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Mr. Smith Goes to Wall Street

 The emails came pouring in yesterday, from friends and family, all with one, innocuous question: “What did you think of the ‘Why I Am Leaving Goldman Sachs’ editorial in the New York Times?”
 The fact is I hadn’t read it: the day-to-day utility of op-ed pieces in any newspaper are slim-to-none, and the Times—with its special brand of high-and-mightiness combined with the kind of straight-faced hypocrisy only a family-controlled institution can maintain in the public marketplace (the recently ‘retired’ CEO at that organization, which prides itself on a devotion to egalitarian causes such as unjust CEO payouts, recently received a $23.7 million exit package for leading the Times over a 7 year period during which its share price dropped 80%)—is no exception.
 Nevertheless, I did read the piece, and I am still scratching my head at why it got so much attention.
 After all, the odd mix of shameless self promotion [“I was selected as one of 10 people (out of a firm of more than 30,000) to appear on our recruiting video”] and playing-to-the-audience self-righteousness [It makes me ill how callously people talk about ripping their clients off”] sure sounds like a Goldman guy talking.
 Besides, did he think he was taking his “bronze medal for table tennis” to work for UNICEF?

  Anybody who has worked with, around and against Goldman Sachs (and I’ve been doing that, on and off, for almost 30 years) knows what apparently never crossed one man’s noble mind: Goldman Sachs is, and was, and always will be, run for the benefit of its partners and shareholders.
 How otherwise to explain the fact that Goldman’s return on equity—the most basic measure of a company’s profitability—puts its peers to shame year after year (40% in a good year, 5% in 2008, the worst-year-since-the-Great-Depression)?
 More personally, I first became aware of Goldman’s clout well before Mr. Smith Went to Goldman Sachs.
 It was in the early 1990’s, and Robert Maxwell, “the Bouncing Czech,” was using company pension money to prop up shares of Mirror Communications Corp—a company I was short (betting against) because of its obvious financial shortcomings.
 So obvious were those shortcomings that the only wonder (in my mind) was the stock never seemed to go down.  The firm I was with—a client of Goldman Sachs at the time—eventually threw in the towel on our Mirror Corp short when the cost of borrowing the shares (through Goldman Sachs, I might add) made it too expensive to bother with.  While Mirror Corp eventually collapsed (after Maxwell was found floating dead in the Atlantic Ocean), it was too late to help: we had already moved on.
 But it was a great lesson that has stayed with me to this day: I learned, the hard way, that whoever was backing up Robert Maxwell had more money than we did…and in the end, money, rather than noble intentions, wins on Wall Street.
 Still, did I write an op-ed for the Wall Street Journal about how unfair the Mirror Corp short squeeze was?  No.  We bit the bullet, and moved on.
 That’s what you do on Wall Street.

 Now, in case you are wondering who was helping Robert Maxwell in those days, the answer is contained here, in the UK Department of Trade and Industry report on the Maxwell scam.

 For the record, the report states: “The investment bank with whom he principally dealt was Goldman Sachs.”

 Mr. Smith should have done his homework.
Jeff Matthews
Author “Secrets in Plain Sight: Business and Investing Secrets of Warren Buffett”
(eBooks on Investing, 2011)    Available now at Amazon.com
© 2012 NotMakingThisUp, LLC
                                   
The content contained in this blog represents only the opinions of Mr. Matthews.   Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations.  This commentary in no way constitutes investment advice, and should never be relied on in making an investment decision, ever.  Also, this blog is not a solicitation of business by Mr. Matthews: all inquiries will be ignored.  The content herein is intended solely for the entertainment of the reader, and the author.
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Bill Gates To Succeed Warren Buffett? Not A Chance…

 When it isn’t obsessing about the meaning of a meaningless number (“Dow 13,000”), the financial world loves to speculate about the name of the man Warren Buffett has identified as his successor at Berkshire Hathaway.
Editor’s Note To Politically-Correct Readers: Buffett’s successor will be a male, so there is no point writing “person,” or “man/woman,” or “non-gender-specific life-form,” rather than simply “man.”  Buffett employs female CEOs atop only four of the 80 or so companies in the Berkshire fold, none with the experience to step in as CEO of a company with more than a quarter-million employees and operations ranging from, as Buffett puts it, “lollypops to jet airplanes.” And while Warren Buffett may seem like the most liberated, open-minded uncle you ever knew, he is, at heart, strictly mercenary when it comes to business.  As for female “liberation,” Buffett has more of a ‘50s era Hugh Heffner sensibility than his female admirers might want to think: he once sent a holiday card with a photo of the Berkshire Board of Directors (including its female members) standing outside a Hooters, surrounded by the Hooters, er, staff—the jocular message inside the card being that the setting explains the high attendance at Board meetings.  And if you don’t believe me, you haven’t read “Secrets in Plain Sight: Business and Investing Secrets of Warren Buffett” (eBooks On Investing, 2012).”
 Getting back to the story here, Warren Buffett last Saturday announced in his shareholder letter that he had identified a successor as his CEO, along with “two superb back-ups.”
 While it was not new-news that Buffett had a successor, it was news that the individual has the Board’s seal of approval—a more formal-sounding arrangement than in years past when, for example, Buffett joked that there was simply a name in an envelope, along with instructions of how to proceed upon is death…the first being, “Take my pulse again.”
 Speculation as to the identity of Buffett’s successor began immediately—almost matching that surrounding who fathered Snooki’s baby—with one Berkshire shareholder in the Wall Street Journal picking Microsoft Chairman Bill Gates as The Guy (Buffett’s successor, not the father of Snooki’s baby…)
 After all, Gates is a close friend of Buffett’s, a Berkshire Board member, has run a large and successful company and is well known to Berkshire’s Board.  But there’s a problem with this angle that we’ll get to in a minute.
 By way of background, Warren Buffett actually wears three hats at Berkshire, each of which will be filled by different men: those hats are Chairman of the Board, Chief Investment Officer, and CEO.
 The Chairman of the Board hat will go to Buffett’s oldest son, Howard, so that a Buffett family member can oversee the family’s major asset while also making sure what Warren Buffett so lovingly and painstakingly built is not trashed by some scummy corporate raider in years to come.
Editor’s Note To Non-Politically-Correct Readers: Yes, Buffett is being entirely, completely, 100% hypocritical in annointing his son—a member of what Buffett himself disparages as “the lucky sperm club” when it comes to describing other rich peoples’ children—as his heir as Board Chair, but you’ll have to get over it: Buffett is smart enough to be able to rationalize anything, including this deal.  And his shareholders are fine with it.
 The second hat—Chief Investment Officer—is also publicly defined: hedge fund managers Todd Combs and Ted Weschler, recently hired by Buffett, will handle Berkshire’s stock investments and, in Buffett’s words, “be helpful to the next CEO of Berkshire in making acquistions.”
 The third hat—and the one all the fuss is about—is who, exactly, that CEO of Berkshire will be upon Buffett’s death or incapacity.
Editor’s Note to Anyone Who Thinks Buffett Will “Retire”: Warren Buffett, now approaching 82 years of age, will not “retire,” despite pesistent media speculation set off by a Berkshire press release that used the term when announcing the hiring of Todd Combs.  Buffett will run Berkshire until he drops dead, has a stroke, or otherwise can’t get out of bed—and even if he can’t get out of bed, he’ll probably run it so long as his mind works: he loves the job; it requires, as he likes to say, “no heavy lifting”; and besides, Buffett has no hobbies outside of making money except for playing bridge.
 So who’s the CEO going to be?
 The answer involves a lot of Kremlinology, which is fine with Buffett since he doesn’t want the focus to shift from himself to his successor before the time comes because, a) he likes the limelight, and b) he doesn’t want anyone distracted by the media attention from doing what’s best for Berkshire.
 While Buffett has insisted that former Berkshire top guy David Sokol was never actually The Guy, Sokol did appear to succumb to what Charlie Munger called “hubris” for precisely the reason that he was Buffett’s presumed heir-apparent, with frequent CNBC coverage and the kind of attention that can only go to one’s head—in a bad way.
 What we know for sure about The Guy is what Buffett wrote in his letter:
“Berkshire’s directors are at the top of the list in the time and diligence they have devoted to succession planning.  What’s more, their efforts have paid off…. Your Board is equally enthusiastic [as they are about Combs and Weschler] about my successor as CEO, an individual to whom they have had a great deal of exposure and whose managerial and human qualities they admire.”
 Reading between the lines—as opposed to jumping to conclusions, which is what much of the speculation involves—it seems clear that Bill Gates is not The Guy. 
 For one thing, Bill Gates is a member of the Berkshire Board (he’s in that unfortunate Hooters photo), and Buffett would probably not have written that description the way he did if a Berkshire board member was The Guy.
 For another thing, Gates is not a manager, and never has been.  He was a visionary who built one of the most valuable and world-changing companies in history, but he has never been known for or admired for his “managerial” qualities.  Finally, Gates happens to Co-Chair the Bill and Melinda Gates Foundation, which is the recipient of Buffett’s Berkshire holdings—making him, in effect, a fiduciary for Buffett’s heirs.  He can’t do both jobs at once.
 So who’s The Guy?
 Well, Barron’s—which a few years ago identified David Sokol in a cover story on the subject—now says it’s Ajit Jain, the reinsurance genius who has added more value to Berkshire Hathaway than anyone but Warren Buffett himself.   (Barron’s keys off Buffett’s statement that the Board has had “a great deal of exposure” to the guy.)
 And while it’s true Jain is familiar to everyone at Berkshire (he’s been making money for Buffett for 25 years) it ignores the fact that Jains runs the reinsurance business out of a small office in Stamford, Connecticut, without as much exposure to the Berkshire businesses that now drive the company’s growth (energy, railroads and manufacturing) as others.
 So while we’d bet Jain is one of the two back-ups, since he can step into Buffett’s shoes easily, if need be, the “managerial” aspect cited by Buffett suggests somebody running actual businesses, which leads to Tony Nicely, who has run GEICO brilliantly—and to big props from Buffett along the way—for decades, as well as Tad Montross of GenRe, Matt Rose of Burlington Northern, and Kevin Clayton of Clayton Homes—all of whom excel at what they do, and (except Nicely) are young enough to fit the bill…but may lack the broad experience of our pick: Greg Abel, the dealmaker and ace manager of Berkshire’s immensely important MidAmerican Energy unit.
 Well-liked, and presumably with plenty of exposure to the Berkshire Board since Buffett bought MidAmerican over ten years ago (back when MidAmerican’s executive offices were across the street from Berkshire’s in Omaha), Abel has the experience of operating regulated, multi-national businesses plus a healthy deal-making background that Berkshire will need over the long run.
 But whoever The Guy actually is (and the name may change before the time comes), Berkshire will be Berkshire after Buffett is off the stage thanks only to the fact that the company is no longer a collection of investments that will compound at staggering long term growth rates thanks to the genius of Warren Buffett’s investment capabilities, but a conglomerate made up of businesses that will rise and fall—but mostly rise, over the long term—with the overall economy.
 And in that sense, there is not, and never will be, a replacement.
Jeff Matthews
“Secrets in Plain Sight: Business and Investing Secrets of Warren Buffett” (eBooks on Investing, 2011)
© 2012 NotMakingThisUp, LLC
                                   
