They’re sold the same way to the same types of consumers.

Luckily, the wine and iPhones haven’t hit the spam-bucket the way watches have recently. Watch spam is probably running a close third to 419 spam (“Esteemed sir, I am requesting for urgent business relationship….”) and [...]]]> What do fake Rolexes, overpriced wine, and iPhones have in common?

They’re sold the same way to the same types of consumers.

Luckily, the wine and iPhones haven’t hit the spam-bucket the way watches have recently. Watch spam is probably running a close third to 419 spam (“Esteemed sir, I am requesting for urgent business relationship….”) and fake ED drugs. That said, the subject or opening lines of Rolex spam are instructive:

Cheap watches that still elevate your social status.
Tired of being jealous of your friend who owns a Submariner SS model?
Your friend will recognize the Rolex on your wrist.
Watches for people who want to live a luxury life but spend less.

(I read spam so you don’t have to!)

It’s easy to see that these fakes are aspirational goods.

Actually, a real Rolex is an aspirational good too. It keeps time no better than a $15 Casio, though it’s a tad more elegant… and considerably heavier. But the price is so out there — $8,000 and up, I think — that even the biggest poseurs recognize it’s an aspirational good. They’re not fooling themselves.

Fake Rolexes, overpriced wine, and iPhones are little marketing marvels of self-deception.

A friend who’s a high-end wine distributor, and who knows good wine, recently attended a tasting of “mid-price” wines, bottles that might sell for $100 in a restaurant. My friend wrote about the various wines (ellipses omitted)

Dull, a bit thick. Their Chablis was tasteless…also dull. Horrible. Are they kidding? Many of the wines were not sound, going through a secondary fermentation. Many were oxidized. The guy next to me was raving about a chardonnay that was oxidized and [expletive deleted]. The emperor has no clothes.

That’s the way of the world sometimes. The Emperor’s clothiers did rather well, as I recall.

The shop in question is in effect selling iPods and iPhones. Both of those devices are glosses on stuff that had been done before, wrapped in nicer packaging and sold as aspirational goods. People want them — and pay a premium for them — because of the cachet that attaches to them. It’s market positioning that Steve Jobs is brilliant at. I may knock the products as overpriced, but I’m truly in awe of Jobs’ marketing savvy and sense of what consumers desire… or can be convinced to desire.

To most people, wine is an aspirational good, like iPhones, like (fake) Rolexes. People aspire to possessing and using (consuming) it, not just as a visible signal to friends, acquaintances, and random observers, but as a symbol to themselves that they have achieved a certain level of fulfillment and status. For many people buying wine, as long as the liquid is not actually vinegar, the label is what they’re consuming; the product in the bottle is secondary.

No one buys the cheapest thing on the menu, as my friend has reminded me a few times. Pick a price point for an evening out. “I would pay $80 for a bottle of wine at this restaurant.” It’s the aspirational thing, not a particular $80 wine. Show the purchaser the menu, and many who think $80 will buy the $90 or $100 bottle. They’re celebrating something — themselves, basically — and they don’t want to buy the cheapest celebration.

The wine shop figured this out. I’m sure the owner knows the wines are overpriced for their quality level. He also knows that it’s a small number of people who understand that quality level, people such as my friend (I sure don’t when it comes to wine).

He’s selling them a vision of their level and status as reflected through some fermented grapes. The skill with which the grapes have been fermented is only a small part of what he’s selling. Think of it as a different version of love-him-or-hate-him wine guru Robert Parker’s rating scale,where wines he likes score 90+ on a 50-100 scale. In the aspirational wine scale, 90% of the score is aspiration and 10% is actual wine goodness. If a wine hits 100% on the aspirational scale and 20% on the taste scale, it gets a score of (90% x 100) + (10% x 20) = 90 + 2 = 92, which Mr. Parker would consider a fairly good wine.

That, I think, is the kind of rating scale people use in evaluating any non-necessary good; the functional aspects are only part of the score, sometimes a small part. Otherwise a Casio and a Rolex would score about the same… or maybe the Casio would score higher, since it doesn’t drag your wrist down. (On the other hand, I recall a James Bond story where Bond, James Bond wrapped his Rolex around his knuckles to punch someone out; maybe for those in a certain line of work the Rolex would get some points as a weapon. I hear Robert Ludlum’s next book is called The Bourne Chronograph.)

