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The Lobbying Process

The Lobbying Process 150 150 Jonathan Poland

Lobbying the government involves a series of steps to effectively communicate your message, build relationships with decision-makers, and influence public policy. Here’s a step-by-step guide to lobbying the government:

  1. Define your objectives: Clearly outline the specific policy or legislative changes you want to advocate for. Be concise and clear in defining your goals.
  2. Develop a strategy: Create a comprehensive lobbying strategy that includes identifying your target audience, selecting the most effective lobbying methods, and developing a timeline for your efforts.
  3. Research your target audience: Understand the decision-makers you need to influence, such as legislators, government officials, or regulators. Learn about their political affiliations, policy positions, and past voting records to tailor your message effectively.
  4. Build a coalition: Form alliances with other organizations, groups, or individuals who share similar interests or objectives. A united front can amplify your message and increase your chances of success.
  5. Prepare your message: Develop persuasive arguments and supporting materials, such as fact sheets, research reports, or policy briefs, to communicate your position. Make sure your message is clear, concise, and evidence-based.
  6. Establish relationships: Cultivate relationships with your target audience by attending events, scheduling meetings, or joining relevant associations. Building trust and rapport with decision-makers is essential for effective lobbying.
  7. Communicate your message: Present your arguments and supporting materials to the decision-makers through meetings, letters, phone calls, or email. Be respectful, professional, and persistent in conveying your message.
  8. Engage in grassroots lobbying: Mobilize public support for your cause through social media campaigns, public demonstrations, or letter-writing campaigns. Public pressure can be a powerful tool in influencing policymakers.
  9. Monitor and adapt: Keep track of legislative or regulatory developments related to your issue and adjust your strategy as needed. Be prepared to respond to counterarguments or new developments that could affect your cause.
  10. Evaluate your efforts: Assess the effectiveness of your lobbying efforts and learn from your successes and failures. This can help you refine your strategy and improve your chances of success in future lobbying campaigns.
  11. Follow lobbying regulations: Be aware of and comply with all applicable lobbying laws and regulations, such as registration and disclosure requirements. This will help maintain the integrity of the process and prevent any legal or ethical issues.

By following these steps and adapting them to your specific context, you can effectively lobby the government to promote your cause and influence public policy. Remember, persistence and professionalism are key to successful lobbying efforts to develop awareness, requirements and determine interest level.

A typical day for a lobbyist on Capitol Hill can be quite busy and varied, as they engage in numerous activities to influence lawmakers and advance their clients’ interests. While no two days may be exactly the same, a lobbyist’s day might include the following activities:

  1. Monitoring legislative developments: A lobbyist usually starts their day by reviewing the latest news, legislative updates, and policy developments relevant to their clients’ interests. This helps them stay informed and identify any emerging opportunities or challenges.
  2. Attending meetings and hearings: Lobbyists may attend committee hearings, briefings, or other events on Capitol Hill to gather information, track policy discussions, and identify key decision-makers. These events also provide an opportunity to network with lawmakers, staffers, and other stakeholders.
  3. Meeting with lawmakers and staffers: One of the primary activities of a lobbyist is to meet with lawmakers and their staff to discuss specific policy issues, present their clients’ positions, and provide supporting materials. These meetings can take place in congressional offices, during informal events, or at other venues on Capitol Hill.
  4. Developing relationships: Building and maintaining relationships with key decision-makers is crucial for a lobbyist’s success. A typical day may involve reaching out to new contacts, following up with existing ones, or attending social events to strengthen connections with lawmakers and their staff.
  5. Coordinating with clients and coalition partners: Lobbyists often collaborate with their clients and other organizations to develop joint strategies, share information, and coordinate lobbying efforts. This can involve conference calls, strategy meetings, or other forms of communication throughout the day.
  6. Preparing materials and presentations: Lobbyists spend time researching, writing, and preparing materials such as position papers, fact sheets, or policy briefs to support their advocacy efforts. They may also prepare presentations for meetings, briefings, or other events.
  7. Engaging in grassroots lobbying: Lobbyists may work on mobilizing public support for their clients’ positions by coordinating letter-writing campaigns, social media initiatives, or public demonstrations. This can involve reaching out to supporters, drafting messaging, or organizing events.
  8. Reporting and compliance: Lobbyists are required to comply with various lobbying laws and regulations, such as registration and disclosure requirements. They may spend part of their day ensuring that they are meeting these obligations and documenting their lobbying activities.
  9. Reflecting and strategizing: At the end of the day, lobbyists often take time to reflect on their activities, assess their progress, and plan for future efforts. This may involve reviewing notes from meetings, evaluating the effectiveness of their strategies, and setting goals for the days ahead.

Keep in mind that this is just a general overview, and a lobbyist’s daily activities can vary significantly depending on their clients, policy issues, and the legislative calendar. However, the core aspects of a lobbyist’s work typically revolve around relationship-building, information gathering, and communication with lawmakers and stakeholders.

