Interview

To be a revolutionary manager – FIRST BREAK ALL THE RULES


Curt Coffman is the New York Times bestselling author of First, Break All the Rules: What the World’s Greatest Managers Do Differently(along with Marcus Buckingham). He is also a researcher, business scientist and a consultant to Fortune 500 organisations. “Approximately 15% of organisations today are embracing the power of people within the organisation.  At the same time, 95% of companies believe that they are doing so. Businesses are currently operating at only 35% of their capacity, because of obsolete people practices.  There is a maxim from quantum physics that says…“When you change the way you look at things, the things you look at change,”” says Coffman. He will be touring India for ‘First, People 2012’, India’s First HR ‘Un-Conference’ in Goa on September 21 – 22 organised by SHRM India (Strategic Human Resource Management), a subsidiary of the world’s largest HR association, SHRM – The Society for Human Resource Management. In this interview he speaks to Vivek Kaul.
In your groundbreaking work First Break All the Rules you got responses from 80,000 interviews to determine that the best managers are revolutionaries.  Could you discuss that in some detail?
Just in the past 5 years we have interviewed approximately 90,000 managers/leaders across the globe.  Great managers have one objective and that is to facilitate unprecedented performance in every individual.  They form very strong relationships with their people based on trust and friendship.  This allows for high expectations that are motivational and challenging.  They don’t treat everyone the same but as individuals with unique talents, gifts for contribution and specific needs.  There is an opposition to the notion of changing people, as they feel one’s work should draw out the individual’s talent versus attempting to put in what was left out.  Commitment to innovation is seen through embracing the differences in individuals rather than create a blanket of conformity.  Yes, they are the rebels who really drive an organisation’s success – one person at a time.
If the best managers are revolutionaries who are the revolutionaries according to you in the current business scenario?
The great leaders of tomorrow will commit to one thing – making sure every individual in the enterprise has a great manager.  Great managers who are close to the action will trump traditional leadership in driving world-class results.  Leaders atop the organisational chart cannot effectively impact the local workplace and thus need great local managers to create ownership and commitment. The senior leaders of today’s most relevant brands know this intuitively.  Brands like Google, Zappos, Apple, Tata, and Starbucks, know the power of aligning brand (how others see us) with culture (how we see ourselves). Enlightened executives know the power of each individual employee on creating success.
One of the things that comes out from First Break All the Rules is that treat employees like individuals, set specific outcomes, but not the process, and focus on employee strengths instead of calling out weaknesses. Could you discuss that in some detail with examples?
Progressive leaders who are charged with creating a better tomorrow and managers who are charged with creating a outstanding today intimately know what creates a passion for excellence within people.

Destroy PassionCreate Passion
Judge me on how I conform to the “steps” of doing the job regardless of results.Help me know the real outcomes of my job – the real reason you hired me.
Point out precisely who I am not and then help me get better in those deficiencies.Help me discover who I am and then allow me to use my gifts for outstanding contribution.
Work should be serious and hard.Work should be fun and full of energy.
Use fear to drive us.Use hope to drive us.
Always highlight what you don’t want.Create a vision around what you do want.

Do you see many companies following this kind of process while dealing with their managers?
Ninety five percent of all organisations proclaim that people are the key to their success.  Sadly, I must say that only about 15% of global organisations have adopted a 21st century vision about people and the vital role manager’s play in building value. That said, there might be a higher percentage in India.  You have some great brands and enlightened leaders who are savvy enough to recognise who really owns the means of production – every employee every day. Very progressive organisations like Taj Hotels, Voltas, Piramal, Lupin and Manipal to name a few, pay sharp attention to how managers are identified, developed and rewarded.
What do they do differently?
These organisations are keenly aware that a manager’s real job is to increase the productivity and success of every individual. In the past being a manager meant organising “things” and only caring about how they are viewed by the leaders above them.  This is position-ship not leadership. If there was any focus on people, it was seen as a hobby not a primary function of the role. Very talented and productive people have options and we know that ultimately they leave managers, not organisations.  If you have ever had a bad manager, you know exactly what we are talking about.
What is that makes a great place to work?
When people can’t wait to come to work!
But isn’t that very idealistic?
Yes, but why should it be?  Knowing what about work gives your people energy and what drains their energy is the most primary step in developing a progressive, people-centered focus. Our most current research reveals that a great place to work is based on the characteristics of relationship, growth, and purpose. Relationships are the foundation of strong culture.  Without them we wither away.  The connections we have with co-workers, managers and leaders are the renewable energy that drives success.  Great organisations promote strong friendships and a spirit of connectedness.  People contribute at exceptional levels when there is another person they trust and feel loyal to.  People are most loyal to the organisations that have helped them grow and develop –  that is why you will see more philantrophic money being given to colleges and universities than any other institution. Great managers help every person know themselves well and thus set people up for success.  When we know our talents and then acquire the right skills and knowledge incredible things happen.
So what is the takeaway here?
We just do our work and relationships differently when we have a sense of pride in the organisation’s mission.  It is the broader purpose of one’s work that makes a difference.  On those days that we feel overworked and frustrated, the higher purpose of our work will pull us through.
Another thing that your research threw up was that an organisation doesn’t have one culture overriding it. It has these many little cultures what you call the “little C cultures”. Could you discuss this finding in some detail with an example preferably?
Everyone uses the word “culture” with little consistent understanding of what it really means.  If culture is the new competitive advantage, we need to become really clear on what it is.  The key discoveries that we have made are that there is no culture without people. Culture exists at three levels – micro (local employee), bridge (manager) and macro (leadership). Each of these cultural charges have distinct roles; Micro to ignite positive/purposeful energy in one-another, bridge is to connect people to purpose and macro is having leaders who are more “interested” than “interesting.” Once key businesses imperatives are defined, the next question should be “what kind of culture are we going to need to drive results?”
Can you explain this through an example?
Steve Jobs at Apple cast a vision for innovation that carved out markets that didn’t even exist.  He was always listening and more interested than interesting (actually he was more interesting because he was interested).  This macro culture is about creating a better tomorrow.  Steve Jobs vision is only achievable when the right people and culture bring it to fruition.  Great managers are attracted to an environment where they can connect individuals to vision. Take the Apple employee as an example – who wouldn’t want to be a “genius” versus a “help desk employee?”
