by: Geoff Ficke

How a Simple Box Concept Changed World Trade And Fostered the Rise of a 3^rd World Middle Class

For almost 4000 years the methodology used to ship finished goods, raw materials and minerals between distant points on the globe did not change. A transport ship pulled into a seaport. Shipping agents onshore organized transport and assigned cargo and bills of lading to specific crews. Stevedores and longshoremen physically hauled the full barrels and trunks containing trade goods aboard the vessels. With a ships hold completely full, the captain and crew began the long, dangerous trip to their destination port. 

This process had not significantly changed since the times of the ancient seafaring Carthaginians and Phoenicians. The advent of the 20^th century saw the introduction of mechanical lifts and winches which made the process a bit more efficient. However, shipping docks in ports all over the world were notorious for being ridden with corrupt customs officials and unions that made prompt haulage of goods an uncertain enterprise at best. 

This dawdling movement of freight made international commerce extremely expensive and slow. A poor, remote country that possessed a necessary raw material typically could not convert that material to finished, value added goods. The materials had to be shipped to more developed, fully industrialized nations where raw materials could be utilized in the manufacturing of desirable consumer goods and industrial products. Poor nations stayed poor. Rich nations got richer.

Today, in the early years of the 21^st century, there is a global explosion in trade between countries on every continent. New shipping ports are being built to accept huge mega-shipping vessels in newly affluent Brazil, Indonesia, Malaysia, Viet Nam and China. Materials, foodstuffs, finished goods and fuels are being transported in massive quantities. The Panama Canal is being widened to allow passage of ever-larger massive freight hauling ships. 

None of this could have occurred without the genius of an unsung American inventor. The redesign of a simple rectangular box that he engineered and pioneered changed the international movement of goods and accelerated the development of consumerism and the growth of a middle class in countries around the world.  

Keith Tantlinger died recently at the age of 92. Mr. Tantlinger was an industrial engineer and Inventor and was working in the shipping industry in the early 1950’s. He was frustrated with the bottlenecks that were a constant at west coast shipping terminals. He set out to do something about the problem. 

Keith Tantlinger designed the first intermodal shipping container. His invention of the corner casting system, Twist-lock system, spreader bar lift and the ship shore transfer apparatus laid the groundwork for the development of the modern universal shipping container. This simple enhancement of a steel shipping box enabled fully loaded containers to be stacked and handled mechanically with almost no manual labor.

The ability to catalog and move goods on such a massive scale enabled Product Marketers to provide consumers everywhere with the benefits of large scale production. For the first time one ship could safely haul a massive assortment of goods, everything from raw materials to Toys, to Sporting Goods, to Hardware Products, to Small Electric Appliances and so much more. 

Today container shipments are ubiquitous. An empty container can be found at a factory in Chicago or Lousiville. The container when loaded is placed on a rail car and shipped to a port for an international destination. At final destination the container is unloaded and the re-loaded with a new consignment of Mattresses or Sofas destined for Germany. Upon arrival in Hamburg, the Mattress or Furniture container is loaded onto a trailer and hauled by truck to a retail warehouse. 

The intermodal flexibility that Keith Tantlinger pioneered accelerated the growth of international trade. It has made the world a smaller and necessarily more co-operative place. Trade partners typically do not have significant reason to shoot at each other. Millions of formerly poverty stricken third world residents have found economic opportunity and benefitted greatly from global trade.

Keith Tantlinger worked in an area where he saw a problem. In typically 1950’s American style he rolled up his sleeves and committed to finding solutions. The development of the intermodal shipping container, capable of being utilized by rail, ship and truck anywhere on the planet was his contribution to the advance of enterprise and improving the human condition. Mr. Tantlinger will be remembered.

by: Geoff Ficke

Many sterling companies have attained great heights in the last 100 years, only to plateau, decline and disappear. Bethlehem Steel, American Motors, Montgomery Ward, PanAm, TWA, Faberge and Marshall Field are prime examples of famous companies that no longer exist after enjoying generations of success. There are hundreds of other examples. Why do organizations expire after gathering such power?

Currently the three American automobile giants are staring at an agonizing death by a thousand cuts. Ford, General Motors and Chrysler are case studies in how to lose direction and implode. They have not responded to changing market conditions, agreed to unrealistic and unfavorable labor and dealer contracts, been indifferent to product styling and let the competition assume a perceived advantage in quality and price. For these, and many more reasons, their future is very hazy.

At one time, these companies were considered great examples of superior American management. Their international reputations were among the highest enjoyed by business anywhere. One of the great suppliers to the auto manufacturers was Firestone Rubber Company. Firestone’s tale of decline is cautionary.

