Gods of Commerce


Michael Phillips

Gods of Commerce


Reliability: Very likely is A+ ... highly doubtful is D-

I love commerce.

The marriage of commerce and technology is by definition the "modern world."

Commerce and technology thrive on three values: Meritocracy, diversity and openness.

Heroes of Commerce

Harold Geneen

Morita, Akio

Louis V. Gerstner, Jr

Sanford I. Weill

Jeffrey Bezos

Almost Heroes of Commerce

Jeffrey Bezos


Joeseph Williams

Gratuitous Advice




Daniel W. Drezner

Daniel Pipes

Alex Gault

Catherine Campbell

Gaiko Forum

Stephan Sharkansky

My list of more public intellectuals

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June 2003

May 2003

April 2003

March 2003

February 2003

January 2003

December 2002

7/29/03 Book Review

The Dutch Republic: Its Rise, Greatness, and Fall 1477-1806 by Jonathan Israel


Jonathan Israel and his book on The Dutch Republic are for intellectuals what Shakespeare and King Lear are for English Literature aficionados: the core reading.

Israel's The Dutch Republic explains where modernity came from. Modernity came from Holland. Holland gave us its democracy and the key components of modern commerce. Holland's urbanity created our modern world. Holland was the source of modernity in science, technology, the arts, intellectual thought and urban life. Our modern world has a single direct ancestor in Amsterdam circa 1640.

I've put my complete review on a separate page.

7/26/03 California B- to D-

In the event my readers didn't notice it or didn't understand it, the rating on California bonds fell, yesterday, from A to BBB. In high school grade terms that means going from B- to D- and will cost us Californians roughly $1 billion per year in increased interest payments.

Some people think bond ratings play a direct role in politics. If you've read A Free Nation Deep in Debt: The Financial Roots of Democracy by James Macdonald (Author) you would have plenty of evidence over a two century period to support your belief.

Since the Democrats have had total control of the State government for the last five years, that would suggest trouble for the California Democrats in the coming few years.

To add to that real possibility there is the also the possibility of Arnold becoming governor. Arnold is apparently huge among Latino voters - the major swing vote in future California elections.

I'm predicting that Davis will be recalled by a 10 point margin and that Arnold will win by a better than 5 point margin.


7/25/03 Technological Species

My source for thinking about this issue is American Genesis: A Century of Invention and Technological Enthusiasm 1870-1970 by Thomas P. Hughes.

A few weeks ago I went to buy a mini-camera here in Tokyo. I was looking for the third generation camera. I bought the first generation camera three years ago, to take photos spontaneously because I could carry the camera in my pocket. Quality was low. I used it a lot.

The second generation, not shown, had several big improvements. The addition of a built-in ultraviolet filter improved image quality a great deal; still the same small number of pixels. I've used it heavily on this blog.

I came to Tokyo this year expecting to find the third generation camera. I found it in the back room of an out-of-the-way shop. It is the last of its species. There will be no more improvements.

As Hughes points out, a technology can advance passed its commercial uses. In this case, the advances in credit card size cameras have reached their commercial limit. New micro-camera advances have been going into the Japanese cell phones. No more technology advances will be marketed for my credit card cameras because the market is gone. The new market for this technology has emerged in Japanese cell phones.

We don't have these compact ubiquitous cell phones, with cameras, in the U.S.

7/24/03 Herb Allen's gathering

The LA Times July 14th carried this line from a story about Herb Allen's annual bash with America's top CEO's: "Wal-Mart Stores Inc. CEO H. Lee Scott stunned many in this high-rolling crowd when he said that he stays at the Days Inn when he travels and often bunks with his chief financial officer to save the company money."

This story needs two supplementary notes. First, the Scott informal chat was the most heavily attended at the gathering because Wal-Mart has moved into the ranks of America's (and the world's) top ranked businesses in revenues, number of employees and profits. This has become evident only in the past few years. This is the first time in history a retail business has grown so big and successful.

