Coyote Blog

In my previous post, I took a look at the absurdity of the metrics in the NEA's recent schools report.  In that post, I ran out of room to Fisk the NEA's suggested areas of improvement for better school performance (keep scrolling).

Here are their improvement areas with my comments.  I always try to differentiate the NEA as a group from teachers individually.  The rants in this post are aimed at the NEA as a group.  Many teachers as individuals have my fondest regards.  Note I have helpfully put a big green dollar sign by every recommendation that boils down to "spend more money":

Continue reading ‘Fisking the NEA's Improvement Ideas’ »

Marginal Revolution cites a James Surowiecki article on branding, arguing that increased information flow, particularly over the Internet, is reducing the power of brands.  This seems right to me.  Brands exist and command premiums for many reasons.  One role of brands is that they serve to reduce risk - without any other information about a product, many people would likely assume an electronics product from Sony to be more trustworthy than a no-name brand with the same features, and might be willing to pay a premium for the Sony product. However, with all the review information on the Internet, people may be more comfortable buying the off-brand, if it has good reviews, and saving the Sony premium.

Of course, brands serve some communication roles that are likely not threatened by the Internet.  For example, high end brands like Prada or Gucci have power because they allow the owner to communicate things about themselves to others.

I would argue that, even with Internet reviews, brands will continue to be powerful in the service sector.  In fact, with the growing complexity of some service offerings and the increasingly high standards of consumers, they may be more important.  Why?  Consistent product quality is much easier than consistent service quality.  A no-name product maker can get high quality product all over the world from one single factory -- all they have to do is to get that one location right.  This is much easier to do than with McDonalds, where there are thousands of locations, or even in our business, where we have hundreds of locations.  Service quality happens in real time, often in many dispersed locations miles away from supervision and the management staff. 

Also, in many cases, service failures are more critical and are harder to correct than product failures.  If my printer does not work, I get mad and box it up and return it for a new one.  But what happens if FedEx fails me on a critical shipment?  Or worse, what if United Airlines fails on me mid-flight? 

An interesting way to prove this is to go to a site like epinions.  Service reviews are generally much more variable than product reviews.  Compare Fedex, who's review is a mix of the lowest and highest scores, with this Apple Ipod, where reviews are much more consistent.  Even when products get a mix of low and high scores, often the low scores are driven by service and support and not the product itself.  In positioning their brand today, does Dell emphasize the product or their service around the product?

Just finished up preparing our sales tax returns for October.  We file in 9 states (Oregon does not have a sales tax) and about 5 municipalities or counties.  Being located outside of cities cuts down on the number of separate returns we have to file, but being in the lodging business adds returns (there are a lot of local lodging taxes out there).  NONE of these taxes work the same, and every return is unique.

I am working on a longer post with some observations about sales taxes, the states that have it right and the states that are over-complicated messes.  However, in the mean time, one observation.  Most states offer an online filing option.  If every state had a nice online tool, or better yet, a tool I could upload data to right out of Excel, I would love it.  This is a true win-win, with the business owner saving time and the state saving LOTS of time by not having to re-key handwritten returns.

However, several states currently have awful, totally non-intuitive online filing systems, or systems that are down all the time, or systems that make correcting errors a real pain in the butt, or all three.  The problem is, in most states, there is no way to try before you switch.  Many states play a kind of brinkmanship, requiring that if you file even once online, you can never go back to paper.  I did this with one state and the online tool really sucked, and now I am stuck  using it, despite the fact that their paper return is easier to use.

So, as a result of this nutty requirement, despite being totally committed to doing things online, I sit here filing paper returns, too risk-adverse to play Russian Roulette with various states' online filing systems.

Insurance was a very scary topic for us this year. As many of you know, the cost of business insurance has skyrocketed since 2001. Our workers comp, auto, and liability insurance costs have ballooned to 10% of sales, which seems incredible to me, particularly since we have nothing really bad on our claims history.

However, this year, at renewal time, the problem went way beyond cost. As background, much of our business is in running campgrounds. Campgrounds have the same liability problems as any public contact business, in that there are more and more people out there who, if they slip and fall on your property, will try to get a financial windfall out of it by suing you. This is multiplied in campgrounds, as the possibilities for a customer hurting themselves accidentally are multiplied over a more controlled environment, like a store.

Now, leave aside for a minute the justice of whether or not we should be responsible if someone pulls their hamstring climbing a tree in our campground. Even when most of these cases go nowhere, they generate defense costs. So, liability rates have been going up.

One of the things I have learned about the insurance market, though, is that carriers pick and choose what industries they want to be in. And, the industries they don't want to be in are those that are relatively small but have higher liability potential -- too much risk of loss for too little income. Unfortunately, this seems to include campgrounds.

So, just a few weeks away from the expiration of our old policy, my old agent tells me that their underwriter will not write us for the next year. Either in our liability policy (for reasons above) or for our auto policy (because we have a lot of older drivers) or for our workers comp (same issue, older workers).

I was therefore faced not with a huge cost increase, but with the prospect of no insurance, which would mean shutting down my business (beyond the stupidity of operating without insurance, my contracts forbid it). My insurance agent at the time had no other alternatives.

This is when I learned a huge lesson - there is a big difference among business insurance agents. Many have only one or two underwriters they work with, and if those underwriters drop your line of business, you can be out of luck. It is desperately important, especially if you are in a tougher than average business to insure, to have an agent with access to many underwriters and sources of insurance.

In the end, I pieced the workers comp together state by state through many agents, which was a total pain. Finally and at the absolutely last minute, for the liability and auto, I found an agent who really knows what he is doing. He got me quick fix policies for these to keep running, and then has found better policies over time to replace them. We have had great discussions about trade-offs in liability coverage (since every policy is different in the small exceptions that they make in their coverage). By the way, I don't know if they are even looking for more business, but if you are in a crisis, particularly if you are in the southwest, you might try these guys.