Leonard Firestone built his eponymous tire and rubber production company during the early 20th century, riding the coattails of the burgeoning American automobile industry. Firestone was the gold standard in tire production. Its management was considered the best of the five American tire manufacturers. As the century progressed, the company prospered greatly but grew arrogant. The business developed a strange aversion to new product development.

In the 1960’s Michelin, a French tire manufacturer, developed the first radial tire. Firestone decided to stick with belted tires. The advantages of radial tires were soon obvious and the world’s auto companies gravitated quickly to these new tires. Firestone’s American competitors Goodyear, Uniroyal, General Tire and tiny B. F. Goodrich tried to compete by introducing belted bias tire technology. They were unsuccessful in this effort and soon decided to jump into the radial business. The great Firestone Company was alone, and very late to get into the radial game.

It took Firestone until 1972 to attempt to market radial tires. A major mistake was made when the management of Firestone decided to simply rework belted tire production lines to produce radials. They decided to take this route to minimize capital expenditures. Nevertheless the historic goodwill the company had accrued made Firestone Steel Built radials the fastest growing tire in the world in the 1970’s. Unfortunately the company had compromised quality in their radial tire production process. The result was the largest tire recall in history in 1978 because of safety concerns. The company became a favorite target of consumer groups.

By 1988 Firestone was exhausted from the radial battles. The Firestone Tire and Rubber Company was purchased that year by the giant Japanese tire manufacturer; Bridgestone. This left only Goodyear as an American owned producer of tires. Why had an iconic, historically well managed company, reacted so disastrously to competition and new technology?

The best answer, and it applies to all fallen giants, is active inertia. Large companies become inert, listless, and ponderous. Their historic corporate relationships become blinders. Values harden into dogma’s, we have always succeeded doing things this way, so we will continue to do things this way. Corporate processes and policies harden into routines.

Leonard Firestone was a visionary. So was Charles Revson (Revlon), Alfred Sloan the architect of General Motors, Henry Ford, Juan Trippe at PanAm and Howard Hughes at TWA. These companies were their heritage. As the businesses evolved into public companies and the entrepreneurs who had had the visions to create and nurture their success retired or died a corporate malaise can set in. Businesses die if this is allowed to happen.

The United States government is the best possible example of failure. This enterprise is structured to fail. It is wasteful, duplicitous, mission confused and counterproductive. Money cannot be accounted for, results are not quantifiable and responsibility for program failures is never assigned. The government is not created to solve problems, it is organized to institutionalize and perpetuate problems. This is why the bureaucracy enjoys never ending growth, even as so little is ever accomplished.

History is the best teacher. Those who do not learn the lessons of history are bound to repeat their mistakes. This piece could have been written about any one of a hundred formerly iconic brands or businesses that failed. The failures are readily available as teaching tools. Hopefully our leaders will start to review some of these case histories before deciding which industries are to be winners and losers.

by: Geoff Ficke

William Shakespeare” famous quote from Hamlet, “When sorrows come, they come not single spies, but in battalions”, is particularly relevant today.

All of the news seems bad. The negative numbers are huge. The human devastation seems interminable. Governments everywhere seem to have lost control. Debt is perverse on a personal, corporate and governmental level.

This glass seems to be mostly empty. It is not!

From the depths of disaster grow the seeds of opportunity. Much as Mother Nature’s wildfires clear overgrowth and enables fields and forests to regenerate themselves, so does the opportunity that germinates from social and financial meltdown. The removal of diseased institutions affords entrepreneurs and reformers the chance to fill an essential void.

Throughout history dynasties, dictatorships and tyrants have risen, and ultimately fallen. They are usually replaced by something much better. The violence of the French Revolution enabled Napoleon Bonaparte to turn France into a warrior state under his dictatorial rule. His “Waterloo” enabled the state to develop into a modern democratically governed republic. The Hapsburg’s in Germany, the Hohenzollern’s in Austria and the Bourbon’s in France all enjoyed the wealth, power and comforts of royal rule before being deposited on the junk heap of history.

Hitler in Germany, Hirohito in Japan and the Communist dictators of Russia all fell and were succeeded by democratic governments with a modern, more open style of governance. Their oppressive rule guided their populations disastrously to decades of war, hunger and societal despair. Something much better has acceded their brutality.

Businesses have historically expired if they did not evolve and regenerate themselves as markets progressed toward new technologies. The home delivery of ice in the first half of the 20th century was replaced by the mass marketing of refrigerators. Carts, whip, buggy and bicycle manufacturers disappeared as the automobile developed as an affordable method of conveyance. The acceptance of Thomas Edison’s incandescent light bulb greatly diminished the need for thousands of local candle makers.