The content contained in this blog represents only the opinions of Mr. Matthews.   Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations.  This commentary in no way constitutes investment advice, and should never be relied on in making an investment decision, ever.  Also, this blog is not a solicitation of business by Mr. Matthews: all inquiries will be ignored.  The content herein is intended solely for the entertainment of the reader, and the author.
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Warren Buffett, Mercenary

 Well at least Buffett laid off the politics.
 His 2011 letter, which is available here and should be read in its entirety (instead of via the thousands of recaps currently going up all over the Internet), is classic Buffett: a review of 2011 (busy), some self-flagellation (not much, mainly some bad bond purchases), props to Berkshire managers (and Brian Moynihan, of all people), lessons for anyone interested in the art of investing (pages 17-19), and the big headline news: Buffett finally has a successor approved by the Berkshire board (no doubt triggered by last year’s Sokol Affair).
 Along the way there are plenty of good lines, in the Buffett fashion, and finally (after decades worth) no nagging wife-sort of jokes.
 And no politics, either.
 But our favorite line comes during the discussion of the Berkshire share buyback, when he cautions investors that he has no interest in doing anything goofy like most public companies that buy their stock, come hell or high water, in order to fulfill the mantra that they are ‘returning value to shareholders’:
 “You should know, however, that we have no interest in supporting the stock and that our bids will fade in particularly weak markets.”
 That’s why Buffett got so rich in the first place: when it comes to investing, he’s strictly a mercenary.


JM

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Hell Freezes Over: Eddie Needs Wall Street

 There it is, plain as day, on my conference call alerts calendar, but I don’t quite believe it:
 Q4 Sears Holdings Corp Earnings Conference Call            2/23/12            8:00 a.m.
 There’s a phone number and a password, so it’s gotta be real.  If it is real, and it does take place, it’ll be the first time Sears has deigned to hold an earnings conference call during the Lampert years, as far as I can recall.
 Hell, it appears, has frozen over.
What might it mean?  Why now?  Well, let’s think about this once-in-a-career announcement for a second.
For starters, the fact that Sears is holding a conference call means the news is probably not very good.  After all, good news takes care of itself, but bad news needs explaining.
Still, that’s nothing the market doesn’t already anticipate—the bid/ask on the Sears Acceptance Corp credit default swaps is a whopping 1475/1583 on my Bloomberg at the moment.
More interesting, perhaps, is that the call is scheduled for 8 a.m. E.S. T.
That’s well before the market opens in New York, which means the news is really probably not good at all, since companies with bad news generally don’t hold calls during trading hours, since they don’t want to have their stock bouncing around while the conference call is going on.
 I could be wrong, of course.  The news could be great.  Eddie could be announcing that he’s finally decided to spend a little cash on the business itself, rather than its stock, and is hiring somebody great—like JC Penney did when it hired Apple’s retail genius, Ron Johnson, a move that’s already proved worth every dollar for that faded department store brand—to turn the business around before it’s too late.
 Either way, good or bad, the call does mean one thing: Eddie needs Wall Street now, and he needs it more than Wall Street needs Sears.
Jeff Matthews
(eBooks on Investing, 2011)    Available now at Amazon.com
© 2012 NotMakingThisUp, LLC
                                   
The content contained in this blog represents only the opinions of Mr. Matthews.   Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations.  This commentary in no way constitutes investment advice, and should never be relied on in making an investment decision, ever.  Also, this blog is not a solicitation of business by Mr. Matthews: all inquiries will be ignored.  The content herein is intended solely for the entertainment of the reader, and the author.
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Is Facebook Killing Google? No, But…

 When a few weeks back my friend and occasional interviewer, Henry Blodget, the CEO of Business Insider, tweeted word of a new BI piece defending Google (with the characteristically understated headline, “Like Hell Facebook is Killing Google”), I tweeted back to Henry that I’d be happy to take the other side of that argument.
 “Awesome!” he responded, “Would love to hear details.”
 It’s been a month, but with quarterly earnings report season winding down, the daily torture of listening to so-called analysts pestering men and women busy running billion-dollar global enterprises in a time of unprecedented volatility and competitiveness with questions no deeper than “how should we think about your tax rate?” and “how should we think about sales this month?” and “how should we think about margins this week?” is almost over, and the hype about Facebook’s impending IPO is heating up…so here goes.
 In “Like Hell etc etc,” which you can read here, Henry correctly points out that Google is currently 10-times larger than Facebook, revenue-wise, and then argues Facebook won’t be able to close the gap as quickly as Facebook fans presume, for a very simple and logical reason:
 Because as the current revenue levels for both companies are demonstrating, search is a vastly better advertising product than social networking.
 Vastly better.
 So much better, in fact, that, when it comes to head-to-head business competition, the two companies aren’t yet even in the same league.
 And why is search such a better business than social networking?
 Because search is the best advertising product in the history of the world….it is advertising space that can capture the consumer’s attention at the exact moment that the consumer is looking for something to buy.

As for the advertising potential of Facebook’s social networking structure, Henry likens it to “hanging signs on the wall of a house during a party and sending sales reps to mingle with the crowd”:
 Yes, you can target which parties you pay to hang your signs on the walls of.
 Yes, you can make those signs appealing to those at the party.
 But the fact remains that the people at the party, who are sharing stories and photos and news and gossip, are not at the party because they want to buy something.
 They’re at the party because they want to socialize.
 And any time you do more than passively hang in the background at the party, they will likely be annoyed by your intrusion. And, annoyed or not, when they do notice your ads, their reaction will most likely be,  “Cool–if I ever decide to buy a car/boat/stereo/meal/flowers/bull-whip, maybe I’ll look at that kind.” Then they’ll go right back to their party.
 Henry’s argument has crisp logic to it—as you would expect from a guy who was one of the very first to recognize the ultimate potential of Amazon.com at a time when that potential was not obvious to many.
 Still, I’ll take the other side of it, with just as simple an analogy: Facebook is the Cable Television of the Internet.
 To put this is terms of Henry’s “house party” analogy, television is akin to “hanging signs in rooms” where people are doing something that has nothing to do with buying something: they are simply watching the signs, i.e. the TV sets.
 Moreover, television advertisers—especially cable television advertisers—know precisely which room will be occupied by which type of people, and will happily pay to advertise in one room or another, regardless of whether the party-goers are thinking of actually buying something at that moment, because, eventually, they will.
 After all, young men don’t watch TV thinking, “I need to watch this football game to determine which beer will make me attractive to women,” but the fact is that young men with a surplus of testosterone tend to be watching those games, so Budweiser showers cash on ESPN.
 And nobody watches “Top Chef” thinking “I need to determine which food processor they use so I can buy one,” but the food processor company knows that “Top Chef” viewers tend to be the ones who buy that stuff.
  And while Google search is, indeed, as Henry points out, immensely effective when it comes to advertising products and services to people who are looking for something, the fact is that only a very tiny percentage of people doing searches on Google are looking for anything other than how to spell a word, or get directions somewhere, or look up a crossword puzzle answer, or finish their history paper with the help of Wikipedia, or check a restaurant menu…none of which has anything to do with ordering something online.
 So, while Google is a company I’ve admired from Day One for many of the reasons Wall Street distained it early on (including a management team totally focused on the long run, paying almost no attention to quarterly earnings), Facebook will, absolutely, hurt Google.
 In fact, it already has, if my own experience advertising a similar product using both Google AdWords and Facebook is any indication.
The product advertised is “Secrets in Plain Sight: Business and Investing Secrets of Warren Buffett” (eBooks on Investing, 2011).  My publisher advertised the earlier, print version on Google, and the more recent e-book on Facebook.
 And while both Google’s and Facebook’s platforms are similar in form, ease of use and detailed statistical reports, Facebook created demand I could monitor on Amazon.com in near-real-time, while Google’s impact was hard to see and impossible to value.
 In short, Facebook proved far better than Google AdWords.
 Here’s how they work.
 Google Adwords is elegantly simple: you write a headline, a brief description, and copy-and-paste the URL you want the ad to click through to.  Then you tell Google which words you want your ad to appear with, pick a country or city or town where you want the ad to be triggered, and Google suggests a price-per-click to pay, which you can accept or not.  (Google’s algorithms know what they’re doing so it’s easiest to go along with them.)
 Obviously, I picked words like “Warren Buffett,” “Buffett” and “Berkshire Hathaway” for my “AdWords.”  When those words were searched for, our ad would appear—assuming our price-per-click was in the range.  If somebody clicked through, we’d get billed.
 Sounds logical, and it is.  But there was a glitch: it turns out most people don’t know that “Buffett” is spelled with two “Ts”—so Google suggests you buy other words. “Buffet,” for example.  And “Warren” with one “N.”  And phrases that wouldn’t necessarily cross your mind, such as the following, none of which I am making up (including the spelling):
“What is warren buffet buying” [he never discusses what he’s buying]
“Books by warren buffet” [he has never written a book]
“Autobiography of warren buffet” [there is no such thing, but people search for it anyway]
“Where does warren buffet live” [this is where it gets creepy…]
 So you add more words and phrases to your list than you might think, to cover all the bases, and provide a credit card and a daily dollar limit or time limit or both for the campaign.  Google takes care of the rest, allowing you to monitor the results on your AdWords page with slick charts and tables showing all kinds of statistics—the main one being how many people actually click on your ad.
 The problem is, while you can and will initially see a lift from folks who “click-through” your Google ads, the odds over time run against a small advertiser, because, unless you’re a bottom-feeding trial lawyer looking for “mesothelioma” clients, click-through rates can be pathetically low.
 After all, people looking for a Buffett book will simply get on Amazon and search for “Buffett” (or “Buffet,” but not, likely, “where does warren buffet live”…) there.  And people searching Google to figure out where Warren Buffett lives aren’t necessarily interested in buying a book about him—nor would I want them to buy my book.
 The result, in any event, was no discernible sustained benefit to book sales.
 Facebook’s advertising platform, meanwhile, proved very similar to Google’s, mechanics-wise: you create a brief headline, a brief description, select a picture or a graphic, select your parameters, and name your price.
 But it is those parameters that make Facebook geometrically more useful than Google.
 For while Google allows you to narrow down the geographic territory in which your ad will appear, Facebook allows you to pick the type of person who will see your ad.
 And that is why I think of Facebook as the Cable TV of the Internet.
 Right now, for example, “Secrets in Plain Sight: Business and Investing Secrets of Warren Buffett” (eBooks on Investing, 2011) is being advertised to college graduates in India, Dubai and Israel, which possess a growing base of investors who admire Warren Buffett.  
 Since Secrets was and remains the only Buffett book to not only spell out how truly extraordinary Buffett’s investing track record is, but also to dispassionately point out certain blind spots in Buffett’s world-view, we’re also advertising to college graduates in the United States who identify themselves as “liberals” or “conservatives” now that Buffett has interjected himself into the U.S. Presidential campaign in a way that has made him a hero to the left and a self-loathing billionaire to the right.
 The benefits—unlike Google AdWords—are discernable: “Secrets…” is regularly one of the two most-downloaded Kindle books on Warren Buffett, alternating in the top slot with “Snowball,” which has rather a fancier advertising budget than yours truly.
  But the magic of Facebook’s targeting doesn’t stop with countries or education.  If I wanted to, I could advertise to all 10,141,480 Facebook users with birthdays that happen in a week or less.
 Think about that.
 And if you really want your head to spin, think about this: according to a friend in retailing, the average Facebook woman updates her relationship status to “Engaged” within two hours of the guy actually proposing…so Facebook sells that relationship status information to retailers who have bridal registries.
 As my pal told me, “We’ve been looking for this for fifty years.”
 Now, for the record, I have no investment in Facebook shares, and this blog is not a recommendation or endorsement of, in ANY way, Facebook stock, which may turn out to be the biggest disaster since eToys.  It is, merely, one individual’s view of Facebook’s business model based on real-world experience.
 Indeed, to the question, “Is Facebook going to kill Google?”
 I’d say, “No.”
 But, to the question, “Is Facebook the next Google”?
 I’d say, “Almost certainly.”
Jeff Matthews
Author “Secrets in Plain Sight: Business and Investing Secrets of Warren Buffett”
(eBooks on Investing, 2011)    Available now at Amazon.com
© 2012 NotMakingThisUp, LLC
                                   
