On Change, Golf and Millennials

I was drifting as I often do Monday morning when I decided to check out the distress debt listings from our bond desk.  I saw Golf Town Canada/Golfsmith debentures and wondered what the golf press looks like.

Before going any further, while I own a decent set of clubs, I am undoubtedly one of the worst golfers around.  It’s not that I lack athleticism or the wherewithal to be a decent golfer, it’s that I am loath to invest the time and effort to be so.

One Google search later and the first article that caught my eye was from Business Insider – “Millennials are Hurting the Golf Industry”.  There are times I think that the press throws around the “Millennial” tag like some specter representing some malevolent force of unreasonableness that disrupts the status quo.

The many reasons for the long decline in popularity that I came across were all anecdotal.  From where I sit, it is no wonder that many golf courses are being turned into subdivisions.  After all, the ultimate economic driver for any business is “next best use”, and if the acreage of a golf course is worth more as undeveloped land than as a going concern, it will fast become a subdivision.  I guess I’ve always seen golf courses as suburban parking lots – a source of revenue until something better comes along.

Business conditions, like the evolution of society because of demographics, change.  My neighborhood local, my rock bar, closed because the landlord decided that it made more sense for him to have different uses for the space he owned.

Casting my eye up and down Queen Street between Spadina and Dufferin shows that many businesses, former stalwarts on their respective blocks, have closed and given way to the mind-numbing sameness of chain retailers, trying to reinvent their big-box-retailer-bound former selves into something more relevant.  What is more significant, I suspect, is that the “next best use” that has driven rents ever-so-higher for commercial tenants ultimately will be a landscape populated with condos, flanked and faced by historical facades, catering to a population that is more into convenience and shopping online that doing the retail dash.

The closest I come to Millennial is having four as kids.  If they are however drivers of the trends I take advantage of, bless them.  Friday night I did the grocery shopping (Costco and Walmart), laundry and bought some Bluetooth headphones for my iPhone.  All online.

I can no more roll back the present to the past than you can.  As inconvenient or unpleasant as some of the things that happen today can be, it is what it is.  And besides, my rock bar reopens four blocks north.  And I’m never going to be a good golfer.

Industrial Alliance Securities Inc. (IAS) is a member of the Canadian Investor Protection Fund (CIPF) and the Investment Industry Regulatory Organization of Canada (IIROC). iA Securities is a trademark and business name under which Industrial Alliance Securities Inc. operates.

This information has been prepared by David Chellew, Portfolio Manager for Industrial Alliance Securities Inc. (IAS) and does not necessarily reflect the opinion of IAS. The opinions expressed are based on an analysis and interpretation dating from the type of publication and are subject to change. Furthermore, they do not constitute an offer or solicitation to buy or sell any the securities mentioned. For more information about IAS, please consult the official website at www.iasecurities.ca. David Chellew can open accounts only in the provinces where he is registered.

On Having a Wells Fargo Moment: The Morality of Loyalty

Baby Daver.png

Dad was always about the deal.  He used to brag about what a great price he got for one thing or another.  You could sell him anything if he was convinced he was getting a bargain.

His relationship with his bank was just as firm.  He dealt with the same bank that he started with when he joined the RCAF always believed those relationships were more important than the growing impersonality of consumer banking.

Dad is gone now.  But the legacy, the strength of his personal convictions however increasingly misplaced, gives me perhaps a greater understanding of the need, on the one hand, to maintain a cognitive status quo and on the other how dramatic conduct can change when actions become so egregious as to overcome the weight of the dissonance.

Just before his death Dad voted liberal, in the last federal election, for the first time in his life.  A life-long conservative, it was only the Conservative Government’s mishandling of the Veterans’ file that pushed him over the edge, or should I say chasm?  His faith and belief in the party was so strong that to this day I find myself gob-smacked when I think of it.

I’m not sure Dad would have noticed the fees he was being charged on his investments or understood them. But Dad would have felt betrayed by his bank if they were knowingly taking advantage of customers.

As much as the days of traders hustling around trading posts amidst the bedlam of open outcry, teletypes clacking, trading slips strewn about the floor has long gone, so too has the sanctity (and perhaps the overbearing patronization) of a visit to the bank.  Technology has changed much in terms of transparency, convenience and execution which is good.  But In the age of disruption, of rapid technological change, we must ask ourselves: “How do I stay true to my customers’ loyalty?”

Industrial Alliance Securities Inc. (IAS) is a member of the Canadian Investor Protection Fund (CIPF) and the Investment Industry Regulatory Organization of Canada (IIROC). iA Securities is a trademark and business name under which Industrial Alliance Securities Inc. operates.