Do-It-Yourself Lobbying

Do-It-Yourself Lobbying 150 150 Jonathan Poland

Yes, it is possible to lobby the government without hiring a professional lobbyist. Lobbying, in its essence, involves advocating for a specific cause, policy, or legislation and attempting to influence government officials to support that position. While professional lobbyists have specialized knowledge, experience, and connections that can help advance an organization’s or individual’s interests, there are alternative ways to engage in lobbying activities without hiring a lobbyist:

  1. Direct contact with government officials: Individuals and organizations can contact their elected representatives, such as members of Congress or local officials, to express their opinions and advocate for specific policies or legislation. This can be done through phone calls, emails, letters, or in-person meetings.
  2. Grassroots lobbying: Grassroots lobbying involves mobilizing a group of individuals, such as constituents or supporters, to advocate for a specific issue or policy. This can include organizing letter-writing campaigns, phone banks, or social media campaigns to generate public support and encourage government officials to take action.
  3. Coalition building: Forming alliances with other organizations or groups that share a common goal or interest can help amplify your message and increase your influence. By working together, these coalitions can engage in joint lobbying efforts, pooling their resources and expertise to more effectively advocate for their shared interests.
  4. Public advocacy: Raising public awareness about a specific issue or policy can help generate public support and pressure government officials to take action. This can include publishing op-eds or articles in newspapers, engaging in social media campaigns, or organizing public events such as rallies or protests.
  5. Participating in public comment periods: Many government agencies solicit public input on proposed regulations or policies through public comment periods. Individuals and organizations can submit written comments or attend public hearings to express their views and advocate for specific changes or actions.

While it is possible to lobby the government without hiring a professional lobbyist, doing so may require additional time, effort, and resources to research issues, develop effective strategies, and engage with government officials. Additionally, it may take longer to build relationships and gain influence, particularly for individuals or organizations that are new to the lobbying process. Nonetheless, engaging in lobbying activities without a professional lobbyist can be an effective way to advocate for your interests and influence government decision-making.

Choosing the Right Lobbyist

Choosing the Right Lobbyist 150 150 Jonathan Poland

First, determining whether hiring a lobbyist is right for your company depends on several factors. Consider the following questions to help make an informed decision:

  1. Legislative or regulatory issues: Are there any upcoming or existing legislative or regulatory issues that could significantly impact your business? If so, a lobbyist may help represent your interests and influence decisions in your favor.
  2. Budget: Can your company afford to hire a lobbyist? Lobbyists can be expensive, so consider the potential return on investment (ROI). Weigh the cost of lobbying against the potential benefits, like advantageous legislation or avoiding negative regulations.
  3. Time and resources: Does your company have the time and resources to engage in lobbying efforts? If you lack the capacity to manage these efforts internally, hiring a lobbyist might be a good option.
  4. Industry presence: Are your competitors or industry peers engaging lobbyists? If so, it may be important to have a voice in the legislative process to ensure a level playing field.
  5. Complexity of the issues: Are the issues your company faces complex and require specialized knowledge to navigate? Lobbyists often have expertise in specific policy areas and can help you better understand and address these issues.
  6. Existing relationships: Does your company have established relationships with policymakers or regulators? If not, a lobbyist can leverage their network to help you gain access to key decision-makers.
  7. Reputation and public perception: How might hiring a lobbyist impact your company’s reputation and public perception? Be mindful of potential backlash, as lobbying can sometimes be seen as controversial.
  8. Long-term strategy: Is engaging in lobbying efforts aligned with your company’s long-term strategic goals? Consider how lobbying fits into your overall business strategy and objectives.

If, after considering these factors, you believe that hiring a lobbyist would be beneficial for your company, take the time to research and select a lobbyist with expertise in your industry and a strong track record of success.

Here are some factors to consider when deciding if hiring a lobbyist is right for your company:

  • The size and scope of your business: If you are a small business, you may not need to hire a lobbyist. However, if you are a large business with operations in multiple states or countries, hiring a lobbyist can help you stay informed about and influence government policy that affects your business.
  • The industry you are in: Some industries are more heavily regulated than others. If you are in an industry that is heavily regulated, such as healthcare or finance, hiring a lobbyist can help you navigate the regulatory landscape and advocate for policies that are favorable to your business.
  • The specific issues you are facing: If you are facing a specific issue that is affecting your business, such as a new regulation or a tax increase, hiring a lobbyist can help you communicate your concerns to policymakers and advocate for solutions that are favorable to your business.
  • Your budget: Hiring a lobbyist can be expensive. You need to make sure that you have the budget to hire a qualified lobbyist and cover the costs of their services.

If you decide to hire a lobbyist, it is important to do your research and hire a reputable firm with experience in your industry. You should also be clear about your expectations and goals so that you can get the most out of your relationship with your lobbyist.