The content contained in this blog represents only the opinions of Mr. Matthews.   Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations.  This commentary in no way constitutes investment advice, and should never be relied on in making an investment decision, ever.  Also, this blog is not a solicitation of business by Mr. Matthews: all inquiries will be ignored.  The content herein is intended solely for the entertainment of the reader, and the author.
NOTE ON COMMENTS: We abide by one rule on the comment pages here, and that is NO “Yahoo Message Board-Type Language.”  So whatever you write and whether or not you agree or disagree with something, spell it correctly and keep it clean, and no personal stuff.  And if you think we won’t enforce that, well, we have over 300 comments that never appeared because they were sloppy, obscene, or personal. —The Management
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The Sears Collapse: Conspiracy or Cluelessness…or Worse?

Since “Hellhound on His Trail” came out in the spring of 2010, I’ve had occasion to think anew about the many conspiracy theories that swirl around the story of the King assassination…a lot of perfectly sane people believe that Martin Luther King was killed as a result of a vast, shadowy conspiracy.
—Hampton Sides, author, “Hellhound on His Trail.”
 This being the weekend America honored MLK, we’re recalling that lament of the above-quoted author Hampton Sides—whose excellent, compelling account of the largest manhunt in FBI history is worth buying, right now, on your Kindle or iPad—about the persistence of weird conspiracy theories surrounding what was, in fact, the well-documented assassination of one civil rights leader by one sorry but clever-enough jailbird, as we consider the persistence of a weird conspiracy theory about a once-proud retailer brought low by one genius of a hedge-fund manager.
 We speak, of course, about Sears.
 The conspiracy theory, lately making the rounds on Wall Street, stems from the fact that the hedge-fund genius, Eddie Lampert, who also happens to be Sears’ board chairman, recently purchased nearly 5 million shares of Sears, mostly from his own hedge fund, at a price of close to $30 per share.
 The conspiracy theory hinges on three verifiable facts: 1) Eddie Lampert is an extremely smart guy with a terrific track record; 2) Sears under Lampert has become even more of a basket case than it was before he took control; and 3) despite the obvious collapse in Sears’ business model, Lampert had been using Sears’ own coffers to buy up stock in the open market at absurd prices that were far higher than what he just paid for the stock, rather than invest in the business itself.
 And on all three facts, the conspiracy theorists are correct.  Lampert is smart—witness his success with AutoZone.  And he has been using Sears’ own cash to buy stock in the open market at absurd prices, in hindsight:
Fiscal Year      $MM Bt    # MM Shares Bt    Average Px
2010                $394                5.5                               $72
2009                $424                7.1                               $60
2008                $678                10.3                             $66
2007                $2,900             21.7                             $135
2006                $816                6                                  $136
2005                $590                5                                  $125
Total               $5.8 Billion     55.6 million shares     

 Average price: $104/share. Last trade: $33.56 per share. Value destroyed: $3.9 billion. 
 As for the notion that Sears has become a retail basket-case, look no further than the credit default swap market in Sears Acceptance Corp—the Sears financing arm—and you’ll see they have blown out to levels that even the calculator-impaired credit monitors at S&P would recognize as, er, stressed.
 “Why then,” the conspiracy theorists ask rhetorically, “would Eddie have bought back all that stock for the company at stupid prices before buying stock for himself cheap?”  Their answer—and while we’re paraphrasing what we’ve heard, we’re not making up the gist of it—is this:
 “Eddie wants Sears to go bankrupt so he can take control of the real estate and make a ton of money.”
 And while the conspiracy theory seems to wrap up a lot of loose ends, it does not take into account the most obvious notion, which is that Eddie got Sears wrong.
 By way of demonstrating just how wrong he may have gotten it, we herewith present a sample of howlers from various Sears filings over the years: 
[Sears] completed development of new Internet technologies and migrated our selling websites to an improved e-commerce platform. This new platform positions us to attract and retain customers using a multichannel service approach to create a consistent experience across the channels and enhance the offerings and the shopping experience where channels intersect. Examples include store-to-Web, Web-to-store, special order catalogs and the sales hotline. Multichannel represents the potential for a sustainable growth vehicle for our company and represents an opportunity for us to unify and integrate the customer’s experience.
…in August 2007 we introduced the Ultimate Appliance Promise campaign. The purpose of this campaign is to show our customers that we are uniquely positioned to meet their appliance needs by offering the largest selection of appliances, a price guarantee, one year of free service and support, and next day delivery and installation in many markets across the U.S.
[Sears] remodeled approximately 30 Kmart stores to include Sears-brand products. We intend to continue our rollout of home appliances, including Sears Kenmore-brand products, into Kmart locations over the next several years as a means of expanding our points of distribution in response to competitor store growth. As of February 2, 2008, approximately 280 Kmart stores, including certain of the remodeled locations, offered broad assortments of home appliances.
MyGofer expanded its fulfillment options in a variety of ways, as well as serving as the engine behind additional integrated retail efforts. MyGofer.com provides features and benefits designed to create a one-stop shopping experience, offering a range of quality products including groceries, prescriptions, health and beauty products, and electronics. MyGofer was created to provide our customers with speed and convenience – the same day a customer places an order, it is ready within hours, with pickup now available in over 600 stores.

And, our favorite: 
With regards to social media, we deployed a variety of campaigns and applications to make our experiences more engaging and “sticky,” both on sites like Facebook and Twitter, as well as on sears.com. 

