Episode #330: In Search of Relationship Value

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This topic was inspired by Fender, founded in 1946: It discovered that 90% of new guitar players quit within 3-6 months, many within 30 days. Those who stick with it for one year become a customer for life.

So it created the Fender Play app, a digital library of over 3,000 online video lessons on how to play the guitar. It attracted around 130,000 subscribers within 3 years, with a 95% retention rate.

Subscribers spent 40% more on Fender products.

During COVID Fender offered a free trial to Fender Play, and attracted 1 million subscribers within several months. We can learn three lessons, according to Tien Tzuo’s newsletter:

  1. Practicing experimentation makes perfect—It’s OK to admit you don’t know what you don’t know. “You find holes by falling into them. Then you fill them and you never do that again.” Constantly tinker with pricing and packaging.

  2. Stay in tune with the customer: understanding the qualitative human elements of the customer experience

  3. Listen to the analytics: retention is important, but so are harder-to-quantify metrics like engagement. People are messy and complicated

Even Value Pricing 1.0 pays lip service to the customer relationship, relative to the subscription business model. There is no better outward-focused business model than subscription. The relationship is at the center of the business. It also does the following:

  • No silos, smashes bureaucracy (timesheets have no place)

  • Bakes innovation into the model

  • Constantly adding value, surprise and delight

  • The empirical evidence is overwhelming, from Unicorns and John Warrillow’s examples [Episode #327], to the many Direct-to-Consumer brands and B2B subscriptions, and the overall growth in the subscription eclipsing traditional transactional businesses.

  • Higher valuations upon selling the business when it has annual recurring revenue and a track record

Words Matter

We don’t have an adequate vocabulary yet to describe all the aspects of this model. As National Review’s [and previous TSOE guest, Episode 316] Jay Nordlinger wrote:The more experience I have, the more I think that definitions are virtually the whole ballgame. What do you mean? What do you mean by that word or phrase? Once this is sorted out, conversation can proceed.”

We talk about price the customer in VP 1.0 and price the relationship + the portfolio in VP 2.0. But the insurance analogy has been taken too far. 

We are really spreading activities among a portfolio of customers (some use more, some less, etc.). This is why one-off services is such a powerful objection and hurdle to implementing this model. We will figure this out through trial, error, and experimentation.

A “choice architecture” business model

The psychology is different with subscription compared to transactional. You are entering a relationship that requires an action to cancel.

Convenience + Peace of mind + front of the line service are powerful drivers of value, even if not fully utilized.

Simplicity, Frictionless, and Transparency, fosters Trust

There is too much friction in the VP 1.0 model. If the customer needs something different, a Change Request process needs to happen [read: hassle, bureaucracy, and friction for the customer], whereas simplicity, frictionless service and transparency in pricing fosters trust.

All of VeraSage’s work has been around increasing pricing power:

  • It’s why we work with sellers, not buyers

  • Penetration/Neutral/Skim pricing strategies, with our focus on Skim (not that the others are invalid)

  • Branding, strategy and positioning, from our colleague, Tim Williams

  • The Adaptive Capacity Model (Are you busy? Raise prices!)

  • Unlimited Access/Value Guarantee/Perpetual Fixed Price Agreements

  • Niche, Innovation

  • Business advisory services: pricing, KPIs, etc.

  • Customer profit focus/lifetime value vs. transactional profit to the firm only

More Vocabulary

Joseph Pine and James Gilmore refer to buyers as aspirants—they aspire to be someone or something different. Here is where “Transformations” enter the model, and how they explain them in their book, The Experience Economy:

  • “Without a change in attitude, performance, characteristics, or some other fundamental dimension of self, no transformation occurs.

  • “Transformations are individual. No individual can undergo the same transformation twice; the second time it’s attempted, the individual would no longer be the same person. With transformations, the customer is the product!”

And they explain the various aspects of insurance, depending on the nature of the offering:

  • Services Insure: Secure payment in the event of a loss.

  • Experiences Assure: Secure confidence, encouragement, trust, or feeling of satisfaction.

  • Transformations Ensure: Secure event, situation, or outcome.

“Think about the emblems aspirants purchase [or receive] to commemorate the transformations they undergo. Rings, crosses, flags, trophies, pennants, medals, badges, medallions, insignias, diplomas, certificates, and other such emblems all tangibly signify that their bearers have transformed themselves in some way: from single to married, from team to champion, from civilian to soldier, from soldier to hero. Transformations cannot be extracted, made, delivered, or even staged; they can only be guided.”

This economic offering requires three separate phases: diagnosing aspirations, staging transforming experience(s), and following through.

Other Resources

Net Revenue Retention (NRR) rate: https://www.klipfolio.com/metrics/saas/net-revenue-retention-rate 

Harrys sale was blocked by the FTC; They also blocked a women’s razor brand sale. Chilling effect on the DTC model?


Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

This week was bonus episode 330 - “AOC, Texas, and Cookie Dough”
Here are a few links discussed:

Click the “FANATIC” image to learn more about pricing and member benefits. 

Episode #329: Interview with Donald Hoffman - The Case Against Reality

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Ron and Ed welcomed to the show the author of Ed's favorite book of 2019, The Case Against Reality, Professor Donald D Hoffman. (Or do they.) The show notes are below.

But first a bit more about Dr. Donald Hoffman…

Donald D Hoffman received a Bachelor of Arts degree in quantitative psychology from the University of California at Los Angeles (UCLA) in 1978 and earned his Doctorate of Philosophy in computational psychology at the Massachusetts Institute of Technology (MIT) in 1983 under David Marr and Whitman Richards. He was briefly a Research Scientist at the Artificial Intelligence Laboratory of MIT, and then became an assistant professor at the University of California at Irvine (UCI) in 1983. He has remained on the faculty of UCI since then, with a sabbatical during the 1995-1996 academic year at the Zentrum für Interdisziplinäre Forschung of Bielefeld University.

Ed’s Questions: Segment One

Welcome to The Soul of Enterprise: Business in the Knowledge Economy, sponsored by Sage, transforming the way we think and work so organizations can thrive. I’m Ed Kless, with my friend and co-host, Ron Baker. And folks, on today's show, we are very pleased to have our interview with Professor Donald Hoffman. Hey, Ron, how's it going?

Ron Baker

Very good, Ed. Looking forward to this.

Ed Kless

Yes. We’ve been marinating in Dr. Hoffman's work all morning, have a little bit of a headache, I must say. But that's okay. We will somehow persevere through this. Let me get the introduction done and over with so we can get right to the content here. Professor Donald D. Hoffman received a Bachelor of Arts degree in quantitative psychology from the University of California at Los Angeles and his doctorate in psychology in computational psychology from Massachusetts Institute of Technology. He was briefly a research scientist at the Artificial Intelligence Laboratory at MIT, and then became an assistant professor at the University of California at Irvine, where he remains on the faculty. Welcome to The Soul of Enterprise, Donald Hoffman.

So I have to give you the quick background story about how I came across your work. I'm almost certain that it was a reference that another one of our guests, Rory Sutherland [Episode #9 and Episode #267], who is the vice chair of Ogilvy and Mather, made to a TED talk that he saw you give, and I went through, and this is probably four years ago, loved it, went out and purchased your book, Visual Intelligence: How We Create What We See, and was so overwhelmed, and showed my daughter this, the picture of the thing called the ripple, which just absolutely blows me away every time I look at it, it is a two dimensional image, that when you look at it, you cannot but see it in three dimensions. And it is a wild, wild thing. So that was my quick introduction. I think it's on page two of this book. But I want to ask you a little bit about where did you come across this ripple? What, the background story about how you got to this visual intelligence piece before we get into the newer work of yours?

No, that would be very bad. So that image, the ripple, a computer would just see that as a 2d image because that's what a computer does at least initially, right?

So this led to your work on visual intelligence and then the your later work gets you to The Case Against Reality: Why Evolution Hid the Truth from Our Eyes, which is where I think we want to spend most of our time talking to you about. Before we start to get into the details of it, what was the transition like? You were coming from visual perception, then all of a sudden, the ideas of consciousness came into being? I'm trying to make that connection.

I love this, you write: “Cats can't do calculus, monkeys can't do quantum theory. So why do we assume that homo sapiens can demystify consciousness? Perhaps we don't need more data, perhaps what we need is a mutation that lets us understand the data that we have.”

Perhaps one of the more bizarre things that I came across after reading your work, that at least made me stop and go, hmm, maybe there's nothing to this, but there was a position that was put forward that said, perhaps people with advanced autism are an evolutionary step forward in their ability to process some of this stuff. And when you hear that initially that just seems ridiculous. But I guess it's theoretically possible that they are just perceiving things differently than we are.

Sure. Wow, this is just fascinating stuff. Thank you, Professor Hoffman, we are at our first break already, I can't believe it.

Ron’s Questions: Segment Two

Welcome back, everybody. We're here with Donald Hoffman, the author of The Case Against Reality: Why Evolution Hid the Truth from Our Eyes. Don, as we were talking about during the break, this book just really makes you think, and I love some of the metaphors you use, like the email on your desktop: it's there to hide the truth from you, and help you do useful things. And you say that's what evolution has done. And then you wrote this, you said, “The truth won't make you free, it will make you extinct.” And that's kind of where you begin to talk about the Fitness-Beats-Truth (FBT) theorem. Can you explain that?

You mentioned eye candy, and you have a beautiful discussion about beauty, and how it's not about objective reality. It's about fitness. And I just thought that was great. I remember, Ed mentioned Rory Sutherland, we had him on, and he says this all the time, that the peacock uses its tail as a way to signal and this is why women chase guys with Ferraris, not truck drivers.

That's amazing. The other thing I have to ask you about because it’s just mind blowing. If I'm sitting here looking at a spoon, and I turn away, is it still there? And you wrote well, “something is there, but it's not a spoon, and it's not in space and time”?

You even anticipate some skeptical questions, like, “If I don't see reality, why does my camera see what I see?” Or, “How does a driverless car work”? Can you explain that, because I can see people raising those types of objections?

Don, this is great, we’re up against our break. It’s like being in a graduate seminar. I really appreciate this.

Ed’s Questions: Segment Three

The book is The Case Against Reality: Why Evolution Hid the Truth from Our Eyes. The author is Professor Donald D. Hoffman, who is with us today on The Soul of Enterprise. And, Don, I want to ask you now about the concept of consciousness. You write: “All attempts at a physical theory of consciousness have failed. They have produced no scientific theory and no plausible idea of how to build one. The failure, I think, is principled, you simply cannot cook up consciousness from unconscious ingredients.”

So the assumption that neurons create, or that physical systems like the silicon circuits, create consciousness or could create consciousness is wrong from the get go, because we're assuming those things have an objective reality, and they don't.

It's funny, a high school friend of mine just posted an article last week from those two scientists that you mentioned about the microtubules. So thanks, you already covered the question that I had for you around that. So then you go the other way and say, okay, well, then what we need to do is we need to argue that consciousness is the foundational building block, and that it is conscious units that create more consciousness. Do I have that sort of right?

The book came out about two years ago [2019], at the end of the book you mentioned that you're starting these calculations with your team. I assume that since you're still talking to us two years later about it, you haven't falsified it yet?

Well, I've got only about a minute left with you and want to ask you what might be a deep question. And if it's out of bounds, please let me know. Has your research and work changed anything about how think about the divine in any way?

Wow, Amazing stuff. Thank you so much. Ron's going to take you the rest of the way home in the last segment. But I just wanted to thank you for appearing on the show today. It's been great to talk to you and a deep honor.

Ron’s Questions: Segment Four

Welcome back, everybody. We're here with Donald Hoffman, the author of The Case Against Reality: Why Evolution Hid the Truth from Our Eyes, which we highly recommend; I think it was Ed's number one book from last year. And Don, I wanted to ask you, on this consciousness topic, you seem to be fairly optimistic, or believe, that Artificial Intelligences can create real consciousness?

We've had George Gilder on the show [Episode #207], and he wrote Life After Google. He's an economist, he's got an information theory of capitalism which I find absolutely fascinating, and talks about some of the same things you do, some of your work overlaps. And I just wanted to get your reaction to this because he doesn't think that AI can, or could, create consciousness, and he wrote this: “The blind spot of AI is that consciousness does not emerge from thought; it is the source of it. The Oracle programmer must be outside.”

This is a business show, so I wanted to ask you about this because I found this fascinating in your book as well. You consulted, I think, for a jeans company, and you were an expert witness for T-Mobile. And you're talking about color psychology and how different colors conjure up different emotions and things like that. And I guess you coined the term “chromatures,” which give a richer structure, and trigger more precise reactions. You give the example of the magenta, T-Mobile's brand color. And I thought of the Tiffany's blue box, or whatever. Do you see this being used more in business and advertising and marketing?

You have a great picture in the book of a gal wearing jeans and both half's are different. And it's just fascinating. How's the book been received, Don?

Have you ever had a debate, like with a Michael Shermer, some type of skeptic about it?

[See YouTube podcast with Michael Shermer and Donald Hoffman here].

Science advances by dissent, not consensus, right?

Don, in the last half minute, do you got another book coming out, or in the works?

Well, if you do put out that book we'd love to have you back on to discuss that one. We're big fans. So Don, thank you so much for coming on the show. This has been an honor, as Ed said, and I really enjoyed the book and best wishes with your research. It is fascinating. Ed, what's on store for next week.

Ed Kless 

Next week, Ron, we're going to talk about “In Search of Relationship Value.”

Ron Baker

Awesome. I will see you in 167 hours.


Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

This week was bonus episode 329: “It's Por-SCHE, not Porsh”
Here are a few links discussed:

Click the “FANATIC” image to learn more about pricing and member benefits. 

Episode 328 - Interview with Gene Marks

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Ed’s Questions: Segment One

Welcome to The Soul of Enterprise: Business in the Knowledge Economy, sponsored by Sage, transforming the way people think and work so their organizations can thrive. I'm Ed Kless, with my friend and co-host, Ron Baker, and folks on today's show, we are pleased to have with us for the first time, Gene Marks. Hey, Ron, how are you doing?

Ron Baker 

I'm doing good, Ed. I had an eye doctor appointment this morning, so my eyes are dilated and full of stuff, so I can barely see you. But I can listen, so that's good.

Ed

Let's get Gene on and welcome him to the show. Gene is the CEO of the The Marks Group, and also the host of the weekly podcast called Small Biz Ahead [presented by The Hartford]. And also Gene marks.com, to read his blog and other fun stuff, welcome to The Soul of Enterprise, Gene Marks.

That’s great. We've recently had Peter Robinson on from Uncommon Knowledge [Episode #320], who was a speechwriter for Reagan and wrote the “Mr. Gorbachev, tear down this wall” speech. And he told us the backstory to that, which was absolutely fascinating. The other thing is that speech that we play as an introduction is from his speech to Moscow State University. And it was delivered with the bust of Lenin is behind him. And he's talking about this economy and mind, no bounds on human freedom to create being the most precious natural resource, and we just think about that. And we think it's perhaps Reagan's best ever speech and the author of that speech, Joshua Gilder, is coming on in a couple of weeks [March 12, 2021].

I personally think that he was right about the Cold War, the Soviets just couldn't keep up with us from an innovation standpoint. And that's one of the reasons that this show is The Soul of Enterprise, because we believe that business has not only a material but also a spiritual component to it. And that was one of the things that was missing in the Soviet Union, not the religious, but spiritual component of business and the creativity.

He was great at that, Let’s hire good people and get the hell out of their way,” that was his motto. So Jean, there's so much we could talk to you about, but the thing that jumped out at me today in news: Bitcoin is over a trillion dollars in market cap. I'm fortunate enough to have some that I bought a long, long time ago, and I'm already out, and have gotten out what I put in. So now it's all house money. So now I'm like, it's either going to change my life in the future, or it's not. That's where I am with it. But I think this is a significant moment, or at least maybe through the next couple of months. I looked at this as a Crossing the Chasm kind of thing. Today, we are about 10% of the market cap of gold. And you know, that Crossing the Chasm, Mark, is that, you know, 10 to 14 to 18%, when you cross the chasm, and then boom, you get all of the early adopters who just completely come online. And, we're at a point now I think, an inflection point, a serious inflection point, whether this is going to make it or we're going to break it in the next couple months. Thoughts on that?

One of the things that Elon Musk talked about, and Greg [Tirico] who runs our social media, and I were talking about this earlier today is, first of all, he always clarifies that it wasn't himself who made the investment, it was Tesla who made the investment. And the rationale for it is really so that they would be less beholden to the volatility of it when they start taking payments in it. That was the thought process. Now, if this starts to happen with other companies, if Walmart, Amazon, starts to hold large amounts of Bitcoin, that's where you see…

I completely agree. So we've got about two minutes left on this segment, so I'm hesitant to bring up a completely different subject. I wanted to get your thoughts. Have you looked at all at the Australian link tax that's come out recently? I tried to post something today on Facebook and was told, nope, you can't do it because there's a link to Australia in there somewhere, And Australia has now put a thing where if you want to put a link up, there's a tax that has to be paid to do this. This is a really bad idea.

That might well be, but posting a link and a tax on a link seems to me that's not content, you're not publishing content when you're publishing a link. It seems to be a silly argument.

All right, we are up against our first break.

Ron’s Questions: Segment Two

Welcome back, everybody. We're here with Gene Marks. And Gene, I feel like we could go a million different places because I know you're a KPMG alma mater, but let me ask you this. This caught my eye looking at your bio, tell me about your book, In God We Trust: Everyone Else Pays Cash.

Fantastic. Let me ask you this, because I know you're a CPA, as am I? Do you think our profession is serving small businesses in this area of cash flow? Cash is king, right? It seems like we play historian with bad memories with the financial statements, but we don't help them model cash.

It seems like we pay lip service to the relationship we have with the customers that we're privileged to serve.

Tell me about your book, The Small Business Book of Lists.

That's phenomenal. It reminds me of the book, The Checklist Manifesto, but on steroids.

Ed and I work in the pricing space, and there's been this pricing revolution going on since at least the mid 1980s, in big business. And my question for you is, do you think that's filtered down into smaller business? In other words, have smaller business gotten more sophisticated with respect to pricing, moving away from the idea of cost-plus pricing and more to value pricing?

And it's good enough, right? It's what one economist called “satisficing,” we just do good enough, we don't set out to optimize or to maximize, we just do good enough?

I couldn't agree more. It is a totally amazing opportunity. And we've been trying to get CPAs to do it for their customers. And Gene, we've had more luck with bookkeepers; they can advise their customers because they seem to have a better relationship with them.

I was thrilled to hear you say that you've got an opinion on everything. So I'm going to switch gears really hard on you here. Grade president Trump's economic policies.

It's a great point. It creates a climate of uncertainty. I think you can equate it back to FDR during the Great Depression, all the programs he tried created enormous uncertainty in the markets. It probably stalled the recovery for more years. Gene, this is great. This is flying by.

Ed’s Questions: Segment Three

And we are back with the CEO of The Marks Group, Gene Marks, and also host of the weekly podcast Small Biz Ahead with The Hartford. Gene, you were talking pricing with my partner, Ron, and we have been doing a lot of shows in the last 18 months or so, including an interview with Tien Tzuo [Episode #230], who wrote the book Subscribed, about the move to the subscription economy. I’d love to get your thoughts on subscription based pricing, especially in the professions.

Let me recommend that you listen to our show from last week with John Warrillow [Episode #327], author of The Automatic Customer, who told a story very similar to yours, how he was working with one client of his that was ready to walk away. John’s big thing is built to sell, that's the name of his system. And he said the one customer in professional services industry, they were getting offers of 70 to 75 cents on the dollar of revenue. Another company, in the same industry, it was media. So search optimization, that kind of stuff, but it had a subscription model, they were getting offers of 13 times revenue.

Let's turn our attention to your latest article and talk a little bit about this, because I think that there might be something here. Your latest article in Forbes, published this morning, says that 48% of sales leaders say their CRM system doesn't meet their needs? Alright, so the good news is that's fixable. All right, why is it and how is it fixable? And let me pose this to you: Why can't you as a business owner make a subscription model around fixing it?

And that's the problem. I did implementations for a long time, both of CRM systems and accounting. And I always felt that the project is this summit, we always use this climbing the mountain metaphor. I was like a Sherpa, and I was helping my client get to the top of the mountain. And then I was taking a helicopter off and saying, “Good luck getting down.” And I think that's really the problem. So I think that by applying the subscription model, look, not every customer is going to want it, and it's going to be significantly less customers that do this. But I think that's really the issue. Let me tell you a quick story before the break. But here's an example of a great CRM system. USAA insurance, I had a little fender bender about two years ago, this was before COVID. So I call up USAA and they say, first of all, “Are you safe?” That's their first thing, customer service. Are you feeling safe? Yes, I'm feeling safe. That's great. Thanks, Mr. Kless, that's wonderful. Oh, and by the way, thank your father-in-law for his service.

Bang.

Remember Martha Rodgers and Don Peppers wrote all those marketing one-to-one books. I saw Martha Rodgers speak at a conference and she called it the “Dory effect.” Remember Dory from Finding Nemo? She had no memory. What paper would you like? The Wall Street Journal like I said yesterday.

Alright Gene. Well, thank you so much. I'm going to let Ron finish up with you for the last 15 minutes so let me say thanks for appearing today. We'll have to have you on again sometime, love talking to you.

Ron’s Questions: Segment Four

Welcome back, everybody. We're here with Gene Marks. Gene, you are an author, you've written some books. So let me ask you, we love to ask our author guests this question. What are some of the business books that have had a major impact on your worldview, your thinking, your behavior?

One of the books we highlighted on our show, Best Books of 2020 [Episode #326], and the one for me was Humanocracy by Gary Hamel [Episode #313]. I don't know if you've had a chance to read it. It is phenomenal. It’s a screed against bureaucracy in business. And it's, as usual, he's just way ahead of his time with that book.

I agree with you reading history, reading biographies, autobiographies, that's where it's at. I learn more from that. You mentioned the FDR book. I wanted to tell you about one of Richard Nixon's books. He wrote many books. He's got one called Leaders that I thoroughly enjoyed. It's one of the best, because I can't stand books on leadership. There's too many of them, they all sound the same. His is completely different, it profiles some of the greatest figures in history. And it's a really interesting perspective on leadership. Really, really good.