Here are some additional tips for hiring a lobbyist:

  • Ask for referrals from other businesses in your industry. This is a great way to get recommendations for reputable lobbyists who have a track record of success.
  • Interview multiple lobbyists before making a decision. This will give you a chance to compare their experience, qualifications, and fees.
  • Make sure the lobbyist you hire is a good fit for your company. The lobbyist should be familiar with your industry and your specific needs. They should also be someone you can trust and work with effectively.
  • Get everything in writing. Before you hire a lobbyist, be sure to get everything in writing, including the scope of work, fees, and expectations. This will help avoid any misunderstandings down the road.

The Importance of Lobbying

The Importance of Lobbying 150 150 Jonathan Poland

Lobbying is the act of influencing or attempting to influence the decisions of government officials, legislators, or regulators on behalf of an individual, organization, or group. Lobbyists advocate for specific policies, legislation, or regulations that can benefit their clients or advance their clients’ interests.

Lobbying activities can take various forms, including:

  1. Direct lobbying: This involves meeting with government officials, legislators, or regulators to present information, arguments, or proposals in favor of a particular policy, law, or regulation. Direct lobbying can also include providing written materials, such as policy briefs, research reports, or position papers, to support the client’s interests.
  2. Indirect or grassroots lobbying: This type of lobbying involves mobilizing public support for a particular issue or policy. Lobbyists may engage in activities such as organizing letter-writing campaigns, generating public comments on proposed regulations, or coordinating public demonstrations to influence policymakers.
  3. Coalition building: Lobbyists can work to build alliances and partnerships with other organizations, groups, or individuals who share similar interests or policy objectives. These coalitions can pool resources, share information, and collaborate on joint lobbying efforts to increase their collective influence.
  4. Monitoring and analysis: Lobbyists often track legislative or regulatory developments related to their clients’ interests, providing analysis and updates on potential impacts and opportunities for advocacy.
  5. Educating stakeholders: Lobbyists may organize educational events, briefings, or presentations to inform government officials, legislators, or regulators about specific issues, industry trends, or policy proposals.

Lobbying is a common and legal practice in many democratic countries, and it is an important part of the political process.. However, it is subject to various rules and regulations, such as registration requirements, disclosure rules, and ethical guidelines, to promote transparency and prevent undue influence or corruption.

Lobbying is important because it allows citizens and interest groups to have a voice in the government. It helps to ensure that government policies reflect the needs and interests of all citizens, not just those of the wealthy and powerful. Lobbying is important for several reasons, as it plays a crucial role in the functioning of democratic systems and the decision-making process:

  1. Expertise and information: Policymakers may not have in-depth knowledge or expertise in every issue they need to address. Lobbyists can provide valuable information, research, and insights to help inform their decisions. This can lead to better policy outcomes and more effective regulations.
  2. Representation of interests: Lobbying allows various groups, organizations, and individuals to express their views and interests to decision-makers. This ensures that a wide range of perspectives are considered when formulating policies, fostering a more inclusive and balanced decision-making process.
  3. Advocacy for marginalized groups: Lobbying can give a voice to underrepresented or marginalized groups, helping to ensure that their concerns and needs are considered in the policymaking process. This can contribute to greater social equity and justice.
  4. Facilitating dialogue and negotiation: Lobbying can facilitate communication and dialogue between different stakeholders, including government officials, industry representatives, and advocacy groups. This can lead to the negotiation of compromises and the development of more balanced and effective policies.
  5. Accountability and transparency: Lobbying activities are subject to various regulations and disclosure requirements in many democratic systems. This can help promote transparency, accountability, and ethical conduct in the lobbying process, ensuring that policymakers and the public are informed about the influence of various interest groups.
  6. Checks and balances: Lobbying can serve as a check on the power of government by allowing interest groups to challenge and influence policy decisions. This can help to prevent the concentration of power and ensure that a diversity of interests are considered in the decision-making process.

However, lobbying can also be abused. Some lobbyists use their influence to promote special interests at the expense of the public good. They may try to influence legislation that will benefit their clients, even if it is not in the best interests of the public.

It is important to be aware of the potential for abuse when it comes to lobbying. It is also important to remember that lobbying is a legitimate part of the political process. It is a way for citizens and interest groups to have a voice in government.

Lobbying is Hard Work

The hardest part of a lobbyist’s job can vary depending on individual experiences and circumstances, but some common challenges include:

