Southwest Airlines, which is a Blue Ocean company, makes news because it has an unprofitable quarter. Why does it have an unprofitable quarter? It is because oil prices have plunged so fast that the company was stuck with a bunch of expensive jet fuel. Oh shivers me timbers! How can this airline company control oil prices? It can’t. But I’m amused this makes news.
Remember, before the Wii came out, that it was a news story that Nintendo profits dropped? It wasn’t that Nintendo became unprofitable, it was that their profits dropped lower. Was it because Nintendo was being mismanaged? No! It was because of the currency exchange rate of the value of the yen dropping (which Nintendo cannot control).
One thing I have noticed is that companies that tend to be Blue Ocean appear very boring on the surface. No one seems too interested in these companies as they are very profit happy, cost averse. But that is what one has to be if one wants to succeed.
One good thing about the recession is that it makes the ‘boring’ companies more interesting. For the most part, a company with a good business model will thrive in a recession or a boom. The companies with poor business models might do fine during a boom but when a recession hits, bammo, we get to see how poor their business model is.
It is like that on a person basis as well. People with ‘boring lives’ often are the stable ones. They aren’t heavy in debt. I drive a very old used car. I simply see most new cars as poor investments, and see the car as merely a means of transportation and not to ‘show off’. Besides, who am I going to impress?
One person I know has a clunker car. He taped the paper of his Berkshire and Hathaway stock to the back window. Bershire and Hathaway is the company owned by Warren Buffet. It always makes money and is extremely reliable. However, the stock is absurdly expensive. It is so expensive, Buffet advises people NOT to buy the stock. So you have to have money to have it. People who know this will look at my friend’s car and say, “OMG. This guy is wealthy!” Or insane for having Buffet’s stock.
He tells me of a barbershop, full of women, where they all look at every car that comes in. If you are in debt and have a new car, drive in, the gentlemen gets plenty of attention. But my friend, he drives in, they take one look, and instantly ignore him. I ask if they ever see the paper taped on the back. He says, “Yes, they see it. But they only see a piece of paper.”
The lesson is that there is a difference between appearance and reality. So many companies make a great big hype, proclaim themselves business masters, are really shiny companies such as Enron. But like a company as Ion Storm (with its very nice looking offices), the reality is that these ‘exciting’ companies are hollow. The ‘boring’ companies are where all the good stuff is at. Besides, everyone is focusing on these exciting companies, might as well focus on what everyone else is not noticing. There is more money where there are less people fishing from the stream.
(Note: I’ll still behind on the email and on posts. I hope to catch up soon.)
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