A fake Rolex, an iPhone, and a $100-at-a-restaurant bottle of mediocre wine represent three different colors across the spectrum of aspirational goods. The fake Rolex is just that, a fake; the intent to deceive is outward only, the aspiration naked. The mediocre wine contains both self-deception and outward deception; the buyer pays for something where price (a/k/a reputation) is pretty much the only indicator of quality the buyer understands. The iPhone is a quality device that works rather well; the buyer is overpaying a bit for the cachet, and often self-deception (“I’m cool, I have an iPhone”) is greater than outward deception (“there goes another iPhone geek”).

Indeed for some the iPhone is the new Rolex, a fashion accessory as well as a utility device. The difference is that the spread between utility cost and actual price is thousands of dollars for the Rolex and a few bucks for the iPhone.

If you’re on the marketing side, positioning your product as an aspirational good, if applicable, is a great way to increase profit margins, though it may or may not maximize total profit.

If you’re the buyer, it never hurts to consider explicitly how much extra you’re willing to pay for cachet rather than pay for play.

=============

For the record:

• I don’t have an iPhone, but I do have a wool-and-cashmere sport jacket I wear on some client visits that is priced above utility cost.
• I know very little about wine, though I can tell the difference between Two-Buck Chuck and an extraordinary 1988 Chateauneuf-du-Pape my friend shared with me last month; I rarely buy a bottle in a restaurant, but if I do I’ll keep it under $40 because I simply don’t know enough to warrant spending above that point. I’m content with the quality of most wines at that price point, even when I can tell the difference.
• I do not have a Rolex, real or fake, but I do have a Citizen watch that cost $129 fifteen years ago; I bought it because part of the money went to support Dennis Connor’s America’s Cup team. Yup, that’s why I bought it. Really.

So I certainly fall into the aspirational-good trap myself. As I get older, though, I try to be more aware of it, more cognizant of how people are marketing to me.

And if I see one more newspaper article that confuses cachet (ka-SHAY, positive reputation) with cache (kash, a store or stockpile), I’ll scream.

A lot of discussion centers on the complex chart topping the NY Times article. Ex-McKinsey consultant and PowerPoint guru explains (and partly defends) [...]]]> There’s a lot of brouhaha today stemming from a report in the New York Times about PowerPoint negatively affecting the US military apparatus. Super-smart graphics maven Nancy Duarte, for example, chimes in here.

A lot of discussion centers on the complex chart topping the NY Times article. Ex-McKinsey consultant and PowerPoint guru explains (and partly defends) the chart here.

Most of this noise, I think, is sadly misguided.

First, PowerPoint is being used synonymously with “presentation software,” with an undercurrent of Microsoft-bashing. Exactly the same charts, good and bad, can be created with Apple’s Keystone, Open Office, and so on.

Second, presentation software doesn’t make us stupid. Taking that comment out of context is more stupid than the comment. It’s a great sound bite, but like most sound bites it lacks substance. It’s like someone quoting the Bible with “money is the root of all evil.” The original quote is “the love of money is the root of all evil” — and even that appears to be a mistranslation of “the love of money is a root of all sorts of evil.”

No, what’s making us stupid in the field of presentation software — and I don’t argue the “making us stupid” part — is twofold. Bad presentation design is making us stupid. Bad presenters are making us stupid. The use of bullet points without verbal explication and detail is making us stupid. Most of all, our relying on this stuff unquestioningly is making us stupid. To wit:

Bad presentation design is making us stupid: Nancy Duarte touches on this aspect, as does Edward Tufte. PowerPoint and its ilk are tools designed to support a presentation, not replace it. As numerous presentation specialists have said, presentation software works best when the images augment and provide a visual context to what the presenter is saying. Presenters who expect the presentation itself to carry the content are part of the problem.

Now sometimes there is deep content that goes up on the screen. Whenever I reviewed budgets or sales numbers in a group, for example, I threw them up on a screen, whether from Excel or PowerPoint. (I used Excel if we were working solely on the numbers, PowerPoint if this data was part of a larger discussion.) And then we took considerable time to understand, study, and comment on the data. Having it onscreen helped me or others point to specific items with everyone in the room understanding what was being pointed out. In other words, even here the data played second chair to the discussion. I didn’t flash this stuff and move on.

Likewise, it’s been years since I used bullet points for anything other than a meeting’s-end (or training-session’s end) summary. Bullet points are fine in this context, because the people in the room have context. They don’t present information; they help people organize information they already have received.

