E-commerce Link Analysis
This map shows where links on our web site make money (green) and where we don't (blue). Amazing how we kill ourselves slaving over areas on our site where we are speaking to ourselves about ourselves. Our customers get what they need from our left navigation, search and a few housekeeping links (cart). There are over 80 links on our site about a little over ten matter to the bottom line. If this sounds like a 80/20 long tail you win a Pareto Distribution.
Golden Triangle Web Design Post
Repeatable fractals are chasing me down the street. Our link sales, when charted, look like a long tail AND every link that makes money on our site is firmly in the Golden Triangle of web design (discussed in an early post).
Thursday, July 30, 2009
Tuesday, July 28, 2009
Starting to see a consistent theme. When large companies try to ape "cool" Internet marketing they become zombies. Marketing zombies wander stiff legged through time looking to suck the life out of any idea. Marketing zombies care about a single thing - their survival.
Breyers Ice Cream: The Real Story
William Breyer hand cranked his first ice cream as America recovered from the civil war in 1866. Word spread around Philadelphia about Mr. Breyer's delicious ice cream. Lucky neighbors were the first to enjoy William's cold, creamy treats. Next a retail store and then three more in quick succession, almost before he realized it a unique American found his calling. Breyers ice cream was family. William's son Henry incorporated the business in 1908. The first radio message was sent from the Eiffel tower in 1908. The Boy Scouts started in 1908. Butch Cassidy and the Sundance Kid may have ended their unique crime spree in Bolivia and the Breyers family created their "pledge of purity" to use old fashioned methods to make the best ice cream on the planet.
Bryers Ice Cream: The Fake Story
No one sets out to be a marketing zombie. The Brand Managers at Good Humor Ice Cream, Breyers current owners a subsidiary of the multi-billion dollar Unilever Corporation, sat in meetings with their ad agency purposely creating a plan to fly their web marketing plane directly into the side of a mountain, and they felt good about the flight right up to the crash.
The idea to update Gone With The Wind has to be one of the worst marketing ideas of modern time. Did anyone on the marketing team realize twisting such a gut wrenching tragedy, the civil war, into web YouTube-like parody was particularly ironic for a company founded in the smoke and pain of our nation's largest crisis. Margaret Mitchell's Gone With The Wind is about glimmers of hope as a country tries to kill itself to set people free. Yeah that seems like a modern updating of Gone with the Wind (not). Anyone ever read Alice Randall's 2001's The Wind Done Gone or what? If anyone at Good Humor had cracked a book (or two or three) they would treat such a difficult time with more care or tackle duck and cover or something equal to their tone.
There is a rule in Hollywood. Never work with kids or dogs as both will steal the show. There should be a rule in marketing: beware deconstruction. Marketing pros learn to hitch wagons to shooting stars. Taking advantage of convention or some super nova current event can help keep marketing expenses down and grow a brand. Breyers, the marketing team explains in their Behind-The-Scenes (best part of the site actually), wanted to "update" Gone with the Wind and King Cong.
Bad idea guys. You update goofystupid stuff we can easily laugh at now such as: Duck and Cover, hula hoops and The Monkees. Breyers SmoothandDreamy site is pointed like a laser directly at women. Why would Breyers "update" something old and negative using such a plastic approach? The roots of Breyer's online marketing disaster reside in True North's great use of the medium (web sites and web video) introducing their new "nut snack" line.
True North Website
True North works where Breyers SmoothandDreamy does not. True North hands a good portion of the site over to seekers, searchers and helpers. Here is a very important brand message. If you want real don't create anything OTHER than a request for help. No marketing team can create real anymore (if we ever could). Any attempt to create a story seems like spin. On the other hand, share your influence, web traffic and resources and you get real for free (free in corporations this size cost about ten million dollars also known as "tip money" when I worked at Mars, Inc. ).
True North's brand is grounded in a new altruistic idea. Is Frito Lay, the makers of True North nut snacks, slick? Yes, but they reduced their spin by sharing everything they could and having fun (you can see fun and confidence in the True North behind-the-scenes). The True North marketing team really wanted to help. They happened to have a huge company backing their play so they made the most of it. They ended up helping True North by doing less than Breyer's artificial efforts to help themselves. Wonder why doing less is always so hard for a marketing team. We are "do more" people I guess. The web's hidden marketing Zen is DO LESS works better. True North got this "do less" idea and got out of the way.