The second note is that some of America's greatest companies grew to pre-eminence with the same frugal management approach. J.C. Penny's became the largest national retailer in its time, Bank of America became the world's largest bank, Safeway became the world's largest grocer and now Wal-Mart runs away with the whole retail category (food, clothes, videos etc).

The lesson: Industrial commerce is about cost cutting. Profit is a measurement on a financial statement; cost cutting is the goal of industrial commerce.

Our current CEO hysteria for excessive executive compensation is based on forgetting the goal of industrial commerce; especially forgetting that CEO behavior is imitated by sub-alterns and the rest of the company employees and suppliers.

More on the same subject

Sometimes the goal of industrial commerce, in an oligopolistic market, can be to raise everyone else's costs by more than you raise your own.

We just saw this happen. The FCC ruled that cell phone numbers must be portable by November of this year. Portability means you can change phone companies and keep the same phone number. We have been paying for this function for several years on our phone bills, (a real cost to the phone companies of only two hours of programming).

All the cell phone companies threatened to go to Congress to stop this FCC mandate because it will be costly based on Hong Kong experience where one-third of all customers changed phone companies in the first quarter after portability became available. It is costly to lose existing customers and more costly to sign up replacement customers.

Verizon publicly backed out of the threat to go to Congress, which defeated the initiative of the other oligopolists. Verizon has the best network coverage and the best service. Verizon figured that everyone's costs will go up, but Verizon will end up with the most net gain in customers and the most profitable customers.

Over time, Verizon can amortize the increased costs much faster than its competitors, several of which are already on the verge of bankruptcy.

7/23/03 Gray Davis and Willie Brown

Right now I'm reading The Dutch Republic: Its Rise, Greatness, and Fall 1477-1806 (Oxford History of Early Modern Europe) by Jonathan Israel . I'll do a review as soon as I'm done reading it. The first issue that comes to mind as I read is the Gray Davis recall.

When you read about the Dutch Republic -- the first real republic, the republic that shaped the English Parliament, the American Republic and all other democracies ever since -- and you read about it for hundreds of pages, one fact jumps out at you: God damn it, democracy is a delicate, fragile, infinitely difficult process. An early democracy can fail at any time. A large group of people (this democracy was made up of a relatively small group of Dutch speakers) has a terrible time reaching political consensus and a good democratic leader has to have infinite patience. In the end of the Dutch Republic, the Amsterdam urban anti-war faction won a key vote and the rural friends of the King backed him in a coup d'tat.

What has this to do with Gray Davis and Willie Brown? Davis and Brown are too smart by a half. In both cases they set out to destroy a very fragile delicate democratic mechanism that has evolved over several hundred years. Brown used his vast power to keep the three leading opponents from running against him for mayor in 2000 (getting one appointed to a high court), leaving a perverted mental dwarf as the only opposition candidate. Brown was already hated by the citizens for driving the public transit system into collapse and then putting his incompetent loyal aide in the top spot to fix the system -- making it worse.

So how did the body politic respond? The voters generated a write-in campaign two weeks before the election for a man whose name they could hardly spell: Tom Ammiano. Ammiano got 44,000 votes: more than enough to deny Willie the election and force a runoff. Willie won the run-off, barely, because Ammiano was very unappealing. The body politic refused to have no one to vote for. The voters still hate Willie, and haven't exacted their full revenge.

Gray Davis did the same thing. In 2002 he used $6 million of his campaign donations to interfere in the Republican primary. Davis spent the money on ads to defeat the only Republican who could easily have beaten him (Richard Riordan) in the general election. The outcome was that Gray faced an incompetent boob (Wm. Simon) in the general election. Gray still barely won, getting many fewer votes than the Lt. Governor.

The voters didn't get a real choice, just like the Willie Brown case. So the body politic rose up as soon as it could and created a recall election.

The public lies about this matter are astounding for those of you who read newspapers and watch TV.