  1. Gaining access to decision-makers: Building relationships with lawmakers, government officials, and their staff is crucial for effective lobbying. However, gaining access to these individuals can be difficult, particularly for lobbyists who are new to the field or representing less influential clients.
  2. Overcoming opposition: Lobbyists often face opposition from competing interest groups, policymakers, or the public, which can make it challenging to advance their clients’ interests. Crafting persuasive arguments and strategies to counter opposition can be a demanding aspect of their job.
  3. Staying informed: Keeping up with legislative, regulatory, and policy developments is essential for lobbyists to be effective advocates for their clients. With the rapid pace of change and the complexity of many policy issues, staying informed can be a challenging and time-consuming task.
  4. Managing multiple clients and priorities: Many lobbyists work with multiple clients and must balance competing priorities, deadlines, and goals. This can make time management and organization particularly challenging.
  5. Navigating complex political landscapes: Understanding the nuances of political dynamics, legislative processes, and policy issues is critical for successful lobbying. Navigating these complexities can be difficult, especially when dealing with highly polarized or contentious issues.
  6. Maintaining credibility and trust: Establishing and maintaining credibility with decision-makers is essential for lobbyists. This can be challenging, particularly when working on controversial issues or representing clients with conflicting interests.
  7. Adapting to changing circumstances: The political and policy environment can change rapidly, requiring lobbyists to adapt their strategies and tactics quickly. This can be challenging, especially when dealing with unexpected events or shifts in the political landscape.
  8. Ethical considerations: Lobbyists must navigate various ethical considerations, such as avoiding conflicts of interest, maintaining transparency, and adhering to lobbying regulations. Balancing these ethical concerns with the need to effectively advocate for their clients can be difficult.
  9. Measuring success: Assessing the effectiveness of lobbying efforts can be challenging, as success may be difficult to quantify, and outcomes can be influenced by numerous factors beyond the lobbyist’s control. This can make it hard to evaluate their work and demonstrate their value to clients.

Despite these challenges, many lobbyists find their work to be rewarding and fulfilling, as it allows them to play a crucial role in shaping public policy and advancing the interests of their clients.

Working with Congressional Staffers

Communicating effectively with congressional staffers is crucial for building relationships and advancing your policy goals. Here are some strategies to help you communicate effectively with congressional staffers:

  1. Be respectful and professional: Treat congressional staffers with respect, and always maintain a professional demeanor. Staffers are often extremely busy, so be concise and to the point in your communications.
  2. Do your research: Understand the legislator’s policy positions, committee assignments, and previous voting records. Familiarize yourself with the staffer’s role and responsibilities within the office. This background knowledge will help you tailor your communication effectively.
  3. Make a connection: If possible, find a common ground or shared interest with the staffer, such as a mutual acquaintance or a connection to their home district. This can help build rapport and make your communication more memorable.
  4. Be clear and concise: Clearly articulate your issue or request, and provide specific details or examples to support your position. Staffers have limited time, so avoid lengthy explanations and focus on the most important points.
  5. Offer resources and support: Provide relevant materials, such as fact sheets, policy briefs, or research reports, to support your position. Offer yourself as a resource for additional information or expertise on your issue.
  6. Be timely and responsive: If you are discussing a pending piece of legislation or upcoming vote, be sure to communicate in a timely manner. Respond promptly to any requests for information or follow-up from the staffer.
  7. Follow up: After your initial communication, follow up with a thank-you note, email, or phone call to express your appreciation for their time and attention. This can help maintain the relationship and keep your issue on their radar.
  8. Use appropriate communication channels: Consider the most appropriate method of communication for your message. Phone calls, emails, and in-person meetings all have their place, but be mindful of the staffer’s time and preferences.
  9. Engage in relationship-building activities: Attend events, such as town halls or policy briefings, where congressional staffers may be present. Engage with them on social media or through email newsletters to stay connected and informed.
  10. Be patient and persistent: Building relationships with congressional staffers takes time and persistence. Keep communicating your message and demonstrating your commitment to your issue, but also be respectful of the staffer’s time and other responsibilities.

By employing these strategies, you can effectively communicate with congressional staffers, build relationships, and increase your chances of successfully advocating for your policy goals.

The World’s Biggest Customer

The World’s Biggest Customer 150 150 Jonathan Poland

the U.S. government is the world’s biggest customer, spending over $6 trillion annually on goods and services. Here are some statistics to support this claim:

  • The U.S. government is the largest purchaser of goods and services in the world, accounting for over 20% of global government spending.
  • The U.S. government spends more on goods and services than the next 10 countries combined.
  • The U.S. government is the largest employer in the world, with over 2 million civilian employees, and over 1.3 million active-duty military personnel, plus more than 800,000 reserve and National Guard members.
  • The U.S. government is the largest purchaser of technology in the world, accounting for over 50% of global government technology spending.
  • The U.S. government is the largest purchaser of energy in the world, accounting for over 20% of global government energy spending.

The U.S. government’s large size and spending power make it a major driver of the global economy. The government’s procurement decisions can have a significant impact on the fortunes of businesses large and small.

  1. Budget: In fiscal year 2021, the U.S. federal budget was approximately $6.8 trillion. This includes both mandatory spending, such as Social Security and Medicare, and discretionary spending, such as defense and non-defense programs.
  2. Defense spending: In 2021, the United States had a defense budget of about $740.5 billion, making it the world’s largest military spender. The U.S. military budget accounted for more than one-third of global military spending.
  3. Federal procurement: The U.S. government spent roughly $600 billion on procurement in 2020, purchasing goods and services from various industries, including defense, healthcare, technology, and infrastructure.
  4. Federal workforce: As of 2020, the U.S. federal government employed about 2.1 million civilian workers and over 1.3 million active-duty military personnel. In addition, there were approximately 811,000 reserve and National Guard members.
  5. Grants: In fiscal year 2020, the U.S. federal government awarded more than $750 billion in grants to state and local governments, nonprofits, and other organizations to fund various programs and initiatives.

