Isaac Mostovicz writes...
In my previous article I discussed De Beers’ new initiative that targets the married couple. However, while this approach is new to De Beers, my partner Randy Pearson and I have claimed for years that the married couple is the natural customer for diamonds.
Recently, we created a boutique operation, Kahro Diamonds in Raleigh North Carolina that is exclusively designed for the married couple. I am aware that not everyone can visit us and learn first-hand how to serve the married couple. Therefore, I created a short list of ideas that might help my colleagues serving the married couple better. The most important point to keep in mind in the following is that the married couple has needs that are fundamentally opposed those of the engagement ring customer.
- Don’t educate. Listen! Since the introduction of the faulty 4C’s concept the sentence every diamond customer will constantly hear is “you need education”. My dear colleagues, stop educating your customer and feeding him faulty information. He is already educated. All you need to do is to listen to him. The customer knows what he wants and needs – though most of the time, his language is different. Listen to him and try to understand what he wants.
- Find out the job of the diamond! As Professor Clayton M. Christensen puts it, customers want to “hire” a product to do a job. Figure out what job the diamond is being hired for. A customer who looks to propose marriage is looking for a diamond to do a totally different job than the one who hires a diamond to celebrate his mutual bond with his spouse. Do you know what job the married couple is hiring their diamond for? Do you know how to satisfy that precise need?
- Don’t confuse the customer! Remember that the customer is looking for one diamond only. Why do you confuse him with an endless list of diamonds that even you don’t really know how to choose from? Why confusing him with the useless letter soup that the 4C’s approach entails? Why depend on diamond “certificates” that don’t certify anything, especially when the paper contains a lot of meaningless information? By the way, do you know what is essential and what is superfluous on the diamond grading report? Spend as much time as necessary to figure out, together with your customer, what diamond you should look for to satisfy his needs.
- Don’t run a circus! I am referring here to the visual aspect of any typical jewelry store. Usually, jewelry stores heavily invest in the show. They tend to be large, with a lot of merchandise on display and, the owners hope, crowded. These stores are noisy, both aurally and visually, and make the customers feel as if they are in a jewelry-story version of the three-ring arena of Barnum & Bailey. They don’t know which show to watch and adding to confusion, all three rings seem to offer a similar show. Noise and glitter might appeal to those whose communication style is shouting over the noise of the dancing floor. Married couples look for a relaxed, quiet and warm venue. Can you create this atmosphere in your store?
Kahro Diamonds follows these guidelines and more. After all, it does serve the married couple. My best advice is to visit this boutique operation in Raleigh, North Carolina. Simply contact Kahro Diamonds at Raleigh@kahrodiamonds.com or 919- 649-6528. But, if you cannot pay a visit, at least you should think on how to apply these rules in your store. It took us years to fine-tune our strategy. You should start revisiting your approach now.
Isaac Mostovicz writes...
Over the past decade the financial situation of the diamond industry has badly deteriorated. As I said here, this is because the industry lost all contact with its customers. However, there is hope for revival if the industry will leverage recent developments to its own benefit.
Seven years ago, I participated in an emergency meeting organized by the leaders of the diamond industry. The industry had arrived at a standstill and banks refused to bankroll its operations anymore. This did not surprise me. For ten years preceding this, I had been warning my colleagues that this catastrophe was imminent. At this meeting I was challenged to present a plan to put the industry back on track.
Seven years passed and the industry went from bad to worse. The lack of cash flow is so severe that De Beers saw its first-half 2015 sales plummet by 21%. Worse, customers of De Beers have the right to defer 75% of the goods allocated to them for six months following the sale.
Nevertheless, I see a light at the end of this tunnel. Recently, De Beers has announced a holiday marketing campaign to increase consumer demand for diamond jewelry. Described as a “call to action” advertising campaign, it will target men purchasing diamond jewelry for their partners and is intended to “create a sense of urgency.” De Beers has finally recognized that the natural customer for diamonds is the married couple. Gone is the image it has cultivated over the past century of the young man on one knee, engagement ring in hand, as the ultimate diamond consumer.
For a long time, my partner Randy Pearson and I were aware of this truth. Over the years we have developed a marketing strategy that would fit the needs and wants of the married couple. Recently, we created a boutiqueoperation – Kahro Diamonds – in Raleigh North Carolina that is exclusively tailored to the married couple. We have created a unique toolbox founded on our extensive experience and supported by my academic research, which turns out to be diametrically opposed to the current best practices which are incompatible with the needs of a married couple.
