Message From Michael - Social Studies and Stocks - March 8, 2010

Message From Michael                                 

                                                                                                                        March 8, 2010                                                                                                                                                                                                                                                                                                                                                         

      THE DEMISE OF DEMOGRAPHICS

      A SNAPSHOT OF YOUTH

      CONFIDENT, CONNECTED AND OPEN TO CHANGE

      INVERT, ALWAYS INVERT

      A LESSON IN ADVERTISING

      CEO’S AND JOURNALISTS

      MOST ADMIRED COMPANIES

      A WEBSITE ADDENDUM

 

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      THE DEMISE OF DEMOGRAPHICS:  That’s the headline on a recent study of the much-sought-after and much-vaunted 18 to 49 demographic group.  Surprise, surprise, the study by the University of Southern California’s Entertainment Technology Center found they’re all different.  Okay, that’s sarcasm, but much of the study (like so many studies) tells you what you probably already knew or suspected.  That is… even if you’re the same age, your tastes and attitudes will differ based on your lifestyle.  Quote: “A 45 year old with a child in pre-school will have different entertainment and purchasing needs than a 45-year-old whose teenage has left for college.”  Or, a 37 year old with a child under the age of 13 has a different perspective than a 37 year old who is married but has no kids.  The study commissioned by The Hallmark Channel identified eight sub-groups in this demographic – College students which comprised a surprising 22% of the total; New Nesters which is people with young children (also 22%); Married No Kids (21%); Recent Grads (12%); Established Families (11%); Single No Kids (10%); and Empty Nesters (3%). 

New Nesters value television more than other groups while Married No Kids are more engaged with friends and activities outside of the home.  Both groups use social networking tools, but New Nesters view it more highly (33% very satisfied) because they use it to keep in contact with friends and family while Married No Kids are less enamored (20% very satisfied) and use it mainly for professional networking.  Although all groups value laptop computers highly, college students are more likely (80%) to rate them as important compared to established families (54%).   A smartphone was the next highly rated item, but here the Single No Kids group were twice as likely to rate it as important (64%) than, for example, the Empty Nesters (32%).  Empty Nesters though were three times more likely to value Tivo or DVR (63%) higher than, for example, Teens (21%).  Teens were twice as like likely (51%) to value an iPod as important compared to Established Families (24%).  The point, says the executive director of the technology center, is that new technologies change the way people think about media.

      CONFIDENT, CONNECTED AND OPEN TO CHANGE:  That was the headline on another demographic study, this one by the Pew Research Center and focused on Millenials.  Add the words, liberal and self-expressive, and the study says you have pretty well defined the generation.  Despite the “Great Recession” and its impact on their job hunting prospects, they are actually more upbeat than their elders about the economic future and the nation as a whole.  Not surprising, three quarters have created a profile on a social networking site.  Also not surprising, one in five has posted a video of themselves online.  A little surprising maybe, four-in-ten have a tattoo; More surprising, half of those with tattoos have two to five; even more surprising 18% have six or more.  Also in the little surprising category, one in four have a piercing in some place other than an earlobe.  And in the category of you can’t judge a book by its cover, more than half (52%) say the most important thing in their lives is… being a good parent.  Nearly a third (30%) rank having a successful marriage as most important.  Continuing that theme of perception and reality differences, and somewhat surprising, only one percent of this 18-29 age group rate ‘becoming famous’ as most important. Also somewhat surprising, they get along well their parents and, the study says, respect their elders.  Somewhat surprising, six in ten Millenials believe families have a responsibility to have a parent come live with them, compared to four in ten adults aged 60 or older.  In the not surprising category, Millenials remain the most likely of any generation to self-identify as liberals.  Interestingly, as an addendum to the demise of demographics study, the Pew study notes that there is “an element of false precision” in trying to set hard distinctions between the generations and that it’s important to recognize that there can be as many differences in attitudes and behavior within the same generation.          

      A SNAPSHOT OF YOUTH:  By Harris Interactive, shows that teens and ‘tweens’ are more accepting of gay and lesbian relationships, but less accepting of abortion or sex before marriage.  More than half of the young people surveyed (59%) now feel “gay or lesbian relations are OK if that is the person’s choice” – a dramatic jump from the one-third (31%) who believed two decades ago in 1989 that “homosexual relations are OK.”  A quarter of them (25%) believe “abortion is all right if having the baby will change your life plans in a way that you will find hard to live” – a drop from a third (33%) who felt that way 20 years ago.  Similarly fewer teens and tweens (44%) think that sex before marriage is “ok if a couple loves each other” compared to more than half (53%) who believed that in 1989.   Acceptance of smoking has dropped from 27% in 1989 to 18% in the latest survey while three quarters (77%) believe selling drugs is “foolish”, almost the same percentage as in 1989 (80%).   