Earlier in the interview you said that most people don’t leave organisations, they leave their bosses. How do you control for something like that?
The steps are rather basic.  It starts with promoting people who are already the spiritual leaders of people.  Great managers didn’t become that way when the official title was given.  Know who these employees are. Don’t make becoming a manager a reward.  Reward great managers who genuinely care about the success and potential of others and know the strengths of each person they work with.  Another step is to not try and change people, but instead draw out the best within them. Don’t make becoming a manager another rung on the career leader.
Why do you say that the worst mission a manager can undertake is attempting to erase a person’s weaknesses?
Great managers will say that people don’t change that much and instead of trying to put in what was left out, let’s draw out what was left in. Neuroscience now confirms that the brain is done developing between the ages of 15 – 22 years of age.  By that time all of us have a pretty well structured network.  There are things that come naturally and others that don’t.  Talent is about hard wiring and explains our predisposition for excellence in certain roles.  Many times we feel as though we can rewire people brains.  It is not possible.  We have never seen a person take a weakness and transform it into a throbbing strength.  There are ways to manage around our weaknesses, like having a complimentary partner who does have the talent and energy for those things in which you do not. Or, you can find a system that makes the weakness immaterial (i.e. grammar and spell check).
You also suggest that it is okay for managers to treat some people as their favourites. Again something that goes against conventional wisdom. Shouldn’t a manager try and treat everyone in his team equally?
Treating everyone the same is true discrimination.  We are individuals with unique strengths, needs and styles.  By legislating one way for everyone, we disconnect people’s distinctive ability to display exceptional performance.
Your latest book is called Culture Eats Strategy. So how does culture eat strategy?
Vision is what could be.  Strategy is our rational plan to get there.  Execution is our continual day-to-day progress toward the desired outcome.  Our rational plans always require human spirit and energy to bring to fruition.   The daily progress we make (or fail to make) is dependent upon our people – our culture.
So how do you define culture then?
Culture is the collision of rational with emotional.   When individual motives, drives and feelings come up against strategy, plans and structure, the end result depends more on the emotion than logic. While evolving a new strategy can be difficult, executing it in the face of existing conventions, routines and ways of working together can be nearly impossible.
Could you explain through an example?
Consider a hospital we know that changed out CEOs five times in four years.  The culture, comprised of long-tenured staff, resisted the new CEO and strategy de jour.   As each CEO was replaced, the culture became more and more convinced they could “wait the next leader out.” Our vision is essential, our strategy critical; but however sound, they are dependent upon the culture  – the people  – to deliver the desired results.
(Interviewer Kaul is a writer and he can be reached at [email protected])
(The interview originally appeared in the Daily News and Analysis on September 17,2012. <http://www.dnaindia.com/money/interview_to-be-a-revolutionary-manager-first-break-all-the-rules_1741770>)
Box:
The discoveries of great organisations:
-People practices focus on building excellence (what we want), not preventing weakness (what we don’t want)
-A senior leader’s greatest impact comes from insuring that every employee has a great local manager
-No people, no culture.  Finding talent is a basic to performance, managing talent is the differentiator
-Obsessing over the “right” decision is not as important as insuring that the decision is being made by the people closest to the issue
-Employee purpose is driven by a “line-of-sight” between their work and the ultimate impact it has on the customer
 
 

'Tesco UK model shows organised retail will buy out kirana stores in India'


Few have approached marketing as a science like V Kumar. “My significant contribution to marketing is bringing science into it. Bridging science and practice,” says the IIT Madras alumnus, who has been greatly inspired by Philip Kotler. VK, as he is better known, is the Richard and Susan Lenny Distinguished Chair Professor of Marketing, and executive director, Centre for Excellence in Brand and Customer Management, Robinson College of Business, Georgia State University, in the US. He was recently ranked amongst the top five marketing scholars worldwide, based on his research productivity. He is also the recipient of eight lifetime achievement awards (in various areas of marketing), which is a record and a consultant to some of the biggest companies in the world. In this interview, he speaks to Vivek Kaul.
Excerpts:
One of your core areas of work has been customer loyalty. Can you talk about that?
Fourteen-fifteen years ago the universal metric was that if somebody is loyal they are the most valuable customers. We questioned that linkage. Why is loyalty equal to profitability? Maybe in contractual relationships it is so. But most of the transactions between a firm and a customer are non-contractual .I am free to go and buy a shirt anywhere, a computer anywhere, a phone anywhere. Very few things are contractual. Your monthly subscription to your wireless plan is contractual. Maybe your internet connection at home and utilities, like electricity are. Given that we started to empirically test the relationship between loyalty and profitability and found it to be a very weak relationship. We went to the companies and said that if you want to engage customers then don’t use loyalty as a metric.
How was customer loyalty defined?
Loyalty was defined as how long a customer has been shopping with a company. How much money out of the total wallet size they have been spending with the company. How frequently they are coming and buying from the company. But there was nothing about profitability or the fact whether the company is making money out of the relationship. Banks were the first ones to start looking at how much profit a customer was bringing in and that too they were looking backwards i.e. how much profit the customers gave in the past and not how much profit they were likely to give in the future.
And you challenged that notion?
Yes. This prompted us to come up with a metric to value the customer. How much profit a customer is likely to give in the future? And we went to companies, got their transaction database of what customers are buying, how much the companies is spending on them in direct marketing costs, and accounting for all this we calculated the gross margin for each product sold. With these three pieces of data we were able to put together a customer life time value(CLV) metric. We did this in 2003-2004 and one of the first companies to implement this was IBM. In a pilot study we tested the customer life time value model and they made $20million instantly. Then that became the mantra for them into becoming a customer centric organisation and allocating resources to those customers where the most bang for the buck is. In India we worked with ICICI Bank . We worked with the Wells Fargo bank in the United States. We worked with the HSBC bank in Middle East. In telecom we worked with AT&T for six years. Then in the retail environment we worked with the Polo Ralph Lauren, Gallery Furniture, etc.
So the focus was on profitable customers and not necessarily the loyal ones…
Yes. In 2007 what happens is that suddenly there is a headline that the telecom company Sprint fires 1000 customers because they were unprofitable. So was it the right thing to do? The media came to us and said, you said profitability is the metric to chase and they are doing that and they are firing unprofitable customers. I said, if they are unprofitable what can you really do? It’s better to fire them, so that they will go to competition and make them unprofitable. It’s good for the company. But what if these customers spread bad word of mouth about the company, I was then asked? Who will listen to them, I replied. Because they are bad customers and hence they were fired. So if bad customers go and say they were fired, the response they will get is that of course something must have gone wrong in the relationship.