As the automobile industry developed there were hundreds of nameplates producing niche vehicles. Names like Packard, Stutz, Essex, LaSalle, Dusenburg, Austin and Cord and most other makes of automobile grew, stagnated and died as they could not compete with newly developed tastes, technologies, economies of scale and mass manufacturing techniques pioneered by magnates such as Alfred Sloan, Henry Ford and Walter Chrysler. General Motors, Ford Motor Company and Chrysler became behemoths with vast profits, international distribution and massive marketing programs. The rest simply faded away leaving little but reminiscences.

Today “The Big Three”, Chrysler, Ford and General Motors are all staring at the grim reaper. To paraphrase Shakespeare’s Hamlet quote’ “their sorrows are here, and they are here in battalions”. Every mistake that management and labor could make that would harm a commercial institution they have made, and often repeatedly so. Wrong choices in models, lack of recognition of the ultimate issue of fuel economy, boring styling, strangling union work rules and poor quality perceptions are just some of the reasons that “The Big Three” are so close to being the three, the two, or the one midgets. It appears highly unlikely that they will continue to exist as independent entities.

Much is made of the potential loss to the United States of any, or all of these iconic carmakers. And yet, automobile manufacturing in the country is booming. Mercedes-Benz, Subaru, Honda, BMW, Toyota, and Nissan have all built factories here in recent decades. Volkswagon has announced that they plan to, as well. Each of these makes has targeted features, styling and benefits that they incorporate into their machines that “The Big Three” had not identified. Also, they have all built their factories in “right to work” states, where labor union influence is minimal. While paying excellent wages and providing competitive benefits, these foreign Companies are not hog tied by arcane, non-productive work rules. They do not confront legacy costs that price domestic manufacturer’s models at such high retails.

We are all being effected by a global financial conflagration. The future economic welfare of citizens, industry and governments all over the world are intertwined and will be decided by how the people who got us into this mess approach getting us out. I use the pronoun “us, because we are almost all to blame.

Home foreclosures are surging because of stupidity and greed. People today, certainly in the developed countries, crave things they do not need and can not afford. Some people should not own homes. They can not afford the maintenance, the insurance, the down payment, or the taxes that accompany homeownership. A married couple with one child and a $3500 per month income, should never have attempted to purchase a $400,000 home, with 4 bedrooms, on a sub-prime loan with nothing down. They were fools, as was the lender, the mortgage broker and the buyer of the derivative that this loan was packaged into.

Banks and insurance Companies that purchased these esoteric mortgage derivative vehicles, historically hugely profitable, are falling like flies. Northern Rock in England, ING in Holland, Indy Mac, Countrywide, Wachovia and WaMu here, are only a few of the powerhouse financial institutions that are now closed, merged or selling off assets. The insurance giant AIG has been taken over by the government. Lehman Brothers, one of the most venerable, respected investment banks was shut down by the government. Merrill Lynch has been sold to Bank of America.

Fannie Mae and Freddie Mac have been hammered for their role in precipitating the credit bubble that has lead us to this precipice. The Congress, which passed laws spurring Fannie and Freddie to make dubious loans to non-creditworthy borrowers, is looking for scapegoats. A number of our sainted Congressmen want to see “perp walks”. I agree. However, I am confident that the real “perp’s” won’t walk.

The problems seem endless and daunting. They are coming “in battalions”. Nevertheless, we will survive this, hopefully learn from it, and prosper from the opportunity to fill the gaps opened by systemic failure. The equity markets appear to offer a “once in a lifetime” opportunity to profit from the steep losses incurred because of the panic the credit debacle has induced. Strong, agile financial institutions, such as Wells Fargo and State Street, will emerge to fill the vacuum left in the wake of the disappearance of hundreds of firms.

Individuals will have to make more prudent purchasing decisions. 84 and 96 months car loans will disappear, making luxury automobiles more difficult to acquire. “Skin in the game” in the form of down payments will be required to purchase real estate, benefiting the homeowner and the lender. Credit cards will be harder to obtain and the credit limits will be lower.

Every person can use this maelstrom as an opportunity to review real needs and wants. Living beneath one’s means might even make a comeback.

by: Geoff Ficke

The type of business structure you organize for your new enterprise is greatly determined by your personality, realities, needs and experience. Millions of people in the United States never enter into any type of formal business structure. This includes the bulk of the black or underground economy.