And I noticed just looking through your blog scroll that you tackle economic issues. So who are some of the economists that have influenced you over the years?

That's awesome, we're economist junkies. We've had a lot of guests that are economists. Are you familiar with Russ Roberts’ podcast, EconTalk?

In the spirit, since you like James Pethokoukis, you might also check out John Tamny, over at Freedom Works. He's written many books on economics just for the layperson, and he's got a different perspective—he bashes both sides. It's just really interesting [John Tamny will be on the show March 19, 2021].

And if there's inflation, we'll just raise taxes and suck the money back out.

Thanks so much, Gene. This has been wonderful having you on. Will definitely want to do this again.

And stay with us as we do our live close. Ed, what do we have on store for next week?

Ed Kless

Ron, next week, we are talking to Donald Hoffman about his book, ready for this folks, The Case Against Reality.


Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

This week was bonus episode 328: “Ed Is Off His Meds”
Here are a few links discussed:

Click the “FANATIC” image to learn more about pricing and member benefits. 

Episode 327 - Interview with John Warrillow - The Automatic Customer

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Ron and Ed welcomed the author of The Automatic Customer, John Warillow. John's work has been a staple of the presentations that Ron and Ed have given on subscription-based pricing since the beginning. His nine models for subscription businesses lay the foundation for almost all subscriptions you will encounter. Join us for what promises to be an enlightening conversation.

Ed’s Questions: Segment One

Well, let me get to the particulars and we'll get John right on because we have been looking forward to this day for quite some time. We've been following John's work for the better part of two years or so, since we've been starting to get into subscription economy. John Warrillow is the founder of the value builder system, a simple software for building the value of a company used by 1000s of businesses worldwide. He is the author of the best-selling book Built to Sell: Creating a Business That Can Thrive Without You, which is recognized by both Fortune and Inc. magazines as one of the best business books of 2011. His next book, which is the one that came to mind to Ron and myself, is The Automatic Customer: Creating a Subscription Business for Any Industry. This was released by Random House in February of 2015 and translated into eight languages. His latest book, which we'll perhaps talk a little bit about, released in 2021, is The Art of Selling Your Business: Winning Strategies and Secret Hacks for Exiting On Top. Welcome to The Soul of Enterprise, John Warrillow.

Well, I'm going to start with subscription. Let's dive full in: subscribers are better than customers. Explain.

And that was pre-COVID numbers. I'm sure it's even higher since then. One of the things that Ron and I had talked about in the professions is getting people to change from using the term client to using customer because of the nature of the word customer, it comes from the word custom, it is their custom to repeat business with you, it is their custom when they came into town to stop by your store. But do you like the term subscriber, or even member, better? For those reasons? Do you think changing that language has an impact?

Yeah, that's how we felt to, especially with the term customer. But I'm starting to like member better, what I think back is to that American Express ad campaign from, I don't know, maybe 20 years ago, membership has its privileges.

What are some of the key mindset shifts that a business owner needs to change when they're going to a subscription model from a product based model, let's say?

I listened to an interview in preparation for the show that you did probably four or five years ago now. And you were critical of Microsoft and how they were rolling this stuff out. Do you think they've improved on what they've done with Office 365? Or are they still struggling a bit in your view?

That was certainly one of our challenges at stage two. We sell business software as well. One of the things, and honestly, I don't know where Ron and I picked up this line from, it may have been your book. And as I was flipping through, I couldn't find the exact line. But our mantra has been that we need to price the portfolio in the subscription model, not price the customer or even the service. Because what you're really looking to do is you're trying to spread the risk pool, it's almost insurance, across the entirety of the pool. And I want to get your comments on that. Did we steal that line from you? Or is that not something you remember writing in the book six years ago?

I love talking about this stuff because people think, “Well, there's always some reason my business can't be subscription,” right? You just gave a great example of selling flowers. But what if I'm retail flower shop, I can't be subscription, can I? And I think, of course you can, maybe you could you could sell some subscriptions. And one of the things I like that you talk about, it's not about becoming a subscription model so much as it is expanding into one. Talk a little bit about that difference? I think it's a subtle but very important point.

I love that. As we would say in America, niche down, but I like niche much better. I think that's a a great phrase to “niche down,” to try to get to where you want to be. Well, this is flying by as I knew it would. We are already up against our first break.

 

Ron’s Questions: Segment Two

Welcome back everybody. We're here with the author of The Automatic Customer: Creating a Subscription Business for Any Industry, John Warrillow. And John wanted to ask you, by the way, I loved your book, I thought your book was excellent. How you laid out the nine subscription models, which was absolutely beautiful. You even gave a little bit of a history of how the European map publishers were the first to really offer subscription, which I found fascinating. But why do you think this subscription Renaissance is happening now? You mentioned the Columbia Record House, which ended up filing bankruptcy—I still think they're charging me by the way—but why do you think that this subscription Golden Age is happening now?

Sure. You wrote that nothing has been as successful in getting people to shop in new product lines. And what I love about this model is it does put a premium on the customer relationship, experience, innovation is baked into the model. You're constantly delighting the customer, you have to constantly exceed their expectations, don't you?

Because you’ve got to develop them into that habit of using you and make it part of their life. I love how you say “communicate like a giddy lover.” But if you do that too much, you can be too needy and annoying. That was a great analogy. I'm going to take your subtitle to heart: creating a subscription business in any industry, because we've been trying to do this, as we said before we went live, in the CPA, legal consulting, and advertising agency space. And I think the model is the concierge or direct primary care medical practice that, I don't know if you're familiar with this—I know you're in Canada—but throughout the United States there's about 14,000 of these general physicians that work in this practice where they have member subscribers paying them anywhere from a cell phone bill a month, or maybe a cable package a month, for access to their doctor: telemedicine, same day appointments, house visits, you name it. And it's just basically saying, look, you're covered for all your health needs, anything that we're capable of doing; if they have to go to a specialist or something that would be separate, their insurance might kick in. But I think that's the model, John, and that model has been around since 1996. A real smart team doctor from the Seattle Sonics founded this company called MD Squared. Do you think this subscription model is possible in the professions?

You mentioned the front-of-the-line model. And in terms of this concierge practice, I want to ask you about this too, because I also think it's tapping into your convenience model and your peace-of-mind model. And I think those are two areas that professional firms completely under invest in. We don't realize how good those make the customer feel. I remember talking to Jonathan Stark, he's got a concierge doctor. He's never used him in 10 years. He said, but I know if I need them, he's there, he'll be right there for me. He says I gladly pay for that. It's kind of like insurance, isn't it?

That's awesome. John, this is just flying by, but it’s great, thank you so much.

 

Ed’s Questions: Segment Three

Our guest today on The Soul of Enterprise is John Warrillow, author of the book The Automatic Customer: Creating a Subscription Business for Any Industry, published in 2015. Ron and I both highly recommend the book and it's been on our hit list for quite some time. John, I want to stay on the theme that Ron has been talking to you about and that is the nine subscription models. When you were developing the book, what was the process for limiting it to nine, to get to the point where you had something discreet about each of these, that made sense in your mind?

And for that [certainty] most of us would pay a little bit of a premium. One of the things I've heard you talk about is, and I love this analogy, the mindset to get into, rather than try to think about a way to give somebody a 10% discount for coming on board a subscription. What can you do to do something so that it's a 10x better than? So talk a little bit about that? I think that is a great way to think about things.

And people probably would use the carwash more, but that's okay. If I paid $30 a month for a carwash I would more likely use it than not, but that's okay.

Off the top of your head, of the nine models that you talk about in the book, have you seen any new ones emerge that made you say, “Ah, there were there was one I missed. I really need to include that if I ever do version two of the book.?”

Another great example of what you called earlier “niching down” that's a great example of that.

Another question that I have for you, you’re probably aware of Tien Tzuo, the CEO of Zuora [Episode #230] and his book Subscribed. His newsletter is fantastic, another one of the other sources that Ron and I go to. He has been begging Apple to get into the subscription business for their products. Right now, I think, about 70% of their revenue is subscription services, a lot of people don't realize that. But he's been begging them to do this for their products. Any idea on your part, why do you think Apple's hesitant to get into the subscription model for its products?

Outstanding. All right, we’re up against our last break.

Ron’s Questions: Fourth Segment

Welcome back, everybody. We're here with John Warrillow. And John, I want to stay on the professional firm and ask you this, talk me off the ledge on this because a lot of people say, “Well, for a law firm or a CPA firm, we have these big projects, or black holes, they're not common. They don't come up all the time. So we couldn't possibly put that on subscription.” Now, I don't buy that. But I know that you profile that Hassle Free Home Services business that will carve out a one-time project, build my deck or remodel my bathroom, and they charge those as one-offs. Is it possible to run a hybrid business model? That is, partly transactional and partly subscription, because that's where I get hung up, because I think these are such different mindsets, that the two don't play well together?

I couldn't agree more. And people are fighting about that with us. I don't know if you've read No Rules Rules by Reed Hastings of Netflix? But it just seems like this model does so many great things. First off, it puts the relationship at the center, but it also blows up silos, and it blows up bureaucracy. Everything revolves around the customer at Netflix. I learned this from the book, they don't have individual KPIs. You can do that in a subscription model. There is no way you can do that in a transactional model.

You've talked about multiples of earnings being the sales price. And I was just wondering, in the professional space, do you have any experience on what most accounting firms sell for, it’s usually one times gross [revenue]? I think if they are subscription they'd go for a higher multiple. Do you have any evidence to support that claim?

They just have to get over that all-you-can-eat fear, like the carwash owners, “Well, what if they come in a million times in a month.” And like you said, and it was a great point, if they did come in that much, it just shows you how much they value your service. It's going to diminish over time, but the value stays there.  Another question I have for you is, and we talked a bit about this during the break, but why do you think companies like Audi and BMW have canceled their automobile subscriptions?

They have that one-on-one relationship, just like Harry's Razor and Dollar Shave Club, that direct-to- consumer is really powerful.

Any new subscription businesses that have come online that have impressed you, or that you've raised an eyebrow, we've got about half minute?

Brunswick is doing a subscription model with boats, and Roam is doing housing around the world, you can live in a house on subscription basis. John, this has been fantastic. Thank you so much. We are big fans of the book. We recommend it all the time. It's all over the place when we talk about this model, really honored to have you on. Ed what's on store for next week?

Ed Kless 

Next week, Ron, we have author, columnist, keynote speaker, and small business expert Gene Marks.


Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

Click the “FANATIC” image to learn more about pricing and member benefits. 

Episode 326: The Best Books of 2020

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An annual favorite, Ron and Ed talked about the best books they each read in 2020. Sometimes there is overlap, other times none. All book links are below including a special top 5 list that specifically includes authors interviewed on the show.

Let’s start with a quote:

“You don’t have to get people to burn books to destroy a culture. Just get people to stop reading them.” —Ray Bradbury, Sci-fi Writer

Ron’s Top Five books from authors we have interviewed (more in the bonus show)

5. How Ronald Reagan Changed My Life, Peter Robinson (Episode #320)

4. Snapshots from Hell, Peter Robinson (Episode #320)

3. Evasive Entrepreneurs, Adam Thierer (Episode #294)

2. The First Cell, Dr. Azra Raza (Episode #289)

1. Humanocrarcy: Creating Organizations as Amazing as the People Inside Them, Gary Hamel (Episode #313)

Ron’s Top Five Books of 2020

5. They’re Both Wrong: A Policy Guide for America’s Frustrated Independent Thinkers, John Tamny, 2019

Love this from the Foreword: “Just because an idea appeals to a lot of people doesn’t mean it’s wrong. But that’s a good working theory.”


4.
How Innovation Works: And Why It Flourishes in Freedom, Matt Ridley, 2020

An excellent account of innovation, along with one of my favorite definitions for innovations: “Enhanced forms of improbability.”

Also, “The number of people predicting the death of Moore’s law doubles every two years.” –Peter Lee of Microsoft Research, 2015

3. Countdown 1945: The Extraordinary Story of the 116 Days that Changed the World, Chris Wallace, 2020

A page turner most momentous decisions in history made by a president who had no knowledge of the Manhattan Project. It was a day, he later said, “when the world fell in on me.”

2. Empires of the Sky: Zeppelins, Airplanes, and Two Men’s Epic Duel to Rule the World, Alexander Rose, 2020

Dr. Hugo Eckner, once the most famous person on the planet, and Juan Trippe, the founder of the first world-wide airline, Pan American. Ultimately the birds would conquer the clouds.  

1. Witness, Whittaker Chambers, 1952

After his early years as a Communist Party member (1925) and Soviet spy (1932–1938), he defected from the Soviet underground (1938), worked for Time magazine (1939–1948), and then testified about the Ware group in what became the Hiss case for perjury (1949–1950), often referred to as the trial of the century, all described in his 1952 memoir Witness.

This is a classic, a work of deep philosophical meaning. His opening letter to his children is profound.

Ed’s Top Five Books of 2020

5. Apocalypse Never: Why Environmental Alarmism Hurts Us All, Michael Shellenberger, 2020

4. Gospel Parallels: A Comparison of the Synoptic Gospels, New Revised Standard Version, Burton H. Throckmorton, Jr., 1992

3. Why Liberalism Works: How True Liberal Values Produce a Freer, More Equal, Prosperous World for All, Deirdre Nansen McCloskey, 2019

2. The Great Gatsby, F. Scott Fitzgerald, first published in 1925

1. The Fabric of Civilization: How Textiles Made the World, 2020 [Episode #325]


Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

This week is Bonus episode 326 - More books and more. Here are just a few links discussed during the bonus episode:

Click the “FANATIC” image to learn more about pricing and member benefits. 

Episode 325 - Interview with Virginia Postrel

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Ron and Ed were honored to welcome Virginia Postrel, author of The Fabric of Civilization: How Textiles Made the World. Virginia is also a columnist and speaker whose work spans a broad range of topics, from social science to fashion, concentrating on the intersection of culture, commerce, and technology. Writing in Vanity Fair, Sam Tanenhaus described her as "a master D.J. who sequences the latest riffs from the hard sciences, the social sciences, business, and technology, to name only a few sources."

Ed Questions: Segment One

Welcome to The Soul of Enterprise: Business in the Knowledge Economy, sponsored by Sage, transforming the way people think and work so their organizations can thrive. I’m Ed Kless with my friend and co-host, Ron Baker, and folks on today's show, we are honored to have our interview with Virginia Postrel. Let's do the formalities here and welcome Virginia Postrel, who is an award-winning journalist and independent scholar, a columnist for Bloomberg Opinion. She previously served as columnist for The Wall Street Journal, the Atlantic, The New York Times, and Forbes. She has authored highly acclaimed books, The Substance of Style, The Power of Glamour, The Future and Its Enemies, and the book we're going to talk about mostly today, The Fabric of Civilization: How Textiles Made the World.

Welcome to The Soul of Enterprise, Virginia Postrel. I became obsessed with this book around Thanksgiving. And I'm going to tell you a story. We have at Thanksgiving, we were able to go over to my in-law's house despite COVID which we're very excited about. And we have a tradition in the family that everybody goes around and says something that they're thankful for, which is very nice. Usually people say the usual, family and all kinds of stuff like that. Well, I said fabrics. And that got uproarious laughter from the dinner table. But Virginia, I really want to know, I think we should be. Why should we be thankful for textiles?

And later in the book, you have one of my favorite quotes, which is “We suffer textile amnesia, because we enjoy textile abundance.”

It really starts with thread, doesn't it? That's kind of the basis for it. So talk a little bit about the origins of thread.

And it's so interesting, you wonder what possessed somebody say, “If I do this, I'm going to get this long piece of whatever, right? I mean, where do we even start with that, that's the thing that amazed me?

And that's unbelievable. At one point you say a queen size sheet is 37 miles worth of thread. Stretching you from the Washington Monument to Baltimore.

Quickly, I wanted to just tell you this, I actually worked for a sheet producer at one time, I did their software installation. And one of the things that these guys told me was always buy irregular [sheets]. And the reason is, there's actually no difference between irregular sheets and regular sheets, except every so often we put like on 20% of them, we just say they're irregular. And those never come back. But the other ones we guarantee. But there's no quality control.

So I have so many questions, we’ve only got about two minutes left in this segment. What's the relationship of textiles to mathematics?

And the really fundamental algorithms built in the looms. So the first algorithms, you say, were those that were produced at the loom?

Which is actually the same way I believe that computers ultimately do division. That's how it works out in machine language. Anyway, we're already done with our first segments, it’s flying by.  

Ron’s Questions: Segment Two

Welcome back, everybody. We're here with Virginia Postrel, one of my favorite authors, and Virginia, if you would have told me at any point that I would read a book about sewing and weaving and fabrics, I would have said you're nuts. But your book just held my interest the whole time. It's just a great, great story. And you're so right that we take this for granted.

Well the link between dyeing and chemicals was absolutely fascinating. Just by itself. You're right. This is a business book, really. In many dimensions.

Your discussion about how textiles were used for money, and the sumptuary laws, ff course, were absolutely fascinating, too. I love the line about how husbands used them as an excuse not to buy a nice wardrobe for their wives.

That's awesome. Well, you've convinced me that we should no longer call it the Stone Age, it should be called the String Age.

One of the most fascinating stories in the book, it just blew my mind. Ed and I have done a few shows on the history of medicine, surgery, anesthesia, and germ theory. Explain the link between silkworms dying which led to germ theory.

It makes sense because so many other things came out of thinking about all of this, such as dyeing and chemicals, polyester and nylon, and all of that.

That was an incredible story. So unfortunately, we're at our break, this is just flying by, Virginia.

Ed’s Questions: Third Segment

We are back on The Soul of Enterprise with Virginia Postrel. Her book is The Fabric of Civilization: How Textiles Made the World, and folks, I can't recommend this book enough, please go get it and read it. It's a great story. And we're only scratching the surface with Virginia today on what's in this book. And Virginia, I want to ask you a little bit about your process of writing this book, because it is so deep and so rich, was it like a term paper, like note cards? I have this vision of you having note cards all over your dining room table to try to put this together?

Do you use Microsoft Word, type it out, and then edit from there?

It’s just a fantastic book. And I love the fact that you include links to YouTube videos, because in many cases. I must have watched half a dozen videos that you recommended in your book, because you want to see, okay, this drop spindle thing that you're talking about, you really have to see that to fully appreciate it.

Well, I've got about five minutes left, I want to ask you a very specific question. And that is did you come across a song called “The work of the weavers” in your travels?

The Clancy Brothers did a version of it. It’s actually a Scots tune. I'm going to give you a little bit of a sample right now, are you're ready?

[Ed sings a part of this song. The printed word can’t do it justice—a must listen!]

And of course the weavers got themselves into a pinch, because…tell that story…

And maybe this is apocryphal. But the saboteurs, wasn't that a similar story, the sabo, with the shoes and such.

I think Don Boudreaux has something on it and that's where I remember reading it. But the last question I have for you is about your Afterword, which is really an essay that can stand on its own. It's just such a great piece. I'm curious, was there a rationale for putting it as an Afterword versus a Foreword, because you could almost argue that it would have set you up for the whole book? I was just curious about that.

It's a magnificent piece. But it can stand on its own as a tease for the book, because it really leaves you with all of these dangling questions. Well, Virginia, thanks so much for appearing. Ron is going to take you the rest of the way home the last 15 minutes. But I just want to thank you for coming on the show today. This is just a great honor for me. And as I said, I was obsessed with the book. So just a lot of fun to talk to you.  

Ron’s Questions: Fourth Segment

Welcome back, everybody. We're here with Virginia Postrel, and Virginia, another book of yours, I absolutely loved was The Substance of Style, which came out in 2003. In there, you talk about Maslow's hierarchy of needs. And everybody talks about this like it's Gospel, the Oracle of Truth. But you don't think it's a good explanation?

It’s like you say, you don't have to wait to have a full stomach or until your roof doesn't leak. The poor built cathedrals, and made pottery and jewelry. It's a really, really excellent point. The other thing I wanted to ask you, and another book of yours that I absolutely loved because, well, for one thing, you signed it for me, it's behind me, is The Future and Its Enemies. And we're going to link to all of your books, and more, on our show notes. But you write in the Introduction to that book, “The central question of our time is what to do about the future? And that question creates a deep divide.” Is that still true?

No, that's really true. It reminded me very much, the whole theme of the book, of Jane Jacobs. She wrote a lot about that bottom-up, trial-and-error process. Hayek, obviously, and George Gilder was another one who I thought of a lot. It's a fantastic book. The other thing I liked that you pointed out is Al Gore wrote Earth In the Balance but the earth doesn't have an equilibrium. There's no static standard for natural.

You wrote very eloquently articles in The Atlantic and on your blog about donating a kidney to an acquaintance, I think back in 2006. And I am, of course, interested in your ideas about the waiting list, how many people die waiting for a kidney and what a tragedy that is. But just that whole process, you talk about how the process is really difficult for the donor?

Here’s Looking at You, Kidney,” June 2006

The surgery was simple; the process is another story,” October 23, 2006

With Functioning Kidneys for All,” The Atlantic, July 2009

It’s laparoscopic surgery, right?

I take it you support a market for kidneys?

I think Iran is the only country that allows that legally?

Well, Virginia, thank you so much. This has been such an honor to be able to talk with you. I'm really excited. And love your books. And we'll put up full show notes, where to contact you, and all the other stuff that we talked about. Ed, what do we have on store for next week?

Ed

Next week, Ron, we're going to be talking about our Best Books of 2020. And you may hear about this one again.

Ron

Excellent. I'll see you in 167 hours.


Episode 324 - Interview with Anne Janzer

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On Friday Ron and Ed were pleased to welcome to the show, Anne Janzer, the author of Subscription Marketing, and four other books on writing. In addition to being an award-winning author, Anne is an armchair cognitive science geek, nonfiction author coach, marketing practitioner, and blogger. She’s on a mission to help people spread important ideas through writing.

Ron’s Questions: Segment One

Welcome to The Soul of Enterprise: Business in the Knowledge Economy, sponsored by Sage, transforming the way people think and work so that organizations can thrive. I'm Ron Baker, along with my good friend and VeraSage Institute colleague Ed Kless, and on today's show, folks, we are honored to be talking with Anne Janzer, author of Subscription Marketing. Hey, Ed, how's it going?