Kahro Diamonds is a boutique operation, currently operating only in Raleigh, North Carolina. We welcome anyone wishing to learn more about serving married couples. Contact us at Raleigh@kahrodiamonds.com or 919- 649-6528. For those who cannot pay us a visit, I will publish some guidelines here to help you turn your business around.
Isaac Mostovicz writes...
We are irrational. After all, out motivation resides in our subconscious. We have passions and emotions that dictate our behavior and constantly overrule, block and blind our logic. Yes, we are human and that we are ashamed of it is human, too.
In spite of these obvious observations academia keeps on failing by trying to squeeze human behavior into this “logic” box. It tries to explain in logic terms why we behave in one way or another when the real answer is actually illogical and irrational.
I recently read an article by one of my favorite brand experts – Jean Noel Kapferer. Prof. Kapferer in his article addresses the challenge that luxury brands face when growth dilutes their luxury cachet. One key characteristics of luxury is rarity and when it is possible to find a product or brand all over it is not rare any longer, or this should the logic argument be.
I enjoy Prof. Kapferer because he has the knack for brands and luxury. In this article he actually explains what luxury is. I believe that he understands the term subconsciously and I have my doubt whether he paid attention to what he actually said. Here is the quote: “For centuries, luxury was limited to the happy few. It was the exclusive lifestyle of those in power: pharaohs; kings, queens, and their courts; and later merchants and industrialists. It was meant to express refined taste and impress crowds by the magnificence of the palaces, horse carriages, dresses, jewels, and so on.” It is a bit blurred but luxury is about unattainable dream. You can stay at Buckingham Palace but you’ll never turn into the Queen. All you can do is dreaming of it and that overnight staying allows you to dream more accurately. On the other hand, Ralph Lauren’s “value is created by prestigious retail stores made to resemble a mansion, materializing the American dream.” That’s the difference between prestige brands which allow people to materialize their dreams and true luxury which stay as a dream although it allow “excursionists” to experience how those legends live, sometimes on a regular basis and sometimes only for a short period. Luxury has a promise that you can enjoy the product and the brand but you’d never become the true elite – this will stay a dream.
Here is an example to what unfulfilled dreams are. In another publication of his, Strategic Brand Management, Prof. Kapferer points to that luxury brands, especially those named after the founder, Channel, Nina Ricci, YSL and so gain strength after the founder dies. Well, not always. However, Channel is a good example. Coco Channel did not create fashion – she was a fashion icon herself. She sold what she wore. You can buy a Channel outfit but you’ll never become Coco Channel, especially now when she died. That’s luxury.
Going to challenging issue of the above-mentioned article, it is clear that we need a psychological solution. Louis Vuitton, for example, would do best by promoting the legendary Louis who died long time ago. You cannot get his services for any price but you can dream on it. Louis Vuitton, the company would provide you with the closest-to-dream replica, you cannot get closer but you can have a more meaningful dream. If you hammer this message into people psyche you can mass sell your products. Irrational? Maybe but I believe that it will work.
Isaac Mostovicz writes...
I am happy to announce that Janus Thinking is now offering its first free webinar. The webinar’s title is, “Are you Really Serious when it Comes to Diamonds?” The webinar is an attempt to put together answers to questions I am constantly asked about. You can have flair of those questions when you visit Janus Thinking’s Facebook page. I was mainly asked to comment on three topics, general knowledge about diamonds, value and prices of diamonds and “blood diamonds”. While I might not cover all the questions I was recently asked I believe that the answers and discussion would be interesting and look at those questions from a novel angle.
The webinar will be of interest to all of you, whether diamonds are your topic or not. We will discuss issues such as marketing, luxury and behavior as well. You can send requests and questions prior to the webinar either by commenting here or to firstname.lastname@example.org.
Here are the details. The free webinar will be held on Tuesday, October 22nd, 20:00-21:00 Paris time, 19:00-20:00 London time, 2 PM- 3 PM New York time. Please register even when you cannot attend so I can send you a link to the webinar’s recording via email.
Please, click here for registering to the free webinar. Don’t forget to invite your friends as well.
Christopher Columbus estimated the globe to be smaller. However, even when we live nowadays in a global village we still did not succeed to cover over the time gap. I had to find a compromise between Europe and the US knowing that the gap of time is five hours or more.