Breyers Smooth and Dreamy Web Site and Ads
Breyers, a company with a 140 year history, creates a plastic ironic presentation. Hello, what are you smoking and where can I buy a pound? True North, the new kid on the block, grounds itself in community, sharing and love. I've never felt so strong about a "nut snack". I gave money to their contest winner, former policewoman Lisa Nigro's Chicago based Inspiration Cafe, because I was moved. I wanted to join True North's crazy "nut snack" community. I even emailed the True North marketing team with glowing praise (they think I am a marketing stalker which I am not, hope to get the restraining order lifted soon :).
I've worked for large companies (P&G, M&M/Mars) and large companies owned by larger companies (Nutrasweet owned by Monsanto). I understand pressure to do something cool, to be with the marketing times. Have you ever seen Robin Williams do his evangelical preacher, "Out demons, out I say." I urge any major company's marketing team to perform an exorcism before attempting to ape Internet values and do something "cool". If you aren't cool don't try to make your company cool online. If you aren't honest....well there really isn't a good solution to that problem other than find religion fast or be gone.
BECAUSE YOU CAN DO SOMETHING DOESN'T MEAN IT IS THE RIGHT THING TO DO.Breyers and the Good Humor marketing team forgot Martin's first rule of web marketing: honesty and truth work better than anything else. In fact, lies and spin can't be supported, they don't scale anymore. Lies and spin are quickly cut to ribbons in forums, blogs and social networks. Worse, your million dollar marketing efforts may simply be ignored as stupid and old hat (the future I predict for Smooth and Dreamy.
Pitching a real brand (Breyers) with positive history and accomplishments in such a solipsistic way, speaking to yourself about yourself, is a crime. You know who commits such crimes? Yep, Marketing Zombies. Breyers is a marketing zombie.
Other Marketing Zombie posts:
Marketing Zombies: Volvo
Marketing Zombie Killer: BMW
Monday, July 27, 2009
Here is what I found on a bulletin board about Alton Pickens, a great artist, kind and patient man who tried (in vain) to teach me to paint:
My Note on July 27, 2009
Alton Pickens = Great Teacher
Ron's post reminds me of the Alton Pickens I knew too. He was a gentle man who was possibly the best teacher I ever had. Attentive and supportive he always helped and never tore down. Your work was always better after long ranging discussions fifteen minutes on your art and two hours on life. Maybe that is the best way to teach art - to be the art you are teaching. If so Alton had it down. I miss him and that time at Vassar learning to paint badly from a great man who never took my lack of innate talent the wrong way (LOL). Marty Smith VC '80, Alton Student
I love Picken's early work but never see it anywhere. Anyone where it can be seen or found?
Why after all this time I should be thinking about Alton I dont know,...but I am. I knew him mostly from international folk dancing, mostly at
Sonny Neumans studio on 22nd. St in Manhattan in the late 60s. When I moved to Woodstock in 1969 he came up to visit me a few times. He danced well, better than most. And really knew something about the dances and the people. He really liked turkey, the people, music and dance. I remember him saying once they were mostly farmers and peaceful.
He was a professor at Vassar when I knew him and said many times he knew nothing about art and hoped they wouldn''t find out that he knew nothing. At this time he was represented in many museums. He was a very modest guy, truly self effacing. Wish I knew him better and spent more time with him.
Martin's PPC Secrets
Pay Per Click or PPC advertising are ads on Google, Yahoo and MSN. Usually located on the far right of the page, well away from the Golden Triangle discussed in a previous post. Ads on Google are how many sites stay in business. My friend Steve asked my advice about bringing a PPC person into his company. Here is my note to Steve:
Done correctly, PPC is a full time job. There are two approaches to PPC management: Algorithm (left brain analytic) and Manual (right brain creative researcher).