If you’re presenting, you carry the message. Let the visual image augment it and help make it stick. The exception is detailed data — which should also be available to participants in print or on their laptops, if possible, so they don’t have to squint at the screen.

Bad presenters are making us stupid: If you read your slides to the attendees, shame on you. But that’s only part one of a two-part sin….

The use of bullet points without verbal explication and detail is making us stupid: If you put up information-bearing bullet points without further explanation, shame on you. (A summary has — or had — further explanation; so does an agenda, which also might look like bullet points.) Bullet points are like headlines; use the headlines to highlight the story, not replace the story. I like Twitter, but its 140-character streams don’t carry a lot of information; look behind the sound bites, or texting bytes.

Here’s where the military, according to the article and the quoted book Fiasco, got in trouble. Bullet points aren’t information; they are the headlines surrounding the information cache. If you can’t open the cache, there’s no “there” there.

If you need to convey highly detailed information, the best format is a written document. That’s Word, not PowerPoint. If you’re trying to motivate people, encourage discussion, or convey core information, then use your presentation skills — which is not PowerPoint, but youPoint.

Our relying on this stuff unquestioningly is making us stupid: Sound bites make us stupid, because we stop thinking, stop analyzing, stop looking into them. Too many PowerPoint presentations, unsupported by the speaker, are nothing more than a succession of sound bites. Above, I called shame on the presenters for doing this. Here, I call shame on us for allowing it.

That doesn’t mean you have to interrupt, though sometimes you should. Rather, make sure you recognize that you’re hearing/seeing a sound bite; if that’s all the presenter is giving you, make it your business to go behind the screens and gather the information yourself before making a decision, whether that means exchanging mail or having an offline discussion with the speaker or going to the source material.

If you [...]]]> When Monty Python sang about it, it was funny. (At least it was funny 40 years ago.) When it takes over your inbox, it’s frustrating. And when someone gets sucked in and loses data, money, or both, it’s a disaster — and a crime that the constabulary can’t seem to get a handle on.

If you think spam has been increasing… well, you’re right. This report in Baseline Magazine notes that 97.5% — 97.5%!! — of email in December and January was spam. [Note: Unfortunately, it's another one of those annoying built-in-Flash-because-the-developer-thinks-it's-cool slide shows.]

The latest trick is manipulating the sent time so that if you keep stuff in your inbox sorted by date, the spam winds up spread throughout the folder; you can’t just pick off the newest stuff on top.

Almost 10% of the spam came from the US. As a US citizen, I find that both embarrassing and infuriating; how is it we can’t catch the folks within our own borders?

====================

The worst part is that about eight years ago Microsoft proposed what still looks like an elegant way to kill spam: make the spammers “pay” for their emails. [The link is to a generally readable page; it then has links to highly technical research papers with more detail.] Microsoft didn’t originate the idea, which has been around since at least 1992, but they actively promoted it for a time.

There was considerable discussion about the idea in the early part of the decade — but there was a lot of “oh, it’s Microsoft, so I don’t like it” and “this isn’t absolutely perfect, so let’s not do it.” That’s the stuff that kills projects, and we’re paying for it today.

Or as Monty Python notes, on the menu “there’s spam, egg, sausage, and spam; that’s not got much spam in it.” Well, now we’re up to spam, spam, spam, spam, spam, spam, spam, spam, spam, spam, spam, spam, spam, spam, spam, spam, spam, spam, spam, spam, spam, spam, spam, spam, spam, spam, spam, spam, egg, spam, spam, spam, spam, spam, spam, spam,  spam, spam, spam, spam, spam, spam, spam, spam, spam, and spam. (Yes, that’s the proportion.) As far as I’m concerned, that’s got too much spam in it.

I knew you had more than a passing interest in outsourcing. Maybe you can come up with a solution for the problem outsourcing companies in India are facing. You may know that majority of the income for outsourcing companies comes from engineering of end [...]]]> A former colleague of mine wrote me the other day:

I knew you had more than a passing interest in outsourcing. Maybe you can come up with a solution for the problem outsourcing companies in India are facing. You may know that majority of the income for outsourcing companies comes from engineering of end of life products (products that are deployed and are in sustenance mode). While overall income from these products has grown, margins have been rapidly going down even before the recession. Outsourcing companies are also scared that if and when we come out of recession SaaS [software as a service, or hosted solutions] and cloud computing will have a huge impact on the topline of outsourcing companies in the wrong direction. Your thoughts…