How did the company handle the situation?
 Sprint also wrote about saying that these customers were calling the call centre eight times a month. At the rate of three minutes each time, it amounted to 24 minutes. Each cost call Sprint three dollars a minute. So the total cost was 72 dollars. And Sprint was making 15 dollars on them .So net net Sprint was losing 57 dollars a month on them. Over a year the company was losing over 600 dollars on a single customer. Sprint communicated to the customer base and told them that if they had not fired these customers, then the rest of the customers would have had to subsidize them..
Could you give us other examples of companies firing people?
After Sprint fired 1000 customers then the internet service providers Comcast and Verizon and all started putting a hold on the bandwidth. If people were hogging internet usage by constantly downloading movies and so on, then they said I am not going to service you or I am going to slowdown your speed. Proactively they tried to ensure that they did not lose money on somebody. They also fired a few consumers..
Some of your more recent work has been in the area of trying to figure out who is influential in the social media and using that insight in marketing. Could you take us through that?
This is the new wave. In 2008 me and my team developed this model. We basically wrote a software that could track everybody’s twitter and facebook conversation. Therefore when you put something on Facebook and others like it, then my software will see it. My software will also capture the tweets. You can ask if all this is legal? They had an open gate system at that point of time. Anybody could monitor anybody. Now they are putting plugs.
So how did the software work?
My software could crawl and track who is on Facebook and Twitter, what they are saying, who is tweeting to whom etc. Not only that, if I tweet something, you forward it to somebody else, they forward it to somebody else and they again forward it to somebody else, we could find out how far your tweet spreads. How far your Facebook like spreads? So when I tweet to you it spreads to 10,000 people. But if I tweet to someone else it only spreads to 200 people. So I then try and I figure out, why in a two week period your tweet spreads to 10,000 and the other person’s goes to only 200 people. And I find that you have more followers on Facebook and Twitter. And you are pretty active in the social media world and you are talking about multiple subjects or even a single subject but more of it. And whenever you say something to somebody they also reciprocate to you. We come up with eight measures like that. With the help of this we can pretty much say something like that if I use you as a seed to plant a message then it will reach 8500 people. That is what we have done.
Could you take us through a real life example on the above subject?
An ice cream retailer from Mumbai approached us and asked us to help them to promote this ice-cream. Our target group is college students and young adults, they said. They are the ones who are going to spread the word. They are active in the social media. So we want to use social media. We have a very limited budget.
So what did you do?
We created a stickiness index. Of all the conversations happening we tried to figure out who are the people who have a high degree of category relevance. So in this case who is talking about ice cream related products on Facebook or Twitter. People could be talking about milkshakes, or gelato. It could be just ice and of course ice cream. We applied the stickiness index on the influencers i.e. if there are 10,000people with a high customer influence effect meaning those who can spread the message the farthest, applying the stickiness index, we narrowed down the number to 300. So we take this 300 and bring them to the ice cream parlour and got them to taste the ice-cream. We also asked them to create their own ice cream and give a name to it.
And what happened after that?
After this we asked these guys to spread the word about the ice-cream. So in next step they put it up on Facebook. Tweeted about it. Other people who saw this on Twitter could take the hashtag associated with the tweet to the ice cream parlour and could buy the specific ice-cream created by the person tweeting. The parlour boy registered the hashtag. At the end of each day our computer read from each ice cream parlour of this chain and related it to the person who sent the message on Twitter. So what is in it for the person sending the message? Each week we had a competition where the winner got a t-shirt, tote bag, etc.
Which chain was this?
This was the Hokey Pokey ice cream chain.
So there are varying things that companies get their customers to do for them…
Yes. If I am the customer and you are the firm, then I can buy from you. If not buy, I can refer customers to you through incentives. If not, then I can write about you on my social media. If not, I can give you ideas to improve your service quality. Introduce this product. Add this feature to your product. When I give ideas to you, you take that idea commercialise it and then whatever profits you make you give a share of profits to me.
Can you give some examples on that?
Many women when they are getting married in the United States hunt for the right bridal wear and often they don’t find the one they like. So they create their own design and send it to the bridal wear company which can post it on its website and say here is a design which one of our prospective customers created. How many others like this? If 200 others like it and are ready to buy it then the company can produce 200 dresses of that design at the stated price and share profits with the person who came up with the design. Another good example is IBM. They put up the Linux operating system as an open source software. So you and I can create an application for IBM that runs on Linux code, give it to IBM, they will market it and share the profits.
Any other examples?
A fast food chain got into trouble when on a YouTube video somebody caught two of its employees picking their nose and then putting their fingers into one of their products. This was a challenging situation. The company decided to have a competition and let the customers design the ingredients. They had a competition. And two people won. The product the winners had designed entered the menu of the fast food chain and the profit was shared.
Can organised retailing compete with mom and pop stores in India?
Organised retailing at best in India could be at 9%. My prediction is this that mom and pop stores or kiranas as we call them will become more and more sophisticated. Today the store owners know people by their names, as the number will grow they will have to start building a database, but they don’t have the capabilities. So organised retailing will start buying mom and pop stores individually. And then they will put all of them under one banner. It will be like how Tesco is operating in the U.K with different store formats.. You have Tesco supermarket, convenience store, street corner store, express etc. So that is the way in India you will be see this evolving because otherwise there is no growth for them.
What is the evidence from other emerging markets?
If you look at evidence from China organized retailing has got more traction. That’s because they did not have many mom and pop stores to begin with. They were cultivating their own things which was locally community based. But with more cities coming up and migration of people from rural areas to cities, gives more scope for organised retailing in China. Also space is not an issue in China. In India space is a constraint. Look at China and India. China is much bigger than India but the population is pretty much similar. Look at Brazil, it is as much bigger than India but the population is maybe one sixth that of India. So they also have space.
Any other factors at work?
