Executive Summary: We look at an entrepreneurial venture, Baked by Melissa, and some things that stand out with this cupcake shop- product size, pricing and a range of product flavors.
The Overview
Walking about in Manhattan, two signs of green shoots caught my attention. Here is "Baked by Melissa".
The "Baked by Melissa" store's hole in the wall look belies all the work that seems to have gone on behind it- they already seem to have a following, and also run a catering operation. I discovered in when I saw a long line in SOHO, almost as long as the ones formed by fans outside the Abercrombie store on 5th Ave., leading up to a little window.
The cupcakes are bitesized, for a dollar each, and you pick a minimum of 3 from the shop. I was only too glad to sample 3 different flavors at one go. I can see cupcake fans going in for volume when they visit the store.
How Do You Find It?
http://www.bakedbymelissa.com/
Green Shoots?
Melissa Bushell started this venture after moving on from her last job. Talk about green shoots! Here's a candid (third party) interview:
http://cupcakestakethecake.blogspot.com/2009/04/cupcake-interview-melissa-bushell-of.html
It's a great insight into "Animal Spirits".
The Deal- The Marketing Strategy
Why would I talk about this startup?
Note: These perspectives are all mine and have not been discussed with Baked by Melissa.
* The Product: Interesting mix of standard and innovative cupcakes. Did I say that I see cupcake fans buying cupcakes in "box sizes"? I can also see a bite-size cupcake going up against mini/ regular/ large cupcakes with a message- "lose the calories, but not the taste".
* Product Size and Pricing: Did I mention that the cupcakes are bite-sized, for a dollar each, and you pick a minimum of 3 from the shop? This strategy confers great flexibility on the margins.
* Positioning- While the messaging theme (see website) is simple and correctly centered around taste, it could also subtly play into a health and fitness savvy dessert-fiend profile.
* Merchandising- none noted at the store. A simple, "back to the basics of taste" operation.
Ahem... Constructive Criticism?
None. The idea here is to understand "green shoots" and "animal spirits". The entrepreneurs ostensibly have the right counsel to survive growth pangs.
What do you think? Ready, Steady, Cupcake?
--
Showing posts with label recession. Show all posts
Showing posts with label recession. Show all posts
Sunday, January 24, 2010
Entrepreneur's Corner: Organicoa, for Hot Cocoa!
Executive Summary: We look at an entrepreneurial venture, Organicoa, and some things that stand out with this cocoa shop- product taste and size, and positioning.
The Overview
Walking about in Manhattan, two signs of green shoots caught my attention. Here is Organicoa.
Organicoa is a cocoa shop (currently) at Lafayette St. in SOHO. The makeshift ping pong table instantly caught my attention- just the excuse you need to walk into the shop for some hot cocoa in the colder than usual weather. The leadership team happened to be around, was very warm to talk with, and was enthusiastic about sharing the organic theme behind the products and the merchandise.
The cocoa brought back memories of some great cocoa I enjoyed over a decade ago. One product comes close to the Organicoa taste- Milo. Yes, the Aussie drink.
The shop had small, bite sized cookies to go with the hot cocoa. Also, you don't have to buy hot coca to play ping-pong. :-)
How Do You Find It?
The facebook page: http://www.facebook.com/pages/organicoa/315291760276?v=info
Green Shoots?
A great product and an enthusiastic team. The team had taken over unused store space while the real estate firm looked to find a leasee for the the space. They aren't waiting around to make their venture happen.
The Deal- The Marketing Strategy
Why would I talk about this startup?
Note: These perspectives are all mine and have not been discussed with Organicoa.
* Great product- It reminded me of some great cocoa I have had previously.
* Bite-size cookies- complement the cocoa. The size also gives you leverage to manage pricing and margins.
* Cup sizes- I saw a single cup size. The current "pilot" (my adjective) location gives them some time to test out price points.
* Store ambience- The large, bare store space still managed to ooze a warm, "lets hang out" ambience.
* Positioning- Yes, Organic is healthy is a core message. However, who would have thought about throwing in a makeshift poing pong table on the large store space? Tied to the ambience, "community" comes to mind.
* Theme is core to merchandising- from the colors to the organic content of the merchandise, the team has closed the loop on the message.
Ahem... Constructive Criticism?
None. The idea here is to understand "green shoots" and "animal spirits". The entrepreneurs ostensibly have the right counsel to survive growth pangs.
What do you think?