The 1.6 million signatures that were submitted had little or nothing to do with funding from Congressman Issa. The recall campaign began on the web and was driven 100% by grass roots organizing. Issa's donations may have sped up the process, but added very little to the massive numbers and high quality of the signature gathering. Davis of course will be recalled. He messed with the ground rules of the democratic machinery and the body politic rose up to punish him.

Now how does the body politic work? I'd love to answer that question but I can't.

I can add three little pieces to the puzzle. I know from being a campaign manager on several occasions (I once taught a class on campaign management to national campaign managers), from being a political activist and from many informal conversations with professional campaign managers, that voters make up their minds, most of the time, especially on arcane issues, by asking friends in their network. In any network there are a few trusted and politically knowledgeable people. For the city of San Francisco, you can win a campaign based on the support of roughly 2,000 key network leaders.

I also know that those leaders are not political party oriented because five or six years ago Californians voted, by a super majority, to return to an Open Primary system (meaning: you can vote in any party's primary) and both political party's activists were hysterically opposed to the Open Primary. We still don't have the Open Primary because the political parties control the Judicial and Legislative process. The body politic will act again to get what it wants ... the Open Primary ... slowly.

The second part of the puzzle is the existence of gatekeepers. Gatekeepers are the people who select commencement speakers, award honorary degrees and select experts for public comments. Gatekeepers are the public memory and they remember for the body politic. These are the people who made sure that Geraldine Ferraro never got another responsible position after she used her Vice Presidential run to sell commercial advertising for Pepsi. These are the people who made sure Arsenio Hall remains a nobody many years after he invited racist Farrahkan to be on his late night TV show.

The third part of the body politic puzzle has something to do with the way individuals in a group of people know how the whole group feels. I know the phenomenon is called group hysteria, and I've felt it many times in mass gatherings ... but I have no idea what it is.

The Dutch Republic

Reading about the Dutch Republic has called to mind another phenomenon.

The Reformation began with Dutch thinkers, Geert Groote, Wessel Gansfort and Thomas a Kempis who wrote and taught ten years before Martin Luther was born.

By the mid 1500's the Netherlands suffered horrible warfare and a century of fighting between Catholics (ultimately becoming Belgium) and the Calvinists (becoming the Dutch Reformed Church of Holland). Iconoclasts were the people who went into Catholic churches and removed the icons, usually turning the churches into Protestant churches.

Both sides had a "take no captives" "give no quarter" approach. Each was the 'one true faith'. Neither side had leaders, only advocates. Both groups were truly grass roots movements attached to ideas. Only the city of Amsterdam came to consider toleration a positive attribute.

This sure reminds me of the smoking/no-smoking religious battle going on in the U.S. today. The smokers have been rather shy, feeling guilty about smoking, in the face of a self-righteous onslaught. The onslaught began in Berkeley in 1966 and has spread over the face of the globe. It can't continue indefinitely. Smokers, like the Catholics who took their world overlord position for granted, will slowly organize and fight back.

In Calvinist Haarlem, the city fathers voted to ban smoking in public. The year --- 1690.

7/23/03 Tokyo Report

The first 2003 style I noticed was men's hair. Fewer men have colored hair, black is back but nearly everyone has soft fuzzy hair. There are many cuts but the soft-fuzzy look is everywhere.

T-shirts with English writing have nearly disappeared. There was always a trace of bawdy in the words, like a young girl with a t-shirt that just said in English across the front: "sexy" or "milk"

Very few women have bare midriffs, maybe one out of a thousand.

Can you believe it? A popular Japanese song that we hear played in fast food outlets is based on Beethoven's 5th symphony.

I find that everyone uses their cell phone for email, Internet access and most interestingly, photos. I look over people's shoulders and they are either looking at a photo someone sent them or they are taking a photo of where they are.

I've asked around and Japanese cell phone email has Spam just like the U.S. and it is similar: Viagra, sex with donkeys and online medicines.

In business, the doggie store in the high couture section with high-end one-of-a-kind designer clothes for doggies was interesting; the store also sells puppies at about $2,000.