 Maybe—just maybe—like when a loser from a broken home of whom nobody had ever heard managed to kill the leading civil rights leader of his times and almost get away with it, the facts are just the facts.
 To support this perspective, we now harken back to an early report on Sears that spookily heralded everything that came afterwards: a 2006 Fortune Magazine piece in which Lampert is called “The Steve Jobs of the investing world,” yet contains enough evidence of the penny-pinching narrow-mindedness that destroyed Sears to be almost prescient:
 The mood was tense at the Bel Age Hotel in West Hollywood, Calif., early last year. The top two dozen executives of Sears Roebuck & Co. were gathering for a strategy session with Eddie Lampert, then 42, the billionaire hedge fund manager who had just engineered an unlikely takeover of their venerable but struggling company. The fact that the vehicle of his acquisition was discounter Kmart–which Lampert had come out of nowhere to snatch control of during bankruptcy–was only one source of unease. Once their presentations started, Lampert also began poking holes in virtually every idea. “What’s the benefit of that?” he asked again and again. “What’s the value?” He shot down a modest $2 million proposal to improve lighting in the stores. “Why invest in that?” He skewered a plan to sell DVDs at a discounted price to better compete with Target and Wal-Mart. “It doesn’t matter what Target and Wal-Mart do,” he declared.
 Eyes began rolling…
—Patricia Sellers, Fortune Magazine, February 8, 2006
 And the eyes should have rolled.  Because, as it turns out, it does matter what Target and Wal-Mart do, just as improved lighting does matter in stores where women bring children to shop for clothes.
 How much such things matter is evident in the numbers ever since Eddie began second-guessing the expenditure of cash on anything, it would seem, excepting high-priced stock.
 From 2006 to 2010, Target and Wal-Mart together spent $16 billion and $33 billion, respectively, on capital upgrades to their businesses (we’ve arbitrarily cut Wal-Mart’s actual capital expenditures of $67 billion in half, to account for the company’s international spending).  Sears, meantime, spent a miniscule $1.4 billion, or about 3% of Target and Wal-Mart combined—and less than a quarter of the share repurchase cost—on silly things like “improved lighting.”
 The result?  While Target’s annual cash flow from operations grew from $4.9 billion to $5.3 billion in that time, and Wal-Mart’s grew from $10 billion to $12 billion (again dividing that company’s total figure in half), Sears was watching cash flow from operations drop 90%, from $1.4 billion—almost 10% of Target’s and Wal-Mart’s combined cash flow—to a nail-biting $130 million…which is less than 1% of its rivals.
 And Sears has done that while generating over $40 billion in annual sales—not easy to manage, negatively-speaking-wise.
 None of this, of course, is new-news.  The 2011 numbers, previewed last month, were even bleaker for Sears.
 But beyond the obvious value destruction and the conspiracy theorist-like attempt to reconcile conflicting facts, the company’s recent performance and its chairman’s ensuing share purchase in January raise a rather obvious question that doesn’t appear to have crossed any minds in the press corps: why is it that Eddie Lampert, who directed Sears Holdings’ share repurchases of 55.6 million shares at an average of $104 over the 2006-2010 period, bought for himself rather than for Sears Holdings those 4.8 million shares at around $30 a share (technically the ‘purchase’ was likely an allocation of his annual performance fee in stock, but still…)?
 After all, a company that had spent nearly $6 billion on its stock at an average price of $104 would presumably have found the shares even more attractive at $30.
 Wouldn’t Sears Holdings have liked to average down?
 To the conspiracy theorists, the answer is self-evident: it clinches their view that Eddie has purposely been buying back stock at silly prices in order to shrink the share base and drive up his personal percentage of the remainder, while simultaneously disinvesting in the stores so aggressively that the Sears parking lot is the only place to find a space at the mall during the holidays, making it worth more to Eddie dead than alive.
 But we don’t buy it.
 We think Eddie’s mother, quoted in the above Fortune article, had it right:
 “I never thought he would go into retail,” Dolores Lampert says. “It’s a very hard business. But it’s a challenge, and Eddie likes a challenge.”
 Still, if Warren Buffett is looking for scapegoats on Wall Street, he might want to direct some attention to Sears.  Unlike Staples, for example, which private equity nurtured and grew into an industry-creating powerhouse, here’s a business that was an industry-creating powerhouse that has, pretty systematically, been destroyed by private equity.
 Retail is indeed a very hard business.
Jeff Matthews
Author “Secrets in Plain Sight: Business and Investing Secrets of Warren Buffett”
(eBooks on Investing, 2011)    Available now at Amazon.com
© 2012 NotMakingThisUp, LLC
                                   
The content contained in this blog represents only the opinions of Mr. Matthews.   Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations.  This commentary in no way constitutes investment advice, and should never be relied on in making an investment decision, ever.  Also, this blog is not a solicitation of business by Mr. Matthews: all inquiries will be ignored.  The content herein is intended solely for the entertainment of the reader, and the author.
NOTE ON COMMENTS: We abide by one rule on the comment pages here, and that is NO “Yahoo Message Board-Type Language.”  So whatever you write and whether or not you agree or disagree with something, spell it correctly and keep it clean, and no personal stuff.  And if you think we won’t enforce that, well, we have over 300 comments that never appeared because they were sloppy, obscene, or personal. —The Management
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Why Eddie Never Hired “The Guy”

We’ve been poking fun at Sears—the Sears of Eddie Lampert, at least—since the inception of this virtual column in 2005.
 But now things are getting more serious, what with yesterday’s dreadful holiday sales report and store closing announcement from that once proud, powerful retailer of all things an American household could need.
 Today’s Wall Street Journal mulls the situation over on its front page, including Lampert’s preference for investing in the shares of Sears as opposed to the stores themselves, and Eddie’s revolving-door CEO selection process that has left the business in limbo for years while all manner of lower-cost, better run, sharper-focused businesses (think Costco, Amazon, Kohl’s and many others) ran rings around it.
 And it was the lack of a great CEO that always stumped the company’s observers.
 I once asked a person (a person who I thought would know the answer) why Lampert had never hired “The Guy”—meaning an Alan Questrom (the genius who turned around Federated Department Stores and, later, JC Penney) or Ron Johnson (the ex-Target executive who helped create the Apple Stores and is now “The Guy” at JC Penney) type of heavyweight retail CEO who could turn the company into something great.
 “It would cost a lot—$20 million, $30 million for the guy, plus hundreds of millions for the stores,” he said.
 I told him that was chump change given Lampert’s big investment in Sears and the potential for a billion dollar payday down the road.
“Doesn’t matter.  Eddie won’t spend that on anybody.”
 Consider that hearsay, but I believe he was being straight.

 And now the chickens have come home to roost at the Sears of Eddie Lampert.
 By way of looking at how little it took to see that Lampert wasn’t going to make it work, we’re reprinting “Buffett vs. Lampert: A Tale of Two Letters,” written earlier this year after both investment titans had written their year-end missives to investors.
 Buffett’s letter, of course, is, as always, informative, interesting, snappy and yet suffused (as noted below) with a 50’s-era sensibility when it comes to nagging-wife jokes.
 Lampert’s letter, on the other hand, is full of unintentional howlers—not the least of which is comparing the Sears mindset with that of Apple’s.
 Yes, he compares Sears to Apple—although he is unlikely to do it in his upcoming letter, for an investor with access to a Bloomberg machine can spot one difference between Sears and Apple that would make a Sears shareholder throw up: even at current prices, Apple shares are cheaper than Sears, at 8.3X EBITDA versus 10.2X for Sears.
 Oh, and we used EBITDA to compare the valuation, since Sears doesn’t have any earnings to speak of.
 Enough said.
 —JM 12/28/11
Sunday, February 27, 2011
Two significant shareholder letters were released this week.
The first was from Sears Holdings’ Chairman Eddie Lampert; the second from Berkshire Hathaway Chairman Warren Buffett.
And while it is certainly easier, and a lot more fun, to write about good news—as Buffett has been accustomed to doing over the years at Berkshire, in contrast to the kind of bad news that has issued forth from Lampert’s fading retail giant of late—there is, even so, a remarkable difference in both the substance and style of letters by two men who actually have a great deal in common.
For one thing, both started out as hedge fund managers. For another, both are without peer in their fields, and fabulously wealthy as a result. For a third, they each got into the position of writing annual shareholder letters as a result of taking control of a fading, once-giant, public company. Finally, they each spent years personally wrestling with how to turn the original business around.
In the end, of course, one (Buffett) decided the rational thing was to disinvest in the original business and re-create the company to his liking, while the other (Lampert) is still wrestling with Sears even as he extracts cash from “hidden” assets like real estate and minority-controlled subsidiaries.
Still, differences between the two men are legion (Midwest publicity-magnet versus East Coast recluse, for starters) and do not end with how they played the hand they were dealt: differences in how to hire, invest, manage and incentivize people are revealed in almost every sentence of the respective shareholder letters they have penned.
Indeed, so remarkably different are the letters that we here at NotMakingThisUp couldn’t help but compare the two, by topic.
On Investing Excess Cash:
“As we have done since we took control of Kmart in 2003, we will continue to evaluate alternative uses of the company’s cash flow and capital resources to generate long-term value for all shareholders. Each year brings with it different circumstances, and we expect to have a variety of opportunities to invest our cash in the years to come. Our discipline in evaluating opportunities leaves us prepared to weather difficult times as well as to prosper when economic conditions improve.”
—Edward S. Lampert
“Our elephant gun has been reloaded, and my trigger finger is itchy.”
—Warren E. Buffett
On Management:
“We continue to make changes in our broader leadership team, as we allocate more responsibility to leaders who have delivered results and seek to attract leaders who are capable of improving performance in areas that have lagged. In particular, we want leaders who are capable of transforming key aspects of our business, as retail is increasingly impacted by new technologies and social interaction.”
—ESL
“Our trust is in people rather than process. A ‘hire well, manage little’ code suits both them and me.”
—WEB
On Investing for the Long-Term
“We will continue to make long-term investments in key areas that may adversely impact short-term results when we believe they will generate attractive long-term returns. In particular, we have significantly grown our Shop Your Way Rewards program, improved our online and mobile platforms, and re-examined our overall technology infrastructure. We believe these investments are an important part of transforming Sears Holdings into a truly integrated retail company, focusing on customers first.”
—ESL
By being so cautious in respect to leverage, we penalize our returns by a minor amount. Having loads of liquidity, though, lets us sleep well…. That’s what allowed us to invest $15.6 billion in 25 days of panic following the Lehman bankruptcy in 2008.
—WEB
On Making a Key Hire
“Lou knows what it is like to be the 800-pound gorilla from his days at IBM, and he knows what it is like to compete against 800-pound gorillas from his days at Avaya. He also understands how technology can shape and change companies and industries. The profound changes that many industries, including retail, are currently experiencing require new thinking, new leadership and new business models. Information and technology have always been an important part of the supply chain in retail, but more and more it is becoming critical that we use information and technology in a much more profound way to deliver great customer experiences. Lou is a proven winner, and I am excited to have him as the leader of our company.”
—ESL
“It’s easy to identify many investment managers with great recent records. But past results, though important, do not suffice when prospective performance is being judged. How the record has been achieved is crucial, as is the manager’s understanding of—and sensitivity to—risk…. In respect to the risk criterion, we were looking for someone with a hard-to-evaluate skill: the ability to anticipate the effects of economic scenarios not previously observed. Finally, we wanted someone who would regard working for Berkshire as far more than a job.
“When Charlie and I met Todd Combs, we knew he fit our requirements.”
—WEB
On How to Deal with a Cyclical Business:
“Given the large proportion of the Sears Domestic business which is in ‘big ticket’ categories and linked to housing and consumer credit, Sears is much more susceptible to the macro-economic environment than Kmart. But I don’t accept this as an excuse: our results at Sears in 2010 were completely unacceptable. The profit erosion at Sears Domestic occurred primarily in appliance-related businesses and in the Full-line Store apparel and consumer electronics businesses….
“When industry margins are shrinking, an organization must respond by adding new innovative products and bundling them with services and solutions that meet customers’ evolving needs….
“The new management in our appliance business has already taken actions to rebuild leadership in this area and to further reinvigorate the Kenmore brand….
“In parallel to the efforts that we are making to increase the productivity of our Sears stores, we are also looking at adding world class third-party retailers to our space. Earlier this year we announced that Forever 21 will be taking over 43,000 square feet of Sears space at South Coast Plaza in Costa Mesa, CA…”
—ESL
[Editor’s Note: We are not making this last part up; the author also discusses leasing out space to Whole Foods].
“Our businesses related to home construction, however, continue to struggle…. A housing recovery will probably begin within a year or so. In any event, it is certain occur at some point. Consequently: (1) At MiTeck, we have made, or committed to, five bolt-on acquisitions during the past eleven months; (2) At Acme, we just recently acquired the leading manufacturer of brick in Alabama for $50 million; (3) Johns Manville is building a $55 million roofing membrane plant in Ohio…; and (4) Shaw will spend $200 million in 2011 on plant and equipment, all of it situated in America. These businesses entered the recession strong and will exit it stronger. At Berkshire, our time horizon is forever.”
—WEB
On Wonderful Businesses vs. the Wonder of Financial Legerdemain
“I wouldn’t be surprised to see our share of Coke’s annual earnings to exceed 100% of what we paid for the investment. Time is the friend of the wonderful business.”
—WEB
“In April, we had the opportunity to purchase an additional 17% of Sears Canada for $560 million, increasing our ownership from 73% to 90%. In 2010, Sears Canada has paid two dividends, which returned $639 million of cash to Sears Holdings. Of course, of the cash we received in dividends, we would have received $518 million without the additional shares purchased (because we already owned 73% of Sears Canada), so in effect we received $121 million in dividends on behalf of the additional shares purchased in 2010.”
—ESL
On Reinvesting in the Business, or Not
“Furthermore, not a dime of cash has left Berkshire for dividends or share repurchases during the past 40 years. Instead, we have retained all of our earnings to strengthen our business, a reinforcement now running about $1 billion per month.”
–WEB
“We invested more than $400 million in capital expenditures in 2010, including significant investments in stores in important markets, and contributed over $300 million to our pension and post-retirement plans. We invested just under $400 million in Sears Holdings share repurchases in 2010, a slight reduction from 2009….
“Share repurchases are not a panacea, nor are they a singular strategy. Yet they are more than just the return of capital to shareholders… As a form of discipline on alternative capital allocation strategies, share repurchases can magnify returns.”
–ESL
Did He Really Say That?
“At Sears Holdings, we seek to create long-term value for our shareholders. Like Apple, we seek to do so by improving our operating performance, innovating, and delighting customers…”
—ESL
[Editor’s Note: The first and last time you will see ‘Apple’ and ‘Sears’ in the same sentence, at least for some time to come.]
“As one investor said in 2009: ‘This is worse than divorce. I’ve lost half my net worth—and I still have my wife.’”
—WEB
[Editor’s Note: Buffett’s letters have always been suffused with a 1950’s-era Hugh Hefner-style male/female sensibility, but it never ceases to amaze us that he continues with the nagging-wife jokes]
On ‘Painting the Bull’s-Eye’ of Performance
“Charlie and I believe that those entrusted with handling the funds of others should establish performance goals at the onset of their stewardship. Lacking such standards, managements are tempted to shoot the arrow of performance and then paint the bull’s-eye around wherever it lands…. To eliminate subjectivity, we therefore use an understated proxy for intrinsic value—book value—when measuring our performance.”
—WEB
“Despite our challenging performance over the past several years, the difficult economic environment, and the dramatically changing retail environment, we have generated very attractive returns for shareholders since May 2003, when we assisted Kmart in its emergence from bankruptcy.”
—ESL
[Editor’s Note: While SHLD stock has more than quadrupled from the aforementioned May 2003 “bull’s-eye,” it is in fact down more than 50% from its 2007 peak.]
What Happens to the Wrong Managers
“This requires us to part ways with some who have given great effort, but who have fallen short of the performance required for us to be competitive.”
—ESL
“Our compensation programs, our annual meeting and even our annual reports are all designed with an eye to reinforcing the Berkshire culture, and making it one that will repel and expel managers of a different bent.”
—WEB
What Happens to the Right Managers
“We will continue to provide great opportunities for talented individuals to run businesses, while holding them accountable for performance.”
—ESL
“Many of our CEOs are independently wealthy and work only because they love what they do. They are volunteers, not mercenaries. Because no one can offer them a job they would enjoy more, they can’t be lured away.”
—WEB
On Throwing Good Money after Bad
“At Berkshire we face no institutional restraints when we deploy capital… When I took control of Berkshire in 1965…the dumbest thing I could have done was to pursue ‘opportunities’ to improve and expand the existing textile operation—so for years that’s exactly what I did. And then, in a final burst of brilliance, I went out and bought another textile company. Aaaaaaargh! Eventually I came to my senses, heading first into insurance and then into other businesses.”
—WEB
“We have a need to manage the scale of our operations at the same time as we transform them. The activities required for transformation are vast and time-consuming. As the retail industry is reinvented, we intend and expect Sears Holdings to be a significant player in this reinvention.”
—ESL
Sentences We Didn’t Want to Read
“By aligning our associates with our customers, not with our stores or products, we believe this reinvention will play out in our favor.”
—ESL
[Editor’s Note: That was perhaps the most astonishing sentence we have ever seen in a Chairman’s Letter—the runner-up being the one that follows.]
“To update Aesop, a girl in a convertible is worth five in the phone book.”
—WEB
Jeff Matthews
I Am Not Making This Up
© 2011 NotMakingThisUp, LLC
The content contained in this blog represents only the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. This commentary in no way constitutes investment advice, and should never be relied on in making an investment decision, ever. Also, this blog is not a solicitation of business by Mr. Matthews: all inquiries will be ignored. The content herein is intended solely for the entertainment of the reader, and the author.
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Shazam! From the Boss to the King to John & Paul (But Not George or Ringo, or Keef or Mick), Not to Mention Jessica & Nick, and Bob Dylan of All People…2011 Edition