Ed Kless

It's going great, Ron, I mean, who would have thought that the nation would come together so quickly? On Wednesday, and of course, I'm not talking about the inauguration, I'm talking about over the Bernie memes that we all seem to have united around.

Ron Baker

I just saw him with the guys from the Great White North in Canada, SCTV sketch.

Ed Kless 

No, I think that Bernie has been true to his socialist word, he has been a burden on productivity now, this is just what everybody's been doing the last two days? That's all we've done.

Ron Baker

All right, well, let's bring in Anne Janzer, an award-winning author, armchair cognitive science geek (I love that), nonfiction author, coach, marketing practitioner, and blogger. She's on a mission to help people spread important ideas through writing. She's the author of many books on writing, Get the Word Out, Writing to Be Understood, The Writer’s Process, The Workplace Writer's Process, and of course, Subscription Marketing, which is now in its third edition, which we'll talk to her about. Her books have won numerous awards, and they've been translated into Japanese, Korean, and Russian language editions. So that's great news. Anne, welcome to The Soul of Enterprise.

So before we get into subscription, which is why we brought you on, I want to ask you, what's it like to teach writing to business professionals? Have you been able to remove their jargon?

The Economist has this columnist I just love, Bartleby. And he constantly rails on the terrible language and writing skills of most business people. They write memos that are indecipherable, and just full of jargon. And he just really takes them to task. I just love the guy. Anne, what motivated you to write a book on subscription marketing?

I bet, because revolutions always start from the bottom up, right? They don't start from the big companies down. You know, we've had Tien Tzuo on [Episode #230], the CEO of Zuora and author of Subscribed and he is, I would say, one of the chief evangelists for this business model. He wrote in his book that “In five years, you won't buy anything, but you'll subscribe to everything.” And I actually like how you put it in your book, you say, “In five years, you'll have the option to subscribe to everything and every business will have to accommodate that fact.” But what we see, Anne, is a lot of inertia. Why do I have to accommodate it, it’s not going to affect Me? How do you respond to that?

That's a great point. We have a saying around here that you compete against any organization that has the ability to raise customer expectations. And how many of your customers are comparing your experience with their experience on Amazon, or when they visit Disney World? This model requires such a different mindset. We always talk about how difficult it is to unlearn. Sometimes unlearning is harder than learning something new. Like I think about Fender guitar, I don't know if you've run across them, but their Digital Play, and they are just a phenomenal success story during this COVID pandemic. They're not really selling guitars, they're selling you how to play the guitar and how to play it continuously better. And that's just not the same thing at all, is it?

Right, and rather than just focusing on the transaction, I love what the fender CEO said: If I sell somebody a guitar, and they try to play it, and they get frustrated, and it goes under their bad, and then they give it away, that's another sale that I don't get to make in the future. So just that whole mindset of customer success and in the book, you talk about Inadequacy marketing. And I love this idea: The prospect lacks something that only can be fixed with our product or service. This idea that we're selling solutions, it seems to me you have an issue with this?

And [Apple] has done this since day one. They show the one user using their product, and they are the hero. Yeah, it's such a narrow mindset to think we sell solutions to problem. It's broader than that, its possibilities and opportunities as well.

We talk a lot about value pricing, Ed and I are faculty members of the Professional Pricing Society. We teach value pricing, and [what we call] value pricing 1.0 was all about pricing the customer. Now we talk  about VP 2.0, which is subscription, where you price the relationship. And people say, “Well, that's just semantics. What's the difference between the customer and the relationship?” There's a big difference. Because with Fender, you have a relationship with the customer, it's a direct relationship, they're invested in your success.

You call it Value nurturing. Can you explain that? Because I love that, too.

You’ll get a royalty when we say it.

Right, and you talk about five approaches to this idea of value nurturing, and I love the content and community. Sometimes just leveraging your community of users or members can make a big difference.

I think about Harley Davidson, that's a way of life. It's not just a motorcycle.

Ed’s Questions: Segment Two

Our conversation today is with Anne Janzer, author of Subscription Marketing: Strategies for Nurturing Customers in a World of Churn, and Anne I want to ask you about a couple of quotes in the book that I've picked out. One of them is this, quote, “I've become convinced of the following truth. Organizational boundaries are the enemies of the subscriber experience.” Expound on that

Ron and I are tied into economics as well. Ludwig von Mises is an economist who said that you cannot parse value, right? You can't break down the difference between the value of the experience in a restaurant of the waiter, the food, or the cleanliness. I mean, if one of those things fails, we judge it all the same. So even if the waitstaff is stellar, but a cockroach runs across your meal, it doesn't matter. I want to just take this to the next level, because later on in that same chapter, you say, “In a subscription based business, everyone is in marketing.” period, really, period, which I loved. But when I read that for the first time, I thought, what is also interesting is how some people in marketing are actually resentful of that.

That's such an important point. I think that the challenge is, of course, when I read that phrase the first time through the book, you think, “Oh, everybody in marketing wants that to happen;” but they don't, they really do sometimes want to hold on to the different pieces. And it's really up to them to educate out. I think that's a great, great point. I wanted to talk to you a little bit about Amazon Prime, and what a great success story that is. It offers you the discounts to be able to do the “Subscribe and Save” choice. And I just want to get your thoughts on this. I think Amazon has made it too easy to order and messed themselves out of Subscribe and Save. I subscribed and saved to some things and found myself unsubscribing because it was so easy to just order it when I need it instead. That's the bizarre part, right?

Yeah, and I can't believe it won't be too long before it's not just COVID tests, but also COVID vaccines. In my fantasy world we have Amazon doing the distribution and Chick-fil-A doing the actual injections, I think we'd have a much better experience overall.

Apparently, in fact, our social media person, Greg Tirico and I talked earlier, [Dave Clark, CEO, Worldwide Consumer] wrote a letter today that has appeared about that very thing—offering Amazon up to do a better distribution of the vaccine. So we'll see how that that plays itself out. This next topic I know is a passion of both Ron and I, and that is, you're talking about the common adaptation models of subscription: the trial, the segmented approach, all-in approach pivot as a marketing subscription. And one of the things that you say is the low-risk strategy of dipping your toe in the water is, inherently, a lack of commitment, and it may doom the trial to failure? Can you talk a little bit about that because I think that's a critical point for people to understand who are trying to transition, that you can't be a little bit into subscription.

This goes back to Peter Drucker, this inherent tension between sales and marketing. In so many companies people say, “If marketing would just do their job,” and others say, “If sales would just do their job,” this back and forth. And I think part of it stems from something that was a problem that emerged out of the ‘80s and ‘90s, was marketing's belief that they were there to just provide leads, right? In fact, compensation systems were built totally on just delivering leads, regardless of how crappy they were, it didn't matter. And I think subscription just completely jettisons that idea. So expand on that a little bit, if you would.

It was interesting reading through your book, a concept flew into my mind, which was how poorly some companies that were subscription based performed early on in this subscription marketing world. I'm thinking specifically of cable and cell phone companies. These companies had the model but just then performed completely poorly, and today are still recovering, in my view. So thoughts on that? Why did that happen? Where did they get lost? They had it.

One of my jokes is I'm pretty sure I'm still subscribed to Columbia House Records. I'm pretty sure that somewhere, if I combed through all of my credit card statements, they're getting money from me somewhere.

Ron’s Questions: Third Segment

Welcome back everybody. We're here with Anne Janzer, and her book Subscription Marketing, which we highly recommend. Ed and I both loved it, and if you do run out to Amazon and get it make sure you get the latest edition, which is the third edition. Anne, you were talking with Ed about your adoption models: The trial, the segmented approach, and the all-in pivot. And I just wanted to get your take on the news reports in the last week or so that BMW, Audi, and Mercedes, all have given up on their subscription trials. BMW might bring theirs back, Audi has no plans, and Mercedes, they'll probably bring it back at some point. Why do you think they failed? I have strong opinions about it, but I'd love to hear what you think.

The legacy systems with the dealer networks are definitely an issue. But, and you probably know this as well—I learned this from Tien’s newsletter—Porsche Drive has been expanding, they are in six cities now. And 80% of the people that have signed up for it are new to the brand. They're flourishing with it. In my mind, they're no different from BMW, another fantastic brand. They're the two most profitable car companies in the world. I think BMW just can't get out of the mindset that they're selling cars. And Porsche says, “No, no, you're subscribing to Porsche. You have a direct relationship with us.”

Obviously [Porsche’s] regular customers are getting older, they're dying off. And they're going after a younger demographic, which is probably going to really be helpful in the future. I'm so glad I asked you during the break about direct primary care and concierge medicine, because you said you have a DPC doctor now. And when I look at those practices, and I've done a deep dive on them, and I realized that a house can't stand if it's divided. You can't be a DPC practice and still have fee-for-service and take insurance. You've got to be one or the other. It's kind of like the problems BMW is having [with its subscription trial]. How do you advise, especially smaller firms, like Ed said, you can't be half pregnant with subscription. You're either all in or don't do it?

One of the things that impresses me about the DPC movement is that they're saying that this is why I became a doctor in the first place, to help people. And the typical general practitioner has 3000+ patients, which is why you can spend seven minutes with them when you have an appointment. And now, because they’ve reduced their panel of patients—like you were saying, not all growth is good growth—they might have 600 patients, but now it's not just about treating you when you're sick, it's also keeping you healthy. And they have the capacity to do that. And, to me, that model just makes so much more sense.

It's really fascinating. Most DPC doctors’ patients have less emergency room visits, less hospitalizations, they even take less drugs, which even the pharmaceutical companies are noticing. It's just like you say, it aligns the incentives, which is great. Greg Tirico actually asked this question, and I thought it was a really good one. He said the number one question he gets, and he's never had an answer for is, “What if someone signs up and then leaves in 30 days with all their stuff?”

One of the biggest challenges, and frankly Ed and I've been working on out on this, and still wrestling with it, is when you convert a CPA firm or a law firm that does litigation, or an IT firm that does massive software installations, they have these one-off projects that are really, really expensive, and loaded upfront with a lot of work. Are you okay with carving out separate prices for large projects, and not having those on subscription, but then the ongoing relationship on subscription?

For projects that come up all the time, then my attitude is you can just bake it in. I think we are really hard on ourselves on this because we don't think we're thinking far enough outside the box. We're still thinking we're selling guitars. We're not thinking like we're helping you play better.

When I when I look at, like you say in the book, even marketing powerhouses like Procter and Gamble and Coca Cola are confronted with these direct-to-consumer brands, like Warby Parker, Casper, and Harry's Razors? Didn't Unilever buy [Dollar Shave Club] for $1 billion?

How do you how do you recommend that firms overcome subscription fatigue? This is another pushback we get?

It comes back to that relationship. And the other thing is the innovation, like you said before about [Amazon] Prime, the innovation baked into this model, which I just love about it. You continuously add capacity but it doesn't change your price, necessarily.

Well, and this has been great, Anne, unfortunately we're up against our next break.

Ed’s Questions: Fourth Segment

We are talking subscription marketing with Anne Janzer, the woman who literally wrote the book on that subject. Anne, I wanted to pick up on another sentence that jumped out at me. At first I had a negative reaction to it. But then over time I've come a little bit more accustomed to what it is that you were trying to say, because I read further in the book. You say, “Upselling and cross selling, these are important results of successful value nurturing.” And here's the thing I objected to, “but never mistake selling for creating value.” Why should we never mistake selling for creating value?

My objection was based on my priors, right, which is this notion that, to me, sales is about what we call the value conversation. It is about having that conversation with a prospect. Keep in mind, we sell large systems to accountants, and also people who need accounting solutions, which is, by the way, one of the few areas that is extraordinarily sticky, and switching costs, even in subscription, are astronomical, because nobody wants to change their accounting system. So it's one of the few exceptions to your rule. I think that was my reaction to it. But I think you make a very important distinction there. Because so many people think that, oh, if I just tell them what the features are, they will miraculously say, “Oh, I get it now.” And that's just not the case.

I want to quickly explore something and I have to set this one up. Ron and I do an exercise that we call the Value Gap, and you write eloquently about economic value. And one of the things that we suggest people do is look at their relationship with a current customer and ask themselves, How much value have they actually created for that customer? And then think, How much value can I create for them in the future? That exercise, to me, has really come home with the notion of subscription, because of what Ron was talking about—the continuous need to innovate. So this idea of what can we do for current customers to create value for them tomorrow? Explore that a little bit with me?

The great example from your book that I love is the MailChimp hang 10 when you successfully launch your campaign, which makes me happy when it happens.

And if they took it away, I would miss it. I wanted to get to this, too. I love your conversations about the launch plan. And by the way, folks, you have to buy this book because it is chock full of not only the great theory, which Ron and I love, but the practical little tips that you can do to make this really, really work. So that's one of the reasons why we love this book, there's a great balance. Back to the launch plan, what I'm finding, and I wonder if you're finding this, and you probably are overly critical of this as well, these email campaigns to get you to use. I'm like, “Stop, please.” They're all the same now. People have to innovate around them now, don't they?

Please, please shut up. If you stop I will continue to subscribe. As long as you leave me alone.

It's like the Brazilian steakhouse with the green and red card that you flip over when you want them to bring more meat? The other thing I want to ask you about is what you call the 90/10 rule that applies to new subscribers. If a customer doesn't start using your solution within 90 days, there's only a 10% chance that they'll become a loyal customer. Is that still true? Is that something that continues to bear itself out in your latest work?

Which leads me to a question that we talked about with Robbie Kellman Baxter as well [Episode #319]. And you do mention this a little bit in your book. I'm curious, and Tien Tzuo is absolutely convinced that freemium is dead—long live the free trial. Robbie says he's a provocateur. What are your thoughts on freemium versus free trial? Has there been any clarity from your perspective on that?

That's a great answer, and this has been terrific conversation. The hour flew by. Ron, what do we have coming up next week?

Ron Baker 

Next week, Ed, we have Virginia Postrel, the author of The Fabric of Civilization.

Ed Kless 

I can't wait. That's going to be great. I'll see you in 167 hours.


Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

This week is bonus episode 324 - Bernie memes and more. Here are a few links discussed during the bonus episode:

Click the “FANATIC” image to learn more about pricing and member benefits. 

Episode 323: Interview with Art Carden

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Ron and Ed welcome economist Art Carden, co-author of Leave Me Alone and I'll Make You Rich: How the Bourgeois Deal Enriched the World, with three-time Guest Deirdre McCloskey to the show. He is a Professor of Economics at Samford University’s Brock School of Business. In addition, he is a Senior Fellow with the American Institute for Economic Research, a Senior Research Fellow with the Institute for Faith, Work, and Economics, a Senior Fellow with the Beacon Center of Tennessee, and a Research Fellow with the Independent Institute.

Ed Kless

Welcome to The Soul of Enterprise: Business in the Knowledge Economy, sponsored by Sage, transforming the way people think and work so their organizations can thrive. I'm Ed Kless with my friend and co-host, Ron Baker. And folks, on today's show, we are privileged to be interviewing economist Art Carden. Hey, Ron, how are you doing this week?

Ron Baker 

I'm great, Ed, this year is starting off with a blast.

Ed’s Questions: Segment One

Well, the best meme I saw was the 2021 saying to 2020, “Hold my beer.” This is where we are. We have a lot to talk about with Professor Carden, so let's do the Bio. Art Carden is a Senior Fellow at the American Institute for Economic Research and Associate Professor of Economics at Samford University in Birmingham, Alabama, and a Research Fellow at the Independent Institute, and he is the co-author, with Deirdre McCloskey—a [two] time guest here on The Soul of Enterprise—of the book, Leave Me Alone, and I'll Make You Rich: How the Bourgeois Deal Enriched the World. Welcome to The Soul of Enterprise, Art Carden.

Well, as I was telling you before we got on the air, Professor McCloskey was our first ever guest [Episode #6, and Episode #293]. And what I want to hear is the story of how your partnership with her came about.

Wow, what brought it about? She wanted a summary of [her trilogy], because that's effectively what you were able to do here.

Yes, a 1700 page trilogy with about 500 pages of endnotes. The first question I have for you coming from the book now is you use the word innovism, if I'm even saying that right, and when Professor McCloskey was on our show, the first time she talked about something called “market tested innovation and supply. Is innovism the new distillation of that concept, or is it a little bit different?

So it incorporates all of those things because I think what a lot of people miss is that the market testing part of it, that's what shakes all of this out.

And then, of course, the supply part is then also important, too. No more interesting than the supply of, let's say, COVID vaccines.

Yeah, it's really been interesting, because I'm sure you've seen this, too. The vaccine from Moderna was developed within 48 hours of them getting the virus genome, and the rest of this time has been delayed from a supply standpoint. Really?

I've said, and you probably have heard this, too, that if we had put Amazon and Chick-fil-a in charge of vaccine distribution, it would be done. And, they would do it with a smile on their face and tell us it's their pleasure.

And then of course, I think it was announced either yesterday or today that Biden has tapped the ex- FDA chief to lead Operation Warp Speed now.

The pigs are now in charge of farm production. Kind of scary. I've got a few minutes with you and I want to get back to the book a little bit. I want to hear your take on this, because I've heard Deirdre’s. What is The Great Enrichment?

I wanted to take a quick side trip on this, because you mentioned this, Thomas Malthus was the one in 1798 who predicted gloom and doom. He does get a particular bad rap, though, doesn't he? I mean, given what he was given at the time, his hypothesis sort of made sense, at the time.

To that end, I want to ask you this. You write in the book, “Will it continue? [talking about The Great Enrichment]. And people are always saying, ‘No.’ Well, you're mistaken. You may be cherishing as you imagine sophistication and good hearted pessimism, more than the scientific fact fullness from realistic [Hans] Rosling, or the historical economic truth of the mindful McCloskey and candid Carden. But let me ask you this, is it in danger with the restrictions that we've seen imposed by what we like to call The Great Suppression that we've seen in the last year?

Yes, and of course, we won't know, right? That's one of those things that's going to be an unseen thing as we approach it. I would like to get your thoughts on this, we have got about a minute left in this segment. What was so interesting, I thought, was the governmental reaction to this crisis treated it as if it were a demand problem, like it always has. But the reality was it was a supply issue, we were restricting, suppressing supply. And that's really, to use a word from to 2020, unprecedented. We've never restricted supply?

I guess you could say it's the equivalent of a war, which effectively creates a supply problem as well. Interesting stuff. Well, we're up against our first break.

Ron’s Questions: Segment Two

Welcome back, everybody. We're here with Art Carden, Senior Fellow at the American Institute for Economic Research, and co-author, along with Deirdre McCloskey, of the book Leave Me Alone, and I'll Make You Rich: How the Bourgeois Deal Enriched the World, which is just a fantastic book, Art, I thoroughly enjoyed it. As you said, as we were talking before the show went live, it's a distillation of Deirdre’s trilogy, which I think you guys just did a great job doing. Towards the beginning of the book you say, “We're not talking about anarchy here. We accept that some government is necessary. McCloskey thinks so at any rate, but [Art] Carden is more sanguine about the viability of a sort of anarchy.” We had David Friedman on [Episode #117], and of course his book, The Machinery of Freedom. Are you an anarcho-capitalist?

I love thinking about those alternate world that David posits in his book. I would love to see it enacted as an experiment. So you talked about The Great Enrichment with Ed, and you made a comment, I just wanted to ask you real quick, you said it was one of the two most important things in history. What was the other one?

The Great Enrichment, just to put some context around it. You cite a statistic that in 1800, worldwide, consumption was about three bucks per person per day. In the United States, Holland, and Britain it might have been six bucks per day. And now we are at $130 per day in the US and $33 worldwide. This doubles every generation. And this is a 3,000% increase. I mean, this is massive. The whole of wealth creation is relatively new in human history. 

Right, and I want to ask you about that, because you wrote an article that 2020 was not the worst year ever, not even close. It’s so true when you think about it from a historical perspective. You know, we've had George Gilder on the show, and he's been a longtime mentor of mine as well. And he wrote in one of his books that the notion that people get rich at the poor’s expense is popular in two places: prison and Harvard. And you write in the book that isn't the West rich, because other countries are poor. In other words, we took it from poor countries, we exploited them, colonialism, slavery, whatever. And yet, as you point out, if predation could cause a Great Enrichment, it would have happened millennia ago. 

You mentioned Neil Ferguson, the historian, and he talks about these “killer apps” that you need to achieve this Great Enrichment: property rights, work ethic, consumer society, competition, modern medicine, and science. And you guys are like, No, that's not it, you have another argument for why the Great Enrichment took off when and where it did.

And you say what is sufficient to do that is a change in ethics, rhetoric and ideology. I mean, it's ideas, and to some extent, even language. And that's just so powerful. We talk about business a lot on this program, because it's a business show, but we have a lot of economists on. And we talk about how if you want to change something, that all change is linguistic, change your language and you change the conversation, and that can certainly happen inside of an organization. But then the example I love is this happened in the world, this was what caused The Great Enrichment. That's just really powerful.

And innovation was in some respects illegal. The king would shut it down or cut your head off, right? That’s a big deal.

I think it was Matt Ridley who pointed out in his book, How Innovation Works, that one of the reasons they didn't like the coffee houses was people gathered there and talk about how bad the king was doing.

Art, this is fantastic. I can't wait to dive in a little bit more when we go out in the last segment.

Ed’s Questions: Segment Three

And today we are on with Art Carden, co-author of the book, along with Deirdre McCloskey, Leave Me Alone, and I'll Make You Rich: How the Bourgeois Deal Enriched the World, highly recommended by both Ron and I. It's a terrific book, great, great, read, funny, laugh out loud in some places, which is just terrific. And Art I want to turn our attention to the middle section of the book where you talk about the pessimisms. I'll, leave it to the readers to read about the seven old pessimisms on their own, and they absolutely should read through those chapters carefully. But let's talk about the three new ones. And I'll just read them: That environmental decay is an existential threat; that humanity is being ruined by a new era of inequality; and that technological unemployment from artificial intelligence is the general fate. Let's talk first, environmental decay is an existential threat.