I am looking forward to meeting you in two days.
Isaac Mostovicz writes...
Last week a friend of mine, Cristina de Azevedo Rosa, shared with me a very interesting presentation of Harvard professor Clayton M. Christensen named “How will you measure your Life”.
Christensen claims that we all look to succeed in our lives. However, the way we measure this success in life is flawed for three reasons. Firstly, we tend to invest in immediate achievements that in many cases stray from our values as humans. Secondly, this measure is quantitative. Since we cannot grasp data in detail we tend to aggregate it. If we run an organization, for example, we cannot grasp the notion of the individual and we refer to people who work for us as “human resource” – we aggregate the data to render it meaningful and manageable for us. Thirdly, we are comparative creatures. We cannot measure in absolute terms but in relative ones. Having more money than the other or controlling more people are some of the indications for success.
However, how useful are these yardsticks for measuring success in life? Christensen asserts that God does not employ accountants. In other words, when we are going to face God at the end of our lives these measures won’t help us much. Firstly, our short-term achievements will be reviewed for their long-term benefit. Secondly, God does not employ accountants or statisticians for aggregating the data. He is able to address each individual encounter to assess success without losing the overall sight. Last, God measures in the absolute – God is not relative.
Consequently, Christensen suggests us to measure our life along measures that can be used when we will encounter God. Is this going to happen? Using Christensen’s arguments I doubt very much. We tend to cede long-term great goals for short-term perks. Secondly, we are human and cannot grasp large data bases – we need to aggregate them to render them sensible and last, as humans we cannot think in absolute terms – we need to compare and contrast.
Is there another way to live life worth living? How should we measure it? Allow me to suggest two measures, pointing to the trap Christiansen fell into. The first is the pursuing of achievement. The question is whether what we call achievement can be considered as such by Him. Is our myopic, narrow and relativistic view suitable for clearly defining what true achievement means? Jewish sages posit that we will not be measured for what we achieved but for our efforts to get there, regardless to where we arrived to at the end of our life.
The two other flaws that Christiansen point to form my second measure which is a measure of leadership. We tend to measure the degree of leadership using measures of comparing and contrasting. When comparing we check people along their relative hierarchical position. When contrasting, we check people along the type of the issues they deal with. Are they deal with strategies and policies or do they deal with the individual. We tend to see the leader as the one who deal with what we consider important and fundamental issues ceding the mundane ones or delegating them to others. Leadership is grasped as being responsible for other, more important issues.
Fortunately, I was educated differently. My masters who were and are grate leaders never closed their doors to anyone. Many of them created fundamental changes that made the world look differently thereafter but at the same time each individual, being a small child or a public figure found his place by them, got their empathy and care. They did not change the issues they dealt with; they just enlarged their scope of responsibility. We do not need to wait for our meeting with God for finding out how to measure our lives. Having these two measures in mind – investing ceaselessly in progressing toward our goal and being truly responsible can turn our life into something worth living for.
Isaac Mostovicz writes...
Tomorrow evening we will celebrate the Jewish New Year. This is a moment of reflection at what we achieved in the past and what our plans for the future are. Looking back to where I was last year I am happy to see how plans start to take form, how fuzzy ideas start to get shape and I am looking toward the coming year with enthusiasm and with hope in the coming weeks we will be able to start participating more using various means, deepen our understanding of us and the world around us.
I wish you happy New Year. Let’s hope that the coming year would bring to all of us health, wealth, prosperity and enjoyment.
Isaac Mostovicz writes...
This is the second part of my previous blog and proposes a strategic marketing approach for the diamond industry.
As in 2008, I was approached with an important question. It is easy to criticize, but are there suggestions you can share with the diamond industry about what steps it should take to pull itself out of its misery? This is an honest question and while I cannot outline a full plan here, I will draw people’s attention to some basic ideas that I think they should follow if they are really concerned with the diamond industry’s future. Actually, these ideas are basic to any marketing strategy in any industry with any offer.
Sounds simple? You’d be surprised to learn how many companies do not know their customers. Decisions are made high in the supply chain while the customer is at the end. How many executives really bother to go out and meet their customers, to talk to them and learn what’s on their minds? How many know how to ask the right questions? The old marketing adage says that we buy by our emotions, but justify the purchase with logical arguments. How many know what the emotional motives behind a purchase are? How many know how to identify those motives? How can we make a marketing decision when we do not know what motivates the customer and how we can satisfy the customer with our offer? Know your customer, figure out his emotional needs and see how you can answer them with your offer.