The economy seems to be continuing at a healthy level, maybe a little slower than last year. In talking to my friend the Senator, (mentioned below 7/14) he pointed out the deflation is good for consumers. That is visible. Prices are stable or lower than last year.

A prediction I made years ago, when a sales tax was added to the price of everything, that Japanese love round number pricing (1.50, 2.00, 3.80, etc) has come true. All prices that for years had sales tax added on are now back to round numbers that include the sales tax. The exception is grocery stores that were never round numbers.

My daughter Laura, an anthropologist passed through Tokyo on her return from East Timor. She loved the Timorese; she worked on a 35,000 year old site. Laura wants us to buy East Timorese coffee, the only thing that might help a permanently pre-industrial society survive.

7/22/03 Homeless enterprise

This is a park near Shibuya that has had homeless for many years. Some have set up businesses.

7/22/03 Starbucks The arrival of Starbucks in Tokyo five years ago has created a new kind of business: the Modern Japanese Coffee Shop. No need to show a photo. They all look like Starbucks -- clean, airy and open.

What is new about the Japanese versions is they are often divided into rooms with one room for smokers, another for comfortable chairs and a third for pairs or single people around a large table. Like Starbucks they have $3.00 take out counters. But, unlike Starbucks, they also have a large selection of sandwiches and snacks.

The Traditional Japanese Coffee Shop was modeled on the traditional sushi shop. A coffee maker served meticulous hand-made coffee at a long counter where customers sat and drank the $4.00 precious cup. Usually in a darkened room with a few tables.

The Japanese take on Starbucks: it's a social gathering place. The Japanese really make it work -- usually the coffee shops are full till closing time at 10PM.

7/22/03 Public Intellectuals My models of American public intellectuals are John Dewey in the 1920's and Walter Lipman in the 1930's. Public intellectuals disappeared during the cold war because most were lefties and a discussion of how much communism America needed was too boring a subject. Only Sidney Hook and Daniel Bell escaped the lefty pall of irrelevance.

Today we have a plethora of emerging public intellectuals. Many have websites.

Foud Ajami, professor middle east studies

Joyce Appleby, Historian,

Pascal Bruckner, writer

David Brooks, journalist

Fredrick Crews, English

Mary Douglas, anthropologist,

Daniel W. Drezner

Catherine Elgin, philosopher

Niall Ferguson, historian

Stanley Fish, English

Francis Fukayama

Clifford Geertz anthropologist

Todd Gitlin

Stephan Greenblatt, historian

Victor David Hanson

David Hollinger, historian

Christopher Hitchens, journalist

Michael Ignatieff, journalist, professor

Robert Kagan

John Keegan, Military Historian

Irving Kristol

William Kristol

Laurence Lessig, lawyer

Martin Peretz New Republic

Daniel Pipes

Richard A. Posner

Virginia Postrel

Jonathan Rauch

Richard Rorty

Elaine Scarry, English

Andrew Sullivan, journalist;

Leon Wieseltier, New Republic

Daniel Yergin, oil economics

Some are online all the time, some write for magazines and newspapers and others write on occasion -- as needed.

7/20/03 Sort of business, but not really business.

A non-profit, S.F. Woman Against Rape, was requiring volunteers to join discussions about how Zionism is part of the international oppressive system that causes rape. The S.F. Jewish Bulletin first reported this basic lefty-fundamentalist position to the public. Within a few days the SFWAR had cleaned up its website, but the next issue of the S.F. Jewish Bulletin had dug into the story and found a consistent pattern of attacks on Jewish volunteers.

This issue is relevant because the last outbreak of San Francisco lefty Jew hate came from the Rainbow Grocery, a worker collective -- remnant of the hippy days. That was last December. I predicted a slow decline in the number of customers and the demise of Rainbow because customers seldom respond well to political self-righteousness. I stand by that prediction.

I make no predictions about SFWAR. A non-profit can see its funding cut off, which SFWAR will see and it can pretend to change its behavior rapidly. Non-profit political self-righteousness is a different species than business. Non-profit status allows for unique forms of deception, collusion and a wide range of secret bad behavior. I'll watch this story.

