smallchou.com/blog

great article at nytimes.com about costco, a retailer that so many of us know and love. it centers on costco as the antithesis of wal-mart (read: treats employees well), but it also brings up some interesting philosophies of the business. i thought one particular quote was really poignant, from jim sinegal (ceo of costco):

Mr. Sinegal, whose father was a coal miner and steelworker, gave a simple explanation. “On Wall Street, they’re in the business of making money between now and next Thursday,” he said. “I don’t say that with any bitterness, but we can’t take that view. We want to build a company that will still be here 50 and 60 years from now.”

when i was working at oracle, one startling revelation was the “we’ll do anything to hit our numbers today” attitude of the sales force. the result was often laughable price-cutting and discounts for software. it was not uncommon to hear that some big customer was given a 90% discount after months of negotiations because it was the day before the end of the quarter. it was so important for the quarterly numbers to “look good” that we were willing to mortgage away tomorrow’s business.

it was so shortsighted though, because it created a bizarre business ecosystem by setting the wrong expectations for everyone involved. shareholders would be sheltered from the reality of the business. analysts would come to expect certain numbers. employees would be disheartened or cynical (often both). and, worst of all, customers would come to expect that they could always negotiate for a lower price. it was acidic.

if you were trying to explain to someone the difference between tactics and strategy, that would have been it.

i mean, if you were planning on selling lemonade for a whole week on the street and some guy came up in the first day and offered to buy a whole pitcher for 1/10 of what he should pay, would you do it? you wouldn’t, unless you 1) didn’t believe in your stand/product, or 2) weren’t willing to go out and work hard for the next six days.

that’s why i find myself respecting companies and executives who cultivate a sense of “f*** massaging the numbers, let’s just do what’s best for the long-term life of the business.” their businesses are planning to be around for more than a quarter and they act like it.