This is the other side of the marketing coin. In 1938 De Beers understood that it had to create demand for its diamonds and invented the market for diamond engagement rings. The diamonds used were relatively large and were suitable for solitaire rings. However, with the discovery of the small Russian diamonds which did not fit the engagement offer, De Beers developed the idea of the anniversary ring which used those tiny diamonds. The anniversary ring was a derivative of the original offer of the diamond engagement ring and those tiny diamonds were found to satisfy the needs typical for a couple a few years into marriage.
However, when Indians proved that they could polish diamonds that were previously considered unpolishable, nobody came up with a suitable marketing offer. The diamond customer today has a variety of emotional needs that need to be mapped. Next, the diamond stock needs to be mapped as well. Different diamonds are suitable for different emotional needs. We know about two types: the relatively larger diamonds, mainly solitaires for diamond engagement rings, and the smaller ones suitable for anniversary rings. However, we need to map the diamond stock more carefully and in detail so as to get a clear picture of what diamond is suitable for satisfying which particular emotional need. Are we sure that any polished diamond is actually a diamond that can be offered as one, once we take into account the emotional needs of the customer? Can any polished crystalized carbon be used in jewellery?
I should point out that in general, marketing offers like I’m describing are not common in the diamond industry. A marketing offer reflects the answer in the market found to the emotional needs of the customer. Answering these needs creates a “pull” effect, or true demand. By comparison, when the diamond market became totally unaware of the emotional needs of its customers and was concerned merely with disposing its wares, it created a “push” effect. The reason behind this practice is financial – pleasing the bankers and competing on supply. The sad result is that nobody pays attention to whether the customer really wants the product in the first place.
Do we have a loyal diamond customer? Most customers are excursionists who go to the jeweller for their engagement rings and disappear from the horizon for the rest of their lives. Even when we bring them to purchase again, it takes a few years. Most jewellers act as supermarkets as opposed to carving out a niche for themselves. They sell an engagement ring today, tomorrow another piece of cheap fancy jewellery and will even replace a watch battery. However, in acting as supermarkets, they become supermarkets – providing no personal attention, no brand identity or affinity, with shelves packed with indistinguishable offers and cashiers at the end waiting only for the customer’s money.
Has anyone asked himself what he really wants to do? What market he wants to concentrate on? Many years ago I was sitting at a panel with the London jeweller Theo Fennell. Theo argued that he does not want to cater to the engagement ring market since the emotional, social and financial burden that lies on the man’s shoulder is so enormous. A representative of De Beers stood up and claimed that this approach is insane since statistics show that the market for engagement rings is the most important by far. To this Theo very gallantly offered that this woman shove her statistics up somewhere, since he was dealing with real people and not with numbers. Theo had a clear idea of who he is and who he would like to meet. Occasionally he would sell a diamond engagement ring but this was clearly not his market. He does not replace watch batteries either.
To sum up, if we are really concerned with the future of the diamond market, we have to take three strategic steps, by answering these very fundamental questions.
Firstly, we need to ask whether there is a market out there for our product or if we can we create one. Are there any emotional needs that are worth pursuing and providing an answer to? De Beers realized in 1932 that there was no diamond market and went about creating one.
Secondly, can we satisfy these emotional needs with our products and how? Is it a single need that we need to satisfy, an entire range of needs or maybe a single need that keeps on changing its face according to socio-demographic concerns? Which of our products are appropriate for which emotional needs? What products do we still need to search for the need that it will be the answer to?
Finally, are we looking to satisfy the entire range of desires or are we interested in carving our own niche? What would this niche look alike? What do we have to know? What supply channels do we need to secure? Most importantly, how can we communicate our existence to our customer of choice?
If the diamond industry or any other industry would follow these guidelines, I think they would succeed. One of the people who inspired me most was Steve Jobs who had a clear vision and could answer these three elements of proper marketing fully. Unfortunately, it seems that Steve Jobs took his vision with him and did not leave his legacy in Apple. This does not mean that we cannot turn the diamond industry or any other industry around. After all, what I describe here is what I call luxury marketing.
Isaac Mostovicz writes...