--
Coming Next on Entrepreneurs Corner: Baked by Melissa- mini cupcakes as Bite-size Desserts?:
http://randomjunkyramblings.blogspot.com/2010/01/entrepreneurs-corner-baked-by-melissa.html
The Overview
Walking about in Manhattan, two signs of green shoots caught my attention. Here is Organicoa.
Organicoa is a cocoa shop (currently) at Lafayette St. in SOHO. The makeshift ping pong table instantly caught my attention- just the excuse you need to walk into the shop for some hot cocoa in the colder than usual weather. The leadership team happened to be around, was very warm to talk with, and was enthusiastic about sharing the organic theme behind the products and the merchandise.
The cocoa brought back memories of some great cocoa I enjoyed over a decade ago. One product comes close to the Organicoa taste- Milo. Yes, the Aussie drink.
The shop had small, bite sized cookies to go with the hot cocoa. Also, you don't have to buy hot coca to play ping-pong. :-)
How Do You Find It?
The facebook page: http://www.facebook.com/pages/organicoa/315291760276?v=info
Green Shoots?
A great product and an enthusiastic team. The team had taken over unused store space while the real estate firm looked to find a leasee for the the space. They aren't waiting around to make their venture happen.
The Deal- The Marketing Strategy
Why would I talk about this startup?
Note: These perspectives are all mine and have not been discussed with Organicoa.
* Great product- It reminded me of some great cocoa I have had previously.
* Bite-size cookies- complement the cocoa. The size also gives you leverage to manage pricing and margins.
* Cup sizes- I saw a single cup size. The current "pilot" (my adjective) location gives them some time to test out price points.
* Store ambience- The large, bare store space still managed to ooze a warm, "lets hang out" ambience.
* Positioning- Yes, Organic is healthy is a core message. However, who would have thought about throwing in a makeshift poing pong table on the large store space? Tied to the ambience, "community" comes to mind.
* Theme is core to merchandising- from the colors to the organic content of the merchandise, the team has closed the loop on the message.
Ahem... Constructive Criticism?
None. The idea here is to understand "green shoots" and "animal spirits". The entrepreneurs ostensibly have the right counsel to survive growth pangs.
What do you think?
--
Coming Next on Entrepreneurs Corner: Baked by Melissa- mini cupcakes as Bite-size Desserts?:
http://randomjunkyramblings.blogspot.com/2010/01/entrepreneurs-corner-baked-by-melissa.html
Aiding Economic Recovery in a Recession- The "I" of the Tiger
Aiding Economic Recovery in a Recession, a.k.a. The "I" of the Tiger, from the desk of Bengal-Tiger-Crackling-With-Ideas.
Executive Summary: There are various ideas and approaches being thrown about to help economic recovery out of this recession. Below is a recently published WSJ article by M. Zuckerman****. He suggests budgetary control, but also spending in "regeneration" programs focused on technology and infrastructure. We look at these through the lens of the GDP. We will expand on this and finally tie this in with Innovation and Animal Spirits.
The Background- Aiding Recovery
There are two broad streams of thought when it comes to aiding recovery. One focuses on cutting all cost and bailout toward balancing a budget, with "let it (a company) fail" as the mantra. The other focuses on providing large doses of temporary stimulus that would be followed by an extended period of belt tightening.
Below is a recently published WSJ article by M. Zuckerman**** that seems to belong to the second stream of thought. He suggests budgetary control, but also spending in "regeneration" programs focused on technology (tied in some way to innovation) and infrastructure.
The Article:
http://online.wsj.com/article/SB10001424052748703837004575013592466508822.html?mod=loomia&loomia_si=t0:a16:g2:r2:c0.133655:b29954458
Proposed Solution: The GDP Lens
Looking at it in terms of the GDP, where GDP = C + I + G + (X - M), the article can be summarized as:
Big C (Consumption) goes down, G (government investment) goes up to assist in increasing I (private investment), and eventually "I" will limp back to normal, finally leading to a ratcheting down of G. Note that I am not talking about X - M right now.
I will admit that investing in infrastructure and technology via government regeneration sounds great. That's supposed to be the "soft", "behind the scenes" aspect of government spending led recovery in this equation. We can also look as some background on debt and economies below:
http://randomjunkyramblings.blogspot.com/2009/12/debt-and-economies.html
Proposed Solution: South Korean Precedent?