Algorithm (left brain)
We use a vendor who fires a mathematical algorithm to determine terms, bid structure and etc… The advantage of using math to do this arduous task is speed of response and ROI protection. The downside is we tend to get trapped into the same terms over and over again. You don’t go scouting out new ideas, new terms and optimization of your landing environment. I don’t have the person. Let me restate that. I have the money for the person if I were to pay a person what I am paying my vendor, but I don’t want the management hassle (or haven’t so far). Part of the reason I avoid this is finding just the right kind of person for what we will pay is almost impossible.
Manual Keyword Researcher (right brain)
Manual can work if whoever is doing it LOVES keyword research. Research sounds left brain, but finding keywords is like solving Rubik’s cube. Keyword research is the most boring thing on the face of the planet. I hate it because, done well, it takes forever to find an inch of room. Some people can dog this out turning over the same terms with slight variations forever. I am not one of those people. Highly detailed creative blood hounds are hard to find. Ones willing to spend their life doing something so boring are even more rare.
Best = Algorithm + Some Manual
The best approach is a combination of algorithm and manual. You would be surprised how rare this is. Shops tend to be all Algorithm or all Manual. If you set up your own shop, find a vendor to fire your most important keywords (usually related to your name) and hire “dog looking for a bone” researcher and bid operator. Taking off the keywords easily controlled by an algorithm frees your blood hounds to mine PPC gold. If you find a blood hound that can do both analytics (left brain) and creative digging (right brain) and LOVES doing it MARRY THEM (lol). They are worth their weight in gold and a rare species indeed.
Hope these thoughts help you understand how to set up a search engine advertising campaign. The best PPC campaign is none. Many sites are strong enough in organic or natural search they don't buy ads on search engines. Natural search really only applies to Google. MSN and Yahoo allow large advertisers to buy their way into what looks like "natural" results. Knowing what is natural and what is paid can get tricky because Google may put paid links at the top as well as on the right. Google is good about creating a different look and feel for natural, most of the middle of th page, and paid (sometimes top and on the right).
I've shared many organic search tips including these:
SEO Writing Tips 1 - 5
SEO Writing TIps 6 - 10
Good luck and let me know if I can help.
Friday, July 24, 2009
Sometimes it is easier to think in pictures. Words get tangled on themselves creating confusion where clarity is needed. My first attempt to chart my e-commerce thoughts showed how the e-commerce battlefield moved from transactions to a fight for customer hearts and minds. Words like "battle" and "fight" seem all Sun Tzu and "greed is good".
See Martin's Evolution of E-Commerce Diagram
I'm seeing a different less confrontational future thanks to authors such as Malcolm Gladwell (author of Outliers and The Tipping Point), Robert Wright (author of NonZero and The Evolution of God) and Michael Shermer (author of The Mind of the Market).
The world, as Chris Anderson proved in The Long Tail, is shifting. When space is limited Sun Tzu says you fight for territory, for space. When retailing space is infinite attention is the most important currency and word-of-mouth the only marketing. When space is infinite we battle for hearts and minds. "Battle" is not a great word to use in the same sentence as "hearts and minds".
Battle assumes a zero sumness. I win so you lose. What if, as Wright puts forth in NonZero, we really want to help each other. Google's famous, "Do no evil," dictate is something we all secretly share. What if our concept of man as selfish and self interested (where "self" may extend to immediate family) is wrong? What if man is an emergent cooperative system more like bees and ants than we realize?
Read Martin's Long Tail PowerPoint on Slideshare.
If these new ideas are even part right we need a new marketing paradigm. I've been selling one thing or another my entire life from soap for P&G, then candy for M&M/Mars, Sweetener for NutraSweet, funky gifts and Found Objects and strange toys in my current Director of E-Commerce position. Every company I've worked for assumed we were the good guys and they, whoever they were, could only be bad. What if we are all good guys and the best way to help people is to cooperate? What if the best use of our time is creating things that can help as many people as possible agnostic to where those helpful things come from.