First, I think margins will continue to decrease for multiple reasons:

• Water seeks its own level, so to speak. As the US transfers money to India, for example, by paying for offshore work there, the basic laws of economics dictate that the value of work there will go up relative to here. Workers will get paid more, the Indian economy will do better (the rupee rising against the dollar), and so on. So it will be more expensive to do work in India next year than it was last year.
• As India gets more expensive, and as other countries do a “”hey, we can do what they’re doing,”" India will have more competition, at least in some areas. There are lots of English speakers in the Philippines, for example; I used to outsource work there a decade ago, and they still have a price advantage. India for now has a skills advantage, but given sufficient price differential, and that will vanish. There’s also a “”nexus”" advantage in that groups of workers congregate and are easy to reach, and they share skills. Both can be overcome with money.
• China is entering the market. There are enough people who read English well enough in China to do outstanding technical work from American documents. There’s still a price advantage in China.

There are other difficulties and issues:

• China also has a time-zone advantage. India is half a clock cycle away (actually, 12.5 hours) from the West Coast. It’s super-hard to get a team meeting to happen, because if it’s 9AM here, it’s near-bedtime there, and vice versa. You can get individuals to connect, but it’s hard to get two full teams on line at the same time. China is 8 hours away from here, which gives a lot more overlap. (It’s 11 hours from the East Coast, though.)
• It slows up work when there is an overnight cycle. You can do only one communications cycle a day with India, and it’s pretty much the same with China. We send something at the end of our day, they work on it while we’re with families and asleep, and we get it back as they go to bed. That’s slow.
• Brazil and Argentina are entering the game. Same time zone, give or take, which is an advantage for collaboration.
• The overhead is significant when dealing with India. There are flights, and time lost to travel. There’s the overnight/full-day-cycle issue. There are general communication difficulties; it’s hard enough for two Americans to communicate and transfer full meaning; it’s a lot harder when there are fewer cultural referents. (That said, India is culturally closer to the US than China or Brazil because of the long history of the British in India.)

I had mixed luck with sending work to India. One project went well, but it had an effective leader (the colleague who wrote me the note above). Two others went poorly, with lots of rework; they ended up costing more — and taking longer — than it would have had I sent them to Bozeman or Bangor rather than Bengaloora (Bangalore). The upshot is that if I looked at costs all up, including transactional friction and opportunity costs, I’m n0t sure I’d find India economical for technical work at this time. That can only get worse with SaaS and the cloud, where much of the work will need to be in the same sort of timezone as the customers. Should the US emerge from the recession before India does, there’ll still be some price arbitrage… but I’d bet the recession will end in Manhattan, NY before it does in Manhattan, Kansas, and so there’ll be price arbitrage opportunities to “”offshore”" to the US and Canada. Bozeman and Manhattan (Kansas) are also offshore. They’re not within 200 miles of an ocean.

Also, the perceived — and possibly quite real — need to do rapid turns (revisions) on cloud-based work argues against an India or China solution. There’ll still be work going there, but it may not continue to grow — and it may well be lower-margin work.

There is, however, another area where the price differential remain enormous — the legal world. Legal Process Outsourcing (LPO) will utilize India and other nations for some time to come… but again for low-margin work.

=========================

There is one critical assumption implicit in all this. I’ve avoided it until now.

That assumption is that the US will continue to be the center of both technological advancement and the source of work such as LPO. Given our litigious society, the latter seems reasonable. But I’m not confident the US will remain the unchallenged “”big dog”" of technological innovation.

China is a scary (from a US-centric viewpoint) rival. India is too. Will the next Microsoft or Google emerge from an “”emerging”" nation? Maybe, if you’re talking about a business. However, will the innovations that drive this mythical company come from outside the US? That’s much more likely than it was ten years ago.

Ten years ago, that was unthinkable. Now, it’s very thinkable.

And therein lies the key to the question raised at the start. India will grow stronger to the extent that it become the technology innovator. Same goes for China.

Think I’m smoking something? Consider: There are a handful of very cool phones at the moment. The iPhone is a US idea, but both the Touch and the Google Nexus come from China. (HTC created both.)

Innovation is the high-margin business. Insight, courage, education, a bit of capital. Used to be, the West was a sole-source supplier of the last two. Today, not so much… and with education, seriously not so much. The opportunity is out there….