This information has been prepared by David Chellew, Portfolio Manager for Industrial Alliance Securities Inc. (IAS) and does not necessarily reflect the opinion of IAS. The opinions expressed are based on an analysis and interpretation dating from the type of publication and are subject to change. Furthermore, they do not constitute an offer or solicitation to buy or sell any the securities mentioned. For more information about IAS, please consult the official website at www.iasecurities.ca. David Chellew can open accounts only in the provinces where he is registered.

If I don’t have something positive to say, why bother: Post-US Election

If there’s one thing I’ve learned from our creatives, it’s that negativity in any form doesn’t belong in my vernacular.

Don’t get me wrong – I’m not one of those people who kicks themselves after someone has offered insult and only thinks about the witty response after it’s too late.  I am well practiced – the sarcasm and repartee very much drips off my lips.  I suppose at another time I would have considered myself a master.

I will always admit to being amused by wry observations of the human condition.   I find it interesting that when I offer those observations on personal social media accounts, those that I have the most respect for don’t respond.  And most of those are millennial.  Rob, oldest son and our social media expert, is my harshest critic.  And when I go off on one my rants, as Rob calls them, he will sit politely and then ask if I’m done.

Lest you think I am trying to fit some Pollyanna mold, let me assure you that I have the same visceral reaction that many of you do to events globally, locally and personally.  But now I am more likely to hold my opinion, watch and learn.

The election of “The Donald” is a case in point.

Had I bought into the “Armageddon” rhetoric post-election I might have well missed out on any number of opportunities.  Equally important, watching President-elect Trump’s use of social media to impale leading US multi-nationals is instructive.

Investment, particularly fixed business investment as economists like to call it, is predicated on a long view.  Part of that view is informed by assumptions of the stability of both the regulatory regime and immutability of the laws of the land.

So too is the rapid acquiescence of the business elite to the sudden turn in direction of their elected government notwithstanding the fact that they were such vociferous critics and opponents prior to President-elect Trump’s election.

Bond rating agencies, when seeing changing circumstances, will put their subjects on credit watch.  All the short-term rhetoric aside, with the changing political landscape in the US I’ve put US markets on my professional “credit watch”.

Industrial Alliance Securities Inc. (IAS) is a member of the Canadian Investor Protection Fund (CIPF) and the Investment Industry Regulatory Organization of Canada (IIROC). iA Securities is a trademark and business name under which Industrial Alliance Securities Inc. operates.

This information has been prepared by David Chellew, Portfolio Manager for Industrial Alliance Securities Inc. (IAS) and does not necessarily reflect the opinion of IAS. For more information about IAS, please consult the official website at www.iasecurities.ca. David Chellew can open accounts only in the provinces where he is registered.

The Changing Face of Consumerism and Technology: Disruption, Diminishment and Disappearance

 

mini-wheats

Linda and I were talking two days ago about losing our Saturday morning delivery of the national newspaper. For all the comfort of having it in your hand and sipping coffee while outside its storming, more likely than not I’ve already read the articles online and the paper moves from front door to recycling. I think the bigger issue is a business model that is falling by the wayside and the effective diminishment of the very thing that newspapers are all about, the newsroom, while the organizations struggle to continue to offer a product that fewer and fewer of us care about. Is the cancellation of our home delivery merely one more sign of a troubled company?

One of my favorite Sunday morning recreations is walking up and down Queen Street West counting the number of stores and restaurants that have gone out of business. Rent is often blamed for the demise of many of these businesses, some open for little more than weeks, but in my opinion it has more to do with relevance in the online age. After all ordering on Amazon is far more convenient and more price competitive. When I go into one of these retailers my experience had better be superlative given the options available to me, and all too often it falls short of even adequate. More importantly, in a rapidly changing landscape, evolve or perish, and many of them are fixed in their perception of what the market is rather than letting the market dictate what they should be.

Changing buying habits of the millennials are also held up as a reason for the rapid shifts in our consumer society. If anything they’ve taught me to be more astute and demanding; all my habits and preconceptions about how my world works have been turned on its head as I’ve looked more closely about how shifts in consumerism have affected everything from media to retailing, manufacturing to logistics. I am not sure it is the generation itself or the fact that they are more closely allied to technology driving the change.