Isn't it smarter to see an opportunity to be of service? Shouldn't our focus remain on our customers instead of our competitors? So many times in the last thirty years competitors and their defeat occupied millions of dollars of company resources and attention. M&M/Mars would never share ideas, shelf space or anything with Hershey. We would battle for "share of stomach" to the end. What if such solipsistic internal focus is stupid and childish. What if one of Google's revolutions is such parochial thinking is over. What if Google, Facebook, Twitter et al. have changed our marketing world in ways we only partially understand or comprehend?
If such a change has happened or even if it has happened even a little we will need a new idea, a new paradigm. One that doesn't depend on wars and battles. Content Marketing Networks is a collective farm where content is the crop, a crop designed to feed people. Hearts and minds can't be won with traditional advertising anymore. Can we believe our lives will be better because we drive a Volvo, use All laundry detergent or Ivory soap? Consumers will never return to the fifties. We've moved on. Anything and everything we bring into our lives to perform any function must touch us in some meaningful way. AND we have millions of choices. Any marketer who doesn't understand new consumer demands, consumers desire to be touched and moved not just served, will fight the wrong battle with the wrong tool.
What will this new world look like exactly? There is unlikely to be any "exactly". Our search for certainty may be as immature as our previous obsession with competitors. No our new marketing world will be built on pillars of sand easily washed into the sea. Here are some of my latest sand castles.
Martin's Content Marketing Powerpoint on Slideshare.
One of my favorite slides in my Content Marketing Deck:
Thursday, July 23, 2009
What comes after content marketing? Many small to medium sized companies may find profits squeezed and costs increase as they try to compete in a search engine marketing world. Content creation gets expensive. Content Marketing Networks help reudce content creation costs while positivley reframing brands. Q: What comes after content marketing? A: Content Network Marketing explained in the slideshare deck below or Content Marketing Presentation (there):
Saturday, July 18, 2009
Schreiber Construction LLC P: 919.240.4190
I was walking my bike home. I flatted this morning on some gravel. Sweat pouring into my glasses I put in a new tire. Went to pump life into the rubber and found my pump was outfitted for Schrader valves, the fat valves. Every tube in my kit used a Presta valve, the long skinny one. There was nothing to do but walk the five miles home. I was about a quarter of a mile into the walk. I’d taken off my cleats. Walking in bike cleats is a true pain. I decided to destroy my socks and not my cleats and ankles. Ever walk around on your heels? Then you know what it feels like to walk in bike cleats.
Suddenly a white truck pulls up in front of me. “Where are you going,” a square man in his thirties asked through the opening window. I noticed he rolled his g’s in a distinctive way I know well having grown up in Connecticut. “I live over by the mall about five miles away,” I said. “Throw your bike in and I will take you,” Timothy told me. Not one to look a generous gift horse in the mouth I tossed my bike in the back of the truck, walked in my socks holding my cleats and hopped in Tim’s truck.
"I saw you flat and working on your tire when I went home. When I saw you walking on my way to the gym I thought you were in trouble,” Timothy told me. I told him I appreciated the ride and asked him where he was from. “Are you from, New York, New Jersey, Long Island?” I asked knowing the answer from an accent I knew well. "Long Island," Timothy confirmed. Soon after heading toward my house I mentioned that all I needed was a pump. “Heck if that is all you need I have one at the house,” Timothy Schreiber told me turning around his truck.
Timothy told me he was a builder. He built the beautiful house we visited with the cleanest garage I’ve ever seen. Work is hard to find for Schreiber Construction right now. “There was a time there where I couldn’t build them fast enough,” Timothy confirmed. “Now I am working on a spec house in Governor’s Club,” Timothy told me. Building a spec house in the million dollar plus Governor’s Club is courageous. Timothy figures about the time he finishes the house the economy will be better. Brave man Timothy.
If I had the money Timothy would build my house. Anyone as generous as Timothy is who you want building your house. In case it wasn’t enough to help inflate my tube Timothy, seeing my wet footprints on his driveway, offered me socks. How many people do you know would pick up a stranger, help him inflate his tire, offer him water and dry socks? I would have trouble getting that much help from my brother (lol Sorry Drew).