7/20/03 All Jews are Israelis

We had dinner at a friend's home and the other guest was a renowned Israeli sculptor, Dani Karavan, age 73. He invited us to visit him in Israel. It was a wonderful evening about world-class sculpture, gossip about all the big names, commissions and jealousies. We enjoyed Dani.

I'm still shocked to learn that Dani can't visit Bali because Israeli passports are banned from Indonesia.

This reminded me, and I told Dani my views, that in 1300 Europe, every European was a Roman Catholic because the issue over rode all others. Outsiders were forced to take a stand about little else than Roman Catholicism. Today all Jews are Israelis. Israel is such a big issue for Jews that each Jew must take a stand on Israel.

My opinion expressed here, in earlier blogs, is that Jews are like Americans, united by an idea. The idea of Judaism and the idea of America. Both Jews and Americans also have a birth heritage. That means you can be born a Jew or (by my standards) declare yourself a Jew. You can be born an American or declare yourself an American.

This birth into a society united by an idea gives us the unique human beings: the self-hating Jews and the self-hating Americans. Both are born to an idea they don't like. There are no self-hating Swedes, Mexicans, Chinese or Australians.

The consequences of combining my earlier views and my current views are that all Jews are Israelis and there are also people who declare themselves Israelis. That means some people who are born Jews and some people born Israeli can hate Israel. Fortunately the number is tiny.

There are of course, hundreds of thousands of Arabs in Israel who are Israelis. That proves my point to me; few of the Arab Israelis are anti-Israel, because birth alone did not make them Israelis; in their mind they accepted the idea of Israel.

7/14/03 International talks

I visited my long time friend Shiina, Motoo. He is a member of the Japanese Upper House and has his own party, the No Party with about a dozen members. Last Fall Shiina was awarded the U.S. State Department's Distinguished Service Award. Shiina may be the first foreigner to have received the award. The U.S. Ambassador (Howard Baker) and three past prime ministers were at the award ceremony. The medallion and plaque came straight from Secretary Powell delivered by Under Secretary Richard Armitage.

I would guess the award is for long time liaison between the Japanese legislature and the U.S. Congress. Shiina is too modest to guess at the reason. But U.S. Japanese relations are at a 25-year high point as I discuss later.

Shiina and I had our longest conversation, one and a half hours. He was particularly interested in my observations on the radical changes in America in the past two years.

I covered the emergence of public intellectuals, the shift from coastal lefties to heartland moderates, pride in America, its military and the change from post WWII -UN-goody-goody-ism to acceptance of American global dominance and responsibility. I covered the re-emergence of the Rockefeller Internationalists in the Republican Party and the public debate on the sources of American democracy. We discussed the way the U.S. self abnegation after WWII created British style parliaments in the constitutions of Germany and Japan and how, along with Israel, Japan had changed over time to provide separate Presidential elections more like the U.S.

Discussing why Europe and the U.S. have such great differences he agreed that Europe was provincial in a world where Asia is the future, Socialism has failed, free markets are much in demand and the U.S. has become the champion of vigor and modernity. He says that Japanese Marxists are still powerful but have no vitality.

We next discussed national sovereignty, which is under going rapid change with the end of Saddam's Iraq and the direct intrusion in U.S. policy discussions by Arabs through Tom Friedman, Ariel Sharon through William Safire and the Spanish PM through the Wall Street Journal.

I brought up the issue of political corruption, which we occasionally discuss. Why had corruption declined so abruptly in Japan? I had previously recommended that Japan consider using PAC's and pointed out the twenty year decline in U.S. popular antagonism toward government, possibly due to PAC's. Shiina said the decline in corruption in Japan was due entirely to social pressure on all involved by family and peers. Japan is a "tiny community" he said; neighbors really count.