 2011 Editor’s Note: Back by popular demand, we’ll again try to keep this year’s update brief…but past performance would tell you not to hold your breath.  Here goes.

 Our annual holiday music survey—highly biased, rankly unscientific and in no way comprehensive—covers new ground this year, to wit: the SiriusXM all-holiday-music channel.
 Actually, there are two such channels courtesy of the satellite radio monopolists at SiriusXM.  There’s one for “traditional” music of the Bing Crosby kind, in which human beings sing traditional Christmas songs while actual musicians play musical instruments; and there’s another channel for everything else.
 By “everything else” we mean much of what we will cover in the text below, particularly the Auto-Tune-dependent sensation Michael Bublé, who has only gotten more popular—unfortunately—this year, along with a new presence not entirely unexpected but nonetheless frightening in its implications: Justin Bieber.
 Enough said about that, for our main beef with SiriusXM is not the presence of yet another teen idol on the holiday music scene: our beef lies with the soul-less quality of the entire SiriusXM gestalt, which requires its three thousand channels to carry songs strictly on the basis of whether they share either a common date of issue (as on the 40’s at 4, 50’s at 5, 60’s at 6et al channels), or a common target audience demographic.
 Among the later, for example is the Classic Vinyl channel, which is essentially a “Classic Rock” channel (“Classic Rock” being a Baby Boomer euphemism for what our parents knew as “Oldies” radio) that plays the WNEW-FM playlist from around 1968 to 1978.
 And nothing else.
 And there is the “Classic Rewind” channel, which is another Oldies channel that plays the WPLR-FM playlist from about 1979 to the late 1980s.
 And nothing else.
 Then there’s “The Bridge,” a Baby Boomer euphemism for “Easy Listening.”  It plays Oldies of the James Taylor/Carole King/Jackson Browne vein.
 And nothing else.
 Certainly there are one or two such channels that manage to jump around between genres (The Spectrum is worthwhile on that score).  But, in the main, each SiriusXM channel is tightly focused on a specific, narrowly defined demographic…sometimes scarily so.
  Here we’re thinking of the “Metal” channel, which plays loosely defined “songs” that consist of young men screaming their apocalyptic guts out above what appears to be a single, head-banging, machine-gun-guitar-and-drumming musical track that never, ever changes.
  You marvel at where these guys came from, what portion of the domestic methamphetamine supply they consume, and how many serial killers might be listening to “Metal”  at the very same moment as you.  If Beavis and Butt-Head could afford a car, this would be their channel.
 Unfortunately, no matter which channel you pick and who the purported “DJ” may be (there are a lot of old-time, smokey-voiced, recognizable DJs on the various Oldies channels) you’ll hear a sequence of songs that all sound like a computerized random-number-generator picked ‘em.
 Listening to the “60’s at 6” channel, for example, you may hear a great Beatles single like “Hello, Goodbye” from 1967, followed by the wretchedly excessive “MacAurther Park” from 1968, followed by an unrecognizable chart-topper from 1962 that nobody plays anymore because it wasn’t any good even in 1962.
 The listener ends up flipping around from channel to channel and wondering why the bandwidth-happy SiriusXM monopolists don’t just give every artist its own channel.
 Happily, there are channels devoted to single artists.  There is, for example, a Springsteen channel, an Elvis channel and a Sinatra channel, as you might expect.  There’s even a Pearl Jam channel.
 But there is, oddly enough, no Bob Marley or Rolling Stones channel—and, head-scratcher of all head-scratchers, no Beatles channel.
 In fact, the absence of The Beatles from the SiriusXM digital bandwidth relative to, say, the Eagles and Fleetwood Mac, is one the great mysteries of the age.
 After all, the Beatles individually and collectively contributed 27of the Rolling Stone Top 500 Songs of All-Time, yet they get nowhere near 5.4% of the SiriusXM airplay, whether on Classic Vinyl,  Classic Rewind,  The Bridge,  60’s on 6, ”   70’s on 7, The Spectrum or any of the other three thousand channels here.
 You quite literally have as much chance of hearing “Snoopy and the Red Barron” on SiriusXM as “Revolution.”
 So why then is there a Jimmy Buffett channel (Margaritaville, of course)?  Hey, why not a Nancy Sinatra channel?

