Create a $2,000 digital white board with a Wii controller.

You ever have such a great white board session you did not want to erase the board? You had someone come in and recreate the board on a legal pad because you were too cheap to spring the two large for a real interactive board. That sounds barbaric and it can now be a thing of the past just using a $40 Wii controller.

If you ever want to get a head full of great ideas, go to TED. TED is a collection of thinkers and doers that have conferences and upload the content for free. This is very significant. If you wanted to attend a conference, your date needs to be a sandy blonde six thousand dollar check! Oh, and you need to be invited! TED is not cheap, but he is smart. They take the 80/20 rule to new levels of perversity by allowing you to “Join for free.” You can exchange ideas with other “members.” You do not even need to be a member to watch the videos. Next, “let’s make TED so hot, if you wait for the videos it’s plain medieval. Only a middle level corporate hack would not want to attend the live shows and be ahead of the crowd. You will get a jump on the rest of the planet for the very latest, cutting edge ideas. You must pay to play in the VIP club.”

These are the voices my marketing sonar has detected from the TED people. It works for me, they win at all levels. The free videos of past conferences are all sponsored. I personally can stomach a few 15 second BMW ads to save $6,000 how about you? Actually you could afford to let a BMW run over your right leg by letting your mind take a plunge into these creative waters. One broken leg, $200 bucks with co pay. A mind full of fresh fertile brain soil, priceless.

I love their marketing and their content. You can learn a lot by going to TED.

Learn how to make a digital whiteboard using a $40 Wii controller.

Experience ideas worth spreading.

http://www.ted.com/index.php/

PS, they even have me thinking about attending the 2009 conference, I am a sucker for great ego meat marketing.

Posted by Chad Harris at 10:04 AM 1 comments Links to this post

Who is Andy Gump?

My wife was looking for Andy Gump in the mountains and had no idea where to find him. In her single days, she worked as the manager of the Spy Shop on Sunset Boulevard for 6 years. Yes a Hollywood girl, she has some strange stories to tell about celebrities and their spy equipment. I tell her she should write a blog, but she is much too discreet for that.

"Looking for Andy Gump" sounded like a Hollywood script that did not make it to Sundance. Hey budding film Directors! I just gave you a massive big idea for a new docudrama! When you sweep the awards and have your name read from the pulpit at the Kodiak Theater, just remember to mention the Whale as your inspiration to all the reporters. Sorry, back to Andy.

On a recent trip to California, I found him. There he was, at the top of 1^st street in Simi Valley just past the freeway. Andy was collecting poop! It was true, Andy Gump is a port-a-potty company. If you Google Andy Gump, you will also find he was a real person, check out his home page.

• Your word is your bond.
• Helping people is our goal, not selling a service.
• Respect every person's contribution. No position is more or less important than another; every job is important to the success of the company.
• Be grateful for your blessings and share with others.
• Andy and Barry would never ask you to do something they have not done or would not be willing to do.
• Use debt sparingly and pay your bills promptly.
• With God's blessing, you have to be ready, willing, able and lucky.

Very heavy stuff if you consider the business. A home page is an external reflection of an internal reality I am told. After reading Andy’s story, I would say that is true. Andy found himself in California after the war and thought he would bring Oregon Christmas trees south for the holidays. Andy rented part of an open lot in Pacoima, California from a septic system contractor, who befriended And. He taught him the septic trade and eventually sold the septic business to Andy for $300. A business was born! Andy never hired a "salesperson" - he relied on his good name and providing a clean restroom to grow the business.

#1 Using your name can be a good thing, if it is memorable.

If you have a name like Andy Gump, back up the truck. I think even before Forest made his mad dash, Gump is a very catchy name.

#2 People remember stories and forget processes.

How many times have you been to a great old restaurant that is still in business and the kitchy menus have the story of the founder, printed with pride for all to see? I love that stuff. After you read Andy’s story and then his core values right on the home page, how can you not rent a can from a guy like that?! The raw honest, unpolished voice really cuts through the slick marketing with the overly happy Getty images of perfect people. Be honest, now that you know his story and standards, you are a little more interested to see what an Andy Gump crapper looks like on the inside right? I understand now why my wife is desperately seeking Andy, they are cleaner. Well “clean” and port-a-potty is a very relative term; the bar is really really low. If you have an industry that you expect to have poor service and poor products, that is the one that is ripe for a premium player. Not a big surprise that Andy has a VIP line that caters to the film studios, golf tournaments, parties and black tie events with 500+ people.