I declined Timothy’s sock offer, hopped on my bike and finished my 25 mile ride. I wish I had a million dollars I could pay Schreiber Construction LLC to build my dream home. I wouldn’t build in Governor’s Club. I grew up in Greenwich when dad worked on Wall Street so been there, done that, don’t need to do it again even if I could afford it (I can’t). You can tell what kind of home a man builds by who he is. Timothy Schreiber is generous, kind and helpful. Timothy Schreiber is a builder who has a free web site from me whenever he wants one.
Thanks Timothy for being willing to give so generously without thinking of repayment. Your actions this morning confirm many musings familiar to ScentTrail readers (NonZero Effect, altruism is more common than we know and love is the killer application).
Friday, July 10, 2009
Creating Great Web Site Design
Several hours of every day of my life is dedicated to thinking, looking at and creating web site design. Great web site design is like great art - hard to create but you know it when you see it. Bad web design, on the other hand, is plentiful as the authors of Web Pages That Suck know.
2009 Web Pages That Suck Contenders
I help friends create web sites all the time. It is something I do for FREE because it is one of the things I love to do. Creating web sites is like painting (see Martin's old Studio). Painting involves balance, texture, color and line. Great web site design must balance all of these painterly elements and more.
Where Does Great Web Design Start?
When Alton Pickens was teaching my friend Michael Rees and me how to paint, we worked with him for years at Vassar, he took a novel approach. Alton taught us to use automatism, quickly drawing or painting without judgment, to create without thinking about creating. Automatism sounds like art double speak, but it works. Pickens had me line up 30 pieces of paper along a long slanted drawing shelf in the art studio. "Now move from drawing to drawing as fast as you can," Alton demand. "FASTER," he would yell when I stayed too long on one piece of paper. I remember sweating profusely and losing myself.
Alton's other lesson was to think about SOMETHING OTHER THAN PAINTING just before we worked. Painting can become obsessive. A painting has an evolving life. Every change leads to more changes and I know every web master reading this knows his or her web site functions the same way. Your great web site design may start in art class, a museum or a scrape book of favorite images. Great web design always start somewhere OTHER than moving text, navigation and images around in Photoshop.
Who is your web audience?
Before you create a single web site design THINK about your audience. Who will come to this site? Once there, what do you want them to achieve. Why will their life be better because they found your great web site? There are some important general truths any web designer must recognize such as:
- No one has any time any more.
- Simple is better than complex.
- Everything you do influences your visitors (EVERYTHING).
- Occam's Razor can't be used too much (when in doubt cut again).
- You have seconds to capture attention possibly for a lifetime or five seconds.
Web Design Elements
Web sites are made up of text, graphics, navigation and white space. I include white space as an active element even as some see it as blank canvas. The hardest thing to do in art is beautifully simplify. Online, a crowded cold place, simple and beautiful are RARE. We want to thrill, wow people with our products and knowledge. Connecting your emotions to people you may never meet through the stage setting of web design requires patience, confidence, courage and a sense of personal magic.
Alton would not allow his fledgling artists to become rigid or over confident. He made it a point to tear down ideas before we became too attached. He removed attachment more than idea. Every web site on the planet can be better. I manage several big sites. Sites with over 14,000 URL's and millions of visitors. There are twenty things I would change about our web presentation right now if I could. In an e-commerce web world present and receiving customer feedback (i.e. making money since money is a vote) is more important than perfection.
The Golden Triangle
Perfection is unattainable and too costly. There are things you need to know before designing your first site. If you don't know these web design secrets it will hurt your design and your site's user experience. I plan to share five of these "secrets" here on ScentTrail. My only goal is helping you design a better web site. The Golden Triangle is my first Martin Web Site Design Secret.
I have no life (to speak of). It is Friday night and I am writing great web site design tips in ScentTrail Marketing instead of doing something fun. My perverse and lonely study of heat maps is yet more evidence of a need for a life. Heat maps are generated by web market researchers by attaching a laser tracking pointer to a web surfer's head. It sounds more intrusive than it really is. Data fed into this tracking system creates "heat maps" of where and how a browser's eyes move around a web site. "Heat" builds up when eyes stay in a location.
