It's a Guy Thing
By Denny Hatch
Peggy and I took the train from Interlaken to Zurich after a week in the Swiss Alps town of Grindelwald. There, the hoteliers and shopkeepers did a superlative job of taking care of tourists and making for themselves a very comfortable living.
On the train ride, we struck up a conversation with a former executive of Swiss Air who recounted the gory details of how an overly ambitious young (mid-40s) CEO started buying up smaller airlines, ran out of money and put Swiss Air—one of the world's great carriers—into bankruptcy.
We got home to read that Conseco Insurance had filed for Chapter 11—"the third largest bankruptcy in U.S. history"—the result of aggressive overexpansion. This on the heels of Enron, WorldCom, Tyco, Arthur Anderson and the catastrophic dive of AOL Time Warner shares.
When Peggy and I started our cranky little newsletter WHO'S MAILING WHAT! out of our basement in Stamford, CT, we gambled $10,000 of our own money on a dry test mailing and it worked. Like mom 'n' pop Swiss shopkeepers, we happily ran it for nine years, eventually selling it for a modest amount and moving to Philly to save this publication. Today the newsletter's successor is titled Inside Direct Mail and still is throwing off modest profits.
Why the mania for size, growth, obscene riches and personal power—the common denominators of all the recent corporate disasters? Target Marketing's 1998 Direct Marketer of the Year was Jay Walker, who started
priceline.com. Recently, I started looking into the brief, fluorescent history of that company and wound up consumed by it. I have just completed the manuscript of "PRICELINE.COM: A Layman's Guide to Manipulating the Media," and am shopping for a publisher. When priceline.com went public in March 1999, the IPO price for a share of stock was $16. The media and Wall Street went nuts. One month later it was at $165. On Dec. 31, 2000 it closed at $1.31. Although it lost more than $1 billion, a cadre of officers, directors and warrant holders, friends and family made off with between $3 billion and $4 billion in insider trades. Priceline.com's dismal business model was best expressed by Maryann Keller, one of three high-powered, influential women whose careers wound up in tatters as a result of their association with priceline.com. A bitter Keller said to an interviewer after the fact:
So here's a sentence I never thought I'd read: Priceline posted a small second-quarter profit last month. To do it, though, the company had to face some tough facts. Not only did it have to rein in costs, but it also had to come to grips with its true identity—it's simply a travel-services flea market, not an all-purpose, name-your-price bazaar.
This realization cost a lot of people a lot of pain and money, including me; I received 100,000 options priced at $78. Wall Street Internet analysts are partly to blame. Had they done their homework instead of filing reports bursting with New Age hyperbole, they would have known that "name your price" is a limited proposition—it works only for perishable products like air travel. My advice for analysts who are still covering Priceline: Walk down the hall and get a tutorial from your brethren covering the airline industry. They'll know to ask the tough questions, like "Can this company increase its revenues and margins?" and "Is this a management that creates shareholder value?"
What's going on in business these days is a dichotomy of personal philosophies. Etched in my memory is the 1967 New York Times obituary of L. L. Bean, founder of the mail order company that bears his name. A reporter asked Bean why he did not expand. "We are expanding," he said. "We are adding some new synthetic red suspenders to the catalog." "No," said the reporter, "I mean really expand. Get some investors to put in some capital and become the Sears or Montgomery Ward of the outdoors and sporting goods business." Bean looked at the reporter quizzically. "I eat three square meals a day," Bean said. "I can't eat four."
But for many of today's CEOs, business is a test of their manhood. How big they can get, how much money they can make. Does anybody care about the customer anymore?
Denny Hatch, contributing editor, consultant and freelance copywriter, is the author of the books "Method Marketing" and (with Don Jackson) "2,239 Tested Secrets for Direct Marketing Success." Visit him online at www.methodmarketing.com.