you $1,000 today...).

 

The great majority of people did not invest in Microsoft or Apple stock when it was at a rock bottom price but instead invested in something else altogether (perhaps like a vacation, new car, designer clothing, tickets to sporting events, or extravagant meals)... and received nothing tangible for their expense.

 

Even more to the point is our investment of time...

 

At least with a monetary investment... we can always have the opportunity to earn more money to invest...

 

When we invest time... that time is lost forever... we can never earn more time...

 

We can invest our time educating ourselves... earning additional capital (also called "work")... resting and/or nourishing our bodies and minds... or perhaps simply exercising our bodies and minds...

 

On the other hand... we could also waste our God-given time... filling our minds and bodies with "junk-food"...

 

For everything that we actually do... there are thousands of other alternatives that we could be doing... some of them good... some of them not-so-good...

 

The first key "take-away" point here is that everything and anything has a cost associated with it... sometimes the cost isn’t monetary but rather it is hidden as the loss of time or a lost opportunity cost...

 

The second bigger point is if you’ve actually made wise investments (both in time and money)... and have succeeded in creating wealth... what will you do with your financial returns?...

 

People like Warren Buffett and Bill Gates have decided to give away their vast wealth to try and create a better world... other wealthy people have the sole intent to use their wealth to gain power and influence for themselves and their families...

 

As with most things in life... there is little that is black and white... but rather simply a spectrum of grey...

 

Living in America, we all have been given the unique opportunity to succeed... and with that opportunity comes a certain responsibility to allow others the same opportunities to achieve similar success...

 

No one guarantees us success... just the pursuit of success...

 

Thank you very much for your support of OptiFuse as we try our best to ensure that you have the best opportunity for success when it comes to circuit protection. 

This and That...

Today’s blog format is a slight change from the normal (yes... sometimes change is good)...

 

***   ***   ***

 

I was driving around town the other day when I noticed a large billboard sign for a local fast-food restaurant.  

 

The sign read... "Four tacos - One dollar"...

 

My first reaction was... I’ve eaten those tacos before and although that might be a good financial deal... it’s a bad deal in most other respects...

 

At one point in time, I came to realize that when it came to fast-food tacos... more isn’t necessarily better.  In fact... less was actually better.

 

Somewhere between Costco, Wal-Mart and the slew of 99¢ stores, we seem to have taken a loss of our senses.

 

Just because we get more for our money... it doesn’t make it better...

 

Today, there are over 200 channels of cable TV... plus hundreds of internet series... plus millions of homemade YouTube videos...

 

There is so much media content in fact, that if a person were to plant themselves in front of an Internet / Cable connected television and watch it for 18 hours a day / 365 days / 75 years, there is not enough time in one’s lifetime to watch all of the current content currently available.

 

The problem is that most (if not nearly all) of the content is simply unwatchable.

 

We have purchased clothing that we have never worn... we buy food stuff that spoils before we eat it... we have books, magazines and newspapers that we’ll never read...

 

I suspect we do this because somewhere we truly believe that we would wear those clothes, eat that food or read more... but that’s not reality.

 

We need bigger closets... larger refrigerators... and off-site storage spaces to keep all our books, dishes, furniture, toys and other items that we really don’t need or even want...

 

Somewhere down the road, perhaps we’ll all discover that a little bit of great usually trumps a lot of bad... and that goes for most things in life...

 

... just don’t tell that to big business marketeers or the government... they just want us to keep spending on things that we really don’t need or want...

 

***   ***   ***

 

I was having a discussion with a friend a couple of days ago about this latest budget debacle in Washington...

 

He concluded that the politicians just needed to put aside their ideological differences and learn to compromise to get something done...

 

I suggested to him that perhaps compromise wasn’t necessarily the way to go at all... instead of compromise... maybe we should look at trade-offs...

 

My friend looked at me somewhat dumbfounded...

 

"What’s the difference?" he asked.

 

I explained that there is a big difference between trade-offs and compromise... with trade-offs... you get something that you want... and the other person gets something they want...

 

Compromise, on the other hand, means that neither party gets what they want...

 

He still looked confused, so I gave him the following example:

 

Suppose you and your wife wanted to go on vacation...

 

Your perfect vacation is to relax on a warm sunny beach with your nose in a good book...

 

Your wife, on the other hand, wants to go on a week-long bicycle wine-tasting tour in France...

 

A compromise would be for you both to take a vacation to New York City... something that neither of you wanted to do but can tolerate...

 

However, a trade-off would be that one year you both go to Hawaii and one year you both go cycling in Bordeaux...

 

With compromise, no one gets what they want... while trade-offs allow you to get exactly what you want... only part of the time...

 

What we end up doing at home, business and government... is trying to appease everyone at once so everything we do gets moved to the bland center... one-size-fits-all...