Ironically, part of that is the people who were No Nukes back at the time when you and I were growing up that scared the crap out of us because of nuclear weapons, and we won't allow nuclear power plants to be built, which is one of the answers to the problem. I'd love to go down that path, we could spend a whole hour on that, but I want to get to other topics. You write in the book that “material equality is not an ethically relevant goal.” What do you mean by that?

Absolutely. And by the way, the math doesn't work even if you do just redistribute it anyway, right? It's not even close. Lastly, turning our attention, this is something our audience is particularly attuned to, is this whole artificial intelligence argument. And here's from the book again: “But artificial intelligence is different, you say, stupid technologies like railways always replace sweat and manual labor. But smart technologies are going to replace the problem solving and mind work, my work,” we're all going to die, Art.

Because the artificial intelligence doesn't ask new questions, right? It just helps us answer your questions. It doesn't come up with new and better questions.

There was a big over the summer with that Netflix mockumentary-documentary kind of thing on artificial intelligence, and how it was manipulating us, and I just thought it was a load of garbage. George Gilder, who Ron mentioned earlier, in his book, Life After Google, talks about how the fact that all of these things might come to pass, we might have driverless cars, and drones, and people that do accounting bots, and all of these things. But, the human species is incredibly adaptive at figuring out ways to serve one another. And this gets back to your Baptist line that you said during the break. There’s a marriage there, which is one of the reasons why this show is called The Soul of Enterprise because we believe that business has a spiritual component.

That's right. As Gilder puts it, innovation always comes as a surprise to us. Art, thank you so much for appearing today. Ron's going take you the rest of the way home on the fourth segment. But thanks again, I want to say for me, hopefully you’ll come on again sometime. There's so much more in this rich book that you have. The book again is Leave Me Alone, and I'll Make You Rich: How the Bourgeois Deal Enriched the World. But right now a word from our sponsor and my employer, Sage.

Ron’s Questions: Fourth Segment

Welcome back, everybody. We're here with Art Carden, the co-author of Leave Me Alone, and I'll Make You Rich: How the Bourgeois Deal Enriched the World. And Art, Ed and I are big fans of Charles Dickens’ Christmas Carol and his other books. He was a fantastic writer. I just read an article in The Economist that he developed over 1000 characters, if you look at his Wikipedia page, and we're still talking about these characters. Yet, he was a lousy economist. You talk about one of his books, Hard Times, as muddle-headed in its understanding of industry and capitalism. He really didn't get it, did he?

There's a defense of the miser. I think Walter Block wrote the book, Defending the Undefendable. Another question I have to ask you, because this certainly has become, I think, more salient during COVID. This whole movement of eating and buying local. I think about even my local coffee shop, say as opposed to Starbucks, buys internationally. I mean, I doubt their espresso machine was made within 100-mile-radius, or even the coffee. And you guys quote a friend of yours, “What will be next, 100-mile-sourced medicines, 100-mile-sourced ideas. I mean, this is a ludicrous idea and movement, isn't it?

You were talking about jobs and artificial intelligence with Ed, and we all know that jobs isn't the right way to measure an economy—it’s not about producing jobs, right, otherwise, Milton Friedman’s line about give everybody spoons. But, are you in favor of a universal basic income, or some type of adaption thereof?

So you would support more of the Charles Murray idea where he gets rid of everything, including Social Security, Medicare, and gives everybody 12 grand [per year], and he even wants to pass a Constitutional amendment to make sure that all this other stuff goes away.

Right, I couldn't agree more. They should apply that same logic, I think, to the distribution of this vaccine. They seem to be botching that up as well. Art, on December 19, I think it was for the Independent Institute [and AIER], on their websites, you wrote an article, “2020 Was Not the Worst Year Ever. Not Even Close.” Would you defend that.

You guys quote Thomas Babington Macaulay in the book, and he says, “On what principle is it that when we see nothing but betterment behind us, we are to expect nothing but deterioration before us.” That such a good point.

Like you said, we've eliminated poverty and wealth creation did that because it's the only antidote to poverty. Art, this has been fantastic. Again, thank you so much for coming on. We love the book and we’re going to recommend it highly all over the place. And folks we will post full show notes. Ed what do we have up for next week?

Ed Kless

That's a great question. I do not have my spreadsheet open. So…

Ron Baker 

Well, I'll tell you, it's Anne Janzer, author of Subscription Marketing.


Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

This week is bonus episode 323 - Subscription and other musings. Here are a few links discussed during the bonus episode:

Click the “FANATIC” image to learn more about pricing and member benefits. 

Episode #322: Interview with Kevin D. Williamson

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Ron and Ed welcome Kevin D. Williamson, fellow with National Review Institute and National Review’s roving correspondent. Kevin writes “The Tuesday,” a weekly newsletter. His latest book, Big White Ghetto: Stone Broke, Stone-Cold Stupid, and High on Rage in the Dank Wooly Wilds of the ‘Real America,’ was published in October.

Ron’s Questions: Segment One

Kevin, welcome to The Soul of Enterprise.

That speech [Ronald Reagan’s Moscow University speech that opens the show] was written by Josh Gilder, who is George Gilder’s cousin. We had Peter Robinson on a few weeks ago, who of course, wrote the Berlin Wall speech. So it's all it's all connected, Kevin.

We're sorry to bring you on during such a slow news week. But let me ask you this. You wrote about Ochlocracy—mob rule—in your book, The Smallest Minority. Should Trump be impeached?

Victor David Hanson has one of the most interesting takes on Trump, from a historical perspective, he calls him a tragic hero. The town brings in this guy to clean up the town and then once he does that, they kick him out.

Let me ask you this. I've never heard how you got to National Review. How did you wind up with at National Review?

Peter Robinson did that, too. He wrote to Bill Buckley and asked him for help. And that's how he landed as a speechwriter in the White House, through Christopher Buckley.

Did you ever get to meet William Buckley?

Excellent. It's kind of an unfair question, but what do you think Bill Buckley would think of Trump, and his administration? 

I've heard you say that before. It’s a great retort. So Kevin, you wrote Big White Ghetto. It was published last year. Even my dad read it and absolutely loved it. I know it's from decade, or over a decade, of on-the-ground reporting, isn't it? You traveled all over, and you start in Booneville, Kentucky, seat of Owsley County. It’s supposedly the poorest place in the USA, but you say it's actually number three, when you look at the 2020 rankings. What confounds conservatives, liberals, and libertarians about that place?

You talk about how there's no cure for poverty, because there's no cause of poverty, it's the natural condition of mankind. So what do you think would help a place like this? Is it bourgeois principles? Is it the success sequence?

Like you say, get a U-Haul. Kevin, this has been great. Thank you so much. We're up against our first break.

 

Ed’s Questions: Segment Two

Our guest today is Kevin D. Williamson. And one of the books that Ron referred to in his opening that I'd like to talk to Kevin a little bit more about is his book called The Politically Incorrect Guide to Socialism. You think you know about socialism, but you really don't until you read this book. It's just fantastic. So let me get the first question out of the way: define socialism.

Kevin D. Williamson

Socialism is the public provision of private goods through central planning.

Ed Kless

And this can happen in countries that are considered capitalist, right? We have socialism here, things like the school system.

A question on that because you go into great detail on each of these places, Venezuela, Sweden, North Korea. The book is almost ten years old, maybe it is ten years old at this point, I think 2011 was the publication date. Are you surprised that these regimes have continued to last for another decade? Did you think that some of them were going to be gone by now?

As you were doing the research for the book, did you find that any of those brands of socialism worse than another, the ones that still exist today? Would you say North Korea is probably the worst? Or do you still have reservations about Venezuela, China?

China seems to be emerging to some extent because of the markets. But Ron and I have a real concern for what's going to happen in Hong Kong. Have you any thoughts on the situation in Hong Kong? What's going to happen there?

It would be great for us just from a mindshare perspective. You know, we play Reagan's speech about the economy in mind. And to have those great minds come here, it would be fantastic.

Are you familiar with Jimmy Lai at all, he is a dissident leader over there? We've talked to Father [Robert] Sirico about him what a tragic story, he refuses to leave. He just he stays.

And [China’s] social credit score that they've implemented, it’s a horrible thing. You find out that you do something against the government, you can't buy a train ticket, can't buy a plane ticket, you’re really locked into where you are.

Some of us even will even have two devices [to be tracked on], not only your phone, but your watch, just as a backup system. But we're up against our next break.

Ron’s Questions: Segment Three

Welcome back, everybody. We're here with National Review roving reporter, Kevin Williamson. And Kevin, before I get back to Big White Ghetto, just to follow up with the conversation you were having with Ed about Hong Kong. I do believe the UK has started to admit some of those people. I think they've done 200,000 or 300,000 visas, from what I understand. But what about China? What’s your take on the NBA, Nike, Apple, all these companies, Disney, absolutely capitulating to censorship and other forms of government control, all the while this stuff with the Uyghurs is going on, and everything else. I mean, do you see any way out of that?

Yeah, it's really a conundrum. There are no easy answers, are there?

Back to [your book], Big White Ghetto. There was a chapter where you were in Alabama, and at one point it was the number one place for opioid prescriptions being written. But you say that Ground Zero of the opioid epidemic is at Walgreens. Explain that.

You also wrote about Colorado’s legalization of marijuana. And you say the stoners rejoiced, but not so much the cops in Nebraska.

You do a podcast with Charles Cooke, Mad Dogs and Englishmen, and he wrote the book, The Conservatarian Manifesto. Do you identify with that sentiment?

Charles has got an incredible accent. One last point, we’ve got about a minute, but I have to tell you, you wrote an article back on November 25, 2020 on raise the entrance fees to national parks [“Raise the Entrance Fees for Our National Parks”]. Kevin, I can only imagine the hate mail you must have got for this. But I thought it was brilliant. You pointed out that a family of four will spend 4200 bucks to go to Disneyland for a week, but it's 35 bucks to go into Yellowstone. But then you made a really profound point. You said a nation that isn't ready for meaningful Yellowstone pricing isn't ready for meaningful carbon pricing.

It was a great article, I had to tell you how much I enjoyed that.

Ed’s Questions: Fourth Segment

We are back on The Soul of Enterprise with Kevin Williamson. Kevin, thanks so much for appearing, we've got one more segment with you. I wanted to turn your attention back to your book on socialism, but only because, this is something that Ron and I talk about often in a business context, and that is the notion of socialism, it sometimes puts inappropriate measurements in place. The example that you give is that in the Soviet Union, they used to measure nails by the pound. So, as a result, they made big, really big nails, and they had plenty of them, but no little nails. But then the same thing takes place in the education system with regard to measurement. Talk a little bit about that.

And, of course, the public schools really came into being in full force during the Progressive era, when this whole measurement thing came about. What I really loved about your book is the story you tell about how Woodrow Wilson was responsible for a socialist coup in the United States. Talk a little bit about that.

Fair enough. Wilson was definitely of a socialist mindset. I mean, he brought everything through the war, the war mentality to everything he did.

We've got about two minutes left, and just to pick up on the theme that we started with. Of course the country recovered from Woodrow Wilson’s socialism. We've been able to recover. What does the country do, maybe even specifically the GOP, to begin to recover post-Trump?

I think that the sleepy-Joe moniker might be what we're all looking for. That would be great. If we could be sleepy for a while. All right, Kevin Williamson, on that note, we are going to wrap things up. Ron, what do we have coming up next week. 

Ron Baker 

We have Art Carden, Ed, who's the co-author along with Deirdre McCloskey of Leave Me Alone and I'll Make You Rich.

Links to Kevin D. Williamson’s writings and podcast:

To subscribe to Kevin’s weekly “The Tuesday,” follow this link.

Kevin’s National Review archive can be found here.

Listen to Mad Dogs & Englishmen here.

Kevin’s New York Post archive can be found here.

Kevin’s Amazon page is here.

To subscribe to National Review, go here.

To support National Review Institute, go here.


Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

Click the “FANATIC” image to learn more about pricing and member benefits. 

Episode Reprise: Interview with Dr. Walter Williams

[EDITORS NOTE: Click here to listen to the show. In lieu of the passing of Dr. Walter Williams, Ron and Ed are going to re-run this episode during their normal Friday show (New Years Day). They will be live again on Friday, January 8th.]

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Biography

Born in Philadelphia, Pennsylvania, Dr. Walter E. Williams holds a B.A. in economics from California State University, Los Angeles, and M.A. and Ph.D. degrees in economics from UCLA. He also holds a Doctor of Humane Letters from Virginia Union University and Grove City College, Doctor of Laws from Washington and Jefferson College. Dr. Williams has served on the faculty of George Mason University in Fairfax, Virginia, as John M. Olin Distinguished Professor of Economics, since 1980; from 1995 to 2001, he served as department chairman. He has authored ten books: America: A Minority ViewpointThe State Against Blacks, All It Takes Is GutsSouth Africa's War Against CapitalismMore Liberty Means Less GovernmentLiberty vs. the Tyranny of SocialismUp From The Projects: An AutobiographyRace and Economics: How Much Can Be Blamed On Discrimination? and American Contempt for Liberty

Dr. Williams is the author of over 150 publications which have appeared in scholarly journals such as Economic InquiryAmerican Economic ReviewGeorgia Law ReviewJournal of Labor EconomicsSocial Science Quarterly, and Cornell Journal of Law and Public Policy and popular publications such as NewsweekIdeas on LibertyNational ReviewReader's DigestCato Journal, and Policy Review.

He has made scores of radio and television appearances which include “Nightline,” “Firing Line,” “Face the Nation,” Milton Friedman’s “Free To Choose,” “Crossfire,” “MacNeil/Lehrer,” “Wall Street Week” and was a regular commentator for “Nightly Business Report.” He is also occasional substitute host for the “Rush Limbaugh” show. In addition Dr. Williams writes a nationally syndicated weekly column that is carried by approximately 140 newspapers and several web sites. His most recent documentary is “Suffer No Fools,” shown on PBS stations Fall/Spring 2014/2015, based on Up from the Projects: An Autobiography

Dr. Williams serves as Emeritus Trustee at Grove City College and the Reason Foundation. He serves as Director for the Chase Foundation and Americans for Prosperity. He also serves on numerous advisory boards including: Cato Institute, Landmark Legal Foundation, Institute of Economic Affairs, and Heritage Foundation. Dr. Williams serves as Distinguished Affiliated Scholar at the Mercatus Center at George Mason University. 

Dr. Williams has received numerous fellowships and awards including: the 2017 Bradley Prize from the Lynde and Harry Bradley Foudation, the Fund for American Studies David Jones Lifetime Achievement Award, Foundation for Economic Education Adam Smith Award, Hoover Institution National Fellow, Ford Foundation Fellow, Valley Forge Freedoms Foundation George Washington Medal of Honor, Veterans of Foreign Wars U.S. News Media Award, Adam Smith Award, California State University Distinguished Alumnus Award, George Mason University Faculty Member of the Year, and Alpha Kappa Psi Award. 

Dr. Williams has participated in numerous debates, conferences and lectures in the United States and abroad. He has frequently given expert testimony before Congressional committees on public policy issues ranging from labor policy to taxation and spending. He is a member of the Mont Pelerin Society, and the American Economic Association.

Ed’s Questions

Your show Good Intentions, do you think the situation is better or worse, and why can’t we seem to shake this good intentions versus actual outcomes paradigm we’re stuck in?

What, specifically, do you mean by spiritual poverty?

Do you think the current welfare regime contributes to this situation because it encourages this behavior because of the way the programs are structured?

I’ve heard you speak eloquently on the freedom of association and the impact it has from an economic standpoint. Would you mind talking a little bit about that?

I’d actually prefer that bigots self-identify so I could avoid them.

Ron’s Questions

You published your autobiography, Up From The Projects: An Autobiography, in 2010. One story I found fascinating was about your economics professor Armen Alchian, who asked the class: why do we build the Golden Gate bridge when a military bridge would do just fine? He didn’t know the answer. Do you now have an answer to that question?

[Professor Williams recommends the book Universal Economics, based on Armen Alchian’s work].

In 1989, you published South Africa's War Against Capitalism, which sounded like an ironic title at the time. What would you say is the biggest misperception about apartheid [apart-hate]?

Speaking of immigration, what would be your preferred policy on immigration?

Would you be for more legal immigration?

Do you favor a point system, or charging people, to get into the country?

Do you think we’ll ever see a market for body organs?

I find it ironic that Iran allows the sale of body organs, but here in the capitalist west we do not?

You and Dr. Sowell have taught me that a shortage usually has nothing to do with actual physical scarcity but because the price is wrong.

If we had to rely solely on people’s altruism, we’d have a materially lacking life.

If you had a meeting with President Trump, what would be one piece of economic advice would you give him?

Special Event: First-ever live chat (and wine party!)

For all of our Patreon members (more on that below), Ron and Ed will be hosting their first-ever live chat (and wine party)! This event will take place on Tuesday, December 29th (or Wednesday if you are in the Eastern Hemisphere) at 5 pm Eastern Time in the US (4 pm CT/3 pm MT/2 pm PT, others adjust accordingly). Bring your own wine or alternate beverage!

Are you interested in becoming a Patreon member? Our members receive commercial-free episodes (otherwise known as “anti Greg Kyte” episodes), bonus content, and more such as live chats.

Click here to learn more!

Episode Reprise: Business Lessons from A Christmas Carol

On this episode (originally number 73), Ron and Ed explored the business lessons from one of the most recognized and beloved stories shared during the holidays, Charles Dickens’ novella, A Christmas Carol. While many of you know the story and seen one or more of the adaptations, many fewer of you have read the original work which, like most of Dickens, an absolute joy to read and has much to say about business practices.

“It is so good,” says Ron, “that you want to read it more slowly to savor it, like a fine wine.”

Ed is also a long time fan as is his daughter as you can see from this video clip.

Episode #321: Second interview with Dr. Mary Ruwart

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Ron and Ed welcomed back to the show, Dr. Mary Ruwart. Her book Death by Regulation demonstrates the futility of the US FDA and was prescient with regard to the bureaucratic delays we have seen with the vaccine for COVID-19. We explored this topic and more with her.

Ed’s Questions: Segment One
Welcome to The Soul of Enterprise: Business in the Knowledge Economy, sponsored by Sage, transforming the way people think and work so their organizations can thrive. I’M Ed Kless, with my friend and co-host, Ron Baker, and on today's show, folks, we are so pleased to welcome back to the show for a second time, Dr. Mary Ruwart. How's it going, Ron?

Ron Baker
Good, Ed. We just got a California Bay Area County lockdown.  

Ed Kless
You’re in official lockdown now? Do you have toilet paper and wine? 

Ron
Yes. I'm ready. 

Ed
You're good to go. All right. Well, let's jump right in. I'm thrilled to bring back, as I said the last time on the show, one of my personal heroes, Dr. Mary Ruwart. It's Dr. Mary, right? Let me just read the introduction, then we'll get into it. Mary Ruwart is a research scientist, ethicist, libertarian author, and activist. She received her Bachelor of Science in biochemistry in 1970, and her PhD in biophysics in 1974, both from Michigan State, she had an assistant professorship and then took a position with the Upjohn company in 1976. Dr. Ruwart was also involved in developing therapies for a variety of diseases, including liver cirrhosis and AIDS. We had her on last time to discuss her book, Death by Regulation: How We Were Robbed of the Golden Age of Health, and How We Can Reclaim It. Both Ron and I highly recommend that book. And as I said previously, it's more scary than a Stephen King novel, because it's actually the truth about what's going on with the FDA. And Ron and I made use of it a lot of the times that we've been talking about the COVID situation. We'll say to one another, we should talk to talk to Dr. Mary Ruwart about this. And now we're happy to bring her back on. Welcome back to The Soul of Enterprise, Mary Ruwart. 

Mary Ruwart
Well, thank you. Thank you. 

Ed
And you're okay with me calling you Mary, Right. What a tempest in a teapot that whole thing is. But anyway, let's move on to the more important stuff. You are uniquely qualified to answer some of the questions that both Ron and I have talked about, and that we've been asked by some of our listeners. But let's first talk a little bit about what your thoughts are around COVID. You think COVID is a real thing, right? It's something to be concerned with?

Ed
So that's a question, but it's way down on my list, but I'm going to jump right in and ask. So a vaccine that's been developed for that, how effective is it against those mutations? 

Ed
Sure. Is that what the mRNA is, the fact that they're developing off of the spikes rather than the innards of the of the virus itself? 

Ed
Okay, so that has nothing to do with the spikes that they use. But why is that. Why would doing the vaccine off of the spikes be better than the innards of the cell for mutations? 

Ed
Oh, I see. 

Ed
No, that's absolutely true. But what are your thoughts? Not necessarily on each individual vaccine. Obviously, no one would know that. But the technology that was used by, specifically, Madonna. I read this in a New York Times article that they actually developed it within two days of the sequencing of the genome.  

Ed
Okay, so it hasn't been demonstrated, but it definitely has lowered the symptoms. And this was interesting to me, it was developed within two days, and in my view, and after reading your book, then the last 12 months or 11 months have been process around approval. And this just makes me crazy to think about this. Do I have this right? 

Ed
Is there a difference, medically, between something developed as a vaccine, which is a preventative and something that's developed to, say, for heart medication that lowers blood pressure? Should there be a different testing regimen for one versus the other? In my layman's mind, one is about efficaciousness, the reduction of some kind of a symptom, that's a response. The other is really preventative from you getting something. Once it's proved safe, isn't efficaciousness, shouldn't that be tested in a lot larger samples? I mean, that just my logic. But am I right there? 

Ed
Okay, and you mentioned, and I've heard this as well, that the messenger RNA is new technology. It has been used in certain other cases; I think they developed an Ebola [vaccine] but they just didn't have enough trials to test it. If the technology proves effective, I want to try to use the right words, if the technology proves efficacious, and that taking a sequence genome from a virus and then quickly turning it around in two days, and that proves safe, can we make a certain assumption about a future vaccine? That future vaccines that are developed in this way, are just as safe? Or is that not something that we can assume? 

Ed
You're not a lay person as I, were you amazed at how quickly this was developed? Or was this something that, having been in the industry, you're like, yeah, I've been following this, it was not surprising to you? 

