Monday, December 29, 2008

Marketing guys get all the girls

It is unfair, really, that the biggest assholes in business should get all the rewards, but it is true. Poor geeks in IT, accounting, and operations management remain in the basement, shunned. Why is this? Because marketing boys (at least those who survive, most do not) make all the money. They have the highest degree of "network intelligence," which I mentioned in my earlier article, "You are who you know."

Take Apple. Most people think of Apple as the company that makes phones and computers. This is not true. Apple is the only the company that markets and distributes phones and computers. In fact, they have nothing to do with the manufacture of these products, which are typically manufactured out of China by Taiwanese ODMs (Original Design Manufacturers) like Asustek, Inventec, Lenovo (actually Chinese) and Acer. With the exception of Lenovo, which is the largest gadget manufacturer in the world, these companies have struggled over the last five years against falling prices and narrowing margins. Likewise, companies like Apple and Best Buy have done well due primarily to their lock on product distribution channels. There is no money in manufacturing; all the money lies in the ability to push product effectively in saturated markets, then upsell it along with myriad other high margin products such as extended warraties, accessories, and software.

As for the "gadget," or product, don't fool yourself. There is no--repeat NO--actual product differentiation these days. Let's take a look at gadgets. digital cameras. Can anyone actually tell the difference between them nowadays? Of course not, because there is no difference. They are all manufactured in the same factories. They are all the same. During a recession, companies that manufacture, market and distribute them will get hit second, right after the car companies get hit. Why? First, because the industry is cannibalistic and will devour itself over a price war, and second, because the gadgets are cheap and worthless. If you market cheap shit, then inevitably you attract a cheap customer base, which cannot be relied upon during a tightening economy to spend the doebucks.

So when you do think of apple, think of the marketing gurus who sit atop their gleaming glass palaces. Think about the network geniuses who slather their friends with cash in exchange for more shelf space in more places. Think about the soccer moms and technobachelors who drive the economy with their seemingly endless stream of disposable credit card income. It is a cycle: cash goes around and around, and the trash goes around and around. It is also a dumb, completely cynical business model. Believe me people, if it disappeared tomorrow, we would be better off.