View the streaming webinar presentation

If you are unable to view slides, please download and use the following pdf version:

Adobe Acrobat version (637 KB PDF)

MP3 Audio File (6.86 MB MP3)

Questions and Answers

The following are additional questions and answers we were unable to cover during the live webinar:

Q: Dr. Webb, Is there any research or explanation on why health care costs continue to rise? When will this stop?

A: It won't. The explanation is very long, but I'll do my best to summarize. Essentially, buyer and seller never meet, so prices are not created by the forces of supply and demand. The use of third party intermediaries result in the consumer of medical goods never understanding the true cost of their purchase, which means that there is no sensitivity to pricing. Things are so bad that if you want to pay a doctor in cash for a negotiated price, he or she will refuse because prices have been negotiated by others that can be charged to Medicaid and Medicare. Prices are not allowed to fall below that. There are also incredible amounts of defensive bookkeeping to ensure payment by these third party payers. Liability insurance also adds to the cost, which reflects fear of the judicial system. If a doctor charges $50 (that's low) for a visit, and has to pay $1000 a week for liability insurance, that means an nearly entire day must be devoted to recouping the cost of insurance. There are also many regulations on medical businesses and the entire industry which serve to create barriers to entry and prevent competition. For example, I live in a small state, Rhode Island, and there are essentially only two insurers. If I would travel seven miles and move to Connecticut, I would have three times that number of insurers available to me. Naturally, because there is more competition in Connecticut, prices are lower there. Because of our size, insurers do not have enough of a pool of potential subscribers to enter this market, and the state insurance board has made it difficult to enter the market as well. There is legislation in Congress, which is expected to pass in 2006 that would allow health insurance to be sold across state lines, which will help.

The other significant reason is that we no longer buy insurance. We buy health plans. Insurance is supposed to cover financial losses for things that are low risk but have incredibly high consequences. The demarketing of indemnity health plans means that people are unable to assume more risk themselves and lower their insurance spending. Under health plans, you don't have a sense of cost. You never have a sense of the cost of insurance until you have to pay for it out of your own earnings, like sole practitioners or small business owners do. Others covered by health plans of larger business do not realize how much their salaries are decreased by these market inefficiencies.

Two books are highly recommended. Always on my list is "Basic Economics" by Thomas Sowell for a general understanding of all issues like this, but his third chapter of "Applied Economics" is devoted specifically to medical markets. But another book by Paul Zane Pilzer called "The New Health Insurance Solution" discusses it from a consumer perspective. I recently had correspondence with him; he's two years older than I am, has three kids, and is paying half of what I pay for the same coverage. He told me there's plenty of room in Utah for me. Only problem is that I'm near my life's quota for snow, so Utah is not an option. But all kidding aside, he stated that comparable health insurance cost on a state-by-state basis is becoming an important factor in determining where people retire.

Q: A lot of companies seem to be buying back their stock with their rising income. Is this a short-term phenomenom or will this continue in the long-term, thus decreasing the potential of wage increases?

A: It would be better economically if they would return the dollars to shareholders via special dividends so they could be redeployed in the economy with more long run efficiency. It is claimed that buying back the stock would raise the stock price, and therefore benefit those stockholders, but that is not always as certain as cash. The other problem is that not all companies actually act on their announcements of buybacks fully.

Assuming that stock prices do rise as a result of the buyback, since the investor class is now about 70% of the U.S. population, it would raise household wealth. There is often too much emphasis on income, and not enough on wealth. This is one reason why the home mortgage market has been so mischaracterized. People have earned money from their economic decisions; that is, they have purchased property at a location that is desirable to others, which raises the value of their decision. Whether or not it comes to them as wages or as equity that they monetize by changing their financing, it is still a payment for the decision they previously made. In the long run, it's net household wealth that really matters, not how it is generated.

Q: What impact will the strengthening dollar have on the economy?

A: It was just a couple of years ago that I got the question, "when will the dollar stop being so weak?" The answer to your question is "not much." It affects individual companies and individual transactions, of course, but there are so many balancing transactions and markets are so liquid, that most of the ill effects can be managed. This includes production shifting between plants, hedging through various means, being sure that you have balancing transactions coming in the opposite direction, and numerous other methods. For the most part, these discussions are not about the actual rates, but more about "things are different than what we expected" or "different than we budgeted" and not about changes in a grander historical context.