I was at the JCK show in Las Vegas last week. The JCK show is one of the largest diamond and jewelry shows in the world and almost everyone in the diamond industry attended either as a presenter or as a visitor. One of the highlights of the show is Martin Rapaport’s review of the diamond industry. Rapaport’s speech recalled for me the immortal Pete Seger song, “Where Have All the Flowers Gone?” because it seems that the industry has not changed its practice despite reality continuing to slap it in the face.
Let’s start with a bit of history. Before the big discoveries in 1882 there was not a diamond industry to speak of. Upon the discovery of the large mines in South Africa, Ernest Oppenheimer and Sir Cecil Rhodes established De Beers. Their major fear was that there might be a surge in diamond supply that the world wouldn’t be able to absorb. So they offered to buy the entire world supply, and act as a buffer, releasing diamonds according to need. Of course, De Beers wanted to profit from their position but they never withheld diamonds just to create artificial demand in a typical monopolistic manner. Following the Great Depression in 1932, De Beers risked becoming insolvent when it could not sell a single diamond while, on the other hand, could not raise enough money to honour its obligation to purchase the diamond production any further.
Fortunately De Beers survived and realized that its responsibility was to create a diamond market, or to create the consumer demand for diamonds. In 1938 Harry Oppenheimer, Ernest’s son, hired N.W. Ayer to help De Beers market diamonds. This move proved to be a tremendous success and the “A Diamond is Forever” slogan was coined, which is arguably considered one of the best marketing slogans ever. De Beers grew based on its ability to control the diamond rough market and to sell the production according to the real demand, taking care not to clog the industry’s arteries. In the 1950’s when the Russians started to sell their diamond production to De Beers, it presented a problem since the Russian production was of much smaller diamonds. Nevertheless, De Beers successfully started to market the anniversary ring as a means for marketing these small diamonds. Prices went up gradually, but in a sensitive way that reflected real consumer demand.
Things started to change in the late 1970’s. There were many factors involved. The introduction of grading reports (or “certificates” as they are known in the industry) increased the categories diamonds were divided into tenfold. Instead of ten categories the industry now had a hundred, and each had to be priced differently just to justify the grade. In no time, prices increased dramatically, but this time the reason was different. The increase in price was no longer geared by true demand but by internal market forces. People started to speculate and with the help of the bankers the industry bought rough with the hope of selling it later at higher prices. De Beers did not want to see a diamond stockpile grow outside their control and in August 1980 they managed to cut this speculative trend abruptly. As a result, the market came to a halt and started to build itself back slowly. Manufacturing of rough, on the other hand, did not stop and De Beers found itself in a position where it had to buy diamonds without clients to sell to.
Into this scene, Nicky Oppenheimer, the third generation, entered. Unfortunately, Nicky did not have the view of his ancestors who knew that the success of De Beers depended on the success of its market of true consumers in which they had invested money and energy to develop. Instead of building a healthy consumption that would eventually benefit De Beers, Nicky Oppenheimer was concerned with his company’s success – he wanted to make money. Looking at his stockpile, Nicky realized that the lion’s share of the value of it came from a very thin sliver of the goods – the better quality. Well, De Beers could survive by creaming its stockpile and hoping for better times to sell the rest. De Beers embarked on faulty market research that created the infamous 4C’s, promoting larger and more expensive diamonds.
Shortly before the 1980 crash, the Indian polishing centre started to grow. The Indians found ways to polish diamonds which only a few years earlier were considered unpalatable. However, De Beers effectively stopped looking for solutions for the diamonds polished from its rough. No marketing idea was introduced to promote the cheap Indian polished diamonds. This revealed the lack of basic marketing thinking in the diamond industry, which is about understanding the unique link between the consumer and its supplier. Local or international, the consumer needs to see what unique offer he gets at the retailer. However, by writing off the consumer, the focus switched to the retailer, and suppliers wondered how they could build loyalty.
Especially with the cheap Indian goods it was difficult to differentiate between supplying offers: they all looked the same and there was an exit barrier and no loyalty. These diamonds were approached as commodities where the cheaper offers won. To offset this problem, programs were created with the aim of tying up the retailer long-term, forcing them to buy goods that reflected the production needs of the supplier, but which were not relevant to the market situation. Instead of appealing to customers’ emotional needs, retailers followed typical push tactics by offering discounts and promoting sales similar to other retail sectors. With the help of De Beers, the suppliers helped those retailers promote these programs. As a result, the bigger the retail account, the more support they got as they had the ability to push more goods down the supply chain, at least theoretically.