 

Take a look at the cars on the road today... they are almost indistinguishable from one another (can you imagine if there were no logos bolted on... how would anyone know one car from another?)...

 

Very few companies take risks to make something truly remarkable... rather they play it safe by dumbing it down to the lowest denominator for the masses...

 

Government is the worst offender... make one box and put everyone in it... but take a poll first...

 

The world today allows for customization and personalization like never in history... no longer should we subjugated to the tyranny of the "OR" (do this OR that)... when we can have the freedom of the "AND" (do this AND that)...

 

We no longer need to compromise... maybe Baskin-Robbin’s 31 Flavors is on to something...

 

***   ***   ***

 

My old friend Rudy stopped by my office to pick up some football tickets.  I wasn’t able to go to the game, so I offered the tickets to Rudy.

 

As we spent a few minutes catching up with each other’s lives, he mentioned that he was an avid reader of the OptiFuse blog each week.

 

Overall he thought I did a decent job each week but wondered how I could keep coming up with fresh ideas week after week.

 

I admitted to him that after nearly four years of writing my weekly Friday blog, I was actually beginning to run out of interesting topics... (granted... interesting to me... not necessarily interesting to every one of my readers).

 

Rudy mentioned that he too wanted to write a blog, but he feared the same thing would happen to him... quickly running out of ideas...

 

"I’m not sure I could come up with that many interesting things to say", he confessed, "I’m not sure I’m committed enough to do it each and every week".

 

That’s when the idea hit us both... almost simultaneously. 

 

I need to have a few "guest bloggers", like Rudy, who have some interesting points to talk about and can write well enough to make it readable to the audience...

 

Heck... if radio and TV talk shows can have guest hosts... why can’t I do it as well?

 

I floated the idea by several of my close friends and advisers... and they all thought it was a great idea...

 

So here’s my challenge to my readers... maybe you have it in you to be a guest blogger... if so... I’d love to hear from you... e-mail me at jimk@optifuse.com

 

Here are my basic rules:

 

1)     You need to have something interesting to share...

 

2)     You need to be able to say it in 800-1000 words..

 

3)     The topic should not be political, religious, and/or too controversial (this is NOT conservative AM talk radio or liberal Public Broadcasting)... 

 

4)     I reserve the right to edit content where I deem it to be inappropriate for the audience...

 

Guest blogging won’t occur more than once a month... but I thought it might be fun to read what others are thinking about... and hopefully we will all be able to learn something new and interesting.

 

I hope you enjoyed the format today... and I hope you’ll like some of our guests writers in the future (maybe it’ll be you)...

 

...and thank you very much for your support of OptiFuse, where we believe that trying new things is what life is all about.

What is a Picture Worth?...

"You can pay me now...or you WILL pay me later"

~ Old Transmission Shop Slogan

 

"Hmmm...I wonder what this is...", I thought to myself...

 

It was Monday morning and for the past week I had been traveling in the New York area so the pile of mail on my desk was unusually large.

 

As I sorted through the mail, I found a letter addressed to the "OptiFuse Legal Department" from someone named Getty Images..

 

Whenever I see this type of letter, I immediately think of three things (two of which are bad)...

 

 1)   Some law firm is trying to solicit my business.

 

 2)   One of my customers is having a legal issue (such as a bankruptcy... and they owe us money).

 

 3)   I’m being sued for something I did or didn’t do.

 

Well of course it was number 3...

 

It seems as though I had mistakenly used a copyrighted picture in one of my blogs and now a company that I have never heard of wants to extort a pound of flesh.

 

My initial reaction was go into denial mode... "I didn’t see any registered mark on that photo... I just downloaded it from Google... I didn’t do anything wrong."

 

I then re-read the extortion letter very carefully to see if I could find any "loop-holes" or "wriggle room" in which to negotiate the sum...

 

The letter was very explicit...

 

They represented the photographer who took this photo. I used this photo without paying for it (they of course aren’t on my blog mailing list... but I do archive all my blogs on the OptiFuse website and that’s where the photo in question resided). Therefore I must immediately remove the image and pay them liquidated damages of $1000.

 

Getty Images was kind enough to send me a lot of additional information in order to scare me into paying up quickly such as "frequently asked questions" and examples of court cases where select copyright infringers were ordered by the courts to pay millions of dollars in restitution to the legal copyright holders.

 

In the FAQ section, it explains that the company is solely responsible for any copyright infringement even if it had hired outside people and/or firms to create the content. The content creator bears no responsibility only the website owner.

 

In addition, if you had actually purchased / licensed the photos from another source... it is quite possible that the person or company never actually owned the rights in the first place... so in essence... you were buying stolen property and needed to pay Getty Images punitive damages.

