John Chester, Wild Apple

Wishful Thinking on China

In the 1980's every business magazine obsessed over how the Japanese were going to run the world.  Just-in-time, kaizen, company songs were the buzz concepts, and we all thought we'd perish without adopting Japanese management practices. 

Now, of course, we're all worried sick about China and how it's going to take over the world.  In this case it's not about purportedly superior management practices, it's all about cost advantages.  In the short term, we have to figure out how to harness this oncoming train, but my wishful, perhaps naive, prediction is that there are influences that will reduce the China threat over time.

Exchange rates.  There is continuous international pressure on China to float or loosen the exchange rate now pegged to the dollar.  Any rise in the yuan will make Chinese products that much more expensive.

Wages.  Media articles report the difficulty many Chinese factories have recruiting workers.  Simple supply and demand suggests that over time that will lead to higher wages.

Environmental controls. Anyone going to China remarks on the nasty pollution.  Just as the US and Europe from the 1960's on put some controls on pollution, China will recognize the need, and that will raise costs.

Copyrights.  Stuff is cheaper when you completely ignore intellectual property rights.  As China builds its own brands, the business community will see the logic of protecting their own patents and copyrights.  Legitimately paying for the rights to use intellectual property will result in higher prices.

This is not to say we should close our eyes and hope the China threat just goes away.  We have to deal with what's going on now, and no matter what China will have a cost advantage for quite some time.  It's just that there's a relentless stream of hype about China, and I don't fully trust hype.  But what do I know?  I'm just blogging in the wind...

Taxes & Choices

Frequently customers who import our fine art posters into other countries ask us to attach a "dummy" invoice showing a lower value than we are actually charging.  The reason, of course, is to avoid taxes or duties.  Some countries apply pretty stiff tariffs and it makes our products significantly more expensive - and therefore not quite as attractive to our customers.  We do a fair amount of international business, so it's a big deal.  And we're told that under-invoicing is a common practice.

We hate saying no to customers, but we put the real price on all invoices.  It's the right thing to do.  It's also the practical thing to do - getting caught could put you into a heap of trouble, and even jeapordize your whole company.  So we'll live with the risk of losing some incremental business, and sleep better knowing things are squeaky clean.

Why Vermont?

Doing business in Vermont has its drawbacks (we're a long way from a lot of our customers, for one; long winters and cold springs for another), but an evening like last night was magical.  We recently gave each other kayaks as birthday presents, and we met friends at a nearby river (is this the modern version of double dating?)

A few hundred yards down river we had clear views of a blue heron rookery, with several nests up high in the pines filled with screeching young ones.  A while later a beaver swam by, and slapped his tail as he dove to hide from us.  To top it off, up the middle of the river about 20 feet above the water sailed a beautiful bald eagle (another kayaker up the river was lucky enough to see the eagle dive and catch a fish).  Why did I wait so long to take up kayaking? 

Anyway, that's why Vermont.