 Having gotten that off our chest, we can move on, since SiriusXM’s holiday channels added little new material to our annual survey because most of the songs are widely played everywhere else.
 Furthermore, we’ve recently been asked to assemble a “Top Ten Worst” list of holiday songs for this review.  The problem is there are just so many, as we’ll be getting to shortly.  Rod Stewart’s somnambulant “My Favorite Things,” which sounds like he’s reading the lyrics from a child’s book of verses, is right up there, while Dan Fogelberg’s “Same Old Lang Syne” stands out in any crowd of non-favorites.
 Easier, then, to simply identify the All-Time, Number One, No-Question-About-It NotMakingThisUp Worst Holiday Song of All Time, and let everyone else argue about the remaining 9.  It is “The 12 Pains of Christmas.”
 This so-called comedy song takeoff on “The 12 Days of Christmas,” a pleasant English Christmas carol discovered by a U.S. schoolteacher from Milwaukee and used by her in a Christmas pageant in 1910, is an easily forgettable humorous novelty song that is neither novel or humorous, in any way.
 It isn’t even fun writing about, so we won’t bother; we’ll simply move on to something pleasant, which happens to be an entirely different sort of humorous novelty song that is both novel and humorous, and, therefore, well worth a mention here.
 We’re talking about the wonderfully bizarre, catchy, Klezmer-style cover of  Must Be Santa, from Bob Dylan’s 2009 Christmas album, “Christmas in the Heart.”  (Yes, Bob Dylan made a Christmas album.)
 The music is fast and cheerful, and Dylan’s low, growly voice is almost indistinguishable from Tom Waits.  (The truly bizarre music video is not to be missed, watch it here.)  After you get over the initial shock of hearing Bob Dylan singing what most Baby Boomer parents will recall being a Raffi song, it becomes impossible to not enjoy.
 Another glaring absence from our previous years’ commentary is neither novel or humorous, and inconceivably does not appear to qualify for the SiriusXM random-song-generator holiday song playlist despite being many-times more worthwhile than most of the SiriusXM catalogue, whether holiday-themed or not.
 The song is “2000 Miles” by the Pretenders, and it belongs on anybody’s Holiday Top Ten.
 If hearing Chrissie Hynde on that original song (she’s also recorded some good Christmas covers, including one with the Blind Boys of Alabama) doesn’t get you in a mellow holiday mood, nothing will.

 
Merry Christmas, Happy Hanukkah and Good New Year to all.
—JM, December 4, 2011 

 2010 Editor’s Note: Back for the third consecutive year by popular demand, we’ll try to keep this year’s update brief—but don’t count on it.
 For starters, we’re going to plug a book: Keith Richards’ autobiography, “Life,” which happens to be one of the best books ever written—and we don’t just mean “Best in the Category of ‘Memoirs by Nearly-Dead Rock Stars’.”
 It is a great book, period.
 The story of how ‘Keef’ (as he signs sweet letters to his Mum while rampaging across America), Brian and Mick developed the Rolling Stones’ sound, for example, is worth the price alone (in short, they worked really hard; but the full story is much better than that).
 Yet there’s more—much more. Guitarists can soak up how Keith created his own guitar sound; drummers will learn—if they didn’t already know—Charlie Watts’ high-hat trick (and from whom he stole it); while songwriters had better prepare themselves to be depressed at how Mick wrote songs (‘As fast as his hand could write the words, he wrote the lyrics,’ according to one session man who watched him write “Brown Sugar”).
 And that’s just the rock-and-roll stuff.
 The sex-and-drugs stuff is also there, and the author lays it all out in his unfettered, matter-of-fact, loopy-but-straightforward style, often with the first-person help of friends and others-who-where-there (and presumably of sounder mind and body than you-know-who: the drug and alcohol intake is truly staggering) who write of their own experiences with the band.
 Okay, you may say, but how exactly is Keith Richards’ autobiography relevant to our annual review of holiday songs?
 Well, while furtively reading snatches of ‘Life’ during a stop at the local Borders (we expect to see the book under the Christmas tree sometime around the 25th of this month, hint-hint), we happened to hear another musical legend perform one of our favorite offbeat Christmas songs in the background, and it occurred to Your Editor that of all the bands out there that could have done that same kind of interesting, worthwhile Christmas song, The Rolling Stones probably top the list.
 What with Keef’s bluesy undertones and Mick’s commercial-but-sinister instincts on top, it would have certainly made this review, for better or worse. (Along these lines, The Kinks’ cynical, working-class “Father Christmas” is one of the all-time greats, and doesn’t get nearly enough air-time these days.)
 Now, for the record, the offbeat Christmas song that triggered this excursion was “’Zat You Santa Claus?”—the Louis Armstrong and The Commanders version from the 1950’s. (The song was later covered, like everything else but the Raffi catalogue, by Harry Connick, Jr.)
 Starting out with jingle bells, blowing winds and a slide-whistle, you might initially dismiss “’Zat You?” as Armstrong’s sadly commercial attempt to get in on the Christmas song thing, except that his familiar, Mack-the-Knife-style vocal comes over a terrific backbeat that turns it into what we’d nominate for Funkiest Christmas Song Ever Recorded:

Hangin’ my stockin’/I can hear a knockin’
’Zat you, Santa Claus?…
One peek and I’ll try there/Uh-oh there’s an eye there

’Zat you, Santa Claus?


Please, ah please/ah pity my knees
Say that’s you Santa Claus
(That’s him alright.)

 It is a delight to hear, and the fact that it is suddenly getting more air-time this season is a step-up in quality for the entire category—or would be, if not for the apparent installation of Wham!’s “Last Christmas” in the pantheon of Christmas Classics.
 A 1980’s electro-synth Brit-Pop timepiece, “Last Christmas” combines a somewhat catchy tune with lyrics that make a trapped listener attempt to open the car door even at high speeds to get away:

Last Christmas, I gave you my heart

But the very next day you gave it away

This year

To save me from tears,

I gave it to someone special

 Considering the fact that the songwriter (Wham!’s gay front-man, George Michael) decided to repeat that chorus six times, the full banality of the lyric eventually gives way to incredulity: “Let me get this straight,” you begin to ask yourself. “This year he’s giving his heart to ‘someone special’… so who’d he give it to last year? The mailman?”


 “Last Christmas” does have the distinction of being the biggest selling single in UK history that never made it to Number 1. Furthermore, all royalties from the single were donated to Ethiopian famine relief, the same cause which led to creation of what turned out to be the actual Number 1 UK single that year, “Do They Know It’s Christmas?”


 “Do They Know…” is a song that has received some push from readers to receive an honorable mention in these pages, and while it is certainly an interesting timepiece, with much earnest participation from the likes of Sting, Bono and even Sir Paul, it is not nearly as worthwhile as an album that seems just as prevalent these days: A Charlie Brown Christmas by jazz pianist Vince Guaraldi.


 How a jazz pianist was hired to create the music for a TV special with cartoon characters is this: the producer heard Guaraldi’s classic instrumental “Cast Your Fate to the Wind” on the radio while taking a cab across the Golden Gate Bridge.
 One thing led to another, and thanks to that odd bit of chance, future generations will have the immense pleasure of hearing a timeless, unique work of art every year around this time. (A second odd tidbit for our West Coast readers: Guaraldi died while staying at the Red Cottage Inn, in Menlo Park—of a heart attack, however, and not the usual, more gruesome fate of musicians who die in hotels.)
 One second-to-last note before we move on: we have been heavily lobbied by certain, er, close relations to include Mariah Carey’s “All I Want For Christmas is You” as a worthwhile holiday song—despite our previously expressed misgivings about her contribution to the genre (see below).


 And we have to admit, her “All I Want…” leaves behind the incessant vocal pyrotechnics that made some of her other Christmas covers (“Oh Holy Night,” for example) unbearable, at least to our ears.
 In this case she seems to trust the song to take care of itself, which it does in fine, driving, upbeat style. Now, as Your Editor previously hinted, all he wants for Christmas is Keef’s book. And it had better be there, if, as previously noted, you get our drift.
 Finally, and speaking of autobiographies, we happened to read Andy Williams’ own book this past year and must report that our reference to Williams below seems overly harsh. For one thing, his book is as honest as Keef’s; for another, as a singer not necessarily born with the vocal equipment of, say, Mariah Carey, the man worked at his craft and succeeded mightily where many others failed.
 Which, we might add, is, after all, the hope of this season.

And so, we wish for a Merry Christmas, Happy Hanukkah and Good New Year to all.
JM, December 13, 2010




2009 Editor’s Note: 
Back by popular demand, what follows is our year-end sampling of the Christmas songs playing incessantly on a radio station near you, and it demands from your editor only a few updates this holiday season.
 For starters, we have not heard the dreaded duet of Jessica Simpson and Nick Lachey singing “Baby, It’s Cold Outside” thus far in 2009, and for this we are most grateful.
 Indeed, if it turns out that their recording has been confiscated by Government Authorities for use as an alternative to lethal injections, we’ll consider ourselves a positive force for society.
 On the other hand, we are sorry to report an offset to that cheery development, in the form of a surge in playing time for Barry Manilow’s chirpy imitation of the classic Bing Crosby/Andrew Sisters version of “Jingle Bells.”
 For the record, “Jingle Bells” was written in 1857…for Thanksgiving, not for Christmas. And it’s hard to imagine making a better version than that recorded by Bing and the three Andrew Sisters 86 years later.
 But Manilow, it seems, didn’t bother to try.

 Instead, Barry and his back-up group, called Expos, simply copied Bing’s recording, right down to that stutter in the Andrews Sisters’ unique, roller-coaster vocals on the choruses, as well as Bing’s breezy, improvised, “oh we’re gonna have a lotta fun” throwaway line on the last chorus.
 Sharp-eared readers might say, “Well, so what else would you expect from a guy who sang ‘I Write the Songs’…which was in fact written by somebody else?”


 We can’t argue with that, but we will point out another annoyance this year: the enlarged presence of Rod Stewart in the Christmas play-lists.
 Don’t get us wrong: we like Rod Stewart—at least, the Rod Stewart who gave the world what Your Editor still considers the best coming-of-age song ever written and recorded: “Every Picture Tells a Story.”
 It’s the Rod Stewart who gave us “Do Ya Think I’m Sexy?” we’re less crazy about.  So too the Rod who chose to cover “My Favorite Things” (for the definitive version of that classic, see: ‘Bennett, Tony’) and “Baby It’s Cold Outside” with Dolly Parton (for an only slightly more offensive version of this one, see: ‘Simpson, Jessica’ and ‘Lachey, Nick’).
 As an antidote to Rod, we suggest several doses of Jack Johnson’s sly, understated “Rudolph the Red-Nosed Reindeer,” which seems to be gaining recognition, and anything by James Taylor—especially his darkly melancholic “Have Yourself a Merry Little Christmas.”
 Of all the singers who recorded versions of this last—and Sinatra’s might be the best—it is Taylor, a former junkie, who probably expresses more of the intended spirit of this disarmingly titled song.
 After all, the original lyric ended not with the upbeat “Have yourself a merry little Christmas, let your heart be light/Next year all our troubles will be out of sight,” but with this:


 “Have yourself a merry little Christmas, it may be your last/Next year we may all be living in the past.”