It just so happens I was speaking about this with a capital goods supplier recently, and he said, rightly, that the sales cycle is such that you have to be committed to a marketplace for a long period of time, and you do not have the choice of "picking and choosing" the exact time that is most optimal for you in terms of exchange rates. Most economic studies I have seen over a long period of time show that even basic hedging ends up reducing long run profits because additional transaction and management costs can easily exceed the actual risks. That does not mean that people should not hedge, of course, because if they decide that managing these risks has value to them, they should do it.

Back in about 1986, I was a peripheral observer to a number of transactions that were taking place between a U.S. company and a Japanese manufacturer. The Yen was around 350. You'd think the world would have collapsed if it was in its more recent common range of 90 to 130, where it has been for years. What happened? Direct investment in the U.S. by Japanese manufacturers changed the nature of their business and they can now shift between plants to have the right mix for that company at that point in time.

Q: If direct mail is the strongest area in printing shipments to date, what would you say is the weakest areas?

A: I still worry about the traditional sheetfed offset business, but I really don't like making a "Dr. Doom" list. There is barely a print product for which you can't find a non-print alternative. What I do like is when companies adapt themselves to markets with a realistic, creative perspective and do well.

An interesting article crossed my desk just this Friday morning as I am writing these comments. Business Week is shutting down its European and Asian editions. I think 2006 will be a very disruptive year for print publications in this regard.

LINK

Q: your comment on postal increase impact - Ronnie Davis of PIA/GATF estimated that postal increases would take out 3% of printing volume... Seems significant. Postage affects not just direct mail but also catalogs, bills, brochures, magazines... 45%-50% of print is mailed (and I think you might have said 70%)

A: There are other costs beyond postage, of course, and it must be remembered that very often the costs of postage exceed the per unit cost of printing. Yet, they are not the total cost of a printed campaign, from concept through handling the transactions that people expect to generate from those campaigns.

Comparing inflation costs, just using first class - and I know that there are other rates, of course - since the rate of 37 cents per piece was established, there has been about 10% inflation. In other words, the real cost of postage has decreased in relation to other prices. That means, that the cost of postage, declining in real terms, should have been a stimulus to its use. This inflation-created "10% off sale" did nothing to stimulate demand. Why? Because electronic alternatives and the costs of implementing them actually dropped more, and the available audience for those media increased at the same time. Those trends are firmly in place, and for now, unstoppable, and beyond the reach of any postal rate change. If postage were $0, even that would not change these trends, because the other costs from beginning to end loom so large.

And finally, postal rates are not set by a marketplace, they are set by a commission and interested parties. Their inability to have market-based prices (such as to reduce prices during slack time to increase postal use, perhaps, just like stores have "sales", or to raise them during peak times, like commodities and other services), or to create new services without first getting full postal service commission approval (which means postal competitors have warning about what their competitor is about to do) just makes things quite uneconomic.

In the end, what matters is that mailers expect a particular return from a particular communications effort. The medium they use to achieve that return does not ultimately matter.

Q: When in England in September I saw a newspaper article on a survey of what people wanted in a cell phone - by region of the world. The results were fascinating - Europe and America wanted more features China wanted a minimum of 20GB storage - in your opinion does this lead to the so called "leap frog" scenario for China?

A: The "leap frog" scenario is well underway in all developing countries that are getting more economic freedom. Why build new "legacy" infrastructures? The technology that these developing countries will have will allow their economies to have historically high growth rates and to reach the economic levels of currently developed countries in unprecedented time. In as little as two or three generations, countries will move from poverty to developed, something that used to take centuries, if they choose to.

Q: If you are not using consumer spending, please advise how you measure consumer confidence.

A: Consumer confidence is tracked by the Conference Board and their methodology can be found here.

There is a good article with some excellent links that compares the Conference Board's work with that of the University of Michigan Consumer Sentiment survey. The article is here.

Q: Can you comment on the trends for outsourcing of transactional print for 2006 and the impact on in-house printing?