In 2022, the federal government spent a record-breaking $159 billion on contracts with small businesses. This represents 27.2% of all federal contracting dollars, and is an increase of $13 billion from the previous year.

The federal government has a number of programs and initiatives in place to support small businesses, including the Small Business Administration (SBA), which provides loans, grants, and other forms of assistance to small businesses. The SBA also offers a variety of programs to help small businesses compete for federal contracts, including the 8(a) Business Development Program, which provides contracting opportunities to small businesses owned by socially and economically disadvantaged individuals.

If you are a small business owner, there are a number of things you can do to increase your chances of winning federal contracts. First, make sure you are registered with the SBA and that you have a DUNS number. Second, familiarize yourself with the federal contracting process and the requirements for bidding on contracts. Third, network with government officials and other small businesses that have been successful in winning federal contracts. Finally, be persistent and don’t give up. Winning a federal contract can be a challenge, but it is possible for small businesses to succeed in the government marketplace.

Durable Competitive Advantage

Durable Competitive Advantage Jonathan Poland

The most important aspect of durability is market fit. Unique super simple products or services that does change much if at all over time and that do not need continuous investment to stay relevant are always better than the opposite. In some industries this is impossible to do. How to spot these kind of businesses? Here are some core traits to look out for.

One.
Check the following strategic metrics against your industry or sector to see whether or not you have a competitive advantage.

  • Sell a product or a service that is a basic necessity
  • Be the first capture a lot of market share
  • Operate in a large industry with little competition
  • Sell a unique product that doesn’t change much
  • Provides a unique service that’s difficult to replicate
  • Be the low cost producer and/or seller of basic necessities

Two.
Check the following financial metrics against your industry or sector to see whether or not you have a competitive advantage.

  • High Margins
  • Low R&D Costs
  • Accumulation of cash
  • Consistent Growth in Sales
  • Consistent Growth in Earnings
  • Inventory rising with revenue
  • Low to No Debt
  • Retained Earnings Growth
  • Book Value (Equity) Growth

Three.
When a business has a competitive advantage, their valuations are higher. Here are the factors used in that valuation.

  • Weighted forecasts of growth in company revenue
  • Weighted forecasts of growth in company margin
  • Patterns of cash returned to shareholders
  • Changes in the company’s debt-to-equity ratio
  • The economic conditions in the company’s industry
  • Market volatility in the geographic areas in which the industry’s major companies compete

How?

There are several ways companies can create durable competitive advantages:

Innovation:
A company that consistently develops innovative products or services that consumers want can gain a competitive advantage. Apple, for example, gained a competitive advantage through the continual development and improvement of products like the iPhone, iPad, and MacBook.

Cost Leadership:
A company can gain a competitive advantage by becoming the lowest cost producer in its industry. By leveraging economies of scale, efficient operations, or lower raw material costs, it can offer goods at lower prices, thereby attracting cost-sensitive customers. Walmart is an example of a company that uses cost leadership as a strategy.

Differentiation:
Companies can also create a competitive advantage by offering a unique product or service that competitors cannot easily replicate. Differentiation can be based on design, brand, technology, customer service, or other features that add value for customers. An example of this strategy is Tesla with their electric cars and superior battery technology.

Strong Brand and Reputation:
A strong brand can provide a significant competitive advantage. Brands like Coca-Cola, Nike, and Google have a strong brand reputation which provides a competitive advantage. The power of their brands gives these companies the ability to charge higher prices for their products and services and ensures customer loyalty.

Switching Costs:
High switching costs can also provide a competitive advantage. If it’s costly, time-consuming, or inconvenient for customers to switch to a competitor’s product, a company can maintain a competitive advantage. Software companies that offer cloud-based services often have high switching costs. For example, it would be a significant undertaking for a company to switch all its operations from Microsoft Office 365 to a different productivity suite.

Network Effects:
Network effects occur when a company’s product or service becomes more valuable as more people use it. This can create a significant barrier to entry and a competitive advantage. Facebook and other social media companies are prime examples of firms that benefit from network effects.

Access to Key Distribution Channels:
If a company has privileged access to key distribution channels, it can prevent or make it harder for competitors to reach the same customers, thus establishing a competitive advantage.

Patents and Intellectual Property (IP):
Companies can also build a competitive advantage by owning patents, trademarks, copyrights, or trade secrets that prevent others from copying their products or services. Whether protected by law or secret sauce (i.e. Coca-cola), this can help brand the business as it puts a stamp of exclusivity on it. Of course, legal protection doesn’t mean what you do is relevant or necessary to the market. Many companies have trademarks, copyrights, and patents even at the small business level, which never amount to competitive advantage.