#3 Look at your web site

Is your website a true reflection of who you really are? Figure out what you stand for and then just tell people in a human voice. Andy does not take himself too serious and neither should you. When you really think about it, most of what we write on websites is crap! No pun here, it’s true. We don’t talk to our friends the way we talk to the world.

#4 If you believe in what you are doing, you can even make money collecting poop!

Go see Andy, then connect back with me, I am sure we can create a fresh way to tell your story.

http://andygump.com

Posted by Chad Harris at 5:00 AM 0 comments Links to this post

Chaos, card counting and free classes at MIT.

It’s MIT Monday!

The recent headlines of MIT reminded me of what a unique environment they have there. The book Bringing down the house is based on six MIT students who take Vegas for millions playing 21. The book is excellent by the way. The new movie “21“ glamorizes their story, I heard only tepid reviews on the movie so I will pass.

Last week the creator behind the butterfly theory, Professor Edward Lorenz passed away he was also an MIT man. He developed a theory that is widely regarded as one of the three horsemen of scientific achievement in this century.

#1 Relativity

#2 Quantum Mechanics

#3 Chaos

Chaos theory developed from Professor Lorenz paper in 1972 which was titled: “Predictability: Does the flap of a butterfly’s wings in Brazil set off a tornado in Texas?” Professor cuts a mean headline! Today big bucks are spent by very smart guys trying to use chaos theory to beat the odds in the stock market, urban planners, and weather forecasting. The theory definitely explains the mystery of my kid’s bedroom.

Card counting undergrads, scientific revolutionaries, what’s next? How about jumping into the minds that make that university so unique. Many people are not aware of this but you can get a $35,000 dollar per year education for free from MIT. I take a Chinese class from them; they have about a dozen others I can take to keep my Chinese skills from getting too rusty. The entire curriculum at a click of a mouse, I am not kidding. When a top level educational franchise like MIT makes a move like this, anything is possible from here. You do not get credit but imagine what creative third world educators are doing with the course material. How about progressive High Schools in America, 1,800 courses complete with audio, workbooks, guides already done for you!

Thanks professor for your contribution and thanks MIT for sharing. I am sure it will return ten fold, back at you MIT!

To start learning from the brightest minds on the planet for free:

http://ocw.mit.edu/OcwWeb/web/home/home/index.htm

Posted by Chad Harris at 8:31 AM 0 comments Links to this post

How to make money helping your Mother In Law

Very soon you will have a decision to make, some of you have already been faced with it. We have 80 million people between the ages of 63-43 and surprisingly 17 states have over 30% of their population in boomers. The percentage is not a surprise it is the states, they are all “cold” states. Alaska, New Hampshire, Vermont, Maine, Maryland, Colorado, Connecticut, Virginia, Wyoming, Washington, New Jersey, Montana, Massachusetts, Minnesota, Oregon, West Virginia, and Wisconsin.

Are boomers not migrating south for the winter? Is this pent-up supply just getting ready to fly the coup? If they move or not you will still be faced with one of two choices you younger boomers and old Gen X er’s must deal with.

The nights running around your house in your boxers watching Sports Center could be over soon if your wife has a say. Or you could tell your wife your Mother In Law is on her own then you will have a new bedroom called “the couch” you insensitive clod!

Either way it is a lose/lose proposition. Of course you could just spend the big bucks and have her put up in a home with full time care but you will need to sell your plasma and the rest of your toys just for the first month’s rent. Living a life as a monk staring at the empty walls in your boxers is not a pretty picture. It is a real problem you are facing even if you do not want to admit it now.

Think ahead, plan now. If you have that decision coming up you are not alone. Now is the time to capitalize on the seismic shift we are facing, be a hero with your wife and make some serious money in the process taking care of the needs of your fellow sports loving brethren!