Vegas

I didn’t realize how significant my urban lifestyle has informed me until a recent trip to Las Vegas for the Life is Beautiful Music Festival. Over the course of six days I grew more and more frustrated looking for a satisfying foodie experience (funny how fast foodie has entered my MS Word dictionary). Our experience on Fremont Street was something generationally challenging – often heard was how cheap the food was (it wasn’t) and how large the portions were (I’m sure I could have fed a family of six on what would appear on one plate), as if my physique which is more akin to Humpty Dumpty than Adonis and white hair meant that I was generally interested in trough feeding. We did find some King Street West experiences to satisfy our palate and conscience but frankly would have ranked the fare bottom tier compared to what I’m used to. We also heard from many about the great food on the strip but frankly for the price point versus offerings, I would rather wander around my city. I didn’t go there to eat.

A couple of road trips during our stay meant a ubiquitous trip to Walmart to buy a cooler and food and frankly as disconcerting as the shopping experience was at least we were able to cherry pick some decent and healthy options. The bigger shock was the plethora of convenience single serving foods we saw and how the price points were more amenable to budgets than was healthy eating.

Consumer Spending

Consumers are responsible for the majority of economic spending and growth. Leaving aside the obvious excesses, there is little doubt in my mind that the competition now is not amongst companies in the same industry fighting over a slowly growing market share, but rather new competition for the aggregate consumer dollar.

I will admit to spending on convenience. We have a cleaning service come in once a week to do our condo. I like to be able to order my groceries online. And who likes laundering sheets and comforter covers – we send those out at the same time our dry cleaning is picked up. On those occasions we haven’t planned the night’s meal we’re as likely as anyone in our neighborhood to go out and either buy take out or eat in at one of the local restaurants.

What dictates how we spend our discretionary dollar now has everything to do with the duality of convenience and excellence. And we grumble every time one of those two dimensions fail; as soon as a better opportunity presents itself we’ll embrace it. And if that opportunity is online (like our groceries or dry cleaners) then that will be our preference.

On Sugar and Cereal

I recently made the weekly trip to our local Shopper’s Drug Mart to pick up some staples – milk, bananas, etc. I snagged a box of sugar cereal and without thinking boldly carried it to the cash. Lots of yoga-wear sweaty people were in the store that Saturday morning and the looks I received left me feeling sheepish, until, that is, I looked behind me and saw several of them with the same box of sugar carefully hidden in their arms.

I have no doubt that a smaller market will exist for these former stalwarts of the weekday breakfast table, but more as a guilty pleasure than as a significant staple. And as the next generation comes of age never having known the ubiquitous presence of some crisp or pop, even that diminishing market will disappear.

Bringing it Home

Technology makes embracing a new way of living easier and the adoption faster. It also creates a new definition of what a market is. In business school I learned about both the economics of substitution and competition, but I have never seen how pervasive the competition is for the consumer dollar. It is no longer from competitors in the same industry.

What I know for sure is how to spot companies that are going to excel – those that focus on speed of convenience, price and excellence are going to win. The rest are merely grist for disruption, diminishment and ultimately disappearance.

Industrial Alliance Securities Inc. (IAS) is a member of the Canadian Investor Protection Fund (CIPF) and the Investment Industry Regulatory Organization of Canada (IIROC). iA Securities is a trademark and business name under which Industrial Alliance Securities Inc. operates.

This information has been prepared by David Chellew, Portfolio Manager for Industrial Alliance Securities Inc. (IAS) and does not necessarily reflect the opinion of IAS. For more information about IAS, please consult the official website at www.iasecurities.ca. David Chellew can open accounts only in the provinces where he is registered.

Building a Business Village One Engagement at a Time

old-toronto

I’ve often thought about business framed around the idea of the village – a grouping of individuals bound by a commonality. I suppose if you go back far enough in time you’ll find those bonds were one of obligation to one’s master but when I think of village I think of the parish church, local pub, general store and the family doctor.

As parochial and quaint, as pastoral and seemingly unchanging those societies are, in my opinion they continue to exist in part because of an intransigence to the new. Try to be an outsider or agent of change. They are fundamentally designed to keep norms, and norms are safe. And those norms are master to all.

I recently watched a community coalesce around conflict. The condo I live in was dealing with a potential threat to our way of life. A developer on an adjacent lot wanted to convert part of our drive into a lane way to allow deliveries and garbage service – I should add that our drive is private property. Both the management company and the boards of the various constituent condos supported the developer. A number of individuals stepped up and had the measure defeated soundly.

In the threat to the community at large, support in opposition coalesced around a few key leaders. Sans conflict, we revert into intransigence, enjoying the benefits of having most of our needs taken care of by the invisible hand of the condo. As the threat recedes, our complacent norms reassert themselves.

