Opinion vs. Expertise

It’s not often that I disagree with Mike and I am not ready to fully do that here but he is not fully centered on the core issue either.

Kimball is correct that he should be better defining his brand and proving his worth — that’s what we’ve been saying all along. But you can do that without insulting the riff raff, as well. You can do that while embracing the “bottom up” process. You can do that without being a total snob that has no time for the people who actually pay your salary.

[From Cook’s Illustrated Editor: I Wish All Those Amateurs Out There Would Just Shut Up | Techdirt]

The underlying issue that Kimball is pointing out is that the internet has become one great big !%$@$^ book club… everyone has to have an opinion about everything (don’t think I don’t realize the irony of ME writing THAT sentence). Kimball’s point is that real expertise is acquired through great effort, not just through the ability to peck away on the keyboard and hit publish, and that authority directly correlates to the relationship you can expect with your audience.

The second point that Kimball is right to make is that advertising has been the seed of destruction for magazines in the food space, but more broadly I would say across the board. Taken online the display advertising model deployed by the vast majority of publications is simply unsustainable and in the process they are destroying the delicate balance between content and advertising.

Case in point is the restyled Bon Appetit magazine, which has gotten really light on content and really heavy on advertising in all forms; if it takes you more than 15 minutes to read the last issue I would be very surprised, and color me shocked when advertiser products are rated “top 5” out of, say, 7 tested products. It’s almost as bad as automotive magazines where no product is ever rated “don’t buy this piece of shit” because every possible product is being advertised in the magazine.

The fascination with lifestyle has also distorted Bon Appetit and alienated their core audience… who I cannot imagine are really that interested in celebrity chef interviews. The remake process for Bon Appetit probably resulted in a more intense discussion of what type of typefaces they would use than what type of content they would be providing their subscribers.

Cooks Illustrated goes into excruciating detail about food and how the process of preparing is affected by the chemistry of food. I have subscribed to this magazine for years and marvel at the lengths to which they will go to find the ideal process, ingredients, and tools, all the while challenging the conventional wisdom about what is the proper method. When it comes to presenting food expertise it is without question that serious foodies, professional and amateur alike, will agree that Kimball has earned his stripes in the expertise department.

Secondly, Cooks Illustrated does not have any advertising, it’s entirely content driven, and what that means is that Kimball’s interests are completely aligned with that of his readers. His is the only publication that I know of that actually has a “not recommended” category for product reviews, and they don’t hesitate on recommending products that are cheap grocery store staples if in fact they are the best ingredients based on taste.

Mike is right to point out that Kimball comes across as a petulant snob with nothing but disdain for food blogs and websites, but Mike fails to acknowledge the broader point that Kimball is making, which isn’t just about defining your brand, that the internet has devalued authority. This is a point I think we can all agree is an issue to be resolved (the measurement of authority).

Where we end up is at an interesting intersection triangulated at by both pieces, which is that the internet has not destroyed traditional publishing but rather exposes the vacuous nature of many established publishing brands. This leveling of the playing field has followed the path that many technology dependent industries have followed, which is that distribution and gatekeeping is increasingly not the dynamic that your business relies on but rather the ability to engage and sustain a valuable audience. Given Kimball’s resume and actual experience in building Cook’s Illustrated, I think he is exceptionally well qualified to opine on the state of affairs but like Mike I would appreciate a little more humility in the process.

Lastly, this is a very interesting discussion because with newspapers dead set on charging for online content we are going to see in realtime what the relationship between newspapers and readers really is.

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Is a Recession the Perfect Time to Start a Business?

Received an email today pitching services for a “renowned business expert” who would like to be interviewed. The pitch was that a recession is the perfect time to start a business because:

* First, everything costs less!

“Start up costs are much lower than 3 years ago,” explains business startup expert, Danielle Babb. “Things like retaining a website designer, investing in commercial space, buying office equipment are all at least 30% cheaper now than they were during the boom.”

* You can hire top talent because of the high unemployment rates.

“Not only are there highly qualified workers available, but most of them are willing to work for less than they did 3 years ago! You can hire more people or you can bring them on as independent contractors.”

* Many suppliers are giving credit.

“Suppliers are now offering a credit option because they need to make the sale. There are lots of low or no money down deals,” outlines Dani.

* You can buy costly equipment at auction for a fraction of the price!

This got me wondering how true these accepted truths really are… let’s take a look.