Mark Armstrong has the answer. Mark is the CEO of ComForcare Senior Services. He probably has one of the only “feel good” type of businesses that you would love running and make a very good living at the same time solving other guys problems like this.

Mark was a former Accountant watching other entrepreneurs make it big when he decided it was time to strike out on his own. That was 20 years ago and now he has one of the fastest growing non medical in home care franchising systems in America. Go to www.comforcare.com and you will be shocked how much territory you can develop for under $75,000.

Listen to our interview with Mark:

If you are still not convinced of the big shift ahead, check out our story:

http://franchisewhale.com/2008/04/demographics-and-stock-market.html

Posted by Chad Harris at 11:21 AM 0 comments Links to this post

Patent licensing disasters by Eli Whitney

Imagine inventing a devise that put America on the map, wrecked civilizations and changed the world, and you still end up dying broke. If you are a history buff, patent expert or licensing lover grab a copy of Big Cotton I forgot how great a read it was until I went through my notes again last night.

Eli was a bright young tutor from Yale heading South via boat to try his luck teaching the children of wealthy plantation owners. In a chance meeting he bumped into Katy Greene, the widow of a revolutionary war hero. Katy saw potential in the young poor teacher and asked him to sit in on a meeting of plantation owners. They had a big problem, an old problem; nobody could solve how to increase cotton processing speed. It took one worker 16 months, full time pulling the sticky green seeds out of enough cotton to make a 500 pound bale. After hearing the problem, Eli said he would come back with an answer. That week his big idea came while watching a cat trying to catch a chicken. He noticed that the chicken got away but the cat had feathers in his paws. That image jarred Eli’s mind into looking at the problem from a completely different direction.

“Instead of picking out the sticky green seeds one by one, why not comb the cotton away from the seeds?”

10 days later Eli came back with a working prototype that was so good, the basic mechanism and motion is still used today. Katy’s fiancé proposed he build the machines and he would license them out as fast as he could make them. He sent the design to Washington DC and Thomas Jefferson, the Secretary of State at that time signed his patent registration in 1794. The government was a lot smaller back then! Every cotton farmer in America wanted one. Greed took over and they charged the farmer 1/3 of the crop plus the cost to build a machine. Why all the excitement? The gin reduced the labor on 500 pounds from 16 months to 10 days! When they eventually added steam power or horses, they could produce 500 pound bales in 4 hours!

Improved gins came on the market with better licensing terms and they remained inflexible even in the face of a new issued patent on a competing product. By 1797 Eli had built 27 gins and nobody wanted them. He had set in motion the biggest economic upheaval ever to hit America, people around him were getting fabulously wealthy and he sat frozen with indecision. In relative terms it would have made the internet bubble look normal because almost the entire South was already dependent on farming. We cannot imagine how crazy it must have been to crank that gin wheel and know all the cotton you could crank had a buyer ready to snap it up.

Eli’s landmines we want to avoid with patent licensing:

• Alienated prospective customers with exorbitant royalty rates.

• Refused to license their design to other manufacturer to meet urgent demand.

• Opened themselves up to knockoffs because of their inflexibility.

• Went broke trying to repair the damage instead of changing course.

To see how staggering this invention was. The year of the invention, America exported 500,000 pounds of cotton to England. In 1800, just seven years later, it exported a whopping 17.8 million pounds! Think of the gold and silver pouring into the south to buy all the cotton and you watch everyone else get rich on your idea.

Just remember your best ideas are in the future. Don’t ever get married to a new innovation and become inflexible in the face of reality. The higher you price the license and royalties, the harder people will try to go around the patent. The really wealthy self made business builders put together a sting of winners, not one lucky grand slam. Next time you are at the negotiating table, remember Eli.

Posted by Chad Harris at 6:00 AM 0 comments Links to this post

Good time to be a Rock Band

Today marks a first for music. Motley Crue, probably one of the most hated bands by parents of the 1980’s released a new single yesterday exclusively on Xbox Live Marketplace. Sweet karmic revenge! You thought your parents were just too old when they told you to “turn off that crap!” Now your kids will drive you nuts jamming to the same band you loved in the 80’s! Technology and licensing is stretching brands to levels that either make us feel older or young again, I am not sure yet.