Over time and especially when the Internet became an integral part of the business, sellers of larger and more expensive goods followed suit, turning the entire diamond market from luxury into commodity. People started to trade “paper” or “certificates” and nobody bothered to use a loupe and tweezers, the tools of the industry. To counter the price erosion, more and more programs were created. Suppliers were ready to act as bankers and extended lavish credits without knowing what they were doing, with the hope that they would manage to tie up their retail customers who would eventually sell their goods and send the money upstream. Instead of focusing on the diamond consumer, the industry looked the other way, trying to please its bankers.
Toward the beginning of the 1990’s I started to gain interest in the diamond consumer market, realizing that the reasons behind people purchasing diamonds are totally different from what the industry that trades and sells their production believes. I could not find answers to why people really buy diamonds within the industry. Nobody knew or even cared to know. The diamond industry totally lost contact with the diamond consumer.
Meanwhile, De Beers went into strategic review and came up with two results. Firstly, its $5 billion unsellable stockpile was worth nothing and secondly, it officially ceased to be the custodian for the industry. The industry which fully relied on De Beers to create its consumer market found that the captain had abdicated the ship.
Nobody seemed to care. As early as 1998 I warned whoever wanted to listen that the industry was heading toward insolvency but nobody really listened. Without much understanding of what they were doing and with the encouragement of De Beers, the industry went into branding itself just to see how $5 billion in cash and bank money, or a third of the industry capitalization, can evaporate within three years without selling one extra diamond to make up for the loss.
Meanwhile, De Beers tried to push its dead stockpile down the industry’s throat. Abdicating its role as the industry marketer, De Beers’ relationship with the market took a new turn. Companies were put into competition based on who could better please De Beers’ bottom line. Which customer had the financial muscles to purchase more diamonds long-term? Companies were not required to show that they could sell but that they could buy from De Beers on a steady basis. Most of the goods were the cheap Indian type and with bank generosity, Indians bought the entire stockpile, polishing it and creating a new unsold stockpile, this time of polished diamonds. The industry was operating completely in reverse — instead of focusing on the end of the supply chain, it was trying to please the beginning.
The industry was now at the mercy both of its bankers and De Beers, totally disregarding the diamond consumer and his needs. With the financial meltdown in 2008, banks were at a very shaky point and needed to justify the credit they extended to the diamond industry, which they could not do, and the industry started to panic and called for an emergency meeting which I attended. I must admit that I was wrong as eventually the industry survived, again with the help of its bankers.
However, five years later things haven’t changed. The industry owes $15 billion to the banks, or more than the annual cost of rough. From another perspective it owes 65% of its polished diamonds’ value to the banks and still it hasn’t realized that there is only one way to do business – by satisfying the consumer’s needs. Visiting the JCK show tells the story. On one part of the show floor you find the manufacturers, dealers and distributors – the diamond industry insiders who keep on dealing among themselves and complaining that they do not make any profit, as if living in a bubble and totally disregarding the retailers. The retailers are found on the other side of the floor, checking new packaging, software and other materials for their stores. These two parts of the supply chain do not meet.
And as for marketing, in his last slide, Rapaport had two important lines. The first was “We need marketing,” and the last one was “He who owns the customer owns the industry.” Well, Mr. Rapaport and my dear colleagues in the diamond industry, you have no marketing and it seems that you don’t care about it at all. Consequently, you do not own the customer and, according to Rapaport you don’t own your own industry.
Isaac Mostovicz writes...
Dozens of people visit my blog every day. Thousands of them every month and many of them are new visitors. I know I attract the interest of many of you, even when I don’t know who you are. Sporadically, I meet people who tell me that they are faithful readers of my blog but almost not one single person cares to comment, to argue or to question.
Why should it be this way? I know that I sometime raise provocative ideas but do they need to be even more so to cause you to react? Janus Thinking has its twitter account @janusthinking and its Facebook account – https://www.facebook.com/#!/JanusThinking. I explicitly asked people to “like” the page simply to be able to get the statistics I need (I need 30 “likes”) but did not get there so far.
Trying to invent myself is difficult. Please use any platform, my site, Twitter or Facebook account to comment, ask, question or just express your opinion. I need your reaction.