Marketing Sherpa Heat Maps
Marketing Sherpa's annual web design report is a great source for heat maps. After studying these Marketing Sherpa heat maps for years it is clear in English speaking countries a "golden triangle" exists on the upper left of almost any web design. English reads left to right, so our eyes resting for the longest periods on a site's upper left is not a huge surprise.
Few web sites seem to realize the importance of this area. My fellow e-commerce sites usually do. They place their navigation in the upper left because they know your eyes will spend more time there. They may create special offers and animations to attack your attention. Sometimes, they "counter-program". They drop noisy features on the far right knowing it will be more work to get your eyes to that portion of the page. Here is an example of A Google heat map showing the Golden Triangle:
Page Right = Dead Zone
I think of web sites like scenery in a play. Let's keep location in space easier than stage left and right. I always start with a simple 4 panel grid. The "Y" axis is the fold. A web page's "fold" is where most browsers will stop. The area "above the fold" is important and will be seen by most people browsing your site. Web site design is a "lowest common denominator" process to some degree because how your site looks on different computers and browsers will vary. Best to aim your design at the largest middle unless you only care about selling people with the latest coolest computers and browsers (most ad agency sites assume this for one negative example).
The golden triangle means upper page left is the most important part of your design. Some web sites do a great job getting as many options as possible in this key area:
My favorite US design company IDEO is a constant source of design inspiration. Their web site understand how to get maximum return from the golden triangle.
I like this gallery site's innovative color and shape menus. Such simple options yet they provide thousand of site variations from a single choice. Great job of getting these innovative ideas up in the golden triangle too.
Clean design with eye catching image in the triangle directing eyes down. Not the best example of stuff in the triangle, but a good example of how to move eyes down into the site.
Remember to use your site's golden triangle wisely. More great web site design secrets and tips soon.
Thursday, July 2, 2009
Marting Zombie Defined
One Marketing Zombie apes current marketing trends and doctrine without really understanding their implications. Newspapers discussing Web social networking strategies comes immediately to mind. Most newspaper sites scream an ugly truth. Newspapers believe they can transpose their print vehicle almost untouched to the Internet. Good luck with that.
Another kind of Marketing Zombie is one who insists on behaving in an outmoded way in the hopes consumers are coming around, they will again respond to the old marketing. Volvo - you are a Marketing Zombie. You can tell Volvo has joined the undead marketing ranks by watching their offensively stupid commercial (above). If I am out in the woods and some strange talking Swedish guy tells me to come follow him I am out of there.
What I find offensive, and you don't see this offense in the YouTube ad example above, beside the commercial's "we aren't listening" attitude, is the last line asking for $33,000 for their stupid car. Let me check this. I am going to choke up a full $10,000 more than a solid Honda or Toyota because some strange talking Pied Piper shows me just how magical his car is while we walk in the woods? And you have a bridge you want to sell me over some swamp land too I presume. Nope, not going to happen there Volvo and shame on you!!!
VOLVO WAKE UP!
The age when cars were magical is OVER. Cars cost too much, as your ad so clearly demonstrates, hurt the environment and are just plain stupid. We are stupider still because we've constructed our world around gasoline and metal (a cure for that oversight is coming soon). Volvo's are driven by old professors. They had a certain boxy elegance in their old faithful inelegant look and feel. Marketing Zombies are always behind their own trends. Companies, like people, always want something else. The grass is always greener, they believe, so they are always on the wrong side of the river.
In our stressed economic times Volvo could tout steady unsexy fuel efficiency. Instead they have a foreign guy doing a Doug Henning in the woods. Clearly Volvo is deaf and dumb. They only hear their own pomposity. The ultimate irony, and this is not the first time we've seen this, is the old Volvo marketing message WOULD WORK in our current depression. Plain, steady and true is what we seek. We won't find it at Volvo even though they used to be a source for exactly this kind of straight talk message and this missed opportunity is what makes Volvo a Marketing Zombie.
Post your Marketing Zombie nominations in comments or send to martinsellingzoe(at)aol(dot)com.
Marketing Zombies: Breyers
Marketing Zombie Killer: BMW
Wednesday, July 1, 2009
Money's Real Value = Zero
Most people, including me for most of my life, think of money incorrectly. Money’s intrinsic value is actually zero. Money’s only value comes from confidence. We believe a piece of paper is worth twenty units of exchange so therefore it is. We subscribe to a collective myth – money’s value.