Already 6 million songs have been downloaded in 90 days on a game that was touted as too expensive to make it. Take an old brand like the Crue and revive it with an entirely new generation. It just shows you that creativity is the only barrier when it comes to great licensing. As I looked at the available list of downloads I see a giant opportunity still hanging out of the school bus, preschoolers. I know it would be about the most un-cool thing your parents would ever tell you, “we got the latest Wiggles song on Rock Band, let Wendy jam with you and your friends for awhile.” I am dead serious here, why make it metal exclusive, would older kids really stop playing just because their sister can jam with Elmo?

Licensing is all about combining strengths to make something even stronger. I remember when Elvis Enterprises was only a few banana peanut butter sandwiches away from selling the mansion to pay the bills, now they are doing 40 million a year. Robert Sillerman now owns 85% of all the trademarks rights film, music publishing, intellectual property and photographs really all the licensing rights in the world to the King. In 2004 he paid Lisa Marie 100 Million for the 85%. At the time many thought he had lost his touch. Sillerman is not a novice, he has amassed a billion dollar fortune moving in and out of media properties with the latest coup being the American Idol franchise he scooped up for about 192 million in 2006.

The Idol is a giant licensing machine. The way they merchandise that show is really incredible. From downloads to product placements and all the production rights to the contestants during and after the show. Simon Fuller the founder of Idol and now just a minority shareholder in his baby is also worth about a billion dollars.

So what can we learn from music and software moguls to apply in our own business today? What is the absolute one thing you are great at? Where are you a complete disaster? Remember, the King was a larger than life performer but a disaster of a business man. Someone needs to be the performer, someone needs to pull the curtain and someone needs to sell tickets. Which one are you? The King is making more dead than alive thanks to Sillerman and Motley Crue has new life thanks to Bill Gates. Today nerds and rock stars can coexist as long as they play their parts. Stick with what you know, rock on Whale watchers!

Posted by Chad Harris at 5:00 AM 0 comments Links to this post

Death ,taxes and rising fuel costs

When you are ranked in the top 10 best places to work in your country for a company of your size it is difficult to top that. Why not extend the good buzz beyond your borders and franchise your brand internationally. I had a great chat with 4refuel.com, CEO Jack Lee.

4refuel is a classic example of not just listening to your customer, but actually giving them what they want. When I asked Jack to tell me in 30 seconds what you do for the corporate fuel market that is your unique edge, he said “we save our customers time.”

In a crowded market with many options to refuel your fleet, building a franchising company based on saving you time is a great edge. You can have all the money and information in the world but if you do not have the time, you cannot seize new opportunities. Time really is the most precious commodity we could give busy buying managers. Go to www.4refuel.com and check out the technology they have rolled out to the corporate re-fuel market. Prospective franchisees do not need any fuel or technical backgrounds. Sales and client services are the key ingredients to make this work for you.

If you believe fuel costs will continue to rise, managers will continue to be short on time, invest some time now on their site; it may save you some in the end.

Play 7 minute interview now!

Posted by Chad Harris at 9:26 AM 0 comments Links to this post

How to cure jetlag and make a billion dollars.

Those great moments of clarity when the timing, idea, product and marketing seem to distill upon your mind like spring dew are few and far between. When they happen, drop everything and start writing! Next don’t lose your notes! When Howard Schultz jumped on a plane to go see who was behind a little coffee shop called Starbucks, he had no idea what he would find. He sold house wares, what did he know about coffee! He was dying to know how two coffee shops in Seattle could outsell the entire Macy’s account of a special coffee machine.

I am sure he had no idea that he would one day sit on top of the largest coffee franchise in the world some day. His gut told him, I smell the smoke; I need to go see how big this fire is.

In 1982 Dietrich Mateschitz found himself in steamy Thailand nursing a major jetlag. Asia is full of little shops with strange potions in even stranger bottles. He probably jumped out of a tuk-tuk at the first site of a store that looked remotely close to a pharmacy and somehow communicated his German clock has not reset to Bangkok yet. Maybe he was watching a kick boxing fight and noticed two Red Bull logos on all the shorts and banners and thought, “why am I watching this, I should be sleeping, and what is up with those Red Bulls?’