Now, South Korea seems to have pulled off something similar to become an OECD economy. South Korea racheted up debt to support imports of technology and machinery, which led to an increase in exports, and kickstarted private investment. The Chaebols, in this case, were instrumental in this maneuver.
* However, can this maneuver by South Korea be called a precedent?
* Was it, and is it now, easy to pull off?
* Could you call the Chaebols in South Korea a strong government-industry partnership?
* Is a very tight government- private industry partnership feasible in the US?
* Does the tight partnership help in managing and spurring innovation? If yes, is the spurring of innovation, and eventual reovery, quicker or slower than in other approaches?
* Can an increase in G truly substitute, or directly lead to, for an increase in "I"?
* Does an increase in G, at best, keeps the social fabric together, and provide a base on which "I" can rebuild? If yes, is there a minimum and a maximum turnaround time for "I", coming out of economic shock?
Perspectives on how economic recovery would assets itself globally are linked below:
http://randomjunkyramblings.blogspot.com/2010/01/economic-recovery-patterns-and-globally.html
Now, lets focus on the "I" of the Tiger.
The "I" of the Tiger- Funding the Recovery
How do we bring "I" back into business? The government could directly hand money to individuals and businesses, or it could hand it to banks and cajole the banks to make the right lending decisions. As we know, too much liquidity brought us to the real estate bubble. So, lenders/ investors/ government/ banks- whatsinaname? - must exercise "good judgement" in their practices.
* Do we have enough "good judgement" to go around for the massive influx of funds bottlenecked in the financial system/ sitting with the government?
* How do we prevent another bubble?
* On the flip side, how do we ensure that the distribution system works, makes money and hence leads to economic activity?
I am reminded of a conversation at a solar energy panel in 2008, where some folks were of the opinion that funds for solar energy projects were available, but they were tied up with the government (DoE?). The government had a poor track record of investing and ideas floating around including getting investment bankers to the party.
Since we are thinking about the what and the how of aiding economic activity, lets talk about innovation.
Technology and Innovation
Now, I have previously talked about innovation- an example is the link below.
http://randomjunkyramblings.blogspot.com/2010/01/innovations-impact-on-economy.html
However, lets get into some detail.
* Do good, fundable ideas arrive in some sort of random manner, or can we increase them by just waving money (and tweaking some more factors, if you like. E.g. increasing unemployment, etc.)?
* The VC industry is currently undergoing some sort of contraction as well.
* Research states that MITIE's (an arm of the Japanese government) investments in the electronics industry did not have a significant impact on it.
Animal Spirits
This is where "Animal Spirits" comes into play. You could call it the natural ability of a people to take risk, to innovate and/ or to build. Naive optimism, if you like. Some previous thought on Animal Spirits can be found here:
http://randomjunkyramblings.blogspot.com/2009/07/art-of-stimulus-and-economics.html
Are people taking risks to build something they believe in? I recently stumbled across a little cocoa shop in the city- the team had taken up an empty store for their venture while the real estate company looked to fill the space. Very enterprising, and they had a good product too! I really hope that company does well. More about it here:
http://randomjunkyramblings.blogspot.com/2010/01/entrepreneurs-corner-organicoa-and.html
Conclusion
The cocoa shop example tells me that the US is still a great place to turn good ideas into great engines for growth. I am keeping my fingers crossed for all the good, bright folks out there who have found/ are about to find a great idea.
What do you think?
Some more thoughts on aiding economic recovery can be found here:
http://randomjunkyramblings.blogspot.com/2009/07/economic-crisis-and-art-of-stimulus-to.html
--
*****Note: The article was posted on a macroeconomics forum by Prof. Rosensweig to kick of a debate on approaches to recovery. The ideas here were posted in a condensed form at the form on January 24, 2010.
Executive Summary: There are various ideas and approaches being thrown about to help economic recovery out of this recession. Below is a recently published WSJ article by M. Zuckerman****. He suggests budgetary control, but also spending in "regeneration" programs focused on technology and infrastructure. We look at these through the lens of the GDP. We will expand on this and finally tie this in with Innovation and Animal Spirits.
The Background- Aiding Recovery
There are two broad streams of thought when it comes to aiding recovery. One focuses on cutting all cost and bailout toward balancing a budget, with "let it (a company) fail" as the mantra. The other focuses on providing large doses of temporary stimulus that would be followed by an extended period of belt tightening.
Below is a recently published WSJ article by M. Zuckerman**** that seems to belong to the second stream of thought. He suggests budgetary control, but also spending in "regeneration" programs focused on technology (tied in some way to innovation) and infrastructure.