In your mind imagine a twenty-dollar bill actually being worth 2,857 paper clips. This is a roughly accurate translation of current paper clip market pricing (1,000 for $7.00 at Staples). You could own a million paper clips for $7,000. You would be a million-paperclip-aire. Paper clips, unlike money, haven’t created a collective myth. A paper clips value is less than a penny.
Our collective money myth had to pick a means of fair exchange. We had to create constant, or flexible drifting constant, to peg paper clips and everything else. The tricky part of that sentence is “flexible drifting constant”. Money fluctuates with trends. Some commodities such as gold and oil act as proxies for money, but proxies don’t change underlying “value”. Underlying value is always a confidence metric.
Confidence’s influence on money is not linear. You can’t know if more confidence will increase money’s value. More confidence may flood the market with currency as a “mob” cleans out bank accounts to buy paper clips. Paper clips could become scare. When too much currency, or demand, chases too few of anything its market price increases. As the market price of any proxy be it paper clips, gold or oil increases money buys less. Again, think of this as a “confidence game” and not in the turn of the century grifter sense. When money loses confidence to oil or gold it takes more money to buy the same amount of the proxy.
Markets are not perfect zero sum games. There are always an infinite number of variables and an equally infinite number of permutations and combinations. The US Dollar may increase in confidence even as oil does due to an infinite variety of other peg points. Lately, we tend to pit money (US Dollars) against key commodities. This is funny since neither one has any intrinsic value. Each is a medium of exchange supported by our collective myth. Money and proxies are so intertwined isolating one from the other is another market myth.
I started this riff to answer a friend’s concern about paying more than she ever imagined for a house. She is worried about the large amount of confidence she is betting on ocean side real estate. One way I trick myself away from money hang-ups is to change the means of exchange, to create my own money proxy. I used paper clips above to illustrate the point. Paper clips seem less dangerous and risky than money. When the myth becomes real we print the myth, or we spend the myth.
Thinking of paper clips helps take away money’s FUD factor (Fear, Uncertainty and Doubt). My friend’s home near the beach benefits from several undeniable trends:
- A lot of petroleum distillates are used when a house is built. Oil is only going to increase (despite short term set backs), so the cost of construction is unlikely to crash. Currently, finished house prices are crashing because supply is too abundant driving confidence down. Remember, housing is just another proxy for money like paper clips. This means it fluctuates with confidence, supply and demand.
- Since confidence is low in housing's ability to hold value pegged to money NOW is the time to buy (or build). You make money in investments when you read the tealeaves and bet against the herd as my friend is by choking up a pile of paper clips for her new home.
- It is impossible to make more seaside real estate. This truth helps create an identifiable bottom to seaside real estate markets. It is possible for mother nature to punch a hole in this psychology, but usually only for as long as it takes to forget. I live in North Carolina where Hurricanes regularly ravish the coast (and sometimes my inland home too). We are now past the ten-year mark from the last ravishing so everything that isn’t moving is having a million dollar home built on it.
- Seaside demand in time of clam only increases and will continue to do so with eighty million baby boomers looking forward to retirement. I doubt baby boomers will want to be anywhere cold. Lake front property in Buffalo, well good luck with that. Cape Cod on the other hand is about as close to a sure thing as possible.
- Finally I think of the ultimate disaster argument. If my friend’s house price collapses then everything is collapsing and it doesn’t matter anyway. Ultimately life is a judgment call. I heard Mike Holland, a well known investor, say this in response to the disaster question put to him by someone on CNBC the other day, “If it is the end, dam it I am going out fully invested.” Mike is a glass is half full and full throttle kind of guy. It is the Mike’s and my soon to be seaside living friend who ultimately pull us out of the spin we are in.
Next time you are driving yourself crazy about money convert those thoughts to a more neutral proxy like paper clips and see if you don’t breath a little easier. Oh, and if you have some seaside real estate don’t forget to invite friends to come for a visit. Free always beats $300 a night (lol). I will be sure to bring some paper clips ☺.