The details are unclear, but he knocked back a can and BANG, the big idea hit him.

Dietrich was the Marketing Director for a German toothpaste company and licensing and marketing was already in his blood. His big idea, let’s license this drink, change it to western taste buds, soup up the branding and see how much we can make selling to truck drivers, travelers anyone who needed a quick boost.

Do you think in 1982 he could see himself on the Forbes 400 2008 biggest swingers in the world list?

#260 all self made! Check out his photo. Like a good race horse, boxer, actor…Billionaires and future billionaires have a certain look, the vibe.

http://www.forbes.com/lists/2008/10/billionaires08_Dietrich-Mateschitz_DGAD.html

No this is not a lesson on how to start a billionaire face franchise. Our friend Dietrich however, followed a proven formula to get fabulously rich and here is the lesson we can learn from him.

Step #1 Do something, anything.

Move around, travel, read, talk to people, do something for someone without any expectation of a return. That creates the ingredients. Great ideas are like good soup. You throw in a lot of great stuff but you need to let it simmer, it takes a while. Killer home runs start with fresh ingredients.

Step #2 Keep an open mind.

What does a marketing guy at a tooth paste company know about creating a global beverage empire? Ask Howard Schultz the same thing about coffee. Ask Ray Kroc when he was selling milkshake machines door to door, did he ever think he would control the biggest hamburger franchise in the world. They all had a common winning trait. A fertile open child like mind to anything new and creative. When you hear negative people that never offer a better solution, just tune them out and eliminate them from your social circles if possible. Anyone can criticize, but without offering a better solution, they are just a pain in the butt and they will never help you get to billionaire row.

Step#3 Play the long game.

With a massive 70% market share for energy drinks you would think that it was ok to kick back. Dietrich has what all billionaires have, vision. They can see 4 or 5 moves ahead. A brilliant move he made was to link Red Bull with sports early in the game.

Great marketing is a mile deep and an inch wide

While every beverage company was playing the short game brewing up new caffeine in a can ideas glutting the market, Dietrich was busy buying up sports franchises. Investing today's earnings on yesterday's business worked great during the industrial production phase 100+ years ago. Today old thinkers will always get crushed by nimble visionaries who take today's cashflow and invest in future businesses. When the competition comes, the winners have already moved the brand to a new and larger stage, leaving the copy cats holding a bag of thin margin, profit sucking vampires.

Step #4 “Don’t get safe, get creative.

The natural tendency when we are ahead is to protect the lead. Yea that worked for Memphis Monday night for the big game right? You are up by three points with 20 seconds left. Foul the guy! Don’t let him go down and drain a three, force him to a one on one! I know fouling when you are ahead and time is running out might seem counter intuitive but going against the grain, fading the herd is often the winning idea. Safe in marketing is a fast track to the poor house. Safe might work in the short run but it is a guaranteed loser in the long run. History is full of dead safe companies you have never heard of.

Additional articles:

“Why most advertising and investment ideas are wrong.”

http://franchisewhale.com/2007/12/why-most-advertising-and-investment.html

“Who knew cavemen could sell insurance.”

http://franchisewhale.com/2007/12/who-knew-cavemen-could-sell-insurance.html

OK, hit the road, keep an open mind, think five chess moves ahead and get creative! When you get on the 400 list, please thank the Whale, I know I will.

Posted by Chad Harris at 4:27 PM 1 comments Links to this post

Virtual office solves big problem for in-home care market.

The elderly care market is probably one of the most predictable patterns we will see play out over the next decade. I love the space! I had a great chat with Michael Newman the CEO of Always Best Care Senior Services who has some innovative solutions to a very personalized service.

In the next decade a massive shift from discretionary spending to medical and in-home care spending will take place in the USA. The tidal wave will accelerate each year until 2023! If you ever wanted to go back in time and use your knowledge for good, now is your chance. Good news, no flux capacitor, you don’t need to be a scientist or DeLorean mechanic. You can start today by looking ahead a decade, not back.