There is another major factor on which it depends whether they will survive or not, it is the homogeneity of the population in consumption behaviour. Does the country as a whole consume common things or there are regional biases? In a country like Brazil people eat similar foods that every retailer can sell. In India between South, East, West and the North, there is so much heterogeneity that you need localized catering and marketing .So consumption behaviour varies therefore unless you are willing to carry heterogeneous products in each of the locations it is tough. But the organised retailers have a choice now. Do they invest capital and build their own infrastructure or should they buy out these kiranas and build them up? And clearly I see the latter as a more viable strategy than putting up their own real estate.
Should we allow the likes of Wal-Mart into India?
Wal-Mart is a value conscious store. Even if Wal-Mart is there in every place, the way they are located is typically outside the city limits. So only people with time, motivation and a vehicle, will be able to go and buy things. And the combination of these three things is very rare. Therefore their ability to grow organically in a country like India by systematically expanding the number of outlets is going to be difficult. There will be a market if they are content at not being the largest retailer. If they say in India I am one among many, they will have a presence. Maybe at some point in the future, things might change, like Wal-Mart buying other retailers and that’s the way they can expand. Their specialty is supply chain and turning the inventory over multiple times than other retailers. They cannot turn it over multiples times here. Each time if they make a 1% margin they get a higher margin due to turning the inventory over multiple times. Here I don’t see them turning it over as many times as in other markets. It’s very difficult to do that.
(The article originally appeared in the Daily News and Analysis on September 10,2012. http://www.dnaindia.com/money/interview_tesco-uk-model-shows-organised-retail-will-buy-out-kirana-stores-in-india_1738905)
(Interviewer Kaul is a writer. He can be reached at [email protected]

‘The theory of maximizing “shareholder value” has done great harm to businesses’


He is 81 and still going strong. His text book on marketing: Marketing Management is now in its thirteenth edition and still remains an essential read for anyone who hopes to get an MBA degree. He’s often called the father of marketing; something he regards as a compliment, while at the same time ceding the title of the “grandfather of marketing” to management thinker Peter Drucker. Meet Philip Kotler, the S.C. Johnson & Son Distinguished Professor of International Marketing at the Northwestern University Kellogg Graduate School of Management in Chicago. He has been hailed by Management Centre Europe as “the world’s foremost expert on the strategic practice of marketing.” In this freewheeling interview he talks to Vivek Kaul.
Excerpts:
Historically, the vast majority of marketing campaigns have been designed to appeal to our personal needs, lusts, greed or insecurities. To what extent do marketers exploit our human tendencies toward addiction?
Professional marketers see customers as carrying on both mental and emotional processes as they consider purchasing anything. Marketers need to choose the emotional appeal(s) that are relevant to the particular product or service. For a toothpaste, the appeal might be better breath, whiter teeth, or fewer cavities. Or going further, the appeal might be looking sexier, or having longer term dental health. Each competitor must make a choice. In a campaign to get people to stop smoking, one can use a negative appeal (cancer, lung disease, kidney failure) or a positive appeal (better sports performance, living longer for your family). I have advocated using an anti-smoking appeal showing a father who puts out his cigarette when his child comes into view so as not to pass on this bad habit to his children (this is a love appeal). Human emotions range widely and the choice of an appeal is a careful decision that is conditioned by competitors’ appeals and other data. It might seem to the layman that ads often use sex, power, or ego appeals but we could cite many campaigns that use appeals that are less base.
Lately companies have been cutting their marketing budgets, given the troubled times that we are in. Do you think it is a wise move to cut the marketing budget?
That is a panic response and often inappropriate. If competitors decide to cut their marketing budgets, the remaining firm should consider keeping or even increasing its marketing budget. I would go further and sat that a well-heeled firm might even consider buying out some weaker firms during a recession. In normal times, a company finds it hard to move its market share. In recession times, a well-endowed firm can power up its market share. Much depends on the quality of the firm’s products and services. A market leader should consider adding more value rather than cutting its marketing budget. The leader will probably have to alter its messages and media but it doesn’t follow that it needs to cut its marketing budget.
The economist Milton Friedman famously said: “There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits”. What are your thoughts on the social responsibility of marketing?
Milton Friedman was my professor at the University of Chicago and we all admired his brilliance. He was a great believer in leaving businesses unencumbered by regulations and he wanted the leave the business owners to decide what they wanted to do with their profits. I took exception to this view.
Why was that?
Businesses are social organizations that can do great good or great harm. We don’t have to be reminded of the environmental damage companies did by dumping waste into water and pollutants into the air. We don’t have to be reminded of Enron and Madoff and other crooks and pyramid builders. We need appropriate regulations for the competitive system to work. I would argue that companies should go beyond their worship of shareholders who often don’t care about the company and jump in and out of owning its stock. The theory of maximizing “shareholder value” has done great harm to businesses. I have argued that smart companies must focus on the other stakeholders first – customers, employees, suppliers and distributor—and make sure that these stakeholders are all rewarded appropriately and that they work together as a winning team. Satisfying the stakeholders is the best way to maximize the long run profitability of the company. I would propose that as education levels rise in a country, more buyers will expect more from companies and base their brand choices partly on which companies have practiced a caring attitude toward the environment and society. Those companies that operate on the triple bottom line — people, planning and profits – will outperform those who only pursue profit.
A major point in your new book Good Works: ! Marketing and Corporate Initiatives that Build a Better World…and the Bottom Line, is that over the last decade there has been tremendous growth in the number of marketing and corporate initiatives that appeal to our desire to help others or tackle social or environmental problems. Why has this sudden change come about? Can you share some examples with us?
Let’s recognise that societies are facing a growing number of difficult problems – world hunger and poverty, local wars, pollution, environment damage, and faulty education and health systems. Solutions are badly needed. Solutions can only come from the three sectors found in any economy: businesses, NGOs, and government. Today, the governments in most countries are in no condition to solve these problems, given their debt levels and their political impasses. The NGOs have as their purpose to help solve these social problems but are even with less funds available in these recessed times. Business is the only agent of change with the means of doing something to improve the sad state of affairs. The public is increasingly interested in which companies are willing to help make a difference in some of these problems. Consider what Wal-Mart is doing now to reduce air pollution. It is not only ordering the most fuel efficient delivery trucks but now asking its suppliers to change to more efficient trucks or else not be accepted as a supplier. Timberland, the maker of shoes and clothing, does a thorough job of waste reduction and of choosing only suppliers who have good environmental practices. The message is that companies have the capacity to be proactive in making the world a better place for all of us.
What do think are the biggest challenges facing marketing today?