Ed
Just quickly, before we have to take our break, are you concerned about it [the vaccine’s safety]? Is that something that you personally would be concerned with? 

Ed
Right, and that could happen, it's kind of a random thing. Well, this is great. I have so many more questions, as does Ron, but we have to take our first break. 

Ron’s Questions: Segment Two
Welcome back, everybody. We're here with our second interview with Dr. Mary Ruwart. And Mary, I wanted to ask you, I'm not a conspiracy theorist, no tin foil hat. But where do you think this virus originated? I mean, probably an animal. But do you think it came out of a lab or a wet market, an animal market? 

Ron
Oh, that's interesting. In the early days of the virus, give us your grading of the FDA’s response, the CDC’s response? What went right, what went wrong? What would you have done if you were in there? Or advising the president? I know it's brutal. But we do want your opinion. 

Ron
It brings me back to your book. Because if a private company like Upjohn was responsible for that, and they blew it, it would pay a price. And the FDA and the CDC are going to end up getting bigger budgets, I'm sure. Did the government do anything good? 

Ron
I was going to ask you about that, so I'm thrilled that you explained that. I know you know Jeffrey Tucker [Episode #201]. He called the lockdowns positively medieval. What's been your assessment of these lockdowns, restaurants, bars, all these different things? 

Ron
Are you as sick as Ed and I are of “follow the science.” Science is a discovery process, right? It can't really tell you exactly what to do. And then, we know science may not lie, but some scientists do? 

Ron
One of the things I learned from your book was the off-label use of drugs and maybe in our next segment, when I have you back, I'll ask you about that. But unfortunately, we're up against our break.  

Ed’s Questions: Segment Three
And we are back with Dr. Mary Ruwart. Her book, which we highly recommend, Death by Regulation: How We Were Robbed of the Golden Age of Health, and How We Can Reclaim It, is on sale at Amazon and other book places. Please go out and give that a read. It's a great work. And I really think that most people really will enjoy it. Mary, I wanted to talk a little bit about the libertarian policy aspects of this. For those listeners who don't know, Mary, you were once our vice presidential nominee for the Libertarian Party, back in, what 1980? 

Ed
Oh, you never got the nomination. Okay, so I have my history wrong there. Thank you for the correction. But I voted for you. Ron talked a little about this, and you mentioned that giving [the vaccine] to healthcare workers is probably the best option. Should government mandate that though, or how should we decide who gets the vaccine, and when? 

Ed
And then you get into private accommodations, could a hotel chain say that you have to produce your vaccine card before you stay at a particular hotel, or even a supermarket say you have to show that you've been vaccinated before you come into the supermarket? We would say libertarian-wise, why sure. But then that gets to a public accommodation issue. So this intersection of rights again, we get back to the baker problem. 

Ed
Ron, which was the airline that put the insurance as part of its fare [Emirates]. They created an insurance that if you fly on their plane and you get COVID for any reason, they will take care of your medical bills, which is a really interesting incentive to have people come and fly. So a great libertarian solution. On the distribution, I think we can all we probably agree that healthcare workers first is the best way to go. But there is a question of do you then go to elderly the best option? Or do you go to younger folks to try to build up the herd immunity quicker so that there's less distribution? It isn't that clear cut, is it? 

Ed
Interesting. So I did not realize that. So it may even be a case that even if they haven't tested it extensively enough to be able to know that with regard to the elderly population. Really? 

Ed
It was interesting, the flu shot is 60-70% efficacy and the Coronavirus [vaccine], at least in the initial trials, is somewhere between 90% and 95%. Which leads me to another question. They tested this, the double Jab, let's call it. It's the stick and then a booster two weeks later, I believe. But I think it was the Moderna trial, they showed that there's a fairly high efficacy with just one jab, almost as high as the flu vaccine. So then the ethical question becomes is should we double jab people, or do you get it out to the maximum number of people? This is yet another question that's not, in my mind, clear cut. 

Ed
Question, just quickly going back to the CDC and FDA and your grade of F, which I agree with you wholeheartedly on. With your understanding of those organizations, and I'm not trying to be an apologist for any administration, would it have been significantly different if there was somebody else in the White House? 

Ed
Sure. But my point is, these are bureaucracies that, regardless of who sits in the White House, are going to behave in a similar fashion. 

Ed
Mary, I'm going to go a little bit over in this segment, but I wanted to ask you this question quickly. As I mentioned, Ronald Bailey was on the show about two to three months ago [Episode #307]. And one of the things that he said, based on this Moderna technology, he thought that it is possible that what we are experiencing will be the last pandemic because of the technology that's in place. So in 30 seconds, your thoughts on that? 

Ed
All right, well, Mary, Ron's going to take you the rest of the way home. Thank you once again for appearing on the show. We'll have you back in the future, perhaps, to talk about this in six months to see where we are at that point.  

Ron’s Questions: Segment Four
Welcome back, everybody. We're here getting a medical degree from Dr. Mary, Ruwart. And, Mary, I wanted to ask you, I've read so much conflicting information from the World Health Organization, from the CDC’s own studies, where do you come down on [face] masks? 

Ron
There seems to be a moral hazard, or a Peltzman Effect, that I've got this mask, so I'm 100% safe. And that's not the case, is it?  

Ron
Don't surgeons change their masks every hour or so? 

Ron
I assume you're a free-trader, being a libertarian, as are myself and Ed. Are you worried that China produces so many of our drugs and the ingredients that go into drugs? We hear percentages like 90% of drugs come out of China, which I know is not true, but in general, do you worry about that? 

Ron
What's your assessment of the COVID task force? Dr. Fauci, Dr. Birx, all the others. They seem to contradict themselves, overall what's your assessment?

Ron
Last time you were on [Episode #192], I didn't get a chance to ask you this. But there was that compassionate use waiver that the FDA used to give? Are you encouraged now that 38 states that allow right to try? [It’s actually national now, every state allows right to try]. 

Ron
It also amazed me that Britain got the vaccine jabs quicker than we did. Does that tell you something about its process? 

Ron
Mary, thank you so much. This has been wonderful. We really appreciate you giving us your perspective on things, you definitely know this stuff really well. So thank you. And Ed, what do we have coming up next time we meet? 

Ed
Next week we're going to have replay of our Business Lessons from A Christmas Carol, and on January 1st, we are re-running our show with the great Walter Williams. And then January 8, we'll be back with a live show with Kevin Williamson of National Review.


Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

Click the “FANATIC” image to learn more about pricing and member benefits. 

Episode #320: Interview with Peter Robinson

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Ron and Ed welcomed Peter Robinson, host of the Hoover Institution's show Uncommon Knowledge. This show (Uncommon Knowledge) is among Ron and Ed's top listens, but it is Peter's own work about which they talked. Most famously, Peter authored the speech given by Ronald Reagan where he implored, "Mr. Gorbachev, tear down this wall!"

Ron’s Questions: Segment One
Welcome to The Soul of Enterprise: Business in the Knowledge Economy, sponsored by sage, transforming the way people think and work so that organizations can thrive. I'm Ron Baker, along with my good friend and VeraSage Institute colleague, Ed Kless. On today's show, folks, we are talking to living history. We have President Ronald Reagan's speechwriter, Peter Robinson, with us. Hey, Ed, how's it going? 

Ed Kless
Ron, I am so excited about this. I have been looking forward to this day since we booked Peter about a month ago. And even though my monitor broke today, my computer monitor, I am still happy guy. That's how good this is going to be. 

Ron Baker
I've been really excited about this since we were able to book him, but let me just read his bio. Peter Robinson is the Murdoch Distinguished Policy Fellow at the Hoover Institution, and hosts Hoover's video series program and podcast on Uncommon Knowledge. In 1979, he graduated from Dartmouth College, where he majored in English. Then he went on to study politics, philosophy, and economics at Oxford University, from which he graduated in 1982. He's also got a Stanford MBA, which we'll talk to him about. He served six years in the White House from 1982 to 1988, for both Vice President George Bush and President Ronald Reagan. He's the author of three books, two of which we'll probably focus on today. Peter Robinson, welcome to The Soul of Enterprise. 

Peter Robinson
Thank you. My pleasure. My pleasure. So far, so far.

Ron Baker 
Okay. Well, we'll see if you feel that way at the end of the hour, but we are just thrilled to have you on. I've been dying to be able to chat with you. You were born in 1957. 

Peter Robinson
Oh, stop. I know, I know. All that buttering me up. And now the knife, all right. 

Ron Baker
At 25 years old, you're in the White House. How does a kid from Vestal, New York, get to the White House at age 25? 

Peter Robinson 
On a fluke, of course. Let me see if I can compress, there's a certain amount of background you need to have to make sense of it. But I'll compress it as best I can. Graduate from high school, go to Dartmouth College, which you mentioned. And then I studied at Oxford. And then the bit that you left out, which I left out—you were reading a bio which I composed—but you've asked, so I'll tell you. After I finished my work at Oxford, I stayed there for a year to write a novel. And the novel turned out to be so bad that even I couldn't read it. So I was broke. I mean, I was really broke. I hadn't paid my final bills at Oxford. And, what was his name, the steward was Colonel somebody, I started getting very nasty letters from Colonel whatever his name was. And I was staying in a 500 year old cottage, the plumbing was 500 years old at least, I'm sure. And that cost me five pounds a week and I could barely afford that. Alright, so I wrote letters to people who I thought might be able to give me leads on a job. And the only person as I recall, certainly most people didn't reply, but Bill Buckley replied, and I can't claim to have known him well. But he always paid attention to student journalism. And I'd written a few pieces in the Dartmouth newspaper that had caught Mr. Buckley's attention as he was to me then, but he eventually became Bill. He wrote to me and said, You like politics, you like writing, go to Washington—this is 1982—and see my son, Christopher Buckley, who was then a writer for George HW Bush, the Vice President. Christopher may be able to find you a job in the still new Reagan Administration. All right. I flew back to Washington. I did present myself to Christopher. And what I didn't know, and Bill I don't think knew when he wrote the letter, Christopher announced to me that he was leaving the job in two weeks, and that his replacement had just fallen through. And he said while you're in the building, go downstairs. This is the old Executive Office Building. Go downstairs and see Tony Dolan. Tony Dolan was then the chief speechwriter to the President. And while I was talking to Tony, the campaign manager for Lou Lehrman, who was running for Governor of New York against Mario Cuomo, called to ask Tony if he could recommend a speech writer. So Tony and Christopher, good friends, conspired, and effectively what they did was put together a kind of fraternity prank. Christopher told the Bush people that he'd found the perfect replacement, me, but that they better move fast because the Lehrman campaign wanted me, and Tony told the Lehrman campaign they had to move fast, because the Vice President's office was going to hire me. Two weeks followed. The Lehrman campaign flew me to New York three times, I was in and out of the White House for interviews with the Bush staff. I got offers from both. I thought Lou Lehrman might lose in November, which was only a few months away. But George Bush at least is safe until 1984. That's two years. So for reasons of job security, I took the job with the Vice President. Did anybody ask for a writing sample? No. Did anybody ask if I had ever even written a speech? No. Both sides assumed that the other had performed the due diligence. And that was really lucky because I had never written a speech in my life. And that is how I ended up in the White House at the age of 25. And may I say? I ordinarily would wish you a large listening audience. But I'm hoping not too many people are listening right now.

Ron Baker
That's an awesome story. And then in the first year, you write over 150 speeches? 

Peter Robinson
Well, yes, but they were, let's put, let's put it this way. The volume was such that I typed most of those speeches. 

Ron Baker
Well, in your book, How Ronald Reagan Changed My Life, which came out 2003. You say the book is not a memoir, it's a primer. You document ten life lessons you learned from Reagan. I don't want to go through them all, because I want people to read the book. But his idea on the Cold War, Peter, I've heard the story a lot, that his idea was “We win, and they lose.” He had that way of taking a complex issue and making it simple. But you analyze this in a way I've never heard before. You said, “actors get used to the idea of alternative endings.” And I just thought that was brilliant.

Peter Robinson
Well, it was Reagan who was brilliant. The premise of the book, it's not a speechwriters memoir of the White House. I was so young when I got there. And this huge figure of Ronald Reagan, I was young, and there were all kinds of ways in which I took his impression. And, I was still figuring out how you did it, how you made a career, so I studied him, I really did study him. And so it was a very, very important part of his own formation, that he was a movie actor Early on in the industry. He moved to Los Angeles and got a contract as an actor in the 1930s. And in his first three years, this is in the book, I can't recall the number now, but was something like in the first three years, he made over 20 pictures. This is long before television, and they were turning out pictures. The President, I heard him say several times, “They didn't want them good. They wanted them Thursday.” He was under deadline. And it was often the case in those days, that the writers who were often a bungalow on their own working on the script, would get behind the shooting. And you get the actors and the crew on the set. And it's expensive, the clock is running. And if you don't have a script, and some of the actors were able to improvise, and Reagan had developed a reputation for being able to imagine the next, having the shot up from the script the day before. And he would he could imagine the dialogue that would come next, the action that would come next. And they could begin shooting with Reagan improvising. Alright. So and of course, when you're in that profession, in that business, you might test a movie in those days, they weren't testing all of them, but you might test a movie and the executives would say now the ending is too much of a downer, give it a new ending. And the ability just to think this, my conclusion was that Reagan developed partly because of his movie acting, he developed a really deep understanding of the sheer open-endedness of life. And so, he becomes a conservative in the 1960s, he becomes President in the 80s and throughout this period, thinking about the Cold War is calcifying, and the intellectuals have concluded—it’s a strange thing when you think about it, but nobody did think about it—the intellectuals had concluded the Kissinger/Nixon point of view that the American position was growing weaker. And that the best we could do, we were playing from a weaker and weaker hand, we'd have to make concessions. The bold stroke of the opening to China from Nixon’s and Kissinger’s point of view, we needed China. We couldn't handle the Soviets on our own anymore. And even conservatives, Jean-Francois Revel published a book in the 80s called How Democracies Perish. Whittaker Chambers, this great glowing, luminous figure among conservatives, who wrote the magnificent book Witness, he writes himself in that book, that when he left the Communist Party, to become—not to join another political party—but to become an anti-communist, he did so with the consciousness that he was leaving the winning side to join the losing side. And so, what's so strange about this is that nobody can tell you when they get up in the morning exactly what's going to happen in the course of the day. But intellectuals, even on the right, had decided they knew how the century was going to end that, that the history was moving on this. And Ronald Reagan comes along and says, “No, no, I don't see why stories can have different endings. Life is open ended. History is open ended.” I also think, I couldn't prove this, but I also suspect, when he was a kid, a high school kid, he was a lifeguard on a river there, they roped off a portion of the river, the Rock River as I recall. And over the course of several summers, he pulled, and he was proud of it, he knew the number, it was 77 people he pulled out of the water. So he prevented some 77 drownings. Well, there's something about that, you pull a floundering swimmer out of the water, and at that moment, you've changed history, you've changed that life, that person's history. And you do that 77 times, and you get the idea you can make a happy ending, you can intervene in history, you can intervene in events, and they can come out differently from the way that the currents of the river, left untouched, might take a drowning swimmer down, the currents of history that the intellectuals thought they understood. And Reagan just comes along with this Midwestern common sense. You know, I think we can handle this attitude. So that's the long answer to a very simple question. But there was something really deep in him that understood the contingency of life, the open-endedness of individual lives, but also of history itself. It's not pre-determined.

Ron Baker
It's a wonderful explanation, and I never have heard it like that before. And of course, he went on, as Margaret Thatcher said, “Ronald Reagan won the Cold War without firing a shot.” You trace that victory in the Cold War to four speeches. I'm just setting up Ed here because we're almost at our breakpoint, but… 

Peter Robinson
One answer per segment…I’ll shorten up my answers… 

Ron Baker
No, no, we'll just hold you over for our bonus episode. You give the British Parliament speech that he delivered in 1982 where he said, basically, Marxism was on the ash heap of history. And you say that's where he announced his strategy. And the Evil Empire speech in March of 83, where he made the moral case for pursuing the strategy. And then the Berlin Wall speech in 87, which of course you are responsible for writing, which pressed his advantage, and then of course, the Moscow State University speech written, I think, by your best friend, Joshua Gilder [George Gilder’s cousin], and of course that was his victory speech. 

Peter Robinson
Yeah.  

Ron Baker
Now, we want to hear the story—I know you're probably sick of telling it—but I'm sure Ed is going to ask you about the story of the Berlin Wall speech, which I think is great. So, I just set you up for that in the next segment. But unfortunately, we're up against our first break.  

Ed’s Questions: Segment Two
And we are back on The Soul of Enterprise with Peter Robinson, author of the “Mr. Gorbachev, tear down this Wall” speech. And Peter, I grew up during that time, I had graduated high school in 1984, and was in college when that speech was made. And I just have to ask you, tell us the story of how that speech came about. 

Peter Robinson
I'm happy to. Spring of 1987, April 1987, we speech writers were told that an event had been added to the President's calendar. He was already scheduled in June to visit Italy, he’s going to go to Rome to see the Pope and see the President of Italy. Then there was a Venice Economic Summit, which was going to take several days. And at the request of the West German government, the staff added a stop in West Berlin to the trip. So after Venice, he'd fly to West Berlin, as we called it in those days, West Berlin for about half a day and then fly back to Washington. Berlin was celebrating its 700th anniversary. It was celebrating its centennial anniversary. And the Queen of England had already visited. Gorbachev was going to visit and that was the point. The West German government, if the leader of the Soviet Union was going to visit East Berlin, which Gorbachev was going to do, then the [Helmut] Kohl government wanted the President of the United States to visit West Berlin. Okay. So I was told where the President would stand, that the speech would last about half an hour, and that he'd have an audience of in the range of 10,000 to 40,000 people. And given the setting, he should talk about foreign policy. Period. That was the direction I got. I flew with the American advanced team, people who are going to be making press arrangements, coordinating matters of security with the West Germans and so forth. I flew with that team to West Berlin, saw the site where the President would speak, paid a visit on the ranking American diplomat in West Berlin, got a helicopter ride over the Berlin Wall. And then that evening, broke away from the American party and got in a cab and went out to a suburb of West Berlin. Where some West Germans put on a dinner party, 15 or so people, for me. The host and hostess, and I had never met, but Dieter Elts was his name. He just died last year. Dieter just finished a career at the World Bank in Washington and retired back to Germany. We had friends in common and our Washington friend, our common friend, got in touch and said could you host Robinson so he can meet some Berliners. My problem was that when I saw the site where the President would speak, I just couldn't imagine coming up with material that would be equal to the Wall, equal to the weight of history. I stood on an observation platform in those days and looked over the Wall into East Berlin, where the buildings were decrepit, the colors seem to be leached out of the scene. Gray concrete, you could still see a great deal of World War II damage, shell marks on buildings, soldiers marching back and forth, dog runs. I just thought what, what can I write? And the ranking American diplomat reminded me that West Berlin was a left leaning city, a couple of major universities there, you know how far to the left universities are. Since West Berlin is entirely surrounded by East Germany, they're very sensitive to the subtlety and nuance required in East-West relations and so forth. So at the dinner party that evening when I was with West Berliners, I told them this. And I said, when I flew over the Wall, I can't see how you could get used to it. The ranking diplomat here [told me], “Don't make a big deal out of the Wall because they've all gotten used to it by now.” And there was silence. And I thought I committed a gaffe, just to kind of gaffe that the diplomat wanted the President to avoid. And then one man raised his arm and pointed. And he said, “My sister lives just a few kilometers in that direction. And I haven't seen her in more than 20 years. How do you think we feel about this Wall?” And then they went around the room. And every person told a story about the Wall. They hadn't gotten used to it, they'd stopped talking about it. But if you asked, they would tell you. And our hostess, Ingeborg Elts, a lovely woman, she died three or four years ago. But she became quite angry, and she said, “If this man Gorbachev is serious with this talk, Glasnost, Perestroika, he can prove it by coming here and getting rid of that Wall.” And I put that in my notebook. And I knew immediately, instantly, that if the President had heard that comment, if he'd been there, he would have responded to that. The simplicity, the decency, the power of it. And, of course, I also lunged at the line, the remark, because I was a 30 year old speechwriter in a lot of trouble. I just couldn't figure out what material, but when she said that I thought, “That's it. That's it. That's it.” So I went back to Washington and drafted a speech around this line, this idea. And Khatami, Griscom was the Director of Communications. He liked the speech. And Tony Dolan, the chief speechwriter, Tony Dolan, Tommy Griscom, and I, pulled a fast one, and persuaded the staff secretary to give the speech to the President on a Friday so he could review it that weekend at Camp David, on the ground that the President had a lot of speeches coming up, and he ought to be given a chance to get his reading in early. The invariable rule in the Reagan White House was that speeches went out to staffing before they went to the President. And we got this speech to the President first. And on the following Monday we had a meeting in the Oval Office, and we're talking about a number of speeches, Josh Gilder wrote a speech for the President to deliver to the Pope. And the President was alive. He had quite a lot of comments on that, more material he wanted to add. Then we got to my speech. And he said, “Well, that was a good draft. That's a fine speech.” I wanted more from him, we always wanted more from him. And so I said, “Mr. President, I learned when I was in West Berlin that they'll hear you on the other side of the Wall by radio, maybe even as far east, depending on weather conditions, as Moscow. Is there anything you'd like to say to the people on the Communist side of the Wall? And the President, this is one of those, I can still play this one in my mind. The President thought for a moment and he said, “Well, there's that passage about tearing down the Wall. That's what I want to say to them. That Wall has to come down.” And I was disappointed because we hadn't gotten fresh material. But that just shows what a fool I was. The speech went out to staffing. From the day it went out to staffing until the President delivered, which was about three weeks, the State Department opposed it, The National Security Council opposed it, the diplomat in Berlin opposed it. They submit draft after draft, as I recall, seven alternative drafts, different pretexts, but from each the line “tear down this Wall” was missing. Then the traveling party left for Italy, I was not part of the traveling party. So this piece, what I've told you so far is firsthand. Now I'm telling you what I heard by Tony Dolan told me the story and Ken Duberstein, the Deputy Chief of Staff. The State Department continues to object. Now they're in Italy. And Ken Duberstein decides he has no choice but to take the decision—it’s bad staffing if you have to make your principal make the same decision twice, right—so you try to resist that, that's a waste. The most precious resource in the federal government is the time of the President of the United States. But Ken decided he really had no choice. So he sat the President down in some Italian garden, he tells me, and described that the State Department said the speech was naive, it would raise false expectations, it would put Gorbachev in a tight position in the Politburo, and so forth. And he had the President reread the central passage, and then they talked about it for a while. And Ken said, and this moment came where the President got that—you guys are too young to remember this—twinkle in his eye.

