Inflation Update, Baseball and Dan Wiedel
As usual, you get an economic update. New this week is a baseball business analogy and looking at the impact Dan Wiedel had on the advertising world.
The Economy
The CPI is in and overall inflation – also known as the headline inflation - decreased ever so slightly to 8.2% from 8.3% last month. But…
Core inflation, the one that excludes food and energy, hit a new high since August 1982: 6.6%. Remember, that’s without food and energy.
That’s not good.
It means the prices of core items continues to increase.
It also means a 0.75% rate increase is likely on November 2. A 0.5% rate hike is guaranteed.
And to add insult to injury, the average mortgage rate was 6.92% for the previous week.
That is a 20 year high.
And still the economy continues to march ahead with unemployment as low as ever.
Up to this point, the inflation drivers were based on goods impacted by supply chain issues.
Computer chips, lumber and other commodities.
That has mostly settled down, with chip manufacturers slowing production due to weak orders and commodity prices back to pre-covid levels.
Well, now it’s the service sector where prices are going up.
During the lockdown phase, everyone bought stuff and manufacturers and suppliers kept thinking this was going to continue, with Peloton as that poster child.
Now, it’s all about businesses that provide services: airfares, travel, hospitality, legal work and behind those, wage increases.
And I think you’ll find housing expenses included in that tally, like rent. That’s a big part.
On the upside, social security payments will go up by 8.7%. That’s the highest since 1981.
Coming up this week:
Building permits, housing starts and… third quarter GDP.
Baseball
Well, the two playoff teams with the worst records beat their opponents, who had the best records. And it really wasn’t close.
The citizens of the city of Philadelphia baseball team (what else can Phillies be?) beat the proud Braves of Atlanta, the current World Series Champions.
The friars of the city of San Diego bested the dodging baseball players of the city of Angels.
Is there a business analogy in here? Possibly.
Runs are like sales. When most salespeople score a big sale, it is commonly known as a “home run”.
Generally speaking, the more sales, the better the business. However…
You can have all the runs in the world, but if you don’t have the back office support or customer service or the margins to pay for the back office support, sales can strike out.
What the Padres and the Phillies had was very good pitching. They may not have had a lot of runs, but with great pitching, that did not matter.
Kind of like customer service and the back office.
Also, both the Braves and the Dodgers had time off; the Phillies and the Padres never got a break, so they never got out of their rhythm.
Many times sales hits a home run and then takes a vacation to celebrate, only to find when they return, it’s hard to get their momentum back.
Small business owners can’t take their eye off the ball. They don’t get a break nor can they afford to drop the ball on service. For this reason, small business can beat big business. They may not get a lot of sales, but when they do, a good back office seals the deal.
You just need an operations manager with the last name of Hader.
Who is Dan Wieden?
One thing Dan Wieden didn’t want to do as a young man was to follow his father into the advertising business.
As fate would have it, he attended the University of Oregon, married and had children in his 20’s. That necessitated the need for income. Advertising it was. But not with his dad.
In 1982, he joined David Kennedy to form the firm Wieden-Kennedy. Their office was furnished with a card table and cardboard file cabinets.
They used a pay phone to call clients. Or client. They only had one client, a very small shoe company just starting out.
The owner loathed conventional practices and took to this oddball of an advertising firm and hired them.
One thing led to another and in the 1990’s, they were doing ads for Subaru, Microsoft, Coca-Cola, McDonald’s and others.
What put them on the advertising map? One simple phrase.
“Just Do It”.
Nike was the small shoe company and Phil Knight was the edgy owner.
Mr. Wieden died last month at the age of 77. He encouraged his employees to “walk in stupid every morning”.
Also, he said: “The minute you think you know, the minute you go, ‘oh, yeah, we’ve been here before, no sense reinventing the wheel,’ you stop learning, stop questioning, and start believing in your own wisdom, you’re dead.”
Those are very true words. The bankruptcy courts are littered with businesses that said “that’s the way we’ve always done it…”
Make a point this week of doing what Paul Castain calls “a pattern interrupt”, something that you haven’t always done before.
Just Do It.