It’s important to note that the success of these strategies often depends on a company’s ability to execute effectively, and each approach comes with its own set of challenges and risks. A sustainable competitive advantage requires ongoing efforts to maintain and build upon these strategies over time.

The Power of Compound Interest

The Power of Compound Interest Jonathan Poland

Traditional finance will explain compound interest as the interest paid on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods. However, it is also the rate of return on an investment like a stock or real estate purchase.

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When interest is compounded on an investment, the interest earned in one period is added to the principal, so that the interest earned in the next period is based on a larger amount. The more frequently interest is compounded, the greater the amount of interest earned over a given period of time. For example, if an investment earns an annual interest rate of 5%, the interest earned in the first year is $50 on a $1,000 deposit. If interest is compounded annually, the deposit will be worth $1,050 at the end of the first year. If interest is compounded semi-annually, the deposit will be worth $1,025 after six months and $1,051.25 after one year.

Historically, home ownership has produced around 5% a year while the S&P 500 has generated around 10%. Over time, that 5% difference per year adds up to an incredible advantage for stock ownership over home ownership. Let’s just use the average mortgage term of 30 years at 5%. Let’s just say you pay cash for your house and it costs $300,000. In 30 years, with the historic compound interest rate at 5% for real estate, that home appreciates to $1.3 million. Do the same investment amount at 10% for an investment in the S&P 500 and that asset appreciates to $5.2 million. The difference is stark and significant. Let’s say you get 20% a year… that investment now becomes $71 million. Let’s say you get 30% a year… that investment now becomes worth $785 million. You get it.

There are a few key factors to consider when calculating compound interest:

  • Principal: The initial amount of money that is invested or borrowed.
  • Interest rate (or) Rate of Return: The percentage of the principal that is charged as interest.
  • Compounding frequency: How often the interest is added to the principal (e.g., annually, semi-annually, quarterly, monthly, daily, etc.).
  • Time: The length of time over which the interest is calculated.

In conclusion, Compound interest is the interest on interest, it can grow the investment at an exponential rate and can be favorable for both borrowers and savers. The calculation of compound interest depends on the principal, Interest rate, compounding frequency and time. There are many online calculators available to help with the calculation.

Austrian Economics 101

Austrian Economics 101 Jonathan Poland

Austrian economics is a school of economic thought that originated in Austria in the late 19th century with Carl Menger, professor of political economy at the University of Vienna from 1873 to 1903. Later Fredrick Hayek, Ludwig von Mises, and Murray Rothbard would demonstrate the mastery Austrian style of analysis can have over today’s economy.

The theory is based on the idea that individuals, rather than governments or other large organizations, are the primary drivers of economic activity. Austrian economists believe that prices, wages, and other market signals reflect the underlying value of goods and services, and that these prices should be allowed to adjust freely in response to changes in supply and demand. They also place a strong emphasis on the role of entrepreneurship and innovation in driving economic growth. Austrian economics is often associated with classical liberalism and libertarianism, and it has influenced a number of economic theories and policies.

Some Axioms:

  • Human Action – All humans seek to improve their situation from their viewpoint.
  • Action Scarcity – The factors available for improving human’s situations are scarce.
  • Human Fallibility – Humans make mistakes.
  • Human Rationality – All humans are rational beings.
  • Action Time – All human actions take time.
  • Action Consequences – All human actions have consequences.
  • Action Choices – Humans choose those actions they believe will best improve their situation.
  • Action Ideas – The ideas human’s hold determine their actions.

Two important modern theorists in the Austrian school are Ludwig von Mises and Friedrich von Hayek. Mises received widespread attention from other economists in the 1920s with his challenge that socialism was totally impossible in a modern economy because of its lack of market prices, for him the indispensable means of rational resource allocation. Both Mises and Hayek have contributed significantly in molding the Austrian theory into an integrated whole. Their explanation of cyclical swings in business as resulting from uncontrolled credit expansion at the hands of government added another significant block to the Austrian structure.

Business Goals

Business Goals Jonathan Poland

Business goals are targets that an organization sets for itself in order to improve its overall strategy and performance. These goals are typically designed to increase profitability and enhance competitive advantage.

There are several types of business goals that organizations may set, including financial goals, such as increasing revenue or profitability; customer-related goals, such as improving customer satisfaction or loyalty; and operational goals, such as increasing efficiency or productivity.

In order to achieve these goals, organizations must develop and implement a strategic plan. This process involves conducting a thorough analysis of the organization’s internal and external environments, identifying opportunities and challenges, and setting specific, measurable, achievable, relevant, and time-bound (SMART) goals.

Once the goals have been set, organizations must work to implement and execute the strategic plan, which may involve making changes to business processes, allocating resources, and setting performance targets.

Effective goal setting and strategic planning are crucial for the success of any organization. By setting clear and achievable goals, and developing a comprehensive plan to achieve them, organizations can improve their overall performance and increase their chances of long-term success. The following are illustrative examples of measurable business goals.