And the President said, “Now, Ken I'm the President, aren't I?”

“Yes, sir. We're clear about that much.” 

“So I get to decide if that line stays in?”

“Yes, sir. It is your decision.”

“Well, then it stays in.”

As Air Force One left Venice to fly to Berlin, the fax machine clicked into action and the State Department sent in another alternative draft. And Ken said, Ken was in the limousine on the way to the Wall in West Berlin with the President, who leaned over and slapped Ken on the knee and said, “The boys at State are going to kill me for this. But it's the right thing to do.” So, that's the story of that speech. You gave me credit for the speech, which in some superficial, narrow sense, I'm grateful. And thank you. It's true, but not deeply true. The deep truth is that that speech belonged to Ronald Reagan. I'd been formed by his thinking, by his speaking style. I was in Berlin to listen for material that would appeal to him. I wrote that speech for him. I worked for Vice President George HW Bush, I knew him well, he was a magnificent man. But I would never have written that for George Bush, and George Bush would never have delivered it. When I wrote speeches for him, when he was Vice President, you'd hand him a speech on foreign policy, he'd take it and say thank you. And then look at you without even looking at the speech, he’d look at you and say, “Now you've cleared this with State, right?” And Ronald Reagan didn't actually care too much what State had to say if he disagreed. So I would never have written it for anybody else. And nobody else would have delivered that speech. That speech belongs to Ronald Reagan. 

Ed Kless 
Well, thank you for that. It's a fantastic, marvelous story. And it is really the iconic line of Reagan's presidency, which is obviously pretty intense. 

Peter Robinson
Now, see, I just gave Reagan credit, as is true. At the same time, Oh, if only I got royalties. 

Ed Kless
I mean, the T-shirts alone. We’re a little bit over but I do want to ask you this question. Do you think that had the Berlin Wall not come down 2.5 years or so after [the speech], would it still have its place? 

Peter Robinson
What, the speech? 

Ed Kless
Yeah, that line.  

Peter Robinson
Not a chance. Not a chance. When he gave that speech, it had a certain amount of impact. The Berlin press paid attention to it. It was interesting, because it was the kind of division that we've gotten used to during four years of Donald Trump. The highbrow press hated it. And the lowbrow populist press loved it. In Germany, as in this country, incidentally, The New York Times of course, huffed and puffed and denounced it. And the New York Post, as I recall, there were the more populist press in this country liked it, but it was, it was a big speech, but it was just a big speech. It disappeared after a couple of weeks. It was when the Wall came down, that the speech—I don't know how else to put it, it seemed retrospectively prophetic, if you see what I mean. That speech gets remembered because Ronald Reagan was right. He was right. You can't ease up on communism. You can't go part way, you have to take this Wall down. That's the interior dynamic of freedom. All right, so no, I don't think we would remember it at all if that Wall hadn't come down.

Ed Kless
All right, well, we are up against our next break.  

Ron’s Questions: Segment Three
Well, welcome back, everybody. We're here with Peter Robinson. And Peter, what a great story. Wow, that was chilling. Just because, like we said, it's living history. I just want to ask you really quick, you went back to Berlin for the 15th anniversary of that speech and did a Fox documentary, I believe, with Tony Snow. And then they recreated that dinner party that you had? What was it like to see East Berlin at that point?  

Peter Robinson
Of course it was good to see the people who had helped me, and in particular, Ingeborg Elts, we went back to their house, it was very good to see them. Tony Snow, the late Tony Snow, what a sweet man, and a good journalist, I do miss him, too. Tony said, “Come on. Let's go.” We finished shooting at one point, and he had been back several times. I had never been back. So what you had in my mind was this vivid image, it's still vivid. To me this is a problem. Even young Germans don't, it's almost impossible to explain what it felt like to be in West Berlin, a modern city, lights, traffic, action, people well dressed, with a wall all the way around. You could forget about it for a moment and then you'd be walking down the street, you turn and at the end of that alley, there would be a wall. All right. So Tony, and Tony had been there before. And we walked through the Brandenburg Gate, which 15 years before had been walled off. It had been on the other side of the wall. And we walked up Unter den Linden, “under the linden trees,” which you can think of it as a German version of the Champs Elysées, or the Mall in London. It was the central historic thoroughfare of Berlin, with great historic buildings, which now had been restored. It was so thrilling. I'd seen them only from a distance and they were crumbling. Now they've been restored. And Tony, Tony knew his Berlin history. And we went to, as I recall, it was the headquarters, it was either the old Soviet embassy—the Soviet Union no longer existed—or it was the headquarters of the East German Communist Party, it was some commie building. And we got there, and it was a Rolls Royce dealership. I thought that was almost too much of a triumph for capitalism, but it was just so thrilling to be in this place that had been walled off and dark. And honestly, this sounds so, I don't know, corny or hokey, but when I was there in 1987, when I looked at, stood on the observation deck, and looked into East Berlin, the only thing I can compare it to, with regard to what it may feel like was, it was as if I were Frodo getting my first glimpse into Mordor. It just felt dark. It almost felt as if there was a kind of malign presence there. It was an evil empire, to coin a term, it really did feel that way. And it was gone. It was gone.

Ron Baker
It reminds me of what Nixon said about communism. He said, “The color of communism is not red, it's gray.” Speaking of the Rolls Royce dealership, there's a communist Museum in Prague. And it tells the whole story, and it's above a McDonald's. So beautiful blending of capitalism and communism. 

Peter Robinson
Oh, and there was a moment, this has got to be available online someplace. But there's a moment after the fall of the Berlin Wall, after the fall of the Soviet Union. I think it was the back page of some expensive advertising site. I think it was the whole back page of Vanity Fair. And there's Gorbachev in the back of a limousine with a fancy suitcase or briefcase and it's an ad for Louis Vuitton. The last General Secretary of the Soviet Union with a Louis Vuitton briefcase. 

Ron Baker
Didn't he sell his birthmark to a vodka distributor? It cracked me up. On Gorbachev, I wanted to ask you this, because in the book you cite an interview that he did. And he said, he was speaking of Ronald Reagan: “He was an authentic person and a great person. If someone else had been in this place, I don't know if what happened would have happened.” Did Reagan win the Cold War? I mean, Gorbachev gets a lot of credit from the left. Where do you come down.  

Peter Robinson
Here's where I come down. This goes back to what we were talking about earlier, the contingency of history. Had someone other than Reagan, or just click through the people who might have been President in place of Reagan. Suppose Jimmy Carter had won. Suppose Bob Dole, or Howard Baker, or George HW Bush been President, had defeated Reagan in the Republican primary. I can't project from what we know about any of those men, that they would have stood up to the Soviets, and taken the heat for increasing the defense budget, cutting taxes to revive this economy, putting the Pershing missiles in place in 1983, delivering speech after speech after speech that sounded like trumpet blasts. Would any of them have done that? I can't believe it. I don't think they would have. Did Reagan win the Cold War by himself? You cannot describe the end of the Cold War without [Pope] John Paul II, or Margaret Thatcher, or indeed Mikhail Gorbachev. I think I might also add Lech Walesa and Vaclav Havel. But I do think you can say there were ten people without whom things would have been different. No Margaret Thatcher fracturing of the NATO coalition. No Ronald Reagan continuation of detente. No John Paul II, no demonstration of the illegitimacy of communism in Eastern Europe, even three decades after imposing communist regimes. No Gorbachev, it might not have ended peacefully. I wonder, I keep going back and forth, not that anybody cares about it at this stage, But how much credit does Gorbachev deserve? When really what everybody hails him for doing is behaving like a decent human being. And not calling the troops, the Red Army out of the barracks in Eastern Europe. Now, they did call out the Red Army in 1956 and put down the Hungarian uprising, they did it again, the tanks rolled into Prague in 1968. And Gorbachev could have done it. The Red Army had a massive presence throughout Eastern Europe, he could have crushed the revolutions of 1989. And he didn't. Well, alright, we should be grateful to him for that, I suppose. But what he did do is behave like a decent human being. He behaved like someone other than a communist, other than a doctrinaire communist. In any event, without Gorbachev it's hard…if Andropov had not died when he did, if Chernenko or Brezhnev were still alive, this would not have ended peacefully.

Ron Baker
And of course, Gorbachev wanted to save communism. I mean, he was a diehard believer.  

Peter Robinson
Correct. He was. The way I think of it is that Gorbachev was the last true believer, he was the last real communist. And in some ways, he was a bit of a throwback. Brezhnev, Chernenko, and Andropov, they all understood the need for the iron fist. Gorbachev was kind of strangely naive, he believed that communism itself was so appealing, that people would choose communism, even if you remove the iron fist. And of course that's nonsense. Nonsense. 

Ron Baker
Awesome. Well, Peter, I've only got about a minute with you, but you wrote a book called Snapshots from Hell: The Making of an MBA about your time at Stanford, published in 1994. As a CPA, I get a lot of questions about “Should I get a CPA or an MBA?” First thing I do is say, go get this book. I've recommended this book to so many people, I think we've both prevented a lot of MBAs as a result. You write at the end of that book: “The reader will have to check in with me again in twenty or so years to learn how my classmates and I stand.” It's been 26 years. Do you regret going to Stanford to get an MBA? Or was it a worthwhile experience? 

Peter Robinson
I have by last count, I have five classmates who are billionaires. And what I regret is not having gotten to know them much, much better as undergraduates. My business degree didn't really take, and yet at the same time, do I regret it? Actually, I don't regret it. You know, it's impossible to undo bits of your life. And here I made good friends. I made friends who are still my friends during that crazy MBA experience. An MBA is only useful for particular kinds of people. And I'm not sure I was one of those kinds of people. In fact, I'm pretty damn sure I wasn't. 

Ron Baker 
Is that what landed you at Hoover Institution? That you were out there and made connections? 

Peter Robinson 
Yes, Ronald Reagan said to me, when I was leaving the White House, in my little farewell meeting, he said, “Now, where are you going?” And I told him, “Stanford Business School.” And he said, “Well, the faculty out there is a little left-leaning. But you get in touch with my friend, Milton Friedman. And so I show up at Stanford Business School, Milton Friedman was across the street at the Hoover Institution, and I thought, how many times am I going to get an introduction from a President to a Nobel Prize winner? So I did present myself to Milton Friedman, who—I don't know if you ever knew him—he was a delight. He could be quite rough on you if he thought you were mistaken intellectually. But he was a delightful, warm, generous, wonderful man. And he kind of introduced me around Hoover. So later, I was invited to return to Hoover. I suppose that's the advantage of my MBA, that I happen to run into people across the street. I got to know people across the street at Hoover. 

Ron Baker
I met MIlton and his wife, Rose, once at a speech they gave, and we've had his son on, David Friedman, he was a delight. But unfortunately, Peter, I'm out of time and if I go anymore, Ed's going to kill me.  

Ed’s Questions: Segment Four
And we are back on The Soul of Enterprise with Peter Robinson. And Peter, it's not often that I get chills doing this show. It has happened on a couple of occasions. But your story is certainly one of them. But one of the times when I've got chills listening to one of your shows on Uncommon Knowledge was your more recent interview with Jimmy Lai. Our listeners have heard Ron and I talk about Jimmy and his experiences, and coming to Hong Kong when he was a boy and getting a bar of chocolate and it changing his life completely. What are your thoughts on the situation, both with Jimmy specifically, but also with what's going on with Hong Kong? And what maybe the US should do about it? 

Peter Robinson
Yeah. You guys can put a link up to the show, perhaps the most recent interview I did with him. So Jimmy Lai is a great figure. He is. I had to have had the feeling when I was talking to him, that in one way or another, he's the kind of man that George Washington must have been. I'm talking about a Chinese man, of course, who speaks heavily accented English. I don't mean that he had the bearing of Washington. I mean he had the courage of Washington, or St. Thomas Moore, a similar kind of person. So Jimmy Lai, a billionaire, and he has British citizenship. And he won't leave Hong Kong. He just said, “This city means everything to me, it gave me the life that I have. I'm not leaving.” When all his, I shouldn't say all his friends, but I know many of his American friends, and they're just desperate for him to get out of there. Which would be easy for him to do. He's one of these rich Chinese who has houses in other places. He will not leave. And so in the last interview, which I did this past summer, I said, “Well, Jimmy, what? They've detained you a couple of times already, this is not going well.” And he said, and he referred to his faith—he’s a convert to Catholicism, so he's a Christian—and he said, “Well, it could be that this is what is. This is what I need for the good of my soul. Maybe I need to go to prison. Maybe I need to suffer for the good of my soul.” Unbelievable for a man to say that. And now of course they've carted him off. He is in prison. What do I think about Hong Kong? I don't know what kind of trades or sanctions might be useful. I was persuaded by Jimmy, whom I interviewed maybe a year ago, and then I interviewed him again this past summer. But a year ago, he made the argument that the mainland Chinese, the communist Chinese, were going to leave Hong Kong alone because they needed it too badly. Something like 60% of foreign investment flowing into China flows through Hong Kong, because investors from Europe and this country want to be able to understand that they've got the rule of law on their side, they'll be able to remove their profits, and so forth. And so the Chinese need Hong Kong, and they'll be very careful, any moves will be incremental. And that was just wrong. I don't believe the analysis was incorrect. As far as I can tell, the Chinese are going to damage themselves. But the horrible power dynamic that seems to power communism, and it seems to be driving them, they can't take dissent. They can't handle that. They can't handle the truth. They can't permit the truth. So I just remember that I did an interview with Nathan Sharansky, who was a refusenik in the Soviet Union. And why did the Soviets, that he said he tried until he was 20, or 21, to be a good Soviet citizen. And here's what it meant. It meant that you said what you knew they wanted to hear. You read the books that they permitted you to read, you lead your life the way you knew they wanted you to lead your life. And at the same time, you knew that it was all a lie. So the question is, why do they insist on this? And the answer is because they need a humiliated, broken population. And the Chinese seem to have fallen into the same, so this to me, one thing that we're finding out here—you might want at some point, you might want to invite Stephen Kotkin on the show, Stephen Kotkin is the Princeton historian. He's working on the third and final volume of what will surely be the definitive biography of Stalin. Stephen came out here to Berkeley, and he began visiting the Hoover Institution as a young graduate student. So we're talking about a man who's 60ish now. So for four decades Stephen has been poring over the archives of the Soviet Union and communist documents, at Hoover and other places, it started at Hoover. He probably knows more, and has read more archives, meetings, notes on meetings from the Politburo and  and so forth, than any person alive, including Russians. And I once said to him, “Stephen, what's the central finding? What's the one thing that you learn from poring over those archives?” and Steven replied immediately, “That they were communists. They were communists, they really believed it. And even when they had nothing to prove to each other, even when they were in private conversation with each other, the members of the Politburo talk like communists, they used Marxist-Leninist terms, they use that kind of analysis.” And as far as I can tell, for some years now, we in the United States have permitted ourselves to believe that the people running China aren't really communists, they don't really believe that stuff. What they believe in is markets and economic growth. And what that means is that eventually they'll move in our direction politically as well. They'll permit greater political freedoms. They're communists, that's what we're finding out now. They really are communists.

Ed Kless
One minute left, and a totally unfair question to wrap it up. What would Reagan do? 

Peter Robinson
Tell the truth. He would tell the truth. I think that's what I'm struck by every speech you give. Someone said, well, did the Berlin Wall speech make any difference? The answer is, I don't know. It's really hard to say. But think of a speech that we know is a great speech. Take the Gettysburg Address. Did it make any difference? Beats me, you can't prove it, right? You can't say GDP ticked up, you can't prove it. Every speech, even big speeches, it's a message in a bottle. You give a speech, and you hope that human beings hear it and respond in some way. And so what I learned from Ronald Reagan is that even when you're President of the United States, and you seem to command the attention of all the media, giving a speech is an act of faith. It's an act of hope. And in dealing with the Soviets in those days, you just didn't. But he did it all the same he, and John Paul II, and Margaret Thatcher, you tell the truth. Why? Because it's the truth. And so that's what Reagan would do. He would tell the Chinese what they were like, he would tell them what they were. 

Ed Kless
Peter Robinson, thank you so much for appearing on The Soul of Enterprise. We hope you come back. I got through like only a short portion of the questions that I wanted to ask you. Thanks so much.


Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

Click the “FANATIC” image to learn more about pricing and member benefits. 

This week was Bonus episode 320 - “Post-Peter, ACO Merch, and Fascism”. Here are some of the links we discussed:

Episode 319 - Interview with Robbie Kellman Baxter

robbie kellman baxter.jpg

This past week Ron and Ed welcomed Robbie Kellman Baxter, author of The Forever Transaction. We talked about, of course, SUBSCRIPTIONS! Robbie's customers include Netflix, the National Restaurant Association, and The Mail Newspapers in the UK, as well as dozens of Silicon Valley SaaS and consumer subscription companies.

A Bit More About Robbie
Robbie Kellman Baxter is best known as the creator of the popular business concept Membership Economy. She is the founder of Peninsula Strategies LLC, a management consulting firm, as well as the author of the bestselling book, "The Membership Economy: Find Your Superusers, Master the Forever Transaction & Build Recurring Revenue" . She coined the popular business term “Membership Economy", which is now being used by organizations and journalists around the country and beyond. Before starting Peninsula Strategies in 2001, Robbie served as a New York City Urban Fellow, a consultant at Booz Allen & Hamilton, and a Silicon Valley product marketer. She has an AB from Harvard College and an MBA from the Stanford Graduate School of Business.

Ed’s Questions: First Segment

Welcome to The Soul of Enterprise: Business in the Knowledge Economy, sponsored by Sage, transforming the way people think and work so their organizations can thrive. I’m Ed Kless with my friend and co-host, Ron Baker, and folks on today's show, we are thrilled to have with us Robbie Kellman Baxter. Hey, Ron, how's it going?

Ron: Good, Ed. I'm looking forward to this. I've read Robbie's books this year, so I've been marinating in her ideas.

Ed: Locked and loaded for today. I'm sure so let me let me bring her on. First. We'll get the Bio out of the way. Robby Kellman Baxter is a strategy consultant helping companies develop and optimize membership models and subscription pricing, has deep expertise in subscription-based and SAAS models, and the membership economy. She brings over 20 years of strategy, consulting and marketing expertise to Peninsula Strategies, her strategy consulting firm, focused on helping companies leverage the subscription model, the digital economy, and freemium, to build deeper relationships with customers. She is the author of The Membership Economy: Find Your Super Users, Master the Forever Transaction, and Build Recurring Revenue, 2015 [and, The Forever Transaction: How to Build a Subscription Model So Compelling, Your Customers Will Never Want to Leave, March 2020. Robbie coined the term “membership economy” and it is now being used by organizations and journalists around the world. Thanks so much for being with us today Robbie Kellman Baxter.

  • Let's start out with the basics. What's the membership economy?

  • So talk about that difference in your mind. What is the difference between having members versus just having customers?

  • I was reminded when I started hearing the term, there was a commercial, I believe in the 70s and 80s, for American Express, and the tagline was “membership has its privileges.” I'm sure you recall that. And that came to mind. And I think that's a great thing to keep in mind, right? Is, what are the privileges that you're developing? And you call it the difference between having the membership as a product versus membership as the mindset?

  • It is really loaded, but it's a good word. I think it's an important word. One of the things that Ron and I have talked about for years and years and years is that in order to make any change inside your organization, as Werner Earhart says, all transformation, all change is linguistic. So the language you use is very important. And it was funny, because earlier today I was talking to somebody who has a membership organization. And we came to this very same conclusion: you're treating your membership as a product, not as this notion of a relationship. And have you seen, I'm gonna kind of go sideways on this, Ryan Hamilton's appearance on the Stephen Colbert show, where he talks about trying to cancel his cancel his gym membership.

  • He's got a great line in the routine where he says “If you have to write a letter to cancel something in 2020, you're being bullied.”

  • And he said at the end, he says, “I actually had to walk by the gym to go to the CVS to buy the envelopes. But isn't that interesting, the other example that I've heard you use, Ron and I have used it, the Hotel California, the worst membership experience of all of our lives, especially if you grew up in the 70s, was the Columbia House Records, which was literally the Hotel California because I bought the Eagles album.

  • And they wouldn't let me, they kept sending me stuff. And, it's so funny that I think we've had to make this adjustment; they had some really good ideas. But what is it that we can do to adapt some of those great ideas that Columbia House and other places had, but make them with the Cancel button front and center?

  • It's horrible. So, is subscription membership a pricing tactic? Or is it a strategy?

  • So I’m curious, do you use the subscription membership model for all of your pricing? Like in the work that you do, I noticed that you do consulting, you obviously do coaching, which I would imagine is subscription?

  • The industry that I can come from, which is Sage, the organization that I work for. We sell accounting software. And this is one of the big conversations inside the organizations right now who used to sell what we call on-premises software, and then have now moved to Software as a Service. The software is now priced on subscription, but their services are not. And there is similar to your thing, a big-bang upfront, with this kind of ongoing thing. That said, I'm trying to coach my people to get past that and really look to see if there is a way that you can make this subscription and take the loss leader of the big-bang up front? So what are some of your thoughts on that?

  • I think that's very true, especially in the industry that I'm talking about, because nobody changes their accounting system because they think it would be fun, right? Hey, let's do this, that would be fun. We know that they're doing it because they're in a world of hurt someplace, like their current system is significantly deficient in some way. Because really, with accounting systems, and I hate to say this as someone who works for a company that does this, debits equal credits, all systems, ultimately is what those things can do. We are already up to our first break.