He asked about the future for President Clinton. I said there was none. No U.S. president had ever created a post-office role. Carter had tried hard to create a role for ex-presidents but he couldn't keep his mouth shut on the eve of the Iraq war and will not be a role model any more. We discussed the way power flows in and then out of an elected person. Once out of power, people in power remember the former officials enemies and mistakes. He told the story of a powerful friend who was starting an Old Boys Club of former leaders. Cory Aquino, cynically, suggested he invite Marcos to join the Old Boys Club.

I asked about the mystery of the Japanese economy. How can GDP be flat for ten years and the country seem prosperous? He suggested that the absence of visible rich people helps keep ordinary people feeling better, the modest deflation is welcomed by consumers and economic measures probably miss the main ingredients of prosperity. Japan is an old country with assets widely distributed as cushions against adversity. GDP doesn't accurately measure changes in assets, in this case the changes are positive.

U.S. Japan relations are better than ever today. Japan needs the U.S. shield against N. Korea and the U.S. needs Japan in China and Asia. Shiina confirmed that the Japanese are paying for part of the 1st stage missile defense system to be used, first, in the North Sea.

U.S. Japan relations are now so good that American legislators come to visit Shiina; he rarely has to go to D.C. My reading is that he admits helping reduce the antagonism that Congressman Gephardt generated toward Japan over fifteen years. Gephardt was the most outspoken Japan basher in the 1980's.

7/7/03 Commerce has some flaws

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One of the most distressing flaws in commerce is the Traffic-Rent effect.

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My first example of the Traffic-Rent effect was in the late 1970’s when Obiko opened on Sacramento Street near Presidio, two doors east of Presidio on the north side of Sacramento.  Obiko was a stroke of retail and artistic genius.  It was a tiny shop that carried hand made elegant dresses in the $1,000 plus range. 

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Obiko became such and immediate success with the Pacific Heights rich ladies that foot traffic on this formerly dead street came to life.  From a neighborhood with 20 struggling stores and three struggling eateries, the new foot traffic generated by Obiko brought an additional 20 stores within two years.  More foot traffic followed.

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So, stupid amoral commerce raised its blind head and the site-location experts at the S&L adjacent to Obiko saw their business increase and the foot traffic increase and reasoned that they should expand their S&L.  That drove Obiko out of the location since the S&L could afford much higher rents.  The S&L expanded into Obiko’s

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Obiko moved downtown to a worse location, but survived.

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The business area near Sacramento and Presidio stopped growing and began declining. The business area is fairly stagnant now and has been ever since Obiko left… it is almost back down to the 20 store level it was before Obiko arrived.

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I see the same thing happening on Harajuku Street in Tokyo.  Harajuku is the street where teenagers come to parade on Sundays and shop other days.  It is packed with young people and crowded with tiny, unique stores that cater to them.

The amoral Traffic-Rent effect is now raising its ugly head.  Foot traffic is up.  Foot traffic sniffers in the location analysis departments of big businesses decided the high foot traffic would be ideal for a new McDonald’s, a few 7-11 type convenience stores and some upscale clothing stores. The new stores are going in with big facades and many linear feet of street front.  Now we are getting a long walking dead zone of stores that aren’t unique and interesting to the teenagers on the street. Before long the teenagers will stop feeling it is their street and will stop coming in large numbers. They’ll find another neighborhood.

7/2/03 Tokyo for seven weeks

I am in Tokyo for seven weeks. I'll keep blogging, just a little less often. Two goals for this trip. Get a better perspective on the Japanese plans for a N. Korea dirty bomb and find out how the economic growth is being hidden.



See June Archive

7/20/03 C Chinese archeology has enough secret finds to change the world of archeology ten times

6/26/03 C- Gray Davis is discussing with his staff resigning when the recall initiative presents enough signatures. That would make Lt. Gov. Bustamonte governor and keep Democrats in control of California.

6/22/03 D- My guess is that Michael Lerner, publisher of Tikkun magazine, works for the Israeli Mossad. I've met him with Mossad agents, his magazine has no visible source of funding and the Mossad would like to know who are the dangerous lefty Jews in the U.S.



email: mp@well.com