Marketing used to be pretty straight forward. Hire able salespeople and brand managers and a top advertising agency and the team will attract many triers and buyers. Marketers didn’t have much input into the product: their job was to get the product sold. Today the picture is radically different. The social media revolution has diminished the power of advertising and requires new skills in the marketing group to successfully use Facebook, You Tube, Linked in, and Twitter. Buyers are now all-knowing thanks to Google and their Facebook friends and they can get excellent information on different brands and their worth. Companies have to make a basic decision: Should the marketing department basically remain a communication group (one P – Promotion), or a 4P group (Product, Price, Place and Promotion)? I am in favor of giving marketing more power to participate in the product development process, and pricing, and place (distribution decisions).
Could you elaborate on that?
I would go further. The ideal marketing department would be headed by someone with the mindset of Steve Jobs. The Chief Marketing Officer (CMO) would be responsible for identifying the best opportunities for the business for the next five years, calibrating the profitability of the different opportunities, and participating with the other senior officers to make the right choices. The marketing group should know more about what is happening in the marketplace and what is likely to happen over the next few years and therefore be in a position to visualise where the business should be going. I remember that some years ago, GE asked its appliance marketing group to anticipate what will be the size and activities in kitchens in the next five years. The marketers came up with a great number of new ideas, many of which GE Appliance implemented. So the basic choice is whether marketing should remain largely a “service” department dishing out communications or it should be a proactive marketing group helping the company identify its best future opportunities. I sometimes say that a company should have two marketing departments: a large one that is busy selling what the company is making , and a smaller marketing group trying to figure out what the company ought to be making the in the coming years.
What is social marketing? Can you share some examples with us?
In July 1971, Professor Gerald Zaltman and I published “Social Marketing: An Approach to Planned Social Change” in the Journal of Marketing. The question was: “could you sell a cause the way we sell soap.” At the time, there was a lot of interest in how we could help people avert unwanted pregnancies, stop smoking, and say no to drugs. We could imagine creating ads that would change certain beliefs and behaviours. We could imagine making new products and services that would provide solutions in these problem areas. We could imagine distribution arrangements that would reduce the accessibility of unsalutory products or increase the availability of better substitute products and services. We could imagine using price to encourage or discourage certain behaviors. All four Ps would work on these social questions as they have worked in the commercial market.
And things have changed since then?
Since that time, social marketing has become another branch of marketing. There are over 2,000 social marketers operating in the world and addressing social causes of poverty and hunger, health, environment, education, littering, literacy and others. Social marketers don’t stop with advertising: they use a planning framework that applies the ideas of segmentation, targeting and positioning and the 4Ps to craft a workable social marketing plan. Dozens of social marketing examples are described in the 4th edition of Social Marketing that Nancy Lee and I published. There is now a hotline where social marketers interested in working on some social problem can put it out to other social marketers to learn of previous work and results in the same problem area. I believe that social marketing methodology has been a major contributor to the decline of smoking, the practice of birth control, the improvement of the environment, the providing of more health facilities and practitioners in poor countries, and rising rates of literacy.
Your basic training is as an economist. How did you move on to marketing?
Marketing is economics, even if many trained economists don’t recognise or read marketing and ignore the one hundred years of marketing writing. As I majored in economics at the University of Chicago (M.A.) and M.I.T. (Ph.D), I was impressed with the high level of theory but disappointed at the neglect of the real actions taking place in the marketplace. Classical economists didn’t say much about several key forces affecting demand such as sales force, advertising, sales promotion, and public relations. Economists focused mainly on price and how it affects demand and supply. They didn’t say much about distribution and the roles played by wholesalers, jobbers, retailers, agents, brokers and other transactional and facilitating forces. In fact, the first marketing books written around 1910 were written primarily by economists who wanted to bring the role of Promotion and Place into the understanding of markets. Even when economists discussed price, they rarely described how price is set separately by manufacturers, wholesalers, and retailers as price setting moves down the value chain.
So how did you move onto teaching marketing?
When I joined the Kellogg School of Management at Northwestern University, I was given a choice to teach either economics (macro or micro) or marketing. I chose marketing because it brought in all these additional forces that affect demand and supply. Earlier I was in a Ford Foundation program with Jerry McCarthy who was writing his textbook on Basic Marketing and proposing a 4P framework: Product, Price, Place, and Promotion. He was influenced by his professor of marketing at Northwestern University, Richard Clewett who taught Product, Price, Promotion and Distribution (which Jerry renamed Place to get the alliteration of 4Ps). Remember that the 4Ps are demand-shaping forces and should be part of basic economic theory. The interesting development today is that classical economics is undergoing the challenge of a different school of thought, namely behavioural economics. Behavioral economics drops the assumption that producers, middlemen and consumers always make rational decisions. At best there is “bounded rationality” and “satisficing” behavior rather than rational profit maximization. What is most interesting is that “behavioural economics” is just another name for “marketing” and what marketing has been researching for 100 years.
How do you manage to write about marketing from almost every angle?
I recognised early that marketing is a pervasive human activity that goes beyond just trying to sell goods and sales. What is courtship, after all, if not a marketing exercise? What is fundraising, if not a marketing exercise? What about building a stronger brand for your city, if not a marketing exercise? Every celebrity and many professionals are engaged in building and marketing their brand. This led me to want to bridge marketing theory and practice to other things than goods and services. I started to research and write on place marketing, person marketing, cultural areas marketing (museums and performing arts), cause marketing (i.e., social marketing), religious institution marketing, and so on.
(The interview originally appeared in the Daily News and Analysis on August 27,2012. http://www.dnaindia.com/analysis/interview_theory-of-maximising-shareholder-value-has-done-great-harm-to-businesses_1733089))
(Interviewer Kaul is a writer and can be reached at [email protected])

The Armchair Economist talks about seatbelts, popcorn at the movies, why we vote and safe sex


Most economists talk about the graver things in life. Fiscal deficits, interest rates, GDP growth rate and once in a while about why they think that the financial world is coming to an end. But that is not the case with Steven E Landsburg, a Professor of Economics at the University of Rochester in the United States, where students recently elected him Professor of the Year. Nearly twenty years back he wrote The Armchair Economist, a book which brought an easy understanding of the dismal science to the masses. The book has been a bestseller since then motivating him to write a new and revised edition which was published this.