Just go to www.abc-seniors.com

The CEO Michael Newman founded the company with some very refreshing ideas in mind. Check out the 11 minute interview and do your homework. If you believe like I do that the demographics never lie, ABC's virtual office is probably the closest thing you will ever find to owning your own time machine for under $100,000.

Posted by Chad Harris at 11:25 AM 0 comments Links to this post

How to grow grey hair and think 10 years younger.

I hate to say it, but as you are reading this blog you have aged. Don’t bail out, what I have to share with you will at least give you some financial security as you cultivate that grey hair.

Wednesday I wrote a blog about demographics being the big dog that wags the stock market tail. Invest a few moments of your life and read this post first, it will make more sense, I hope. Don’t shoot the messenger!

http://franchisewhale.com/2008/04/demographics-and-stock-market.html

Last November I wrote a post that talked about the recession was baked into the 2008 pie because of a very accurate indicator that screamed contraction the day before Thanksgiving 2007. Doh! Darn economic tryptophan!

http://franchisewhale.com/2007/11/thanksgiving-surprise-locks-in.html

Those stories are background to this main point. Just like everything else in nature, people, groups and even countries, all go through growth and decay cycles. As an entrepreneur, our job is to help people live better through the growth a decay cycles and make money in the process. Let’s first look at the major growth markets and then we can drill down to the industries.

Young people take more risk than old people.

Insurance companies know this too well. I live in Arizona and trust me, the dinner-before-5-bunch do not drive any better than the High School musical crowd. The elderly have a better grip on their own sense of mortality however. I know this for a fact, at 40 years old I found myself bouncing down the road at 50 miles an hour with no helmet! At that exact moment in time, I realized, “This is really going to hurt!” Time literally stopped and 138 feet later of an epidermis laden skid mark, I realized, I was mortal.

Most people are much wiser than myself and discover that obvious jewel of mortality wisdom earlier than I did. At some point we all realize it. That realization makes us more cautious, more risk adverse and more conservative in our financial affairs. When you have a country full of people that realize they are getting older at the same time, the economy will also “slow down.”

We are almost at the peak of a very tall spending hill. 2010, we will start down the hill and will spend less each year for the next decade in America. What breadcrumbs can we follow to put together our Macro hotlist of countries that will keep spending and growing while we are getting older and more conservative?

• What is the average age of the country we are interested in?

• If I find a real young country, do the political and economic systems support growth? (Afghanistan is full of youngsters but would be a nightmare investment environment.)

• As countries urbanize, they have fewer children.

• Fewer children, fewer spenders, slower growth (Think Europe and Japan).

The geography box score looking ahead:

• Slower and declining growth: Europe, America, Canada and Japan.

• Moderate growth: China.

• Fast growth: Latin America, South East Asia and the Middle East.

• The Mother of all growth markets: India.

I know some of those seem counter intuitive. How can China actually be in the moderating growth column? Two big reasons. The “one child” policy put a kink in the Chinese birth canal. In 2015 their version of the Baby Boomers will enter their peak spending cycle top. They will also be nursing a slowdown as their biggest export market, America continues to spend less. Double Wammy!

What about India? They are packed with youngsters, a very bureaucratic but democratic system none the less. Combine that with a massive birth rate, huge human capital pool and pro business planners. They will not peak in their spending until 2065! Also they have avoided the mistakes the social planning meat heads made behind the rice curtain. The Chinese do not have a corner on the market of dumb growth policies. Japan and Germany have very rigid immigration laws and the USA is moving in the wrong direction building a wall when it should be opening an express freeway for bright, honest foreigners. Check out the birth and immigration trends in Japan and you will see why the Nikkei average peaked December 29, 1989 at 38,916. Today the average is at 13,342. Still down 65% after 14 years! The US stock market declining from 2010 to 2023 is impossible! Think again.

When God gave the commandment in the garden, “Be fruitful and multiply and replenish the earth”, it was the biggest stock tip in the history of the world! If you produce fewer consumers than yourself, you are digging an economic grave for yourself.