It is estimated that the underground economy consists of about 10% of all commercial activity in the United States. This includes legal and illegal activities. A kid cutting your grass for $20 is technically working black. The handyman that repairs your patio for cash might be working black. Drug dealers are definitely kingpins of the underground economy.

Entrepreneurs should not want to work black, but should seek to be totally transparent for many reasons. The reason a person typically seeks to become an entrepreneur is to maximize the opportunity our capitalist system offers each person willing to try. This means playing by the rules, competing and pursuing success utilizing every available legal tool. The opportunity to sell a successful entrepreneurial business is almost zero without complete books, records and tax returns, typically details that underground business works hard to avoid.

I recommend any new entrepreneur seek consultation with an attorney familiar with the laws and regulations of the state, county, city or township of your residence. Even if you are planning to run your enterprise as a sole proprietorship, there are local zoning laws, restrictions on business activity, public announcement requirements, DBA (Doing Business As), fictitious name ordinances, etc. Do not try to avoid the pesky forms and filings required in most localities. If compliance is a hurdle for you, then success prospects for you as an entrepreneur are probably slim.

Your investment in the attorney consultation will pay for itself. You can go online, or visit the business section of the local bookstore and find just enough information to get yourself in trouble in these areas. Occasionally, I meet an entrepreneur that did not consult professionals, and has everything in order. This is very rare. More often, I meet shortsighted dreamers trying to cut a corner and save a few dollars. Professional help will save you time, money and mistakes.

Here are the most common business structures that entrepreneurs have access to when formalizing their new venture.

Sole Proprietorship

This is the most commonly utilized structure for new, small, startup business ventures. Essentially, the proprietor, you, the entrepreneur, announces that you are working alone. The sole proprietor accounts for all income from sales as personal income and is responsible for all debts incurred by the enterprise. Personal and business funds are often commingled in this structure and need to be identifiable for tax purposes. There is no formal corporate entity, but you must adhere to all local laws and statutes. A Federal Identification Number is not needed (use Social Security Number) when filing taxes.

Partnership

When two or more people decide to enter a partnership, they basically agree to enter a form of marriage. We all know that marriages can get messy. Partners must minimize any possibility for a messy divorce by creating a partnership agreement that details what each partner brings to the opportunity (investment, sweat equity, intellectual property, etc.). Also, the partners responsibilities (silent, working, sales, marketing, production, etc.), and an agreed split of income, profits and harvest, as well as liabilities and losses.

I like, and often recommend, a partnership for young entrepreneurs with limited, narrow experience. Operations experience often does not translate to sales and marketing for instance. The only imperative is that there are no surprises after the enterprise succeeds, or fails. This when a cloudy division of liabilities or profits often becomes problematic.

Limited Liability Corporation (LLC)

Again, there are “do it yourself” methods of creating LLC’s. Use an attorney. I am no friend or fan of the legal profession. I am not a lawyer, either. I just know from experience that this is difficult: and often a contentious area of law that requires expertise.

An LLC limits the owner’s exposure to some losses. The LLC also enables the owner to treat income beneficially for tax purposes. Professional legal and accounting assistance is really important in establishing the LLC in a proper legal format.

Corporation

The Corporation offers the most comprehensive protection for the owners. Losses accrue to the Corporation, in most cases. The Corporation assumes the role of a person, even though abstract. A Corporation requires the filing of Articles of Incorporation in a state. Consult an attorney for advice on which state to file this document. Nevada offers secrecy. Delaware is most popular for large corporations. Each state has different fees and requirements. Get good help!

The Incorporation requires a fair amount of housekeeping. This includes appointing a board of directors, keeping meeting minutes, issuance of stock, etc. Many startups convert to corporate status after achieving some amount of success.

There are other intricate options, trusts and arcane structures available. However, for 99.9% of all entrepreneurs the four discussed here offer the best vehicles for properly structuring a new business. Approach each with the goal of maximizing your income and minimizing your time commitment to housekeeping the entity you choose. Remember: in order to be successful as an entrepreneur will require every scintilla of your thought, work and creativity to be concentrated on your project.

by: Geoff Ficke

Most of the entrepreneurs we interview in our consulting business have a very unrealistic conception of what excites and disappoints investors. The dream of many inexperienced inventors seeking to fund their opportunity is to build a substantial infrastructure. Their business plan identifies the need for factory space, equipment, staff, and many other fixed costs.

by: Geoff Ficke

Every business requires a structure that will withstand necessary legal and governmental scrutiny. The choice of how to organize a new enterprise should be made based on the needs and capacity of the owner(s) to maintain and detail the records, history and finances of the business.