 No, we are not making that up.  The good news is it should keep Barry Manilow from be covering it any time soon.


JM—December 19, 2009




Wednesday, December 24, 2008


Shazam! From the Boss to the King to John & Paul (But Not George or Ringo), Not to Mention Jessica & Nick
 Like everyone else out there, we’ve been hearing Christmas songs since the day our local radio station switched to holiday music sometime around, oh, July 4th, it feels like.
 And while it may just be a symptom of our own aging, the 24/7 holiday music programming appears to have stretched the song quality pool from what once seemed Olympic-deep to, nowadays, more of a wading pool-depth.
 What we recall in our youth to be a handful of mostly good, listenable songs—Nat King Cole’s incomparable cover of “The Christmas Song” (written by an insufferable bore: more on that later); Bing’s mellow, smoky, “White Christmas”; and even Brenda Lee’s country-tinged “Rockin’ Around the Christmas Tree” (recorded when she was 13: try to get your mind around that)—played over and over a few days a year…has evolved into a thousand mediocre-at-best covers played non-stop for months on end.
 Does anybody else out there wonder why Elvis bothered mumbling his way through “Here Comes Santa Claus”? 

It actually sounds like Elvis doing a parody of Elvis—as if he can’t wait to get the thing over with. Fortunately The King does get it over with, in just 1 minute, 54 seconds.
 Along with that and all the other covers, there are, occasionally, the odd original Christmas songs—the oddest of all surely being Dan Fogelburg’s “Same Old Lang Syne.”
 You’ve heard it: the singer meets his old lover in a grocery store, she drops her purse, they laugh, they cry, they get drunk and realize their lives have been a waste…and, oh, the snow turns to rain.
 So how, exactly, did that become a Christmas song?
 Then there’s ex-Beatle Paul McCartney’s “Wonderful Christmastime,” which combines an annoyingly catchy beat with dreadful lyrics, something McCartney often did when John Lennon wasn’t around.

 (After all, it was Lennon who replaced McCartney’s banal, teeny-boppish opening line for “I Saw Her Standing There”—“She was just seventeen/Never been a beauty queen” is what McCartney originally wrote—with the more suggestive “She was just seventeen/You know what I mean,” thereby turning a mediocre time-piece into a classic.)
 But Lennon was not around to save “Wonderful Christmastime” even though McCartney actually recorded this relatively new Christmas standard nearly thirty years ago, before Lennon was shot.
 It rightfully lay dormant until the advent of All-Christmas-All-The-Time programming a couple of years ago. Fortunately, by way of offset, Lennon’s own downbeat but enormously catchy “Happy Xmas (War is Over)” is played about as frequently as “Wonderful Christmastime.”
 Who but John Lennon would start a Christmas song: “And so this is Christmas/And what have you done…”?  Of course, who but Paul McCartney would start a Christmas song, “The moon is right/The spirit’s up?”
 If anything explains the Beatles’ breakup better than these two songs, we haven’t heard it.
 Now, we don’t normally pay much attention to Christmas songs. If it isn’t one of the aforementioned, or an old standard sung by Nat, Bing, Frank, Tony, Ella and a few others, we’d be clueless.
 But thanks to a remarkable new technology, we here at NotMakingThisUp suddenly found ourselves able to distinguish, for example, which blandly indistinguishable female voice sings which blandly indistinguishable version of “O Holy Night”—Kelly Clarkson, Celine Dion, or Mariah Carey—without any effort at all.
 The technology is Shazam—an iPhone application that might possibly have received the greatest amount of buzz for the least amount of apparent usefulness since cameras on cell phones first came out.
 For readers who haven’t seen the ads or heard about Shazam’s wonders from a breathless sub-25 year old, Shazam software lets you point your iPhone towards any source of recorded music, like a car radio, the speaker in a Starbucks, or even the jukebox in a bar—and learn what song is playing.
 Shazam does this by recording a selection of the music and analyzing the data. It then displays the name of the song, the artist, the album, as well as lyrics, a band biography and other doodads right there on the iPhone.
 Now, you may well ask, what possible use could there be for identifying a song playing in a bar?
 And unless you’re a music critic or a song-obsessed sub-25 year old, we’re still not sure.
 But we can say that Shazam is pretty cool. In the course of testing it on a batch of Christmas songs—playing on a standard, nothing-special, low-fi kitchen radio—heard from across the room, without making the least effort to get the iPhone close to the source of the music, Shazam figured out every song but one (a nondescript version of a nondescript song that it never could get) without a hitch.
 And, as a result, we can now report the following:
 1) It is astounding how many Christmas songs are out there nowadays, most of them not worth identifying, Shazam or no Shazam;


 2) All Christmas covers recorded in the last 10 years sound pretty much alike, as if they all use the same backing track, and thus require something like Shazam to distinguish one from the other;


 3) Nobody has yet done a cover version of Dan Fogelburg’s “Same Old Lang Syne,” which may be the truest sign of Hope in the holiday season;
 4) None of this matters because Mariah Carey screwed up the entire holiday song thing, anyway.




 Now, why, you may ask, would we pick on Mariah Carey, as opposed to, say, someone who can’t actually sing?
 Well, her “O Holy Night” happened to be the first song in our mini-marathon, and it really does seem to have turned Christmas song interpretation into a kind of vocal competitive gymnastics aimed strictly at showing off how much of the singer’s five-octave vocal range can be used, not merely within this one particular song, but within each measure of the song.
 In fact Mariah’s voice jumps around so much it sounds like somebody in the studio is tickling her while she’s singing.
 More sedate than Mariah, and possibly less harmful to the general category, The Carpenters’ version of “(There’s No Place Like) Home for the Holidays” comes on next, and it makes you think you’re listening to an Amtrak commercial rather than a Christmas song (“From Atlantic to Pacific/Gee, the traffic is terrific!”), so innocuous and manufactured it sounds.
 Johnny Mathis is similarly harmless, although his oddly eunuch-like voice can give you the creeps, if you really think about it. Mercifully, his version of “It’s Beginning to Look a Lot Like Christmas” is short enough (2:16) that you don’t think about it for long.
 Now, without Shazam we never would have known the precise time duration of that song.
 On the other hand, we would we never have been able to identify the perpetrators of what may be the single greatest travesty of the holiday season—Jessica Simpson and Nick Lachey, singing “Baby it’s Cold Outside.”


 “Singing” is actually too strong a word for what they do. Simpson’s voice barely rises above a whisper, and you cringe when she reaches for a note, although she does manage to hit the last, sustained “outside,” no doubt thanks to the magic of electronics.
 Thus the major downside of Shazam might be that it can promote distinctly anti-social behavior: having correctly identified who was responsible for this blight on holiday radio music, listeners might decide that if they ever ran across the pair in his car while singing along with the radio too loudly to notice, they wouldn’t stop to identify the bodies.
 Fortunately, the bad taste left by that so-called duet is washed away when Nat King Cole’s “The Christmas Song” comes on next.
 Thanks to Shazam, we learn that this is actually the fourth version Nat recorded. The man worked at his craft, and it shows. This is the best version of the song on record, by anyone, and probably one of the two or three best Christmas songs out there, period.
 The second those strings sweetly announce the tune, you relax, and by the time Cole’s smoky, gorgeous voice begins to sing, you’re in a distinctly Christmas mood like no other recording ever creates.
 (Unfortunately, the song’s actual writer, Mel Tormé, had the personality of a man perpetually seething for not getting proper recognition for having written one of the most popular Christmas songs of all time. We did not learn this from Shazam: we once saw Tormé perform at a small lounge, during which he managed to mention that he, not Nat King Cole, wrote “The Christmas Song”—as if this common misperception was still on everybody’s mind 35 years later. When that news flash did not seem to make the appropriate impression on the audience, he later broke off singing to chew out a less-than-attentive audience member, completely destroying the mood for the rest of the set.)
 Like that long-ago performance by the “Velvet Fog,” the pleasant sensation left behind by Cole’s “Christmas Song” is quickly soured, this time by a male singer performing “Let it Snow, Let it Snow, Let it Snow” in the manner of Harry Connick, Jr. doing a second-rate version of Sinatra.
 Who is this guy, we wonder?
 Shazam tells us it’s Michael Bublé. We are pondering how such a vocal lightweight became such a sensation in recent years—the answer must surely be electronics, because his voice, very distinctly at times, sounds like it has been synthesized—when John Lennon’s “Happy Xmas” comes on.
 It’s a great song, demonstrating as it does Lennon’s advice to David Bowie on how to write a song: “Say what you mean, make it rhyme and give it a backbeat.” The fact that Lennon had the best voice in rock and roll also helps.
 Unfortunately, his wife had the worst voice in rock and roll, and a brief downer it is when Yoko comes in on the chorus like a banshee. (Fortunately she is quickly drowned out by the children’s chorus from the Harlem Community Choir.)
 The other songs in our Shazam song-identification session are, we fear, too many to relate.
Sinatra, of course; Kelly Clarkson, an American Idol winner who essentially does a pale Mariah Carey impersonation; Blandy—er, Andy Williams; and one of the best: Tony Bennett.
 Then there’s Willie Nelson, who has a terrific, understated way of doing any song he wants—but sounds completely out of place singing “Frosty the Snowman.” One wonders exactly what kind of white powder Willie was thinking about while he was recording this, if you get our drift.
 Oh, and there’s Coldplay’s “Have Yourself a Merry Little Christmas,” which pairs the sweetest piano with the worst voice in any single Christmas song we heard; Amy Grant, a kind of female Andy Williams; the Ronettes, who are genuinely terrific—a great beat, no nonsense, and Ronnie singing her heart out with that New York accent; and then Mariah again, this time doing “Silent Night” with that same roller-coaster vocal gargling.
 Gene Autry’s all-too-popular version of “Here Comes Santa Claus” would be bearable except that he pronounces it “Santee Closs,” which is unfortunate in a song in which that word appears like 274 times. ‘N Sync is likewise unbearable doing “O Holy Night” a cappella, with harmonies the Brits would call cringe-making, and Mariah-type warbling to boot.
 Hall & Oates’s “Jingle Bell Rock” is too easy to confuse with the other versions of “Jingle Bell Rock”—thank you, Shazam, for clearing that up—while Martina McBride manages to sound eerily like Barbra Streisand imitating Linda Ronstadt singing “Have Yourself a Merry Little Christmas.”
 Winding things down is Dan Fogelburg’s aforementioned “Same Old Lang Syne,” and here we need to vent a little: something about the way he sings “liquor store”—he pronounces it “leeker store”—never fails to provoke powerful radio-smashing adrenalin surges.
 Fortunately, we suppress those urges today, because the Shazam experiment concludes with one of the best Christmas songs ever recorded. Better than Bing, and maybe even better than Nat, depending on your mood.
 It’s Bruce Springsteen. The Boss. Doing “Santa Claus is Comin’ to Town”…live.
 Yes, this song was recorded live, and despite its age (more than 25 years old), the thing still jumps out of the radio and grabs you.
 Now, as Shazam informs us, this particular recording was actually the B-side of a single release called “My Hometown.” (Back in the day, kids, “singles” came with two songs, one on each side of a record: the “A” side was intended to be the hit song; the “B” side was, until the Beatles came along, for throwaway stuff.)
 Fortunately nobody threw this one away.
 Springsteen begins the familiar song with some audience patter and actual jingle bells; then he starts to sing and the band comes to life. Things move along smoothly through the verse and chorus…until ace drummer Max Weinberg kicks it into high gear and the band roars into a fast shuffle that takes the thing into a different realm altogether.
 Feeding off the audience, The Boss sings so hard his voice slightly breaks at times. Then he quiets down before roaring back into a tear-the-roof-off chorus, sometimes dropping words and laughing as he goes.
 This is real music—recorded in 1975 during a concert at the C.W. Post College—with no retakes, no production effects, and no electronic vocal repairs, either.
 Try doing that some time, Jessica and Nick.
 Actually, come to think of it, please don’t.
Merry Christmas, Happy Hanukkah and a Good New Year to all.