The Article:
http://online.wsj.com/article/SB10001424052748703837004575013592466508822.html?mod=loomia&loomia_si=t0:a16:g2:r2:c0.133655:b29954458
Proposed Solution: The GDP Lens
Looking at it in terms of the GDP, where GDP = C + I + G + (X - M), the article can be summarized as:
Big C (Consumption) goes down, G (government investment) goes up to assist in increasing I (private investment), and eventually "I" will limp back to normal, finally leading to a ratcheting down of G. Note that I am not talking about X - M right now.
I will admit that investing in infrastructure and technology via government regeneration sounds great. That's supposed to be the "soft", "behind the scenes" aspect of government spending led recovery in this equation. We can also look as some background on debt and economies below:
http://randomjunkyramblings.blogspot.com/2009/12/debt-and-economies.html
Proposed Solution: South Korean Precedent?
Now, South Korea seems to have pulled off something similar to become an OECD economy. South Korea racheted up debt to support imports of technology and machinery, which led to an increase in exports, and kickstarted private investment. The Chaebols, in this case, were instrumental in this maneuver.
* However, can this maneuver by South Korea be called a precedent?
* Was it, and is it now, easy to pull off?
* Could you call the Chaebols in South Korea a strong government-industry partnership?
* Is a very tight government- private industry partnership feasible in the US?
* Does the tight partnership help in managing and spurring innovation? If yes, is the spurring of innovation, and eventual reovery, quicker or slower than in other approaches?
* Can an increase in G truly substitute, or directly lead to, for an increase in "I"?
* Does an increase in G, at best, keeps the social fabric together, and provide a base on which "I" can rebuild? If yes, is there a minimum and a maximum turnaround time for "I", coming out of economic shock?
Perspectives on how economic recovery would assets itself globally are linked below:
http://randomjunkyramblings.blogspot.com/2010/01/economic-recovery-patterns-and-globally.html
Now, lets focus on the "I" of the Tiger.
The "I" of the Tiger- Funding the Recovery
How do we bring "I" back into business? The government could directly hand money to individuals and businesses, or it could hand it to banks and cajole the banks to make the right lending decisions. As we know, too much liquidity brought us to the real estate bubble. So, lenders/ investors/ government/ banks- whatsinaname? - must exercise "good judgement" in their practices.
* Do we have enough "good judgement" to go around for the massive influx of funds bottlenecked in the financial system/ sitting with the government?
* How do we prevent another bubble?
* On the flip side, how do we ensure that the distribution system works, makes money and hence leads to economic activity?
I am reminded of a conversation at a solar energy panel in 2008, where some folks were of the opinion that funds for solar energy projects were available, but they were tied up with the government (DoE?). The government had a poor track record of investing and ideas floating around including getting investment bankers to the party.
Since we are thinking about the what and the how of aiding economic activity, lets talk about innovation.
Technology and Innovation
Now, I have previously talked about innovation- an example is the link below.
http://randomjunkyramblings.blogspot.com/2010/01/innovations-impact-on-economy.html
However, lets get into some detail.
* Do good, fundable ideas arrive in some sort of random manner, or can we increase them by just waving money (and tweaking some more factors, if you like. E.g. increasing unemployment, etc.)?
* The VC industry is currently undergoing some sort of contraction as well.
* Research states that MITIE's (an arm of the Japanese government) investments in the electronics industry did not have a significant impact on it.
Animal Spirits
This is where "Animal Spirits" comes into play. You could call it the natural ability of a people to take risk, to innovate and/ or to build. Naive optimism, if you like. Some previous thought on Animal Spirits can be found here:
http://randomjunkyramblings.blogspot.com/2009/07/art-of-stimulus-and-economics.html
Are people taking risks to build something they believe in? I recently stumbled across a little cocoa shop in the city- the team had taken up an empty store for their venture while the real estate company looked to fill the space. Very enterprising, and they had a good product too! I really hope that company does well. More about it here:
http://randomjunkyramblings.blogspot.com/2010/01/entrepreneurs-corner-organicoa-and.html
Conclusion
The cocoa shop example tells me that the US is still a great place to turn good ideas into great engines for growth. I am keeping my fingers crossed for all the good, bright folks out there who have found/ are about to find a great idea.
What do you think?