Ron’s Questions: Segment Two

  • Welcome back, everybody. We're here with Robbie Kellman Baxter, the author of The Membership Economy and The Forever Transaction. Robbie, on your Membership Economy book, you talk about the move from customer service to customer success. There seems to be a customer success department in a lot of subscription-based businesses. You also talk about how membership is an attitude, whereas subscription is more like a financial arrangement. Because with a membership, you're committed until you cancel, right? I mean, you have to actively break up to cancel. And Ed and I think about this in terms of “choice architecture,” and psychology. There's just something deeply different, whether you call it membership or subscription, about joining something, versus just entering into a transaction.

  • The peace of mind. And the convenience, like you say, I think they're completely undervalued. I'm a recovering CPA, and I work in the accounting, legal, advertising space with professional firms. And I'm trying to get them to move to this. And I realize that you're talking about this in the book, this all you can eat option, but like concierge doctors, or direct primary care doctors, I do think these firms could set up, hey, whatever you need, you're covered. Anything we’re capable of doing under our roof, you are covered. If you get audited, you know just like a doctor, whatever you need, stitches, broken leg, whatever, they'll do it, you're covered, and that just swaddles the customer in this peace of mind and convenience that they will pay dearly for.

  • We talked about, and I know you’ve spoke already at the Professional Pricing Society, Ed and I are faculty members there. So we've been teaching value pricing for years, and value pricing was all about, and you say this in one of the books, pricing the customer—it’s the airline model, your pricing each customer, not the seats. The customer, whether they are business or leisure, when did they buy their ticket, all those types of factors. And in the subscription model, what's different is your pricing the relationship. I think about the Porsche Drive program, I'm not subscribing to a car, I'm subscribing to Porsche. That's a big, big difference isn’t it?

  • And 80% of the Porsche Passport members are new to the brand, which is phenomenal. They did rebrand it, by the way. It's Porsche Drive, not passport. I'm bummed because I thought Passport was great marketing. One objection we get from firms, and I'm sure you hear this all the time, is what about that one-off service? You know, I think you call them Ala carte services? And I'm like, Okay, well, you could carve out and price that separately. But if you're constantly doing that, why can't you just bake it into the model?

  • That's just one of the main disadvantages of value pricing, pricing the customer. And at Professional Pricing Society, for a long time, we thought that that was the trend, you're going to have individual prices for each customer. But the membership economy kind of blows that up and says no, no, make it transparent. Make it Netflix, and just let people use what they need. They're not going to abuse it, maybe 2% might use 20% of your resources, but you can price for that. You can actuarially price the portfolio. That's the other thing I love about this model and spread that risk amongst all of your customers.

  • You said something about the airlines that I just love, you said that they're an excellent example of an electric fence rather than a magnet. I love that. Do you think with the airlines, will we see any major carriers like United move to a subscription option, where you just pay them 50 grand a year and they fly you anywhere you need to go?

  • Do you think they should?

  • We've got less than a minute, Robbie, but just real quick, do you think this is easier to do for a company that's really focused? I mean, I'm thinking the difference between Coke and Pepsi. Pepsi is involved in food, and fast food, and all this stuff. But Coke just does beverages? It's much easier if you're focused, isn't it?

  • It's easier to put guardrails and it's easier to bake in those ala carte one-offs, all of that type of thing. Well, this is great. There's so much more I want to ask you about these books, because I really enjoyed both of them. I think they're both really great, very thought provoking pieces of work. So congratulations, and I know that The Forever Transaction came out this year, right? I think this is cutting edge. This is bleeding edge stuff. And that's, that's how we know it's a great idea. It scares people, right? Anytime you're out there scaring people, you know you've got a great idea.  

Ed’s Questions: Segment Three

  • We are back with Robbie Kellman Baxter, author of The Membership Economy and The Forever Transaction. Robbie, I wanted to ask you about something that you said during an interview with Singularity University. You said, “In order to move to a subscription model, the company needs to have developed a competency in innovation.” And first of all, interesting verb tense. So that needs to have developed a competence in innovation, so is an innovative thinking style a prerequisite to the membership economy?

  • That's hysterical. One of the things I want to ask you about is, I know you've done some work with Netflix, and they are very tied into the fact that they have one choice. It's this, here's your choice, this is what you do. But I know that a lot of folks are saying, and when we teach value pricing, we have always talked about giving at least three choices to the customer. What is your thought with regard to subscription in regard to offering choices? And also, what have you learned about creating what we call fences between those choices, to make them optimized?

  • And what has been helpful with regard to more than one choice, about creating clear differentiation between those choices. One of the things that I see oftentimes is people don't have enough distinction between those choices, and I’m wondering if you had any thoughts or insights on that?

  • You brought up the all you can eat. In the Brazilian steak house, I'm always a fan of that the salad bar and the bread that they give you, which is absolutely delicious, that's just a diversionary tactic to get you not to have the meat. So avoid that. Don't let them distract you. I wanted to ask you about something that Tien Tzuo has written recently about, the author of the book Subscribed. He says that freemium is dead, and long live the free trial. Do you have any thoughts on that? Or, if you have that mindset now? Or are you still, freemium still has its place?

  • That's a great answer, and a great example. I love the way that you give the example of the meat, and all that, that was perfect. So I had a question. You talk a lot in your courses about ethics and trust being an important thing. And I'm going to put you on the spot here a little, I think. What about the ethics of the subscription model for, say, a pharmaceutical company? Should we be able to subscribe to say, Moderna, for early access to future vaccines?

  • Yes, I did. I only have one more minute with you. So I figured I had to go.

  • Sure. And the argument on the other side would be, is that if people are on a subscription, they're helping to fund future vaccine development.

  • I think that from the ethical side, my argument would be, well yeah I get early access, but I helped fund the development of the vaccine. Anyway, great answer. I know that was a sharp left, but I do really appreciate that. Yeah, it's a lot of fun to think about all of these different models.  

Ron’s Questions: Fourth Segment

  • Welcome back, everybody. We're here with Robbie Kellman, Baxter, author of The Forever Transaction. And Robbie, you wrote something in here that I absolutely love and I find very incredibly thought provoking, especially for one of our VeraSage colleagues, Tim Williams, who works in the marketing and advertising space, as a consultant. You say a forever promise is different from a brand promise. How so?

  • It goes all the way back to the relationship, doesn't it, there's just something about putting the relationship at the center of the business. And I know you talk about this as being more than just a pricing model. It is a business model change. I'm kind of a student of business models. And I've learned two things about them. At least two things change when there's a new business model, the pricing strategy changes, you know, we go from buying CDs to buying 99¢ cents a song, and now we're subscribing, right? But the other change that always happens, and I can't find a single solitary exception to this, maybe you know one. But the other thing that changes is your dashboard. Your KPIs are completely different. Airbnb has a different dashboard than hotels, and Uber has different dashboard then taxicab companies. And you say, some companies think of themselves as product companies, we all say we're customer based and relationship based. But our measurements don't reflect it. Our measurements track transactions. So how important is changing those measurements internally?

  • I think a lot of even a lot of accountants don't understand the income statement for subscription business with that rolling forward of the annual recurring revenue, and the calculation of customer lifetime value, and all of those things. This is all new, and GAAP doesn't deal with this very well. And so a lot of companies need some help thinking about the metrics, because we're so used to that transactional mindset.

  • We interviewed Joseph Pine, he's the author of The Experience Economy [Episode #34], and his highest level of value is the transformation. And I just think this fits so beautifully with having a business model that puts the relationship at the center, because when you provide customers with transformations, the customer is the product.

  • What's higher than actually transforming the customer from where they are to where they want to be. You know, we try and keep track of every subscription based business, as I'm sure you do, and you probably do a better job than we do. It's inundating just how many things you can subscribe to, all sorts of things now. Has there been something recently that's really excited you or impressed you? I mean, I see Rome, where you can subscribe to houses, you can subscribe to a boat now from Brunswick with sailing lessons from a captain, and all this kind of stuff. Is there anything out there that you see that's really novel and new?

  • You have also started thinking about the Internet of Things. That's going to be just an effervescence of all this, isn't it?

  • The other thing you point out, and I love this, that many companies prioritize acquisition over retention. But that's a misplaced mindset. And we see this all the time, your cable company gives somebody six months free, and you've been a member for 15 years, and they give you nothing. How do you coach your people through that?

  • Awesome. Well, Robbie, this is great. Any new books in the works?

  • That's going to be in my feed. So I look forward to that.

  • Thank you so much, Robbie. This has been fantastic. We knew it would be, and congratulations on the books. They're really, really good, and we recommend them highly. So, Ed, what do we have coming up next week.

Ed Kless: Next week, Ron, we have Peter Robinson, host of Uncommon Knowledge.

Ron Baker: My hero, and the author of Ronald Reagan's “Mr. Gorbachev, tear down this wall” speech. I’m really looking forward to that. See you in 167 hours.


Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

Click the “FANATIC” image to learn more about pricing and member benefits. 

This week was Bonus episode 319 - “The C-19 vaccine and the FDA”. Here are some of the links we discussed:

Episode Reprise — Scroogenomics: Why You Shouldn’t Buy Presents for the Holidays

[Editor’s Note: Some things are just too good not to share again. While our most ardent listeners are familiar with Episode #22, Scroogenomics, many may not be familiar with this specific show. This past Friday was Black Friday in the United States which means it’s time - once again - to talk about why you shouldn’t buy presents. Bah, humbug!!!]

On Black Friday, and right before Cyber Monday—the biggest shopping days of the year—Ed and Ron thought it would be fun to discuss the interesting, funny, and thought-provoking book by Joel Waldfogel: Scroogenomics: Why You Shouldn’t Buy Presents for the Holidays.

The author makes the case that the deadweight loss to the economy from gift giving, in 2007, totaled $12 billion, out of approximately $66.5 Billion spent (about 12%). Citizens Against Government Waste would classify Christmas as a wasteful government program.

Gift giving severs link between buying decision and item’s value to its user—the transaction actually destroys value. To add insult to injury, we are obliged to pretend to be grateful!

His complaint is not the level of spending or the consumption, but the waste.

We discussed the four ways you can spend money in the economy:

 

Former Congressman Dick Armey pointed out how difficult spending is in Category II (Gift), let alone Category IV (Government):

Every year, I worry and fret select the right birthday gift for my wife, Susan. Every year, try as I might, I manage to choose the wrong thing. If I can’t figure the needs and desires of the one person who is closest to me in the world and who I deeply love and care for, how can we expect the government to do a better job?

Three groups spend other people’s money: children, thieves, politicians. All three need parental supervision.

Hierarchy of value of gift giving

  • Aunts & uncles & grandparents = 75%

  • Parents = 97%

  • Friends =91%

  • Siblings =99%

  • Significant others = 102%

Further, we spend approximately 2.8 billion hours shopping in December. To put that number in context, the old USSR—before it imploded—spent 35 billion hours annually standing in line for everyday products and services.

Infographic from Deloitte’s 2018 annual holiday survey

Economist Ian Ayres said this about Waldfogel’s book:

Joel Waldfogel is one of the smartest and funniest economists on the planet. I think of him every time I start to unwrap a present. Buy Scroogenomics for your friends and family. It makes the perfect Christmas gift.

Episode #318 - Fourth interview with Father Robert Sirico

father robert sirico.jpg

Ron and Ed were thrilled to have one of their favorite guests back on the show, Fr. Robert Sirico of The Acton Institute. He along with Rabbi Lapin inspired the name of our show. Among the topics we discussed were an update on the situation in Hong Kong especially Jimmy Lai, The Economy of Francesco, and the new papal encyclical Fratelli Tutti.

A Bit More About Fr. Sirico
Rev. Robert A. Sirico is the president and co-founder of the Acton Institute and the pastor of Sacred Heart of Jesus Parish, both in Grand Rapids, MI. A regular writer and commentator on religious, political, economic, and social issues, Rev. Sirico's contributions have been carried by the New York Times, the Wall Street Journal, Forbes, the Washington Times, CNN, ABC, CBS, NPR, and the BBC, among others. In his recent book Defending the Free Market: The Moral Case for a Free Economy, Rev. Sirico shows how a free economy is not only the best way to meet society's material needs but also the surest protection of human dignity against government encroachment.

Segment One: Ed’s Questions
Here's some good news, Father Sirico is ready to join us. Let me see if I can get him here and jump right in. Well welcome! We are live and on the air; we started without you father.

Fr. Robert Sirico 
They never do that at Mass. 

Ed Kless 
That's true. No matter what you go on, because three weeks ago, our my pianist didn't show up. And I had to do acapella, Father, as the cantor. 

Fr. Robert Sirico 
That was fun. I've done that on my own. 

Ed Kless 

  • It's great to be with you. For those of you who are joining us, Father Sirico has been on three-and-a-half times, because one time he was on with Rabbi Lapin [Episode #226], and you should know Father, we told him that he was now one up on you and he was very happy about that. 

  • If you want to hear father's bio, we'll print it in the show notes. But let's get right to the topics at hand. Ron and I are both following the story of Jimmy Lai in Hong Kong with much interest, and I know you happen to be personal friends with him as well. I know you interviewed him recently when you had an Acton Institute event. What's the latest Father, what's going on?

  • Absolutely. He’s a hero of mine, and Ron's as well. And we have Peter Robinson coming on in a couple of weeks [December 11th]. And Ron and I were both moved by Peter Robinson's interview with him as well. At the end of the interview he asks him, “Why don't you just leave, Jimmy? Why don't you just leave?”

  • Yes. And his family seems to have rallied around him as well and says we're with you. It's a very, very moving story. 

  • Well, I've only got about 90 seconds or so left with you in in this segment, and in my next segment I want to talk more about the papal encyclical, but one of the things in the interview that you did with Acton Institute, you talked about how the pope refused an audience with the cardinal from China? I had not heard that.

  • That's astounding. It is very sad. And as I said, we'll get back and talk a little bit about Fratelli Tutti – TL;DR in the next segment but unfortunately we're against our first commercial break.

Segment Two: Ron’s Questions

  • Welcome back, everybody. We're honored to be here for the fourth time with Father Robert Sirico. Father, I want to get back to Jimmy Lai with you, but before that, how have you been holding up under COVID? I know you've got your church and you run a school too, right? How's that been going?

  • Excellent. Well, you soon will have a vaccine, hopefully. 

  • Yes, it is a triumph of free markets, isn't it?

  • I'm here in California, Father, so you could imagine.

  • We can't have Thanksgiving, without a mask and we're not supposed to sing, it's just crazy, really is. I heard you the Acton Line podcast several times. And by the way, great podcast, I'm really enjoying it. I heard you talk about the school. And I'd never heard you tell that story before. But you really grew that school, didn't you?

  • That's incredible. What grades?

  • And Father, back to Jimmy Lai, in the last two minutes that I have in this segment with you. What should we do, but what can we do, about the situation other than perhaps offering Hong Kong residents citizenship [in the USA] like Great Britain and Australia?

  • I would love to see that. I just don't know if we have the political will to stand up to China. I mean, our companies are caving under their pressure, the NBA, Disney, the movies, we just don't seem to do anything.

  • Yes, I couldn't agree more. Well, Father, this has been great. We're up against our next break.

Segment Three: Ed’s Questions

  • We are back for the fourth time with our friend, Father Robert Sirico, from the Acton Institute. And Father, I want to talk to you about the papal encyclical Fratelli Tutti – TL;DR. But first, I have a question for you about last week's Gospel. I hope that if you feel your ears burning on Saturday, about five o'clock, it's because I'm thinking of you when I'm hearing a Gospel: “I wonder what Father's Sirico would think of this one,” because I know you are writing a book on the Parables. And last week, there was the Parable of the of the talents, one of the most well-known and beloved stories. I love this time of year just before Lent, especially with Matthew's Gospel, we get we get a run of them. And so this is the line that struck me: Should you not then not have put my money in the bank so that it could have gotten back with interest on my return? And what came into my mind was, there were banks? I thought banking as an institution came later? I’m sure the word “bank” wasn’t around?

  • I thought that was interesting. I guess it wouldn't have the same ring if he said, “Could you not have put my money with the loan sharks to earn interest?”

  • The encyclical issued by Pope Francis in early October [Fratelli Tutti – TL;DR]. And as a lay person who has slogged their way through it. And it was a slog. It was all over the place. And quite frankly, I'm used to a language in encyclicals that, even if I don't agree with it, is inspiring, is helpful. This just seemed to be a mishmash of like terms that the Holy Father just kind of threw out at us, with no real cohesiveness about it. Did I miss something?

  • Along those lines, it’s interesting that you bring that up. And by the way, I thought throughout reading the whole thing, I was saying “hashtag straw man, hashtag straw man.” We had Gary Hamel on recently who's written a book called Humanocracy [Episode #313], which is about getting rid of bureaucracy in business institutions and replacing it with humans. The institutions should be as human as the people who are in them, is his argument.

  • I mentioned Sage is the company that I work for, and the coming together that we have seen as a community, and I've been a 17-year remote employee with this organization. So I've never really been fully kicked in. I've always worked from home. But the coming together of the community that has happened inside this organization has been phenomenal. And I hear that over and over and over again from other people in business that they were missing the fact that their company was not a replacement for the family, but another institution that they could rely on, and I think that most people miss that about the places where they work. And in a way, I'm glad we've had the opportunity to experience that.

  • Along those lines on the institution, one of the things that struck me, and I hope I have this wrong, and I need to reread Fratelli Tutti again, but it almost struck me that Pope Francis has almost a lack of faith in the Church as an institution. Now he doesn't call for social programs, I get that. But he doesn't seem to say what he does want? He just doesn't seem to position that the Church could be the answer here.

  • I agree. I, I may have mentioned this to you in a previous conversation we have had, but I have a friend who has passed away, a libertarian, who wrote this fantastic song, a country song. It was called “Let's get Caesar involved.” And what he did was he took a couple of the Parables and it tells them in a country music way. And the response from Jesus in this this song is, well, sorry, we’ve got to get Caesar involved, and one of them is the Good Samaritan. It's hysterical because his point is good. The Good Samaritan didn't say, “Oh, there's a social program available for you.”

  • Anyway, we're up against our last break, Father. I could, as you well know, have talked your ear off at some events here in Dallas, and we missed you this year. Hopefully we'll be able to get back to normal on this.

Segment Four: Ron’s Questions

  • Welcome back, everybody. We're here with Father Sirico. Father, we're coming off a political election that looks like it's been settled. I guess my question is, do you think character is destiny? We used to have a certain standard for politicians about character and morality. And then of course, we’ve got the current person that's in there, do you think character will return? Or will it just be this pragmatic, transactional relationship with our politicians, as long as they do a few things that I like, or several things that I like, I don't care about their character. Where's character fit in, in all this?

  • I can't even imagine that.

  • Do you think we'll survive it? Adam Smith, didn't he say “there's a lot of ruin in a nation?” Do you think we will survive?

  • Michael Novak, who I absolutely loved, though I never got to meet him or even talk to him. But I know you knew him, he was just a wonderful thinker. He said something in one of his books that envy destroys civilizations throughout history. And when you think about all the talk about inequality, Piketty, and all these other people, they rarely mention poverty, but they talk a lot about inequality. Is inequality just disguised envy?

  • It's one of the seven deadly sins, right?

  • Father, I'd be remiss if I didn't ask you how your brother is doing, Tony. Has he been in anything we might have seen? I know he was in the Sopranos.

  • Beautiful. Last time we had you on you. You said here that you were working on a book on the parables. But you also had mentioned two other books you were working on, one hundred and one questions, and then your memoir.

  • Excellent. Well, Father, we'll have you back on. Thank you so much for appearing on The Soul of Enterprise. It’s always such a privilege to be able to talk to you.


Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

Click the “FANATIC” image to learn more about pricing and member benefits. 

This week was Bonus episode 318 - “C-19-alifornia”. Here are some of the links we discussed:

Episode #317: Subscription Economy Update

317 10.42.20 AM.png

After the plethora of interviews these past few months, Ron and Ed return to their examination of the subscription economy. They looked at new subscription offerings they have collected including some in professional firms as well as the overall state of subscriptions in the face of C-19.

Subscription Economy Update

  • Ron’s sees his recent webinar audience moving beyond the “how to” questions about the subscription economy. These ideas are resonating.

  • Ed ran a CPE webinar called “Sell your brain, not your time” and the questions were more about the implementation of subscription pricing as opposed to a defensive posturing.

  • People are starting to go beyond the three choices for subscription. It starts to get confusing around 5 and you’ve lost them at 6 or 7. There is a propensity towards moving towards 3 subscription prices but with a toggle like annual vs monthly.

  • You can’t have a $50,000 a year customer and a $500 a year customer at the same time. This is obvious with subscription pricing but, honestly, you shouldn’t do it anyway!

  • A lot of the questions implicitly imply that their firms don’t have anything of value in which to compete. But how do they compete now? If you have customers now, you obviously have a value proposition. You just need to tease out the value proposition.

  • Jody Grunden, Summit CPA, removed growth constraints with a subscription model. He grew the firm from $600,000 in revenue in 2004 to $7,000,000 today! https://www.thesoulofenterprise.com/tsoe/subscription-pricing-summit-cpa

  • Can you have value pricing 1.0 (pricing the customer) and value pricing 2.0 (pricing the relationship) in the same firm? Ron’s long term answer is no. So is Ed’s. Maybe you can have one-offs, but the ultimate goal is to have a relationship with the customer, not a transactional relationship.

  • Areas of specialization in larger firms provide an opportunity for various subscription offerings. The Apple One service is a great model for professional firms to leverage.

  • Recidivist guest Rabbi Daniel Lapin has a subscription pricing option now at WeHappyWarriors.com

  • Tien Tzuo has been talking about freemium vs free trial in his newsletter: When it comes to freemium vs trial there is a clear winner. It’s a free trial. Freemium users have not bought into the value of your services.

  • Something that feels obvious but needs to be said: Psychology and behavioral economics play a big role in subscription pricing. 

  • A question to ponder: Would you subscribe to a pharmaceutical company? Yes, and we may start to see experiments in this area.

  • Americans tend to underestimate their subscription spend by 1/3rd according to a new study by The Atlantic

  • Tien Tzuo has also been writing about how “every day is prime day”. Here is the full post: https://medium.com/@tientzuo/every-day-is-prime-day-2322a6867d0

  • Unbundling of the automobile: https://medium.com/@tientzuo/the-unbundling-of-the-automobile-8a43bad390d3


Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

Click the “FANATIC” image to learn more about pricing and member benefits. 