 

I also thought (erroneously) that a company owning the rights to an image needed to send the infringer a "cease and desist" letter before taking legal action, however FAQ section pointed out that OptiFuse wasn’t a patent infringement... but a copyright infringement and the "cease and desist" rules don’t apply.

 

Lastly, I discovered that ANYTHING that you publish ANYWHERE is automatically copyrighted by that individual who created that original material.

 

For example... you own the copyrights on all those Facebook photos that you publish (therefore you can potentially sue for damages, anyone you catch reposting your photos without your permission).

 

A person is not required to register any of their content with the U.S. Patent and Trademark office in order for their work to be copyrighted.

 

I was angry at myself for not knowing the rules of the game.

 

When I am in over my head, it’s time to bring in the hired thugs... attorneys...

 

I called my friend Brian, who I have known now for 25 years. Brian and I worked for the same company at one time (when he was still a sales engineer).  Now Brian is  a patent and intellectual properties attorney in the Bay Area.

 

Brian gave me a lot of legal information about what I had done and confirmed most of what I found in the extortion letter from Getty Images.

 

On Brian’s counsel, I had our web person immediately take down the image (as well as all other potentially non-licensed photos)...

 

The following day, I was ready to send my payment into the extortionists when I decided to do a little more homework.

 

What I discovered was a website dedicated to fighting Getty Images (and others like them).

 

The website was appropriately called www.extortionletterinfo.com

 

It was full of valuable information specifically regarding Getty Images (as well as some solicitations to purchase their legal defense services).

 

According to the website, Getty Images has engaged a company called Pic Scout who sends out Internet bots to scour sites looking for unlicensed images. Once they find a potential victim, they turn the matter over to the Getty Images attorneys, who then begin the threatening letter campaign.

 

It is estimated that Getty Images has now sent some 150,000 letters to companies and individuals in the U.S., Canada, Australia, and the U.K. requesting anywhere from $800 to $10,000 for unauthorized use of their managed images... (doing the math shows that if they average $1,000 per letter... they have pocketed a cool $150M since 2006 when this "enforcement" campaign started.)

 

I also learned that Getty Images will only harass the victims for so long before they turn over the account to a collection agency by the name of NCS (usually in about 60 days).

 

NCS will continue the harassment and threats... telling you that if your matter goes to trial, you will be liable for statutory damages that could total millions of dollars in punitive damages and court and attorney’s fees.

 

What they don’t tell you is that only copyrighted work that have actually been filed with the Federal Trademark office (less than 1% of all work current represented with Getty Images are registered) are eligible for statutory damages and even then courts typically order payments of substantially less than that of what Getty Images is demanding.

 

Also, the collection agencies will tell you that they are trying to collect a debt... but they are not... they are trying to make a negotiated settlement... the infringer owes the company nothing until a judgment is rendered by some court.  It is a debt only if you had purchased goods and service and never paid for them.

 

The burden of proof is on them to first prove that you had infringed on their copyright before a court... only then they can collect a judgment.

 

Finally they will use the tactic of telling you that they will ruin your individual credit rating if you don’t pay them, even though you work for a corporate entity (a favorite tactic of debt collection agencies)... however, once again, they are not collecting a true debt... they are looking for a "settlement".  You have never purchased anything from them... so there is no debt.

 

If you happen to one day become a victim of Getty Images (especially be on the lookout for purchasing "pre-made" templates from what is seemingly legitimate sources when you or someone else designs your website)... there are only three things you can do:

 

1)   Pay them the extortion money and be done with it.

 

2)   Don’t do anything and hope that you don’t end up in court (according to the ELI website... Getty Images hasn’t actually sued anyone as of yet) an deal with the harassing letters and phone calls.

 

3)   Fight them - although it might cost more to hire an attorney than to just pay the money.

 

In order to prevent this from happening to you, if you use images on your website or in your blog, only purchase your images from highly legitimate sources such as istockphotos, Shutterstock, or Thinkstock. Purchasing images might only end up costing a few dollars per image.

 

Legitimately purchasing your images does two things...

 

1)   It prevents lawsuits.

 

2)   It helps to supports the artists who painstakingly created the images in the first place.

 

I do want to go on record that I definitely and positively do not support digital piracy (stealing media and using it for profit), however I also don’t support the scare tactics being used by Getty Images to extort exorbitant sums from unsuspecting victims.

 

In the end, I will pay Getty Images their pound of flesh as it is simply not worth any more of my time...

 

In addition, I have now subscribed to an image service so this will never happen again.

 

However it’s important to me that you know about this scheme and are able to protect yourself so you don’t fall victim to their spider web. 

 

Thank you very much for your support of OptiFuse, where we believe that an ounce of prevention is worth a pound of cure.