Some more thoughts on aiding economic recovery can be found here:
http://randomjunkyramblings.blogspot.com/2009/07/economic-crisis-and-art-of-stimulus-to.html
--
*****Note: The article was posted on a macroeconomics forum by Prof. Rosensweig to kick of a debate on approaches to recovery. The ideas here were posted in a condensed form at the form on January 24, 2010.
Wednesday, September 24, 2008
The Anatomy of a Financial Crisis/ Good Times, Bad Times
Notes:
The first 5 points of the notes are at end of the novella below.
6> Characters below bear no resemblance... oh, go on and read it for yourself.
The Anatomy of a Financial Crisis, Or,
Good Times, Bad Times (With Apologies to Led Zep)
Minnie, Manny and Moe are bankers in GeeWizLand. They like to lend folks money so that folks can take fun vacations and create a global economy. The 3Ms have been doing this for ages, and they like to lend money to a certain set of people, like Paris Heelton and Britney Spurs, with the odd movie star like Ms. Jolee thrown in.
Funky Fred comes along and tells the 3 Ms that he will be happy to guarantee these vacation loans for a small fee. Given the uncertainty over Paris' Jail time and Britney's asylum ambitions, this sounds like a good idea to the 3 Ms. Funky Fred also decides the he could lend to the 3 Ms. Moe is totally on board with Funky Fred on this. Ms. Winepub showed up at Moe's very ornate door seeking money for a rehab vacation, and Funky Fred's loan would help Moe lend a helping hand to Ms. Winepub.
Times are good. The 3 Ms meet at the 3Ms Factory every Friday night to gorge on Cheesecake and are happy to invite Funky Fred to the party. On one of these evenings, Funky Fred comes up with another innovative, brilliant idea. He will not only allow ordinary folks to become shareholders in his company Fred Smarts, but he will also borrow. There are only 3 bankers in GeeWizLand. The 3 Ms. Funky Fred points out that the smart and funky thing about this borrowing is that he will pick and choose loans, label them 3 As and let Minnie, Manny and Moe choose to lend against the 3 As.
Minnie, Manny and Moe look at each other, and like the idea. After all, Funky Fred is the smart guy running Fred Smarts. He is guaranteeing their loans. He is also a lender and has some insight into the loans business. Minne is thinking she will get to lend against the 3 As in Moe's bag- she had been eyeing superstar Winepub's rehab vacation deal that Moe pulled off. So, they begin to hammer out the idea over more Cheesecake. Funky Fred totally connects with Minnie when he mentions that he thought Ms. Winepub was such a good bet, he lent her money for her second rehab vacation. With the cha-ching at the opening of Pink Floyd's Money ringing in their ears, Funky Fred and Moe exchange high fives. Manny being Manny, throws a plate of cheesecake up in the air, high fives a cute hanger on, and then tosses it over to Funky Fred. Finally, to close the deal, Funky Fred announces, "Folks, I think this is the beginning of a beautiful friendship".
Sweet!
Of course, the 3Ms are not supposed to be thinking about Funky Fred's uncle. Sam. Sam is the Warren Buffet of GeeWizLand. Fred has always been careful to tell them that Sam's a great guy and everything, but Sam and he have no business dealings, and that Sam minds his own business. Anyhow, the 3 Ms think it can't hurt to have Sam for an Uncle.
So, times are good. With all the fees Minnie, Manny Moe and Fred are making, the innovative Friday night cheesecake parties at the 3 Ms Factory are the toast of GeeWizLand.
Along comes Boogie Howser, NPH. Brilliant guy. He wants to take a year long sabbatical- he wishes to go sailing around the world. He intends to use the money from his consulting gigs, playing doctor sans frontiers, mais avec un bateau, at his stopovers to pay the interest on the loan while he is away. Moe likes Boogie. Boogie's past record as GeeWizLand's superdoc is unbeatable. Moe thinks this loan is do-able and happily loans Boogie the money. Moe thinks Boogie is not just Type A, he is Type 3A and labels him as such (AAA). Same goes for the loan- now 3A (TM). Plus, times are good, aren't they?
Now, Boogie breaks a leg at a stopover in Timbucktu. He treats folks who cannot really pay much. He misses a payment, and then some. Ms. Winepub treats her rehab vacation like a vacation, her concerts bomb, and her second album completely bombs. Ms. Winepub is a gem of a person. She will repay her loan. Fred and the 3 Ms think she will too. She's a rockstar and a gem of a person. Really. However, for now she missed a payment and then some.