I know that I am not alone. I have a friend who knows a thing or two about social media but complains that he does not get much of a reaction from his readers. Well, many of his customers are from the ultra orthodox Jewish community who wish not to expose themselves on social media. Maybe this is the reason by him but I know from others who have thousands of people following them but never comment.
Here is a question: what would make you comment? You can choose any means you wish. You can send me a private message asking for anonymity which I am going to respect or you can show me examples of what works and what not in social media, explaining what makes social media powerful in your opinion. Can we turn Janus Thinking into an interactive discussion place or should I use my screen as a crystal ball trying to figure out what is on your mind?
Isaac Mostovicz writes...
Almost a year ago I published an article titled “Value for Money?” (http://www.janusthinking.com/2012/07/value-for-money/), questioning the logic of this economic axiom. I proposed instead that we should examine an offer either along its money (cost) parameter or along its value one. This basic approach (value or money) is not only mine.
Daniel Kahneman and Richard Thaler, the Nobel laureates in economic sciences in 2002, already questioned the microeconomic theory that people can relate interchangeably to an item or to its monetary value. They demonstrated that the perceived value of an item actually changes. Specifically, Kahneman and Thaler, among others, empirically proved that ownership has a tremendous effect on an item’s perceived value. Observation of a myriad of domains, ranging from everyday items such as coffee beans and mugs to nonmarket items such as air quality, has shown that people value more those items they already own. Hence, when they want to buy they will pay less than what they would charge when selling the same item.
The reason behind this discrepancy is psychological. People are loss-averse, meaning that they put more weight on losses that they do on equivalent amount of gain. Correspondingly, people focus on different parameters when buying versus selling. In short, economic exchanges are not about trading money for a particular value, but about the psychology of the buyer and seller.
This modern behavioural economic view is not new. The Talmud distinguishes between money, which is used to purchase, and the item purchased, which the Talmud coins “fruit”. This view leads to interesting discussions. For example, when we borrow money, we have to pay attention to the currency we borrow in. If, in America, we borrow 10K€ Euros that we then exchange for $10K dollars, did we borrow money or did we borrow a kind of item/value that we then exchanged for money? This specifically becomes an issue when returning the loan. What if the Euro dropped relative to the dollar during the course of the loan and now the 10K€ loan is only worth $9K?
If we consider the American dollars we received in exchange for the Euros to be the money, and the Euro to be some sort of value – we only have to return $9K – which is currently equivalent to the value we originally borrowed. But if we relate to the Euros as money that we borrowed, we would have to return €10K.
Introducing the term “value” adds a new dimension, which is discussed in the Talmud as well. An item might be of a certain value to one person and of a different value to another. Hence, we always discuss a chain of value-item-money which has a different meaning to different people.
Recently, I reflected on these ideas when the new Israeli finance minister announced his initiatives for the forthcoming annual budget. One of Mr Lapid’s questions during the election was, “Where is the money?” reflecting on the enormous deficit of over $10 billion in Israel’s budget. As we read now, Mr. Lapid’s initiative is to fill the gap by cutting the budget, raising taxes or getting the money somehow. It seems that Mr. Lapid really doesn’t care where the money is going to come from as long as he can fill up the deficit. It is a power struggle and the budget cuts are based on skirting the people resisting them or not stepping on those with a popular cause. But is this the right way to go?
Having a balanced budget is important but, as we discussed, what counts are the values we seek. Mr. Lapid needs an agenda that he is building toward – even if it is simply economic growth. With a limited budget in one hand and clear values in the other hand, we can start looking for the “fruits,” or items we should spend on so as to fulfil our values’ needs.
As a leader, the task is especially difficult. Israeli society is far from being homogenous and many sub-groups have different and even opposing agendas. Nevertheless, a leader must find a goal, a flag to unify the nation behind. It is not always possible to find one common denominator, although it is possible, as we have witnessed, when going to war. However, we don’t need war to find one big goal, deeply rooted in life values, that seems worthy to pursue. Such a goal is based on values defined by Milton Rokeach as long-held, difficult-to-change beliefs. These are the kind of beliefs, which when looking back we leave this world, make us feel that our presence on earth was worthy despite all difficulties. This kind of goal provides hope and stimulates the entire nation.
I keep searching for a goal like this in Mr. Lapid’s financial program. Unfortunately, his agenda seems purely money-oriented. I do not find in it any larger goals or values. Yair Lapid, where are your values?