Revenue

A farmer targets revenue of $400,000 with a strategy to plant several high value crops.

Overhead Cost

A company plans to reduce software licensing costs by $1.1 million by retiring a legacy system.

Gross Margins

A cafe has a goal to increase gross margins from 30% to 35% by introducing higher price menu items such as specialty coffees.

Unit Cost

An organic cereal company plans to reduce unit costs by 10% by directly purchasing several key ingredients from organic farmers.

Market Penetration

A snowboard manufacturer establishes a target of 10% market penetration with a pricing strategy designed to offer low prices to price sensitive customers.

Sales Volume

An ice cream company plans to increase summer sales volumes to 14 million units a month by expanding sales into the Mexican market with a distribution partner.

Customer Acquisition Cost

An air conditioning maintenance company plans to reduce customer acquisition cost to $1000 per contract with a sales partnership with a building management firm.

Customer Lifetime Value

An airline seeks to improve customer lifetime value to $144000 for its elite members by expanding its services at airport lounges.

Customer Churn

A cloud platform seeks to reduce customer churn to 3% for small business customers by reducing bandwidth costs that are often cited by customers as the reason they are closing their account.

Conversion Rate

A streaming music service has a goal to improve its conversion rate for website visitors signing up for an account to 3% by accepting more payment methods.

Leads

A house builder has a goal to generate 400 leads for a new development project with advertising and the launch of a local sales office.

Win Rate

A software company has a goal to improve its proposal win rate to 50% by recruiting talented sales people.

Customer Profitability

A cloud computing provider seeks to improve the value of a government contract to $66 million per year by providing value added services in areas such as security management.

Share of Wallet

An information security company seeks to improve its share of wallet to 40% for large accounts by offering a line of infrastructure products.

Productivity Rate

A software development company seeks to improve its average lines of code per day with a program that lets developers work from home three days a week if they meet productivity and quality targets.

Efficiency Rate

A bank seeks to improvement its data center infrastructure efficiency to 65% with a new cooling strategy. Data center infrastructure efficiency is the percentage of energy at a data center that is used for computing as opposed to other facility uses such as cooling.

Throughput

A bank that plans to improve the throughput of a mortgage application process from 440 application reviews a day to 880.

Cycle Time

A company targets improvement in the cycle time of order-to-delivery to an average of 47 hours.

Time to Market

A product development initiative at a bank targets a 6 month time to market for a new mortgage product.

Time to Volume

An electronics firm targets a time to volume for an innovative new camera lens of one year and one million units.

Figure of Merit

A solar panel company seeks to improve its cost per watt to $0.29 with new designs and manufacturing methods.

Diversification

A manufacturer of ceiling fans plans to diversify its product line with a number of lighting products with a target to generate 25% of revenue from the new product line within 3 years.

Customer Satisfaction

A telecom company targets a customer satisfaction rate of 55% from 35% by removing unpopular contract terms.

Customer Ratings

A hotel seeks to improve its ratings on a popular travel site from 3.2 to 4.0 by addressing the top 3 complaints in reviews with new services and policies such as a later check out time and cheaper flat rate parking prices.

Customer Loyalty

A brand of coffee targets 1 million loyal customers with a plan to aggressively position their product as the cheapest high quality organic coffee on the shelves.

Churn Rate

A software platform plans to fix several bugs and remove unpopular features to improve monthly churn rate from 4% to 2%.

Brand Recognition

A dentist advertises their clinic all over town with a target of achieving 20% top of mind brand recognition for local dentists.

Brand Image

A technology firm does a rebranding and promotional campaign to break its association with a legacy technology and establish an more modern brand image. The goal is for brand recall of 30% for the produce category software as a service.

Employee Satisfaction

An insurance company seeks to improve new employee satisfaction to 80% with a more extensive onboarding process.

Employee Retention

A restaurant owner seeks to improve one year employee retention to 80% by offering more consistent and predictable shift scheduling.

Employee Performance

A graphic design company seeks to improve employee performance with a series of training workshops. They will measure performance improvement in terms of client satisfaction with a target of 90%.

Return on Investment

A factory is expanding from two production lines to three with a target return on investment of 1400%.

Payback Period

A telecom company builds a new data center with a goal to achieve payback within 4 years.

Occupancy Rate

A hotel is investing in room renovations to improve customer satisfaction and ranking of the hotel on travel sites. The goal is to improve its occupancy rate to 94% and average price per night to $200.

Availability

A SaaS app targets uptime of 99.99% with architecture and infrastructure upgrades.

Load Time

A fashion brand redesigns its website with a target of a 3 second average load time.

User Engagement

A streaming media service seeks to improve its average user engagement to 11 hours a month by introducing new children’s shows.

Mean Time to Repair

A telecom service provider targets a mean time to repair of 35 minutes.

Returns

A manufacturer of men’s shirts has a goal to reduce returns from 18% to 5% by improving the quality of materials to produce shirts that are more opaque and less likely to wrinkle.