Moe realizes he is in trouble. Even if its only for now. First there was Boogie, a customer he had not dealt with previously, and now Ms. Winepub was tottering as well. All superstars, each one a gem of a person. Moe suddenly has no money to lend because he is not getting any money in. In fact, Moe may not be able to make his payments on the money he has borrowed.
Funky Fred and Moe have a quiet chat at their Cheesecake Party. Funky Fred realizes he is in trouble too, just like Moe. First there was Ms. Winepub. Now, he has to stand by his guaranty for Moe.
Funky Fred has no money. Not to lend. Not even to make payments to Minne and Manny who were counting on his funky 3 As. Minne and Manny haven't heard about Ms. Winepub's financial mess. They couldn't. To them, she had become one of the funky Type 3As- Not Just a Number, But a TLA (Trademark, Funky Fred). In any case, Minnie and Manny soon realize they are in trouble as well. Funky Fred can't pay them. Now, Minne and Manny can't lend. Maybe they wouldn't be able to make payments in the future either.
The 3 Ms realize that old methods like throwing cheesecake at each other to sort matters out would not work. True to their reputation, the 3 Ms will have to innovate yet again. Minnie, Manny and Moe now step out of their party and head over to Fred's Uncle's- Sam's- place.
Sleepy Sam is awakened by a 3 AM knock at his door and finds Minnie, Manny and Moe looking at him. Sam, a little drowsy, begins to think about why he should bother with the 3Ms. Really. Minnie, Manny and Moe dug their own grave. Then there was Funky Fred, who was always too smart for his own good. Who goes about calling himself Funky Fred? He is not sure if its the sleeping pills reacting with his face cream, but his mind plays a phantasmagoric reel of Young Sam punishing little Funky Fred for making too much money at his lemonade stand by spanking him and getting him to drop Funky from his name for the next school year. The reel ends abruptly with Funky Fred negotiating with the immortal line, "Funky by any other name... is still Funky".
What should Fred's uncle do? A simple "Get lost!" to the 3Ms should do the trick and he can deal with Fred (down with Funky! Now!) in the morning. However, it's not that simple, is it? There's a faint thought in his mind, barely registering thanks to the throbbing headache caused by The Friday Night Party People showing up at his doorstep in the middle of the night. Perhaps his businesses, and wealth are tied to the 3Ms fortunes.
Sam is huge. HUUGE. He has borrowings from the 3Ms. He also has borrowings from distant shores. The distant shores like GeeWizLand. Its a nice town of superstars that always have money. Now, unfortunately due to the Winepubs and the Howsers, the 3Ms don't have money. And the superstars don't have any money to spend because 3Ms aren't giving them any.
Oh and btw, somehow, folks outside GeeWizLand aren't buying Superstars anymore. The Superstars will find a way, but for now, they really have no money.
Sam's businesses, even stable businesses like EyeRuS (How much emptier can you pocket be today? Trademark EyeRuS), are now hurting because Superstars have no money.
Distant Shores (TM, The Distant Shores Syndicate) has a little camera behind a Curtain in Sam's House. It is watching Sam. What will Sam do? Can Distant Shores' members continue lending to Sam the same way they used to? Perhaps distant shores ("More Than That Syndicate") have no options either, just like Sam.
What does all of this mean? This looks like one big snake biting off its own tail! This may also look like something that GeeWizLand and distant shores may have to weather together. For how long? A year? A decade? A generation?
GeeWizLand knows little about distant shores. Those who do know about distant shores tend to go break a leg in Timbucktu. Distant shores think they know GeeWizLand and its Superstars, but that's an illusion as well. However, everyone has a sinking feeling that even if it is for a little bit- with faith in Superstars and everything- everyone is in it together.
What do you think?
Notes, the strange loop version:
1> This writing (Novella, as some readers have called it) is a slightly modified version of an extempore email sent out on July 12 to a MENSA message board to explain, in layman's terms, what was going on in the financial sector at that point of time.
2> This is an incredibly painful time for the financial services industry, the US economy and global economies. This article is just an abstraction. Its a starting point for readers to explore market structure and think analytically about decision making. If this encourages you to build complex models that tie in macroeconomics, consumer behavior and game theory, please drop me a line. We should talk.
3> A lot has happened since July 12. If you have read the story before-I will reemphasize that its not over yet. The article is structured so that you challenge every paragraph and analytically dig into the details. Your comments are welcome and critical.
4> Many thanks to Prof. Rosensweig for teaching.