A brilliant move the Indian planners made was to skip the industrial phase and jump right to services. It took the USA about 100 to ramp up and take the manufacturing power away from Europe. China took that away from us in about 30 years. India realized, why fight over declining margins and try and compete with a bigger labor force. The planners jumped straight to the services and information phase. Do you ever see your kid’s toys or your clothes labeled “made in India?” When was the last time you had someone in tech support or a call center help you from India? If you told a guy in the 1950's that they would one day pay someone else to change their oil in their car, do their yard work and repair their dishwasher, he would have thrown your pansy candy butt out of his yard! Things change. Change is the only guaranteed certainty in the future.

Africa is a real wild card. That could be a very interesting market for the brave at heart but too much to analyze in this story and much lower hanging fruit around the world to consider first.

I know, Harris, easy boy, I am not that adventurous and want to make money in the USA. OK, you just need to figure out where people will still spend money as it grows grey and get there before they do. Next week I will be interviewing some CEO’s that will open your mind to the accelerating franchise boom providing services to the elderly.

Posted by Chad Harris at 8:45 AM 0 comments Links to this post

Demographics and the stock market.

In 1987 I had the incredible luck of hearing from my manager that I passed the securities examination. He told me the results on Monday the 19^th day of October. For you younger readers (I can't believe I typed that) in one day, the Dow Jones went down 22.6%! This was a very big day.

At the time it was blamed on too much portfolio insurance. I know, how can too much insurance make things fall apart? Wall Street always has a nice answer to each major catastrophe. I think they love putting a name and reason on each big crash to give us that feeling that it was all expected, no worries. This round it is too many subprime loans, underwritten and bought by the wrong people. I can’t wait to hear the next excuse in 2010, but more on that in a moment.

One thing I learned at Lehman, all crashes are caused by the big boys running for the exit at the same time and trying to slam the slow guys fingers in the door. This round, Goldman Sachs and JP Morgan Chase made it to the door first, Bear Stearns was a little too old and fat. The good news, Wall Street is not going away, the bad news, we are.

Out of all the clutter I have read by over educated economists that are long on theory and short on real experience, Harry Dent’s work really stands out. He is a Harvard chap, we don’t hold that against him, but he has cut his teeth as a fund manager and has a elegantly simple answer that is eerily correct over the past 50 years.

The stock market is controlled by demographics.

I know not earth shattering breaking news for some, overly simple you might say. I love simple. Here is the theory. We go through economic cycles as individuals from the moment we pop out of the womb to the time they stick us in a pine box. Studies have shown that between the age of 46 and 50 we peak in our spending patterns. His theory was, if I project ahead 48 years and overlay the stock market on the birth cycle, it should correspond.

More consumption= more production= higher stock prices.

Check out the chart on the top (Click the chart to see a large version). Do you see that giant red top like a bloody roller coaster? That is 2010. That is when the herd of baby boomers will have passed their prime economic spending and each year after that we take a long slow painful decline for 12 years until Gen-X enters their prime spending. Twelve years!? It will make the crash of 1987 look like a speed bump.

This not only has corresponded with each blip in births for the last 50 years it makes total sense. Our economy is a scary 80% consumer spending now and 20% savings and manufacturing. If the spending slows down, prices will go down. As we start out we don’t spend much until we get to high school. In college the cash starts getting consumed even as we live like a monk. Next we get our first jobs and need fancier clothes, eat out more, need a car. Next I am getting married; need a house, bigger car, more spending…when we get to about 48, things turn over. We pull our horns in and realize we will not live forever and we take less risk, spend less and prepare for the day we need to live off of equity, not add to it. (See chart).

If Harry is right, by 2010 you better have a solid 10 year plan.

So where do we go for opportunity in all of this. The answer might surprise you. Friday I will dive into how we can capitalize on getting into the right demographic markets internationally and what are the hot franchise opportunities domestically after 2010. Next week, I will be interviewing some CEO’s that are running businesses that will thrive while most sectors will be in triage for the next decade.

Buckle up, it is going to be a bumpy ride!

Posted by Chad Harris at 5:53 PM 2 comments Links to this post