This week was Bonus episode 317 - “Non-POTUS election results”. Here are some of the links we discussed:

Episode #316: Interview with Jay Nordlinger

jay nordlinger.jpg

As expected, the timing from Ron and Ed could not be better for this post-election episode. Thank you to Jay for being a wonderful guest!

A Bit More About Jay Nordlinger:
Jay Nordlinger is a senior editor of National Review and a book fellow of the National Review Institute. He writes about a variety of subjects, including politics, foreign affairs, and the arts. He is music critic for The New Criterion. Since 2002, he has hosted a series of public interviews at the Salzburg Festival. For the National Review website, he writes a column called “Impromptus.” With Mona Charen, he hosts the Need to Know podcast, and he also hosts a podcast called “Q&A.” In 2011, he filmed The Human Parade, with Jay Nordlinger, a TV series bringing hour-long interviews with various personalities. His latest book is Children of Monsters: An Inquiry into the Sons and Daughters of Dictators. He is also the author of Peace, They Say, a history of the Nobel Peace Prize. Some 100 pieces are gathered in Here, There & Everywhere: Collected Writings of Jay Nordlinger. A native Michigander, Nordlinger lives in New York.

Ed’s Questions: Segment One

  • Ron, I remember sending you an email and saying who would you like to have on the Friday after Election day and you said Jay Nordlinger. And I said, well go after him. And you got it. And here he is. Welcome, Jay.

  • Jay Nordlinger : I'm so easy, guys. If only you’d have known. I'm delighted and flattered to be here with you. And I love that Reagan quote. It reminds me, I believe, Warren Brookes, the great Warren Brookes, wrote a book called The Economy in Mind, right? It was wonderful to hear Reagan's voice.

  • Ed Kless: Believe it or not, in order to make that quote work in the segment with the music, I actually had to edit out his name because Reagan actually does mention it in the speech. Let's do the quick bio, so we can dispense with that and get right to it. Jay Nordlinger is a senior editor and a fellow at the National Review Institute. He writes about a variety of subjects including politics, foreign affairs, and the arts. He is the music critic for the New Criterion, and for National Review’s he writes a column called impromptus, and hosts a podcast called Need to Know with Mona Charan, and he also hosts a podcast called Q&A. His latest book, which Ron is going to talk to him about, is Children of Monsters: An Inquiry into the Sons and Daughters of Dictators. Officially welcome to The Soul of Enterprise Jay Nordlinger. What the hell happened this week? What's going on?

  • They will probably write opera about this at some point in the future, won't they?

  • Well, I'm thinking of yet another retelling of Romeo and Juliet with the Dems and the Repubs or whatever. Not many people know this, but the reason for Romeo not making the rendezvous with the person passing the message on to Juliet was because he got stuck in a quarantine. So it's perfect.

  • I was listening to John McWhorter’s podcast, Lexicon Valley. I don't know if you get a chance to listen to that? And he did a whole show on the word “why.” And one of the examples that he brings up is the “wherefore art thou, Romeo?” She he was not asking where he was. He was right there. It meant, Why are you a Montague? That was really the rationale behind it. Anyway, let's get back to this crazy election story. Is it best to describe you as an anti-Trumper? I know you're not a never-Trumper but sort of anti-Trump, but you really felt the office was far above him, he really should not have ever even been ascended to the presidency?

  • Yeah, it been interesting. I've been unfriended on Facebook from a number of people already this week because I'm a Libertarian; I should say staunch, dyed-in-the-wool. I was at the Joe Jorgensen campaign event here in Dallas to celebrate the end of this nonsense, which we never got to, and what people are saying is, “Well, you Libertarians, you stole this election from us.” I'm like, “Oh, no, it couldn't have been that Donald Trump couldn't have done like maybe one thing that was like a regular human being that would have probably turned the election completely over to him.” If he had just came out and said, “You know what, let's put some masks on. Let's just protect ourselves.”

  • I have heard it said that if Nancy Pelosi and Chuck Schumer had decided to just bend down and kiss the ring, maybe in the first year, he would have given them anything they wanted because he's not really ideological.

  • In a recent column you brought up the fact that one of the things that really set you off about Trump was his calling of Joe Biden in a tweet with the dictator from North Korea, Kim Jong-Un, and Trump piled on, on the side of Kim Jong-Un [Kim Jong-Un had called Joe Biden a fool of low IQ].

  • Yeah, pretty easy one. I think there's certainly starting to be some cracks in the veneer. I read an article earlier today that Marco Rubio said something to the effect of counting votes is not fraud.

  • Yeah, I had I posted exactly that on Facebook about a week before the election. Countdown to Republicans gaining fiscal responsibility once again, it begins. This has been fantastic.  

Ron’s Questions: Segment Two

  • Welcome back, everybody. We're here with Jay Nordlinger, the senior editor at National Review. Jay, it's not every day you get to talk to one of your favorite writers, but I have to ask you: in your book, Here, There & Everywhere: Collected Writings of Jay Nordlinger, which was published in 2007, you cite Natan Sharansky. And he talks about totalitarian, or what he calls “fear societies.” And he thinks there's three groups in those societies: 1) true believers; 2) dissidents who are in open opposition; and then 3) the double thinkers that talk one way and act another, which he thinks is a large and vital group. We were just talking about North Korea. Do you think there are enough of the third type, the double thinkers, in North Korea to cause change?

  • Do you think it will peaceful?

  • I know you've had the opportunity to meet some of the defectors [from North Korea], and actually interview them. I've read a lot of the books by the defectors and have watched their TED Talks.

  • Yeah, he's the one that met with George W. Bush in the White House.

  • You also cited in your book, Andrei Sakharov, who said he didn't want to talk about human rights. He wanted to talk about specific cases. And, Jay, I’ve got to ask you, what's your take on Hong Kong, because we keep an eye on Jimmy Lai, and I think he's another one of these incredible men that just amazes me. How do you see Hong Kong unfolding?

  • I know you probably know Peter Robinson. He constantly interviews Jimmy Lai on his show, and he keeps asking him, “Why don't you just leave? You’ve got billions of dollars.” Do you see people leaving Hong Kong because the UK is granting them citizenship, per Boris Johnson, and Australia, too?

  • I know you admire Ronald Reagan, as do I. In fact, I shouldn't say this, Jay, but I was named after him. My mom actually loved him as an actor, if you can believe that. All I can think of is the scene in Airplane when the woman who eats the bad fish or whatever, and says, “I haven't felt this awful since I saw that Ronald Reagan movie.”

  • He had this simple way, but not simplistic. Like I love his idea on the Cold War: We win, they lose. You know, he didn't like Détente and said, “Isn't that what the farmer has with his turkey until Thanksgiving?”  Did you ever get a chance to meet Reagan?

  • Well, I never got the chance to meet William F. Buckley. I was at an NRI conference, it was after Clinton won. And so they were trying to calm everybody down. I don't think he made it to that one because he had some type of conflict. Got any good Buckley stories?

  • That one line he had about Oprah, the woman who's alternatively skinny and fat.

  • So I have to ask you this for my dad, Jay, because he's big golfer, and you write about golf a lot. And you quoted a columnist from the Washington Post that wrote this terrible article about Augusta. And she called it the most famous tree house in America—it’s Spanky and Our Gang for millionaires. Have you ever played Augusta?

  • Have you gone to a Masters there?

  • No, but my dad's gone to a few masters [actually, just one]. That's his big dream in life. What did you think of Jack Nicklaus coming out for Trump in the last 30 seconds that we have?

  • Like you say, calling balls and strikes. You know, how do you Ump Trump? It's really interesting.

Ed’s Questions: Segment Three

  • And we are back with Jay Nordlinger from National Review. Jay, you quite publicly left the republican party when Donald Trump got the nomination in 2016. And I guess we're thinking it's a 95% chance that Biden is going to win. Donald Trump would really have to pull not only an inside straight but an inside royal flush, in order to pull this out. I’m wondering what you think the future of the Republican Party looks like sans Trump? And is that something that you envision you might be a part of?

  • And now we measure stuff in the trillions, we've moved on from the billions to the trillions. And there's a great cartoonist, and he talks about how for most people $900 billion is more than a trillion, in their head. I honestly do think that now that we're in this trillions. We spent $2 trillion, what's the big deal?

  • I want to turn your attention to journalism. I saw a speech that you made where you were talking about one of your books. And in it, you talked about yourself as a journalist. And one of the things I want to ask you about journalism is what do you think the state of journalism is today? True journalism?

  • We had author Warren Berger on the show [Episode #302], not the Supreme Court Justice, different guy, with an E. He’s written a wonderful book that Ron and I both love called A More Beautiful Question, referencing the E. Cummings poem. He thinks that journalists just have gotten lousy at asking questions. They just don't know how to ask questions anymore. As silly as that sounds, they just like to talk about themselves.

  • Well, it’s totally okay for you to be the hero of that story. I asked you the question.

  • I love that. That's fantastic. I heard you use that in the speech that I was watching to prep for this. It's a great, great quote. The example that I was thinking as you were talking is the Bob Woodward situation with his book coming out, where he revealed that Trump thought that the virus was worse than he led on. Didn't Woodward have a responsibility, if thousands of people were dying, to come forth with it instead of waiting for your dang book to come out?

  • It's all just a blur. The whole Trump administration is. Ron and I were joking, what's the Presidential Library going to look like? His twitter feed?

  • Well, thanks. We're honored by that comment. But we are unfortunately already against our last break.

Ron’s Questions: Fourth Segment

  • Welcome back, everybody. We're here with Jay Nordlinger from from National Review, and Jay there's so many things I want to say about your segment with Ed, but I want to jump to your book, Children of Monsters: An Inquiry into the Sons and Daughters of Dictators that was published in 2015. You focused on 20 dictators, most of whom ruled in the 20th century, except I guess Fidel Castro did make it into the 21st. What motivated you to write that book? Because when I saw it come out I said, “Do I want to read this?” And then something in me said “Yes, I do. This is interesting.”

  • You say something in there that I just think is so profound, you say, “We sometimes grade on a curve.” Franco, and maybe Pinochet, I rather live under them than Stalin, or Mao, or Pol Pot.

  • For sure. Because isn't this the point that Jean Kirkpatrick made in Dictatorships and Double Standards?

  • And Jay, I’ve got to ask about this, even though I know it's probably not true, but it just blew my mind when I read it in your book, that Hitler, we think had no children. But some guy's mother said, “Oh, no. This is my son [by Hitler]. And you have a picture of him in the book.

  • You go through 20 dictators, and you lay out their kids and tell their stories, and the one that's fascinating is Stalin's daughter, because she defected. Thanks to you, I went out and read one of her books. And it was just fascinating.

  • Didn't she say also that she wished her mother had married a carpenter?

  • You write in there, and I found it interesting, too. She said she was a registered Republican and a National Review was her favorite magazine.

  • Did she get hooked up with like Frank Lloyd Wright, and his wife, and live somewhere in Phoenix?

  • It's true, the sins of the Father, right?

  • I have to ask you, Jay, because we've been talking about this, too. What's going on with China and the NBA over there, and even Disney, giving credits, and even changing their movies, self-censoring. I think back 20 or 30 or maybe 40 years and ask, Would the NBA or Disney had done business with South Africa during apartheid?

  • You know, those of us who believe in free markets really got this wrong. We thought that if we traded with them and opened up, let them into the WTO, they would become more like us.

  • What are they supposed to do in the meantime? It's just an intractable problem, like Hong Kong, in some ways, isn't it?

  • Jay Nordlinger: Ron, do you think that do they have proper markets? Or is it more kind of mercantilism?

  • Ron Baker: You know, George Gilder, who I love and has been a mentor for years, came on the show [Episode #257] and said they're [China] more capitalist than the United States. This was during the Huawei kerfuffle. And that line from George killed me because he's been anti-communist his whole life. His conservative credentials are as good as yours or anybody else’s.

  • Very true. Well, Jay, unfortunately, we're at the end of our time. And I just want to say thank you so much for coming on. This has been a great honor to be able to chat with you.

  • Thank you very much. We'd love to have you back. Thank you so much.


Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

Click the “FANATIC” image to learn more about pricing and member benefits. 

This week was Bonus episode 316 - “Rank Punditry”. Here are some of the links we discussed:

Episode #315: Second interview with Dr Jules Goddard

dr Jules Goddard.png

Ron and Ed welcome back Dr. Jules Goddard, author of Uncommon Sense, Common Nonsense: Why some organizations consistently outperform others (co-authored with Tony Eccles). His brilliant observation that "Strategy is the rare and precious skill of staying one step ahead of the need to be efficient," continues to inspire us. We will continue to unpack this statement and more.

A Bit More About Dr. Goddard:
Dr. Jules Goddard earned his MA at Oxford, an MBA from Wharton, and his PhD from London Business School. He's a Guest Lecturer at INSEA and formerly Gresham Professor of Commerce and Mercers School Memorial Professor at The City University. He is currently Research Associate of the Management Lab MLab at London Business School. He's a teacher, writer and consultant in the areas of business creativity, strategic thinking, leadership and corporate transformation.

Ron’s Questions: Segment One

  • Jules, you were on back in January of 2015 (Episode #27). It seems like eons ago. How have you and yours been holding up under COVID this year?

  • That's excellent. How about teaching, you said you were still teaching, would that be remote or live?

  • That's interesting. You know, you wrote in Uncommon Sense, Common nonsense: Why Some Organizations Consistently Outperform Others, your book from 2013, which Ed and I just absolutely loved. You said in that book, “We believe that most enterprises today are insufficiently entrepreneurial.” Do you think COVID might be changing that?

  • I love that point, and it anticipates my next question. And I know this is incredibly subjective, and very anecdotal. But have you seen innovations, or new ventures, or just new ways of doing things? Like maybe knocking out some of this bureaucracy or these old management ideas that have impressed you?

  • Well, we're Austrian economists, Jules, we have to be optimist by definition. I think back to the Great Depression, and just the flowering of innovation that took place in that horrific decade was kind of amazing when you go back and look at it.

  • I'm sure you've read Matt Ridley's book, How Innovation Works. That was just a great tour of how innovation works. And what a surprise it always is, and we can't plan it. It's an act of creativity.

  • Jules Goddard: Have you had Matt on your show yet?

  • Ron Baker : No. I would love to get Matt on the show. We've had Dan Ariely on the show, too. And I remember, I think Tim's got some debates with Dan on YouTube, he challenges on certain things, and I just found that really refreshing as well. Brilliant guy. You wrote something in the book, too, that I just think is profound. You said “Businesses decline as the production of new insights dries up. A theory of business, therefore cannot be a substitute for insight.”

  • I think you quoted Russell Ackoff, who said, “The future is best dealt with using assumptions rather than forecasts.”

  • Great point, I mean, could this be why, despite all this move to remote work—because we have to—but if you listen to outfits like Apple and Google, they want people in the office to bang together and talk and meet in the hallway, because they think that's where innovation comes from. They're not big fans of remote work.

  • We've been saying since this COVID crisis, with people predicting the decline of cities, and we've been trying to make the point for the last few months on this show that says are you kidding, cities outlast governments.

Ed’s Questions: Segment Two

  • Our guest today on The Soul of Enterprise is Dr. Jules Goddard from London Business School. And Jules, I wanted to ask you a little bit about a session that I saw you deliver, I guess it was remotely since it was during COVID, a xmonks. The title of your talk was about the 4D model of Leadership. And you talk about destiny, drama, deliberation, and development. Can you expand on that if you would?

  • So true. In the book, The Coddling of the American Mind, one of the things that the authors point out in that book is that in a lot of ways we're doing a lot of harm to society, to ourselves, by coddling people, and I think we've seen a shift in leadership from command and control. But then over to this, what I'll call the white knight leader, the one who comes in and saves everyone. And that's, I think, just as damaging. Because it's just you fixing the problem for people, they're not able to fix it for themselves and be able to get out of the situation.

  • You know, during World War II, they didn't say you must go into the tubes, right? That was not a mandate. What I think is so interesting is that we have folks telling us that what came out of the College in London, that 2 million were going to die because of this model. And I see so much of this happening, this is this what's happening in governments, but I equate it to businesses as well. They're obsessed with this model. Ron says, I love this quote, he says, “All models are wrong, some are helpful.”

  • Wow. One of the things I talk to my mentor an awful lot about is this concept of leadership, where what we're concerned with is regulating the level of anxiety in ourselves and also in society. Anxiety and creativity are always inversely proportional to each other, right? The more anxious you are, the less creative you can be. And we can't turn on creativity, right? We have to do is as how do we lower our anxiety level? What's happened with leaders, not just in business but also in government, is they're feeding this anxiety. They're stepping up the level of anxiety like a transformer does with electricity. And I just don't think it's healthy for us as individuals nor for society. I mean, our response has been positively medieval to this COVID situation.

  • Yes, that's a great question. He [Rockefeller] didn't have access to antibiotics either. So, you know, we're talking about a vaccine for COVID being tested in less than a year since the disease has been identified. That is absolutely amazing.

  • Yeah, I think it is going to be incredible. As Ron said the innovation that came out of the Great Depression, I think we're going to find is the innovation that comes out especially in medical and healthcare, not dealing with vaccines per se, but out of healthcare, because of the research that was around it, we're not going to see it for another two, three, or five years, but it's going to be intense.

Ron’s Questions: Segment Three

  • Welcome back, everybody. We're back with Dr. Jules Goddard and Jules I wanted to ask you because I also just love this line. I know I'm throwing lines at you from your book from ten years ago. You say, “Beliefs and assumptions, rather than goals or values, separate winners from losers. Markets are battles between belief systems.” I don't know who said this, it's usually attributed to some Nazi, “That whenever I hear the word culture, I reach for my revolver.” But, how does one work on a culture? I mean, this seems to be the current buzzword, and culture is the sum of beliefs, assumptions, how we do things, our worldview? Is it really possible to change? I know it's possible to change a culture but that doesn't give me insight on how to do it?

  • There's a saying here that politics is downstream of culture. That it's culture, the mass media, Hollywood, that type of thing, but I think it does work in some ways, because you're right, I think a president, somebody like Ronald Reagan, can definitely affect the culture.

  • I think it's one of his best speeches.

  • I would agree. I'm glad you say that. I'm always interested to hear what outsiders think, peering into America, or listening to immigrants who seem to have a real deep appreciation because they know the other side. Jules, I hate to do this, because this is such a lofty conversation. But I’ve got to ask you about this because it's one of Ed and my pet peeves. We just despise the annual performance review process. We think it's Kabuki theater on steroids; it's the most ridiculous thing we subject ourselves to in these organizations. And you even pointed out in your book that the average European company spends 25,000 person days on planning and performance per 1$ billion of turnover. We try to keep a list of all the companies that have moved away from this: Accenture, Deloitte, Medtronic, Microsoft, Netflix. It's now estimated over 10% of Fortune 500 don’t do them or they've gotten rid of them. Do you see that trend in your work?

  • Ed likes to equate it to the self-criticism sessions that you had in the old Soviet Union and at present in North Korea. You probably saw it, but there's a wonderful episode of The Office, the British version, the actual funny one, not the one that we ripped off from you. It's called Appraisal Day. And every time we show that to HR people it just hysterical laughter. One girl actually said, “I peed my pants I laughed so hard.” Yes, we say that laughter is confession. We know this is a ridiculous process. And we still keep it around. It amazes me. So I just wanted to get your take on that.

  • And it wasn't a year after you did the deed. As we said before we went live, we did have Gary Hamel on two weeks ago [Episode #313]. And of course we did talk to him about Humanocracy, a book that Ed and I just both love. What your take on it?

  • I just the love the idea. It's even in the subtitle, “Creating Organizations as Amazing as the People Inside Them.” It's such a great insight.

  • He's right. When you look at bureaucracy in these organizations, it's just takes over, it is insidious. And like he says, it grows faster than the organization is growing. Well, Jules, this has been great. Ed is going to take you home, but I just wanted to say thank you so much for coming back on the show. We will definitely have you back on, if you're willing. We love talking with you. This has just been so enriching. So thank you.

Ed’s Questions: Fourth Segment

  • It is our joy to present to our listening audience our second conversation with Dr. Jules Goddard. We so enjoy our conversations and time with him is flying by, but I want to jump right back into it Jules. In the presentation I saw you give you reference a quote by Tim Ambler from 2003. This is his quote: “On average, boards devote nine times more attention to spending and counting cash flow, then to wondering where it comes from, and how it should be increased.” I can't get through the quote without laughing because of the absurdity of it. But yet that's the case, isn't it?

  • Yes, there was another moment in that presentation where you say zero out of 25,000 companies could point to cost cutting as the reason for driving profitability. Zero of 25,000!

  • At best, he said it was it was two of them. One of the things that Ron and I have been talking a lot about on our show the last couple of months, even over a year now, is subscription pricing. We think that is such a huge innovation because it does exactly what you just talked about. It forces the company to come up with new and better products every single year. Take Netflix, for example, they don't increase the price when the new season of Ozark drops. They constantly have to refresh their product in order to keep the keep the customer happy. So just some of your initial thoughts on that type of thinking.

  • I appreciate that. Because while certainly it's a noble thing to have a local source, the great thing is that the extra 20% can still be kiwi fruit from the global market. And it is amazing to me, and I try to point this out to my kids when we walk into a Target store, we should be amazed every single time. The fact that we were short on toilet paper when COVID first happened, alright, that's still a minor inconvenience compared to all of the things that we still have. And it's the marketplace that got us there.

  • With perhaps with different belief systems, different religions, all of these people somehow figured out a way to cooperate with one another.

  • Yes, well, let's hope that we can begin to get back to this kind of thinking and maybe COVID, as you said earlier, will spur us on to new and better things within our society. What are you working on? We have about a minute left? What are you working on?

  • I'm going to make a note of that and expect the email. Thank you so much, Jules. Ron, what do we have coming up next week?

  • Ron Baker : Ed, I'm so excited. We have one of my favorite writers from National Review, Jay Nordlinger who wrote a great book called Children of Monsters, which I can't wait to talk to him about so I'm really looking forward to it.


Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

Click the “FANATIC” image to learn more about pricing and member benefits.