5> I remember telling someone in a different context (the energy crisis) that if I could fix the problem tomorrow, I would do it. I really, really, really would like to. I can't. I can, however, do my best to learn. "We shall overcome!"
The first 5 points of the notes are at end of the novella below.
6> Characters below bear no resemblance... oh, go on and read it for yourself.
The Anatomy of a Financial Crisis, Or,
Good Times, Bad Times (With Apologies to Led Zep)
Minnie, Manny and Moe are bankers in GeeWizLand. They like to lend folks money so that folks can take fun vacations and create a global economy. The 3Ms have been doing this for ages, and they like to lend money to a certain set of people, like Paris Heelton and Britney Spurs, with the odd movie star like Ms. Jolee thrown in.
Funky Fred comes along and tells the 3 Ms that he will be happy to guarantee these vacation loans for a small fee. Given the uncertainty over Paris' Jail time and Britney's asylum ambitions, this sounds like a good idea to the 3 Ms. Funky Fred also decides the he could lend to the 3 Ms. Moe is totally on board with Funky Fred on this. Ms. Winepub showed up at Moe's very ornate door seeking money for a rehab vacation, and Funky Fred's loan would help Moe lend a helping hand to Ms. Winepub.
Times are good. The 3 Ms meet at the 3Ms Factory every Friday night to gorge on Cheesecake and are happy to invite Funky Fred to the party. On one of these evenings, Funky Fred comes up with another innovative, brilliant idea. He will not only allow ordinary folks to become shareholders in his company Fred Smarts, but he will also borrow. There are only 3 bankers in GeeWizLand. The 3 Ms. Funky Fred points out that the smart and funky thing about this borrowing is that he will pick and choose loans, label them 3 As and let Minnie, Manny and Moe choose to lend against the 3 As.
Minnie, Manny and Moe look at each other, and like the idea. After all, Funky Fred is the smart guy running Fred Smarts. He is guaranteeing their loans. He is also a lender and has some insight into the loans business. Minne is thinking she will get to lend against the 3 As in Moe's bag- she had been eyeing superstar Winepub's rehab vacation deal that Moe pulled off. So, they begin to hammer out the idea over more Cheesecake. Funky Fred totally connects with Minnie when he mentions that he thought Ms. Winepub was such a good bet, he lent her money for her second rehab vacation. With the cha-ching at the opening of Pink Floyd's Money ringing in their ears, Funky Fred and Moe exchange high fives. Manny being Manny, throws a plate of cheesecake up in the air, high fives a cute hanger on, and then tosses it over to Funky Fred. Finally, to close the deal, Funky Fred announces, "Folks, I think this is the beginning of a beautiful friendship".
Sweet!
Of course, the 3Ms are not supposed to be thinking about Funky Fred's uncle. Sam. Sam is the Warren Buffet of GeeWizLand. Fred has always been careful to tell them that Sam's a great guy and everything, but Sam and he have no business dealings, and that Sam minds his own business. Anyhow, the 3 Ms think it can't hurt to have Sam for an Uncle.
So, times are good. With all the fees Minnie, Manny Moe and Fred are making, the innovative Friday night cheesecake parties at the 3 Ms Factory are the toast of GeeWizLand.
Along comes Boogie Howser, NPH. Brilliant guy. He wants to take a year long sabbatical- he wishes to go sailing around the world. He intends to use the money from his consulting gigs, playing doctor sans frontiers, mais avec un bateau, at his stopovers to pay the interest on the loan while he is away. Moe likes Boogie. Boogie's past record as GeeWizLand's superdoc is unbeatable. Moe thinks this loan is do-able and happily loans Boogie the money. Moe thinks Boogie is not just Type A, he is Type 3A and labels him as such (AAA). Same goes for the loan- now 3A (TM). Plus, times are good, aren't they?
Now, Boogie breaks a leg at a stopover in Timbucktu. He treats folks who cannot really pay much. He misses a payment, and then some. Ms. Winepub treats her rehab vacation like a vacation, her concerts bomb, and her second album completely bombs. Ms. Winepub is a gem of a person. She will repay her loan. Fred and the 3 Ms think she will too. She's a rockstar and a gem of a person. Really. However, for now she missed a payment and then some.
Moe realizes he is in trouble. Even if its only for now. First there was Boogie, a customer he had not dealt with previously, and now Ms. Winepub was tottering as well. All superstars, each one a gem of a person. Moe suddenly has no money to lend because he is not getting any money in. In fact, Moe may not be able to make his payments on the money he has borrowed.