Jeff Matthews

Author “Secrets in Plain Sight: Business and Investing Secrets of Warren Buffett”
(eBooks on Investing, 2011)    Available now at Amazon.com
© 2011 NotMakingThisUp, LLC


The content contained in this blog represents only the opinions of Mr. Matthews.
Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. This commentary in no way constitutes investment advice, and should never be relied on in making an investment decision, ever. Also, this blog is not a solicitation of business by Mr. Matthews: all inquiries will be ignored. The content herein is intended solely for the entertainment of the reader, and the author.
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What ELSE S&P Threatened to Downgrade Today…

 Research-in-Motion

 Motorola
 Victrola Talking Machines
 eToys
 Longtop Financial
 Greece
 Detroit
 Solar panel industry
 Herman Cain
 ‘N Sync
 Amy Winehouse

Anything else we missed?

Jeff Matthews

Author “Secrets in Plain Sight: Business and Investing Secrets of Warren Buffett”
(eBooks on Investing, 2011)    Available now at Amazon.com
© 2011 NotMakingThisUp, LLC


The content contained in this blog represents only the opinions of Mr. Matthews.
Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. This commentary in no way constitutes investment advice, and should never be relied on in making an investment decision, ever. Also, this blog is not a solicitation of business by Mr. Matthews: all inquiries will be ignored. The content herein is intended solely for the entertainment of the reader, and the author.
Categories
Uncategorized

His Magical Thinking: “Steve Jobs” by Walter Isaacson

The NotMakingThisUp Book Review
 So how did a guy who was described by one of his closest friends as “reflexively cruel and harmful to some people” and by the mother of his first child as “an enlightened being who was cruel”;
 Who honed a “trick of using stares and silences to master other people”;
Who took a bonus meant to be split with his best friend and future co-founder of Apple, Steve Wozniak—which “Woz” had earned for the duo by designing a video game with fewer chips than a preset maximum—and still denied it after he had become a multi-billionaire (Wozniak got paid all of $350 for his efforts);
 Who was described as sometimes “abusive” by an early business partner, as “the opposite of loyal…he has to abandon the people he is close to” by a longtime friend and as “frighteningly cold” by another;
 Who denied he was the father of his first child and according to the child’s mother “didn’t want to have anything to do with her or with me”;
 Who threw a “tantrum” when Apple’s first president gave him employee badge #2 while Wozniak got badge #1, then demanded, and got, badge #0;
 Who shouted down strangers at business meetings by yelling “Let’s stop this bullshit!” and wooed engineering prospects by telling them “Everything you’ve ever done in your life is shit, so why don’t you come work for me?”;
 Who parked his car in the handicapped spot at the front of his building so frequently that an Apple employee “painted over the handicapped wheelchair symbol with a Mercedes logo”;
 Who was described by his first supervisor as “a goddamn hippie with b.o.” and was considered by his first boss at that same company to be “not a great engineer”.…
 How, exactly, did Steven P. Jobs become the unstoppable force who, by intelligence, intuition and sheer willpower lead the creation of not one, but two dominant companies of their times, and directly affect the lives of more human beings than any other individual of his generation?
 For the answer to that question, read this book.
 What it mainly comes down to—and we’re not giving anything away here, because you’ll want to read it all—is that Jobs simply used what Apple veterans called his “reality distortion field” to talk people into doing things they didn’t think they could do.
 One of the best—among many—stories along this line occurs when an Apple engineer tries to explain why an early beta of the Mac operating system is taking so long to boot up, too long for Jobs:
…Jobs cut him off.  “If it could save a person’s life, would you find a way to shave ten seconds off the boot time?” he asked.  Kenyon allowed that he probably could.  Jobs went to a whiteboard and showed that if there were five million people using the Mac, and it took ten seconds extra to turn it on every day, that added up to three hundred million or so hours per year that people would save, which was the equivalent of at least one hundred lifetimes saved per year.  “Larry was suitably impressed, and a few weeks later he came back and it booted up twenty-eight seconds faster,” Atkinson recalled.  “Steve had a way of motivating by looking at the bigger picture.”
 And Isaacson tells the story of that bigger picture very, very well—mainly by letting other voices do the talking.
 They are the voices of those who were there early in Jobs’ career, when the defining impetus of his life—being given up for adoption—was shaping the personality that would alternately fascinate, disgust, energize and terrorize those who encountered that “reality distortion field.”
 They are the voices of those who influenced Jobs along the way (Atari founder Nolan Bushnell’s voice is especially delightful, and the simplicity of his instructions for Atari’s first Star Trek game—…uncomplicated enough that a stoned freshman could figure them out… “1. Insert quarter. 2. Avoid Klingons”—became a guiding principle behind Jobs’ own creations).
 They are the voices of those who were there when the Apple II, the Mac, the iMac, the iPod, the iPhone and the iPad were born; when Jobs was creating—and failing with—NeXT; when Jobs returned to Apple somewhat older and somewhat wiser, and still a perfectionist; and when Pixar was saved and nourished into an animation powerhouse by Jobs.
 Also they are the voices of those with him when he was dying.
 The book flows quickly and it flows without a hitch, because even though the author spent a great deal of time with Jobs in the waning days of his life, he does not interject himself, except when absolutely necessary to tell the story.
 Also, it’s not written as a straight chronology: it jumps ahead at times—for example, to explain Jobs’ bond with Jony Ive, Apple’s chief design guru, before going back to the ‘aha’ moments that led to the iPod, the design of which Ive and Jobs shaped together—and always to good effect.
 And, as you’ve already figured out, Isaacson sugarcoats very little.
 Most important of all, along the way in this great story you’ll learn where Jobs got his love of craftsmanship; how the first product Wozniak and Jobs came up with was in fact illegal; why Apple was named “Apple”; how employees manipulated Jobs to (sometimes) reach the conclusion they thought he should reach; why the first iPod was all-white (even the ear-buds); how Jobs’ work at NeXT and Pixar informed his return to Apple; how Jobs’ exile in Italy after his first Apple career influenced the floors you walk on today in every Apple store; why Jobs wore turtlenecks;  what he told Larry Page about how to manage Google, and, more interestingly, what he told the CEO of Corning while successfully persuading him to resurrect a failed Corning glass R&D project into what became the rugged but clear glass screen on your iPhone; and, over and over, how the perfectionist Jobs could obsess over any detail when it came to the design of a product, a hotel room, a business card—even an oxygen mask in the hospital as he lay near death.
 Indeed, the word “obsess” appears nine times in this book, the word “tantrum” eight times, and the phrase “Jobs insisted” appears—we are not making this up—28 times in the book.
 Jobs’ favorite derogatory term for bad work—“shit”—appears early and often, in various forms (“this is shit” appears four times, “it’s shit” once); while “sucks,” another favored Jobs adjective for bad people or bad things, appears five times, including once when Jobs simply combines the two adjectives into “he’s a shithead who sucks.”
 Still, the word that sticks in the mind after reading all of Steve Jobs is neither.  In fact, it is in no way negative.
 The word is “magical,” and it appears 19 times in the book, including three times when it’s used by Jobs describing a technology or a product.
 But the most poignant, and powerful use of the word comes from Jobs’ wife who, in explaining how he at first avoided coming to terms with his initial cancer diagnosis—in a similar fashion to the way he routinely avoided coming to terms with the limitations of fellow human beings, thereby pushing them into making products that literally changed the world—summed up the mindset that nursed Pixar from a struggling graphics design shop into the savior of Disney and, at the same time, pushed Apple onto a path that would make it the most valuable company in the world before he died.
 It was, she called it, “his magical thinking.”
 So read this book.
 If you’re a teenager who “thinks different” and wants to understand how Jobs took that same quality and turned it from a liability to a world-changing asset; if you’re a geek who wants to understand how Jobs identified break-through technologies and made them commercial; if you’re an investor who wants to understand how a company learns less from great success than from failure; if you’re a board member who wants to understand how destructive a creative genius can be, and how to harness that genius without destroying a company; if you’re a CEO who wants to discover what makes a product a flop like Microsoft’s Zune instead of a hit like the iPod; if you’re a design student who doesn’t care about business but wants to understand why the iPad feels so comfortable to pick up (hint: rounded, not square, edges); if you’re an advertiser who wants to understand how two frames can be the difference between a “great” TV commercial and a “shit” commercial; if you don’t care about any of that but just want to understand how all these products came to be…read this book.
 It’s great.
 Maybe even insanely great.
Jeff Matthews
Author “Secrets in Plain Sight: Business and Investing Secrets of Warren Buffett”
(eBooks on Investing, 2011)    Available now at Amazon.com
© 2011 NotMakingThisUp, LLC