Landsburg is also the author of Fair Play, More Sex is Safer Sex and The Big Questions. He considers himself as the most important figure in the world of modern poetry, in consequence of the his status as the only living being who reads poetry but does not write it. In this freewheeling interview to Vivek Kaul, he talks about why safe belts are unsafe and more sex is safer. He also speaks on why he has no clue of why people vote and popcorns being so expensive at the movies.
Excerpts:
You write that “most of economics can be summarized in four words: people respond to incentives. The rest is commentary.” Why do you say that?
I say that because it’s true, and because it’s important. When the price of lettuce falls, people buy more lettuce. When the price of haircuts falls, people get more haircuts. When the penalty for murder becomes more certain, people commit fewer murders. Due to some combination of arthritis (which makes it difficult for me to turn my head to the right) and irresponsibility, I had a years-long habit of backing the right rear corner of my car into lamp posts, trees and other stationary obstructions. Often enough so the body shop owner joked about giving me a quantity discount. I paid $180 to get my bumper repaired, and I came to think of this as an unavoidable expense. Then in 2002 I got a new car with a fiberglass bumper, backed it into a tree, and discovered that this repair was going to cost me over $500. I have not backed into anything since. Even economists respond to incentives.
Do seatbelts bring down the number of traffic related deaths?
This is a good illustration of why it’s important to think about incentives. A seat belt makes it easier to survive an accident, and so reduces the incentive to avoid accidents in the first place.
But research shows that drivers with seat belts drive less carefully —to such a large extent that they’re just about as likely to die as drivers without seat belts. Also pedestrian deaths seem to have increased. If you find it hard to believe that people drive less carefully when their cars are safer, consider the proposition that people drive more carefully when their cars are more dangerous. This is, of course, just another way of saying the same thing, but somehow people find it easier to believe. If I took the seat belts out of your car, wouldn’t you be more cautious when driving? What if I took the doors off? So if we really wanted to reduce the number of driver deaths, the best policy might be to require every new car to come equipped with a spear, mounted on the steering wheel and pointed directly at the driver’s heart. I predict we’d see a lot less tailgating.
Why is popcorn so expensive at the movies?
Not for any of the reasons that pop quickly into most people’s minds. It’s not enough, for example, to observe that the theater owner is exercising his monopoly power. If that were the whole story, he’d be charging monopoly prices not just for popcorn but for everything else in the theater — the water fountains, the restrooms, and the right to sit down once you’ve entered the theater, for example. The reason he doesn’t charge monopoly prices for those things is that his theater would become less desirable, and to maintain his clientele, he’d have to slash prices at the box office. The same would be true of popcorn, if everyone bought the same amount of popcorn. What’s gained at the popcorn stand is lost at the box office. In fact, it would be even worse than that: By jacking up the price of popcorn, he makes the entire theater experience less desirable, so the total amount he can extract from his customers is lowered, not raised. So the high price of popcorn can’t be explained as a way to exploit customers generally; it must be a way to exploit popcorn-lovers in particular. And this makes sense only if the theater owner believes that popcorn-lovers are more likely to tolerate high prices than popcorn-haters are. Why should that be the case? I’m honestly not sure.
Why is more sex safer sex?
In economics, we’re always thinking about the incentives faced by decision-makers. A decision-maker who does not face all the consequences of his actions often makes bad decisions from a social point of view. For example, the factory owner who decides to pollute the air usually does not feel all the consequences to other people’s health, and therefore over-pollutes. Likewise, people who are very likely to be infected with terrible diseases, when they take new sexual partners, are not accounting for all the consequences of their decisions, which means that from a social point of view, they have too many partners. But the flip side of that is that people who are very likely to be *un*infected, because of their cautious past behavior, when they take new sexual partners, make sex (on average) *safer* for the rest of us. If the likely-to-be-infected are like polluters, then the likely-to-be-uninfected are like anti-polluters: People who go out and pick up trash in the parks.
Why do people vote even when they know that there one single vote is unlikely to influence the outcome? Do they do it because they think that in a democracy it’s a good thing to do?
I haven’t the foggiest idea why people vote. But to say that it’s “a good thing to do” is hardly an explanation. There are lots of good things to do. Instead of spending 15 minutes at the voting booth, you could spend 15 minutes picking up trash in the street. If all you’re looking for is “a good thing to do”, it’s still not clear why you’d choose to vote.
Why are failed corporate chieftains often retired by their boards with very high pensions and a lot of other facilities?
Partly so the chieftains won’t be afraid to take risks. We want our corporate executives to take reasonable risks in order to boost profits. Sometimes reasonable risks lead to failures. If every failure meant personal ruin, executives would be far too cautious. When a corporate risk turns out badly, it’s often hard for the stockholders to know whether the executive was foolish or just unlucky. In case he’s proven foolish, they want to fire him. In case he was just unlucky, they want to treat him well, so that future executives will be willing to risk bad luck.
What is common between college education and long useless peacock tails?
They’re both used to show off. And for that reason, they can both be wasteful. Growing a longer tail than your neighbors’, just to outshine him, is, from a social point of view, a waste of effort — you gain status but your neighbors lose status, so on average nobody comes out ahead. Likewise, getting more years of schooling than your neighbors, insofar as you’re doing it just to advertise your willingness to endure the ordeal, can be socially wasteful. Of course, some students actually learn something useful while they’re in school, so the analogy with the peacock’s tail is incomplete.
Do death penalties deter crime or are there better ways out?
The bulk of the evidence is that passing a death penalty law has very little effect on crime, but that actually executing people has a very substantial effect. In the United States, quite a few studies have found that each execution prevents several murders — typically the studies find that “several” means approximately eight. Of course that doesn’t prove that the death penalty is a wise policy — you might worry, for example, that a government empowered to exact the death penalty will not always use that penalty wisely or even honestly.
An increasing amount government debt puts more money into people’s pockets. What is the logic behind saying that?
 There are two ways the government can increase its debt. One is by spending more; the other is by taxing less. Obviously, when they tax less, they put more money into people’s pockets. In that case, the net effect on individual finances is mixed: On the one hand, you, as an individual taxpayer, will eventually be taxed to pay off not just the government’s debt, but also the interest on that debt. On the other hand, you, as an individual taxpayer, not only have more money in your pocket, but also the opportunity to earn interest on that money. Those effects roughly balance out. So if government debt is causing you harm, it must be for reasons more subtle than the ones we usually hear about.
