Very Long Distance Customer Care

The Penfolds wine making team travels over 10,000 miles from Australia to New York (and many cities in between) to provide the ultimate in customer care.

Every two years, Penfolds reached out to owners of their wines and offers a free inspection and re-corking procedure for any wine 15 years or older. Whether you have a single bottle or case... of their world renowned Grange or their everyday wine, Bin 347, they provide the same level of care and attention. link

Earlier this week, I had an appointment in mid-town New York with Peter Gago and the Penfolds staff to examine the 5 bottles of 1985 Grange I have stored in my cellar. Grange is a world-class wine noted for its considerable ageing potential -- which can be cut mercilessly short due to a flawed cork. Corks may dry out over time and may need to be replaced. I know of no other wine producer of ultra premium wines which offer this level of service.

My experience with Penfolds this week was remarkable. I had a specific appointment to make sure the team gave my their undevided attention. After examining my five bottles, it was determined that only one needed re-corking. The process was explained to me step by step and my wine never left my sight. I left not only with the wine I brought but with a gift bag from Penfolds including a 10 year old Shiraz, a Reidel handmade wine glass and a book listing all Penfolds wines and vintages with annually updated tasting notes.

Why does Penfolds go to this length? Already known for producing one of the greatest red wines on Earth, it makes sense for Penfolds to invest in protecting the customer experience, brand values and premium positioning associated with Grange. The re-corking service also allows Penfolds to establish a personal relationship with its end consumer - which is difficult if you make the wine in Australia, ship it around the world and sell through wholesalers and retailers. There is a limit to the amount of customer touch one can do over the Internet.

Short-term, the economics probably don't make sense. But the wine business at the high end is not about short term economics. It's about strengthening brand equity and preserving the value of its past vintages. This is measured in generations, not quarters.

Raise a glass to Penfolds and say, Cheers!

Wired and Wonderful

Ah, the good old days of telecommunications. Remember Ma Bell? Even after the historic break up of AT&T, everyday life was pretty simple for the phone consumer.

Your RBOC (Regional Bell Operating Company) provided local service and AT&T "long lines" provided long distance service. Sure, wired technology was basic. And, the monopoly structure meant you paid too much. But in the words of one tech guru, "every time you picked up the phone receiver, you heard a crystal clear dial tone." Telecommunications became the ultimate standard for tech reliability.

Deregulation of service brought more choice and keener price competition. You could shift from AT&T to MCI and buy your phones from Panasonic at Wal-Mart. And, wireless technology ushered in a whole new era of communication convenience and value added services. But life today is a lot more complex, confusing and downright frustrating from a consumer experience standpoint.

The rapid change of mobile technology coupled with the variety of service providers competing for your business should translate into great value and service. Yet, it is not. Instead, consumers are faced with an array of confusing monthly pricing plans, steep fees for value-added services and multi-year subscription commitments. It doesn't have to be this way.

I lived in London for several years and loved my BT service and my G3 Motorola phone, which worked without interruption almost everywhere in the world. I don't recall ever having a problem with service interruption. The pricing plan was relatively simple.

How do we make the wireless experience as satisfying in the U.S.? I have two recommendations. First, de-couple phone marketing from service plans. There is absolutely no economic benefit for consumers in packaging phones and service plans. The economics are entirely in favor of the wireless provider even after considering phone rebates. Consumers ought to be able to buy any phone when and where they choose. Second, offer month-to-month service contracts; add a reasonable cancellation fee such as one month notice. These two changes alone would revolutionize the U.S. wireless market. It might actually drive growth and reward those companies which provide the best phones and the best service.

Today, wireless companies act like they have the old AT&T monopoly behind them. Too bad, they don't offer the same value, service and reliability.

The Hippies Were Right!

Well, at the very least about a few things.

Joni MItchell wrote Big Yellow Taxi and put it out as a single in 1970. The release of this pop anthem for the green movement coincided with the first "Earth Day" and help popularize eco-awareness.

Green activists back then pushed Congress to pass the Wilderness Act and ban the use of the synthetic pesticide, DDT. Scientists cite the ban on DDT as a major contributing factor in the return of the American Bald Eagle --"You dont know what you've got... Till its (almost) gone."

Mitchell released an updated version of "Big Yellow Taxi" on her new CD, Shine, just in time for eco-activism part II.

Here are the lyrics --

They paved paradise
And put up a parking lot
With a pink hotel, a boutique
And a swinging hot spot
Dont it always seem to go
That you dont know what youve got
Till its gone
They paved paradise
And put up a parking lot

They took all the trees
Put em in a tree museum
And they charged the people
A dollar and a half just to see em
Dont it always seem to go
That you dont know what youve got
Till its gone
They paved paradise
And put up a parking lot

Hey farmer farmer
Put away that d.d.t. now
Give me spots on my apples
But leave me the birds and the bees
Please!
Dont it always seem to go
That you dont know what youve got
Till its gone
They paved paradise
And put up a parking lot

Late last night
I heard the screen door slam
And a big yellow taxi
Took away my old man
Dont it always seem to go
That you dont know what youve got
Till its gone
They paved paradise
And put up a parking lot

If I were on the Comp Committee...