That brings me full circle to the idea of community in business.

If I think back over the years of management education and organizational experience I’m struck by the emphasis on the elemental impersonality of it all. Think of it this way – most businesses see themselves like an advertisement. They choose to be perceived by the way they present themselves in the hope that they offer sufficient appeal to the buying public to meet their needs – to sell a product or service. The public aren’t part of their community.

In the process of self-discovery over the past year and a substantial effort at rebranding our emphasis a key part was on boiling down the essence of what we stood for, who we are presented in an honest and forthright manner.

What my business partner and I, and our marketing guy, seem to be struggling with right now is how to build the business out going forward encouraging engagement. Linda is successful in attracting people who want to be part of her circle, to be part of something larger. I am affable and intense at the same time and rely on my intellect to guide through what can be a pretty confusing landscape. Rob is just finding his feet as a social marketer applying skills he’s acquired going through the process of building a startup.

Where we have failed is not acknowledging that we three form a community that’s part of a larger one. I can talk about target market and business proposition until I’m blue in the face but it doesn’t change the fact that to be successful going forward I, we, have to be conscious of how business has to be operate going forward.

It is easy to galvanize a group and provide leadership in the face of crisis. I can fall back on the very elements that has in the past built successful business practices – fear, greed and envy, as a peer and mentor once hammered at me, but a community can’t be grow unless the process is built on something more sustainable. Living and working in a state of perpetual crisis, or conflict, is inherently unhealthy; creating both dependencies and fear are mere manifestations of that.

So what is it then to try to build a successful business around the sense of a larger community? I don’t know but I’m willing to find out. And I’ll be finding out one engagement at a time.

 

The Arrogance of Scolding Millennials to Fit Them into Our Business Model

I was drifting through the CNBC news offerings this morning and came across a reference to money mistakes millennials make and thought to myself, great alliteration but insufferably arrogant.

Let’s face it – my industry and the advice channel is in danger of becoming increasingly irrelevant. To open a typical stock and bond account today means having relatively huge amounts of money which only serves to put up barriers that the average starting investor can’t overcome. If fintech and disruptive business models are going to redefine our relationships with our clients, closing our doors to the most tech savvy generation that has ever existed is going to morph that experience into an accelerating destructive business model.

I’ll be honest. I walk down Queen Street West in Toronto and look at the new businesses opening up and can reasonably predict whether it is going to be a success or a failure in the short term by applying the Amazon test – if I can order it online I probably won’t be gracing your store. Discovering a way to order my Costco online made my day – no more having to arrange for a Zipcar and trekking out to what is for me an increasingly irrelevant experience in the suburbs. In fact, no more schlepping Kirkland brand toilet tissues up to our 11th floor condo. I hear a knock on the door and, voila, all the hassles and bother disappear.

Not too long ago Linda and I bought a cup of coffee on our way to Trinity-Bellwoods Park and for the price of a Starbucks I got none of the over-the-top experience I get every time I walk into the one down the street. I’m willing to pay a premium for the experience of genuine warmth and gratitude.

In this particular case, we practiced what we are increasingly finding ourselves doing – one chance and if the verdict is “fail” we’ll move on to our next experience never again gracing the doors of your establishment. You can’t order a mani and pedi online but like the coffee, it is about the experience. If you’re buying a publicly traded company I think the test going forward for survivability is the basic service model and the consistency of the delivery not the product model.

So what is my point about the arrogance?

I once remarked to Linda after a particularly complicated product presentation from a supplier that what I was seeing taking place were solutions in search of problems. Competition in 2005 involved an already homogeneous product market place and all that the manufacturers were doing was adding fins to what was already old technology – think 1957 Ford Fairlane. Part of that arrogance in lacking responsive differentiation in business is the practice of so many of my peers to scold rather than learn and adapt.

Who is to say that the next generation haven’t figured out a better way. I am an uber Uber fan. Airbnb revolutionizes how and where I stay. And if I use booking.com to arrange for a hotel room, don’t give me the gears at the front desk or give me a crap room. I won’t under any circumstances stay at your hotel again no matter how cheap the price.

What I read was a clumsy, patronizing and patrician opinion of an old man preaching fire and brimstone, scolding the young ones to fall in line and heed his warning. Okay, so I exaggerate – but for all of us the first principal should be to learn what we can that we may adapt to an ever-changing present. Do that and the future will take care of itself.

This information has been prepared by David Chellew, Portfolio Manager, for Industrial Alliance Securities Inc. (IAS) and does not necessarily reflect the opinion of iAS