Risk

An airline plans to measure risk probability and risk impact for its legacy IT systems and reduce that risk by $4 million over five years with modernization projects.

Sustainability

A fashion brand plans to improve positive perceptions of its brand by switching to 100% sustainable materials that are responsibly sourced, have low environmental impact and are renewable.

Strategic Communication

Strategic Communication Jonathan Poland

Strategic communication is the deliberate planning, dissemination, and use of information to influence attitudes, beliefs, and behaviors. It is a crucial aspect of successful organizations, as it helps to align the actions and messages of the organization with its goals and values.

There are three main types of strategic communication: internal communication, external communication, and online/digital communication.

Internal communication refers to the communication within an organization, including communication between departments and between management and employees. Effective internal communication is important for building trust and ensuring that all members of the organization are informed and aligned with the company’s goals and objectives.

External communication refers to the communication between an organization and its external stakeholders, such as customers, investors, and the media. Effective external communication helps to build and maintain relationships with these stakeholders and manage their expectations.

Online/digital communication refers to the use of digital platforms and channels, such as social media and websites, to communicate with stakeholders. In the digital age, it is important for organizations to have a strong online presence and to effectively use digital channels for communication.

To plan and implement effective strategic communication, organizations should follow a process that includes identifying communication goals and objectives, conducting audience analysis, developing messages, choosing appropriate channels of communication, and evaluating and providing feedback.

There are several challenges that organizations may face in strategic communication, such as managing crisis communication, dealing with conflicting messages, maintaining consistency in messaging, and managing internal and external stakeholder expectations.

To overcome these challenges and effectively communicate with stakeholders, organizations should follow best practices such as developing a clear and consistent brand message, being transparent and authentic in communication, engaging with stakeholders and building relationships, using a variety of communication channels and platforms, and continuously evaluating and adjusting communication strategies.

In conclusion, strategic communication is an essential aspect of successful organizations, as it helps to align the actions and messages of the organization with its goals and values. Effective strategic communication requires careful planning and consideration of various factors, including the audience, message, and channels of communication. While there can be challenges in strategic communication, following best practices such as being transparent and consistent, engaging with stakeholders, and using a variety of communication channels can help to overcome these challenges.

The following are illustrative examples.

Candor

Being open, honest and forthcoming with your stakeholders as a matter of principle. For example, a solar panel manufacturer that communicates a quality problem to customers, investors and regulators in a straightforward manner. This can earn a firm respect and trust.

Strategic Silence

Strategic communication can include efforts to keep secrets from external stakeholders. For example, customers may delay purchases if they know a vastly improved version of a product is soon to be released. As such, a firm may have incentives to keep product releases secret until shortly before launch.

Defensive Publication

Defensive publication is the practice of releasing public details of things you don’t want your competition to patent. For example, a firm that develops a new speaker design may release details that serve as prior art that prevent competitors from patenting the idea.

Propaganda

Propaganda is manipulative use of communication to influence. For example, a firm that spreads disinformation to undermine public support for environmental regulations.

Fear, Uncertainty and Doubt (FUD)

Communication that aims to create fear, uncertainty and doubt about the competition. This strategy was historically used by large IT firms whereby salespeople would imply that customers who choose products from smaller competitors often end up getting fired for this decision. This was so common that it became a truism in the phrase “Nobody ever got fired for choosing (fill in large firm name)”

Embrace, Extend & Extinguish

Embrace, extend and extinguish is the dubious strategy of embracing a smaller competitor or open standard only to lead them to ruin in the long term. For example, a large IT company that voices support for an open source technology but then help to lead the project in ways that cause it to fail.

Striking Fear Into the Hearts of the Competition

Striking fear into the hearts of the competition is the practice of communicating strategies that are intended to draw a competitive response. For example, a firm that announces a future product capability that would change everything in an industry. This may cause the competition to waste resources chasing this capability when it may not be feasible. This can be interpreted as illegal in some situations — particularly if you mislead investors by implying that you will do something wonderful in future when you have no serious intention to do so.

Self-Fulfilling Prophecy

An effort to change things by communicating a vision such that it becomes more likely to become reality. For example, an early pioneer of electric vehicles who communicates a vision that sparks other firms to invest in the technology creating momentum for a technology that requires massive infrastructure changes to be successful.

Engagement

Seeking to engage stakeholders such as lead users. For example, a technology firm that pitches its platform at developer’s conferences to increase adoption.

Brand Image

Promoting a brand image. For example, a CEO who communicates wild ideas about the future to promote the image of a firm as being innovative.

Brand Recognition

Communication that is simply intended to create recognition of your brand name and symbols in the minds of your target audience. This is based on the tendency for customers to simply buy what they recognize.

Public Relations

Public relations is the process of communicating to stakeholders such as investors, employees, partners, communities and regulators. For example, a firm that seeks to create positive investor sentiment by communicating efficiency improvements.

Change Management

Internal communications design to build momentum for change.

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