Funky Fred and Moe have a quiet chat at their Cheesecake Party. Funky Fred realizes he is in trouble too, just like Moe. First there was Ms. Winepub. Now, he has to stand by his guaranty for Moe.
Funky Fred has no money. Not to lend. Not even to make payments to Minne and Manny who were counting on his funky 3 As. Minne and Manny haven't heard about Ms. Winepub's financial mess. They couldn't. To them, she had become one of the funky Type 3As- Not Just a Number, But a TLA (Trademark, Funky Fred). In any case, Minnie and Manny soon realize they are in trouble as well. Funky Fred can't pay them. Now, Minne and Manny can't lend. Maybe they wouldn't be able to make payments in the future either.
The 3 Ms realize that old methods like throwing cheesecake at each other to sort matters out would not work. True to their reputation, the 3 Ms will have to innovate yet again. Minnie, Manny and Moe now step out of their party and head over to Fred's Uncle's- Sam's- place.
Sleepy Sam is awakened by a 3 AM knock at his door and finds Minnie, Manny and Moe looking at him. Sam, a little drowsy, begins to think about why he should bother with the 3Ms. Really. Minnie, Manny and Moe dug their own grave. Then there was Funky Fred, who was always too smart for his own good. Who goes about calling himself Funky Fred? He is not sure if its the sleeping pills reacting with his face cream, but his mind plays a phantasmagoric reel of Young Sam punishing little Funky Fred for making too much money at his lemonade stand by spanking him and getting him to drop Funky from his name for the next school year. The reel ends abruptly with Funky Fred negotiating with the immortal line, "Funky by any other name... is still Funky".
What should Fred's uncle do? A simple "Get lost!" to the 3Ms should do the trick and he can deal with Fred (down with Funky! Now!) in the morning. However, it's not that simple, is it? There's a faint thought in his mind, barely registering thanks to the throbbing headache caused by The Friday Night Party People showing up at his doorstep in the middle of the night. Perhaps his businesses, and wealth are tied to the 3Ms fortunes.
Sam is huge. HUUGE. He has borrowings from the 3Ms. He also has borrowings from distant shores. The distant shores like GeeWizLand. Its a nice town of superstars that always have money. Now, unfortunately due to the Winepubs and the Howsers, the 3Ms don't have money. And the superstars don't have any money to spend because 3Ms aren't giving them any.
Oh and btw, somehow, folks outside GeeWizLand aren't buying Superstars anymore. The Superstars will find a way, but for now, they really have no money.
Sam's businesses, even stable businesses like EyeRuS (How much emptier can you pocket be today? Trademark EyeRuS), are now hurting because Superstars have no money.
Distant Shores (TM, The Distant Shores Syndicate) has a little camera behind a Curtain in Sam's House. It is watching Sam. What will Sam do? Can Distant Shores' members continue lending to Sam the same way they used to? Perhaps distant shores ("More Than That Syndicate") have no options either, just like Sam.
What does all of this mean? This looks like one big snake biting off its own tail! This may also look like something that GeeWizLand and distant shores may have to weather together. For how long? A year? A decade? A generation?
GeeWizLand knows little about distant shores. Those who do know about distant shores tend to go break a leg in Timbucktu. Distant shores think they know GeeWizLand and its Superstars, but that's an illusion as well. However, everyone has a sinking feeling that even if it is for a little bit- with faith in Superstars and everything- everyone is in it together.
What do you think?
Notes, the strange loop version:
1> This writing (Novella, as some readers have called it) is a slightly modified version of an extempore email sent out on July 12 to a MENSA message board to explain, in layman's terms, what was going on in the financial sector at that point of time.
2> This is an incredibly painful time for the financial services industry, the US economy and global economies. This article is just an abstraction. Its a starting point for readers to explore market structure and think analytically about decision making. If this encourages you to build complex models that tie in macroeconomics, consumer behavior and game theory, please drop me a line. We should talk.
3> A lot has happened since July 12. If you have read the story before-I will reemphasize that its not over yet. The article is structured so that you challenge every paragraph and analytically dig into the details. Your comments are welcome and critical.
4> Many thanks to Prof. Rosensweig for teaching.
5> I remember telling someone in a different context (the energy crisis) that if I could fix the problem tomorrow, I would do it. I really, really, really would like to. I can't. I can, however, do my best to learn. "We shall overcome!"
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