A: This is not something I've studied a great deal, but it seems to me that the transactional print service houses (I assume that you're asking about those computer service firms that supply banks, financial institutions, and insurance companies, as well as frequent purchaser programs, and the like) is becoming a more sophisticated business, playing on the edges of the commercial printing market, and also making capabilities available to corporations that their in-house departments cannot afford to provide. In that sense, this is quite an interesting business now. In-house printing is in a 20-year decline from a traditional departmental printing perspective. This will continue to contribute to it, and in about 10+ years, we'll probably have only 3,000 in-plant printing departments of any substance between the availability of these outside services and new media displacement.

But that's off the top of my head, and if you've seen me lately, there's not much there anymore.

Q: Should we expect U.S.-based printers partnering with overseas, low labor cost printers in alliances to become a broad trend?

A: I would certainly hope so. If people are concerned about print's ability to compete as a medium, then we should not be concerned about where it is done. If we are, then that will only accelerate displacement by other media.

Q: Who is the Center for Digital Future?

A: They're at the University of Southern California and their website is www.digitalcenter.org

Q: Do successful companies spend money on training?

A: Of course they do. More importantly, they spend time on training. Time and money are not always related. The best investment one can make in employee retention is to invest in training. But even simple things are "training." I remember that one management professor I had, one of the ones who had real business experience, said "delegation is the sincerest form of flattery." When you think about it, having a robust enough organization that trusts people to learn from their mistakes is the way people get trained most effectively. Training should occur every day in the manner that all employees interrelate. Every day, someone should learn something new about their job or the company, even in the most casual manner.

Q: What is your opinion regarding offshore and nearshore printing? Do you thing the United States will be able to fine a way to compete? Or do you think it's a fad that will go away if left alone?

A: Offshore printing is not a fad, just like international trade is not a fad. It's a way of life. Though the U.S. is depended on by the world for its trade in one way or another, Americans themselves are incredibly ignorant about trade. All the press talks about are "foreign imports," yet there is almost never a story about our exports. Compete? We already compete. What's more important is where do we go to find growing markets. It used to be the South or the Southwest; to a Northeastern printer, that was the equivalent of exporting, in their minds and in their patterns of doing business. Offshore is here to stay, and we should be in the thick of it, investing in those markets.

Q: What is your preferred method of offline communication?

A: Hmmmm…. I don't know if I have one anymore. I know people try to talk to me now and then, in person, but they usually just throw their hands up in disgust and walk away sometimes.

Q: As you discussed how printing companies can get into offering a broader range of products and services; companies (printers) need to focus on new technologies and processes (digital print, servers, programmers and more). What percentage of revenue do you believe should be reinvested in training and education? Do you see enough companies investing in training and education?

A: The best training that occurs is not a budget item, it's part of a company's culture, which should include inculcating a sense of profession among all its workers, responsibility for one's own performance and improvement in that performance, and an environment of mentoring and coaching. The latter is not top-down only. Older owners and executives can learn a lot from younger workers. This is why it's essential to have age diversity in companies, especially now since communications technologies and preferences are changing so much.

That said, there is definitely a place for classroom and other training. More time has to be spent, however, implementing what is learned. Too often what is done in the classrooms is not reinforced and gets trampled by daily tasks. Outside training is often viewed as "time out of the office" and not "investment to improve what happens in the office."

I don't know what the "right" percentage of revenue is that people should be investing in training, is (and I couldn't find a figure that I felt was appropriate in Google searches). But whatever it is currently, it's probably not enough.

This free event is made possible by Kodak

About Kodak

Kodak is the leader in helping people take, share, print and view images –for memories, for information, for business, and for entertainment. With sales of $13.5 billion in 2004, the company is committed to a digitally oriented growth strategy focused on four businesses: Digital & Film Imaging Systems – providing consumers, professionals and cinematographers with digital and traditional products and services; Health – supplying the medical and dental professions with traditional and digital imaging and information systems, IT solutions and services; Graphic Communications – providing customers with a range of solutions for prepress, traditional and digital printing, and document scanning and multi-vendor IT services; and Display & Components – supplying original equipment manufacturers with imaging sensors as well as intellectual property and materials for the organic light-emitting diode (OLED) and LCD display industries. More information about Kodak is available at www.kodak.com.

If you have questions about this webinar, please contact Eric: eric@whattheythink.com

Get 2 Weeks Free

Become a Premium Member and get your first two weeks free. No obligations. Join Today »