Everything costs less!

True, many expenses like commercial real estate and some services are discounted but the flip side is that your own pricing will also be discounted while hardware and datacenter costs are not likely to be discounted much at all. Headcount, the single largest expense any business has, is a little more complex. Payroll taxes haven’t changed materially and benefit costs continue to go up, in spite of salaries being flat or even reduced 5-10% in some cases.

Verdict: some things cost less but in light of the more complex picture on business expenses it is certain that margins will be compressed meaning less free cash flow for business investment.

You can hire top talent because of high unemployment rates

Technically true but the best people in any industry are always in demand so to suggest you can have your pick of the bunch is just as untrue today as in years past. You will always be competing for top talent and if anything the best people tend to gravitate back to the security of large companies in times of economic turmoil because of natural risk aversion. Lastly, top talent is always in a position to demand and get top pay, further eroding the “everything costs less” meme.

Verdict: complete bullshit.

Many suppliers are giving credit

This assertion flies in the face of everything we know about the financial market crisis and broader industry news. Suppliers are demanding letters of credit more now than ever before while large customer are telling suppliers that they won’t issue letters of credit because of finance costs meaning the burden for credit is more than ever being pushed on suppliers. It’s a real conflict but one thing is certain, if you go to a supplier for credit to your startup, be prepared to put some personal collateral on the line or agree to some onerous terms… which also reinforces the above claim that not all business expenses are going down.

Verdict: I haven’t seen any truth to this.

You can buy costly equipment at auction for a fraction of the cost

If you need costly equipment auctions are a viable avenue but keep in mind that warranty and support will be extra.

Verdict: As in past economic downturns this is absolutely true.

I don’t think there is a bad time to start a business because the one truth about new venture creation still holds true, you build your business plan to reflect current and projected economic conditions. Starting a business today means you do it with less capital, have a clear line of sight to revenue and profit, and do your best to cover all known risk factors with more specificity than in years past. Capital is tougher to get but still available, and customers will no doubt be more demanding but none of this means it’s a bad time to start a business.

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Small is the New Big on the Way to Hyper-Local

The turmoil in financial markets is revealing an interesting truth, “too big to fail” is fraught with public policy and financial risk. Seriously, is anyone really comfortable with the notion of any bank or insurance company having so much scale that our financial future relies on their continued existence? How about an auto manufacturer that is declared immune from bankruptcy and all costs to the taxpayer?

The “Wall St. and Main St.” analogy has been seriously overplayed, but that won’t stop me from using it one more time. Much has been written about the implosion of retail chain stores Linen-n-Things, Circuit City, and Mervyn’s …. but as I make my way through daily errands with local retailers I am not seeing the precipitous drop off in activity that would predict such large scale retail failures.

A very effective way to gauge retail activity at the local level is simply to ask. Most small business owners, store managers, and even retail clerks will be quite forthcoming when asked “how is business” and that picture can be compiled into a picture of overall economic activity in a local region.

There is a drop off in retail activity, clearly, as people think twice about purchases that would previously have been an impulse buy, but it’s not apparent that this is being felt equally by all retail segments (case in point, the store manager at Babies-r-Us told me their sales were up 2% last month).

I don’t think consumers are abandoning mass market retail, certainly not so with the sales and discounts that can be routinely found, but I do believe that local retail is resurgent as consumers stick close to home, and quite possibly value the intimacy of local retail experiences as, for lack of a better word, comforting. Greg Cohn dubbed this an extension of the “slow food movement” in a conversation we had recently.

I have always been a big advocate for local and hyper local but equally fierce in my criticism of local retailers who either fail to offer superior service and believe that it is a forgivable indulgence to charge prices well above what could be found elsewhere. In other words, local retail can’t suck and cost more than national chains just for the privilege of being a locally owned business, in fact the bar for good service is actually higher in local retail because there is an expectation of it born from the business being a member of the community as opposed to simply located there.

There remains a significant opportunity in local search but that window is closing. The big search engines continue to enhance their local search products and local retail is learning how to take advantage of these services. Niche search sites are improving the depth of their search results and in the case of review sites, it’s increasingly uncommon to find businesses and categories that feature no reviews.

Mobile local search is a related topic but that’s one I’m not so bullish on, primarily because mobile search in general is a niche compared to broader web search as a result of device and behavior circumstances. Having a mobile experience to augment a web-based service is a winner in my opinion.

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