Why do celebrity endorsements increase the sales of the product even when we know that the celebrity has been paid to recommend the product and isn’t really an expert on that product?
The company that hires a celebrity endorser is sinking a lot of money into advertising — money that will take them years to earn back. You can be pretty sure this is a company that cares about its reputation, and so is likely to provide a quality product.
You write that advocates of mandatory helmet laws for motorcycles argue that arider without a helmet raises everyones insurance premiums. The opposite might very well be true. Why do you say that?
If helmets are voluntary, then helmet-wearers get better insurance rates for two reasons. First, helmets prevent injuries. Second, by wearing a helmet you can advertise that you’re a generally cautious person — the sort who probably gets his brakes checked regularly and so on. If helmets become mandatory, you still get the first break — the helmet is just as effective when it’s mandatory. But you no longer have an opportunity to earn the second break, so your premiums might well rise.
Why are employees better off with some amount of monitoring from their employers?
If your employer had no way of knowing whether you were showing up for work or performing any of your duties, it’s unlikely he’d be willing to pay you very much. The more he can verify, the more valuable you’re likely to be. So, for example, software programs that keep track of office workers’ keystrokes, while they might feel intrusive to the worker, are also making that worker more valuable and quite likely account for the employer’s willingness to pay the worker’s salary.
Why does the business world reward good dressers?
I don’t know for sure, but I suspect that the ability to dress well is a signal of several valuable skills: The ability to observe fashion trends, the intuition to understand the limits of what’s acceptable, and the talent to be creative within those well-defined limits.
What made you write the book The Armchair Economist?
One day in 1991, I walked into a medium sized bookstore and counted over 80 titles on quantum physics and the history of the Universe. A few shelves over I found Richard Dawkins’s bestseller *The Selfish Gene* along with dozens of others explaining Darwinan evolution and the genetic code. In the best of these books, I discovered natural wonders, confronted mysteries, learned new ways of thinking, and felt I had shared in a great intellectual adventure,
founded on ideas that are dazzling in their scope and their simplicity. Economics, too, is a great intellectual adventure, but I could find, in 1991, not a single book that proposed to share that adventure with the general public. There was nothing that revealed the economist’s unique way of thinking, using a few simple ideas to illuminate the whole range of human behavior,shake up our preconceptions, and jolt us into new ways of seeing the world.
I resolved to write that book. *The Armchair Economist* was published in 1993, and attracted a large and devoted following. In the intervening 20 years, it has earned much high praise. But what I take most pride in is that *The Armchair Economist* is still widely recognized among economists as the book to give your mother when she wants to understand what you do all day. After 20 years of correspondence with readers, I found new ways of explaining this material that I thought were even clearer and more engaging than in the original book. That — plus my desire to update many of the examples for the 21st century — motivated me to write the new and revised edition that was published in 2012.
(The interview originally appeared in the Daily News and Analysis on August 13,2012. http://www.dnaindia.com/money/interview_the-more-your-employer-snoops-the-more-valuable-you-re-likely-to-be_1727258)
(Interviewer Kaul is a writer and can be reached at [email protected])

“Indians will vote for Anna Hazare or the candidates he supports”


Ravi Batra is an Indian American economist and a professor at the Southern Methodist University, in Dallas, Texas. Over the years Batra has made many predictions which have turned out right. He correctly predicted the fall of communism in USSR and at the same time said it would continue in China. He also predicted an enormous rise in wealth concentration in the United States that would generate poverty among its masses. These predictions were made way back in 1978 in his book The Downfall of Capitalism and Communism. These along with many of his political and economic predictions have come to be true over the years (for a complete list click here). Batra uses the Law of Social Cycle to make these predictions. On the basis of this law he now predicts the rise of the Team Anna political party. “Through long and painful fasting Anna Hazare has captured the attention of people, and finally decided to form a political party. Indians will indeed vote for him or the candidates he supports,” says Batra. Batra is the author of many bestselling books like The Crash of the Millennium, The Downfall of Capitalism and Communism, Greenspan’s Fraud and most recently The New Golden Age. In this interview he speaks to Vivek Kaul.
Excerpts:
What is the law of social cycle?
The law of social cycle was pioneered by my late teacher and mentor, Shri Prabhata Ranjan Sarkar. It can be explained in a variety of ways. Let’s start with a simple observation. A careful examination of every society reveals that there are three possible sources of political power –the army, popular ideas, or money.
Could you explain that through an example?
For instance, if we carefully explore the political landscape of our world, we find that in places like the United States, Western Europe, Canada, India, Australia and Japan, money rules society and super-materialism prevails. In places like Iran, the priesthood is dominant with control over religious ideas, whereas in Russia former intelligence officers such as the ex-KGB chief, Vladimir Putin among others, hold the reigns. In China, the communist party is supreme but the ultimate source of political power is the military, which established the party’s rule in a Marxist revolution in 1949. The Tiananmen Square massacre of 1989 clearly illustrates this point. When the Chinese government faced a serious challenge to its authority, it is the army that restored order in the country and crushed the opposition to the communist rule?
So what does this suggest?
This suggests that there are three main sources of political power—the military, human intellect, and, of course, money or wealth. Religion may also bring power, but priests dominate society by mastering scriptures and rituals. In other words, they also utilise their intellect to control and influence people. Thus, ultimately political power or societal dominance stems from three sources—physical strength or skills, human intellect or intellectual skills, and the hoarding of wealth. As a result, through the pages of history, we find that a society is sometimes dominated by warriors, sometimes by intellectuals (including priests), and sometimes by acquisitors who are experts in making money. However, the law of social cycle goes a lot further than merely describing the three classes of people.
Could you explain that?
It analyses the evolution of civilizations and states that a society evolves in terms of a cycle wherein a nation is first dominated by a group of warriors, then by a group of intellectuals, and finally by a group of wealthy acquisitors. Then towards the end of the age of the wealthy, there is so much corruption and crime that people get fed up and revolt against the elite or the rulers, who are overthrown in a social revolution. Since it takes a lot of courage to revolt against the authorities, the successful revolutionaries are the true warriors, who start another warrior age and bring an end to the corrupt rule of money. This way the social cycle begins anew and moves along in the same succession of warriors to intellectuals to acquisitors and then to the social revolution.
