No man can serve two masters

What is it that inspires the marble halls of ad agencies?

Anyone who has been to an ad agency, or one of the other disciplines that we insist on splitting ourselves down into, will have noticed the conspicuous consumption that goes on in the interior decor department. In fact you would imagine that this is counterproductive as presumably clients walk in and think to themselves wow - these guys must be charging me too  much look at all this spare money they have. It must be time to renegotiate the contract...

How could it be that this state of affairs has come about. The short answer I suppose is that everyone else is doing it, so our preening egos don't want to the chumps with a formica table and a dodgy pot plant on reception. I have a theory about the long answer; in that why is everybody else doing it?

Consider you are considering starting an ad agency. It has got to be one of the most capital unintensive industries that there is. What do you actually need? Two, maybe three people, a couple of phones and (nowadays) an internet connection. Assuming you don't pay yourselves a salary to begin with, you are talking about an investment of around £5000 each.

This is in part responsible for the terrible over-supply of ad agencies in the marketplace. In such an environment start ups sparkle brightly and then die out on an alarmingly regular basis. 

As a purchaser of advertising services, you want to be sure that your people are going to be around for a significant amount of time. They are handling several millions of pounds of your money and you want to be sure you have not hired a group of travelling hobos or other shiftless bums to your FCOJ account.

So therefore, like banks, who handle large amounts of money for their clients on trust, agencies need to give across the impression of stability, permanence and the appearance of great wealth. So we decorate our offices with marble, brushed steel and exotic woods so people don't think we're fly by night chancers.

All photos courtesy of This ain't no disco // www.aintnodisco.com

A fertile valley in the world's driest desert

In some parts of the Atacama desert it has not rained for at least 400 years. Someone told me it is the driest place on earth and given how much the inside of my nose was itching the whole time we were there I have no reason to disagree with them. However, just outside the village of Toconao, about 50km from San Pedro de Atacama is one of the most curious things I have ever witnessed – an incredibly fertile valley maybe 60m across, bounded on each side by incredibly steep walls of pressed sand.

The reason for this is that they are blessed in that place by a small stream that flows out of the Andes down into the plain below. This stream of course never meets the sea, it is used in full by the people who live there. Interestingly the Atacama desert was not always so dry, when the  land was first colonised about 12000 years ago the area was significantly wetter than it is now and since then the population have had to employ increasingly ingenious methods to cope with the drier and drier conditions.

The stream is maybe 1.5m across and is extensively canalized as it comes down through the valley. Small stone and clay channels snake off from the valley floor to the most amazing gardens of peach, grapes, chirimoya (custard apples), pomegranates and oranges as well as a whole load of indigenous plants I forget. There was one tree that was apparently growing something akin to alfalfa which they use to make some local moonshine.

Critically, no-one owns the water that flows down the valley. Instead  there are a series of rules  that determine who has access to it, for how long and when. A series of sluice gates control the flow of the water and it is a criminal offence to touch them if you are not an official from the local government – water monitors I guess.

Each person receives a share of the water flowing down according to the size of the garden they own, at an appointed day and time. If there is a drought, everyone's share is commensurately less. Taking water at a time not allocated to you will earn you a trip to see the popinjay Caribinieri, which I imagine you would not want.

Woolworths, plastic crap and your core competency

I read yesterday that there is a £2 billion windfall awaiting retailers this Christmas given that there is no Woolworths nowadays and that is the amount of Christmas shopping that has historically been done there. £2 billion. How could it be that a company that commanded so much of the nation's purse have gone so badly wrong?

Thinking of the times I had been in there in recent years I recall a catalogue of disappointment. In the past they had been the place to go if you needed a small screw or some new tupperware. In recent years they had been seeming to specialise in the sort of plastic shit that no-one really needs. Inexpensive kids toys, crappy homewares, that kind of thing.

You can see how it happened, plastic shit is very high margin. Probably some young thrusting exec got hold of some shelf space to stock some new lines, and bingo, it made a fortune. So some more and then some more again was given over to this plastic gold, until so much was going through the shop that they forgot what they were all about.

It's very common to talk about what your 'core competency' is – especially in these difficult times – but it is not so easy to see what it actually is. For instance Bosch are in many different areas of industry seemingly; kitchen products, construction, gardening, you name it, but they actually understand their core competency very well – the production of small electrical motors.

Woolworths core competency was comprehensiveness, you could get whatever you needed there for your home, no matter how small or strange. As soon as that promise went unfulfilled, it was irrelevant how much shiny plastic stuff they had, no-one wanted to go there.

So I guess the question for business today is; are you selling plastic shit or electric motors?

Creative destruction

View more documents from Chris Sandström.

I read a great book while I was away about how we are entering a deflationary era in part as a result of the massive technological changes in industry and society, meaning that the cost to produce and bring to market products is always decreasing (Deflation, Chris Farrell). The author talked about Joseph Schumpeter's theory of 'creative destruction' meaning this is not necessarily a bad thing as new means of doing something more efficiently is actually a good way of allocating resources in the economy over the long run.

Just today by chance I found out that Simon Waldman from the Guardian / GMG is in the process of writing a book about creative disruption, and had referenced a great presentation about Schumpter's theory, which I have put an embed of above. The book looks like it's going to be great and I'm looking forward to it. Check out the blog too, as there are some interesting case studies there.