      INVERT, ALWAYS INVERT:  That is one of the maxims of Prussian mathematician Carl Jacobi who postulated (rightfully most times) that many hard problems can be clarified by expressing them in inverse terms.  It is also a business maxim that the “Oracle of Omaha” Warren Buffett uses, although as he says, the inversion principle can be applied on a less lofty level as well.  For example, “sing a country song in reverse and you will quickly recover your car, house and wife.”  His long-time business partner Charlie Munger has a more pragmatic application – “all I want to know is where I’m going to die, so I’ll never go there.”  It is that kind of down-home, folksy advice that permeates Buffett’s annual letter to stockholders of his company Berkshire Hathaway and which makes it a must-read.  It is unfortunately un-too-common-sense applied to business.  For example, when measuring what they have, or have not accomplished, they don’t, as he put it, see where “the arrow of performance… lands… and then paint a bull’s eye around it.”  But then they don’t have to.  A single share of Buffett’s Berkshire Hathaway company goes for $84,487.  It started at $19.  Admittedly that was 45 years ago, but still… pretty dang impressive.  On a conservative measure (per-share book value), that shows a gain over that time of 434,057%, or 20.3% compounded annually.

      A LESSON IN ADVERTISING:  In the letter, Buffett notes that subsidiary insurance company GEICO spends $800 Million a year on advertising.  That’s double the runner-up company advertising in the insurance business.  But it has paid off.  GEICO’s market share has grown since Berkshire acquired it, from 2.6% to 8.1%, a net gain of seven million policyholders.  It has risen from the sixth largest auto insurer to the third largest.  And its float (the amount of actual cash money it has on hand) has risen from $2.7 Billion to $9.6 Billion.   

      CEO’S AND JOURNALISTS:  One of Buffett’s other traits is a self-honesty and responsibility not often associated with CEO’s.  For example, he confesses that he pushed for GEICO to get into the credit card business even though his managers were not enthusiastic about the idea.  It turned into a business fiasco, as he admits, entirely of his own making.  He thought he was older and wiser when he pushed for the credit card idea; it turns out, he admits, in this case, he was only older.  In the same self acceptance of responsibility, Buffett says he handles the company’s controversial derivative contracts because if they go bad, he has only himself to blame.  Buffett excoriates the CEO’s and directors of some of the huge financial institutions bailed out by the government.  The shareholders ended up bearing the cost of such failures when it should have been the CEO’s who should have had to suffer severe consequences.  Buffett is less scathing but no less forgiving of journalists and “sound bite reporting.”  He cites as an example a quote from his last annual letter in which he said the economy will be in shambles in 2009 but it was hard to say whether the market would rise or fall.  The first part was “blared” on news reports without the second part.  The result was the stock market fell precipitously on the day the letter came out.  Buffett makes the point that the complexity of the business can’t be summarized in a few paragraphs (like I’m doing now) or put into a “catchy headline that journalists sometimes seek.”  However, it should be noted that Buffett asked three financial journalists to act as moderators on behalf of the shareholders at the annual meeting which he dubs “Woodstock for capitalists.”

      MOST ADMIRED COMPANIES:  Buffett’s company Berkshire-Hathaway came in third in a survey by Fortune Magazine of most admired companies.  The most admired company was Apple followed by Google.  Microsoft came in at number 11.  Somewhat surprisingly, Toyota came in at #7, but the editors note the survey was taken just as the recall was starting and before it reached the proportions it has now.  Just as surprising, until you realize that this is a survey of investors, not ‘real people,’ one of those financial institutions Buffett talks about – Goldman Sachs ­­-- came in at #8.  Only three foreign companies made the list -- Singapore Airlines, Nokia and Samsung.    

      A WEBSITE ADDENDUM:  In the interest of providing a balanced Message, here is another website for you to visit.  Last week it was shitmydadsays and chatroulette.  Both sites are generating a lot of ‘buzz’ (don’t you hate that word?) but which are (to put it mildly) risqué and, in the case of chatroulette, risky.  So, for something completely different, try woodshedwisdom.com.  On this one, the warning is the opposite.  It has a very distinct Christian message.  But, like Buffett’s letter, it also has some folksy observations that provide an often welcome rest area on the tension-jammed highway of life.  Full disclosure:  It is produced by Freeman Martin, one of the account executives at the university-owned television station, WNEG-TV. 

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