That’s very interesting…
Historically, the warrior era has been represented by the rule of the army, and the intellectual era by the supremacy of the priesthood or prime ministers. By contrast, the eras of acquisitors have occurred when feudal landlords or wealthy bankers and merchants were dominant. Thus warriors come to power with the help of physical might, intellectual with the help of ideas, and acquisitors with the help of money.
Since when has this cycle existed?
The social cycle has existed since the birth of human society and its validity can be proved by written history and the logic of social evolution. For instance, in India, around the times of Mahabharata, warriors dominated society; then came the rule of brahmans or intellectuals, followed by the Buddhist period, when capitalism and acquisitors were predominant; this era ended in the flames of a social revolution, when a great warrior named Chandragupta Maurya, put an end to the reign of a king named Dhananand, and started another age of warriors. What is interesting is that India’s overwhelmingly powerful caste system, wherein the brahman is placed atop the social hierarchy followed by kshyatriyas, vaishyas and shudras, was not able to thwart the law of social cycle. There were times when in practice, though not in theory, the brahman accepted the supremacy of people belonging to other castes. During the Buddhist period, for instance, the vaishyas were treated with great respect. They were called shreshthis, meaning “superiors.” In today’s acquisitive age, of course, we clearly see the priest eagerly and humbly accepting money from the rich regardless of their caste.
What happened after Chandragupta Maurya?
Reverting to the cycle, the Mauryan age of warriors was followed by another age of intellectuals in which the kings themselves claimed to be brahmans. The latter period was followed by feudalism, representing the age of acquisitors. Later, the feudal landlords, sometimes called rajas, were overthrown by an illustrious warrior, named Samudra Gupta, who thus organised another social revolution against the rule of acquisitors. Some historians have called the Gupta king the Napoleon of India, because he destroyed the armies of a large number of landowners and brought the wealthy under control.
And the age of Samudragupta was followed by?
The Gupta warrior era gave way to another intellectual era in the 9th century, when a renowned ascetic named Shankracharya revived brahmanism and uprooted Buddhism from the land of its birth. Priests and prime ministers dominated again, but their influence waned in a few hundred years and gave way to another round of feudalism, which was followed by yet another age of warriors, this time under the rule of Muslim invaders. Thus began the Muslim warrior era during the 14th century and continued as the Mughal empire in the 15th. Akbar the Great was the most illustrious emperor of this age, which lasted for a while and then gave way to another intellectual era, this time under the dominance of Muslim priests or Ulemas, who held sway over the Mughal king Aurangzeb. Around these times the great warrior Shivaji founded the Maratha Empire, which, after his death, came under the influence of brahmans known as Peshwas. At the same time, the northern Mughal Empire came under the sway of its wazirs or prime ministers. Thus this Mughal-Maratha period was the latest era of intellectuals, which was followed by yet another era of acquisitors, when the British took over around 1800. India has been in this age ever since. Indians will indeed vote for him or the candidates he supports
So what is the point that you are trying to make?
The main point is that no class remains in power forever, and that the acquisitive age always ends in a revolution. Such was the case in all civilizations. In fact new revolutions are already taking place in the world. Muslim society, where Saudi oil wealth is the main source of power, is also in the age of acquisitors, as is much of the planet. Rebellions have already occurred in the Islamic nations of Tunisia, Egypt, Libya and Yemen, and now Syria is facing the same fate. The Syrians have shown admirable resolve, and even though unarmed or heavily outgunned they are revolting against their ruler, President Assad.
What about the current state of affairs in India?
Courage is contagious and gradually inspires the masses to fight tyranny. The wave of courage that has dethroned many Muslim rulers is now budding in India under the guidance of Shri Anna Hazare and Baba Ram Dev. The movements they have started are still in the early stage but such movements are likely to grow and ultimately succeed in their mission to rid the nation of political corruption, because the age of acquisitors is about to end around the globe. Who could have imagined just a few years ago that Egypt’s Hosni Mubarak and Libya’s Colonel Kaddafi would be overthrown by their people?
Yes you are right…
A revolution doesn’t occur overnight, but when it starts it engulfs the nation in a mighty wave that crushes the ruler. It is initiated by small groups that have been opposing corruption for a long time, and for a while it faces public apathy and even opposition, but when the right moment comes it ignites the people to decimate the elite. The current decade is likely to be the decade of revolutions that will consume the ruling classes around the planet. The revolutionary wave began in the Muslim world and it is bound to spread in all areas where the acquisitors are dominant, because remember that courage is contagious. India gained independence in 1947 and so did many other countries within a few years. The point is that when a revolutionary wave begins in one area, it unleashes a flood that engulfs the neighbours. The moment has arrived to dethrone the corrupt acquisitors, and someone has to seize the moment to feed this flame. Anna Hazare and Ram Dev are doing it and they deserve the support of moralists around the world.
But how do you see the current rule of wealth being overthrown in India?
The rule of wealth in India will end through the electoral process, because people will vote for those who vow to end corruption. Through long and painful fasting Anna Hazare has captured the attention of people, and finally decided to form a political party. Indians will indeed vote for him or the candidates he supports. Although, some of his followers will be unhappy with his decision to enter the political fray, this is the right thing to do. As Mahatma Gandhi demonstrated, fasting alone is not enough to achieve a desired goal. You also have to offer a concrete and credible alternative. The social revolution against the acquisitors has started in Muslim society and is slowly gathering steam in India and the United States. By the end of this decade, if not sooner, the age of acquisitors will be a thing of the past, and those with courage to oppose the elite will start a new age of warriors, because courage is the chief hallmark of a person of warrior mentality. Today, an acquisitor’s democracy prevails in most nations; in the near future it will give way to a warrior’s democracy, where money will not be needed to win an election.
So how do you see this new age that you are predicting?
During the Buddhist period preceding Chandragupta’s ascension kings were elected in some areas of north India. That was an example of warrior’s democracy wherein a person’s martial skills, not wealth, brought him the high office. Similarly, in the future a candidate’s military background could be important in his rise to power. Whoever brings about the new warrior age will also give birth to a new golden age.
(The interview originally appeared on www.firstpost.com on August 7,2012. http://www.firstpost.com/economy/raghuram-rajans-advice-isnt-what-upa-may-want-to-hear-410694.html)
(Vivek Kaul is a writer and can be reached at [email protected])