Angelo Mozilo
Chairman of the Board, CEO
Countrywide Financial (CFC)

2006 Total compensation: $43.0 million


The story of Countrywide Financial and its CEO, Angelo Mozilo, illustrates the point I am about to make. Countrywide is a big force in home mortgage lending and over the years, Mr. Mozilo became one of the highest-paid executives in America. In 2006 alone, FORTUNE Magazine reports that he made $43 million. link

Other reports based on public filings indicate that he took home $160 million in 2005 and $120 million in 2006, when factoring in pay, profit on exercised stock options and stock gains.

As everyone knows, Countrywide's stock tanked in late summer as its sub-prime lending woes made the headlines. Thousands of employees lost their jobs and the Company was forced to seek an emergency investment from Bank America to stave off bankruptcy. CFC closed yesterday at $19.88 - way off its 52 week high of $45.26. Leave aside the moral issue of foreclosures and personal bankruptcies for those middle and lower income families who can no longer afford their variable rate mortgages. Let's focus exclusively on this mess as it relates to CEO compensation.

Is it appropriate that a CEO should make tens or hundreds of millions of dollars as he or she leads the Company right into disaster? Even if the board takes action and fires the CEO, employees and shareholders are left to feel the most financial pain in view of the huge sums of money already made by the CEO. This just doesn't seem fair. These CEO's should have more in the game than their pride and ego.

I have a solution. It is called variable value options (VVO for short). Here is how a VVO would work. Options have vesting periods; typically 3-4 years. Options have exercise periods; 5 or 10 years. Why then is the exercise value of an option determined by the price on a single day? Why not have an 18 or 36 month option value period initiated by the option exercise. An option's final value to the executive would be determined by the average price of an option over this extended period.

Under a VVO plan, the CEO would continue to participate in the performance of the Company's stock either way -- if performance gets better, stays the same or gets worse. This doesn't seem unreasonable given that CEO's are charged with building the long term value of the Company and they can make millions doing so.

The easiest way to implement this policy would be to eliminate the right to buy and sell an option immediately upon exercise. Force all executives to hold their shares upon exercise. This would truly align the top management with shareholder interests.

A Job is the best way to stop a gun

This is a favorite saying of Father Gregory J. Boyle, S.J., the founder of Homeboy Bakery; link provided if you would like to donate or get involved. For almost 20 years, Homeboy Bakery has trained gang members to become bakers using job training as a way to escape gang life.

Today, Homeboy Industries helps over 1,000 people a month and has expanded both its range of job opportunities and its support services such as tattoo removal and life skills training. Former gang members -- tattooed, with prison records and little employment skill -- find it extremely difficult to break free and start over. Without a job, this transition is impossible. A job truly is the best way to stop a gun.

Unemployment -- and the lack of economic and social mobility -- are key factors in crime and civil violence. Perhaps Father Boyle's lession can be applied beyond the streets of East L.A. Maybe job creation should guide our Dept. of Defense policy too.

ExxonMobil: Saving the world one shareholder at a time

The current ExxonMobil advertising features the tagline "Taking on the world's toughest energy challenges" as it should since the company is by far the industry leader.

How is ExxonMobil meeting this energy challenge? By pumping more oil.

I expected the ad body copy to speak to ExxonMobil's commitment to fuel innovation and investment in alternative fuels. But no, the ad's headline reads, "as our economy grows, Americans are demanding more gasoline.... and we're producing." This doesn't seem like hard work at all on the part of ExxonMobil.

In fact, I don't think anything is too difficult for ExxonMobil these days. 2006 was a record year in which the company generated $39 billion in net income and $52 billion in operating cash flow. How did ExxonMobil spend this money?

Not on innovation. $25 billion was spent on share repurchases -- making remaining shares more valuable. $8 billion was spent on shareholder dividends. And only $730 million was spent on technology R&D.

So how ExxonMobil is meeting the world's energy challenges is crystal clear. As demand for oil increases and oil reserves decline, ExxonMobil will continue to pump more oil and raise prices at the pump. Profits will be used to buy back shares.

What will happen first-- will we run out of oil or will ExxonMobil go private? Don't expect energy innovation to stand a chance in this race.

Skype Hype

Ebay, the online auction house, announced a $1.43 billion write down related to its acquisition of Internet phone company, Skype. Skype has not lived up to the commercial expectations associated with Ebay's purchase back in 2005.

While $1.43 billion is a lot of money, it will do little real harm to Ebay -- which has a $54 billion market cap and is trading near its 52 week high. Wall Street takes big write downs like this in stride; often having already reflected anticipated bad news into a company's share price. For example, yesterday Citigroup took a $5.9 billion charge related to write down of corporate loans and mortgages. Yet, Citigroup's shares actually rose by about a dollar.

In the M&A frenzy of Web 2.0, it is buyer beware. Skype now has over 220 million users worldwide. But since it doesn't charge for phone calls between Skype users, the company has had difficulty converting this user base into profitability. To gauge a company's true value, acquirers are once again looking at benchmarks such as revenue growth, profit margins and business models.

"How do you make money" is once again a fashionable question to ask. Otherwise, you might end up paying twice as much as you should for a company as Ebay did for Skype.