Okay, so there's this hierarchy of commercials. The laws of marketing dictate that even between the most useful product in the world and the most willing consumer in the world, commercials provide a vehicle for, often artificially, regulating the distance between consumer and consumable. And whether a commercial is something that you look forward to or an annoyance that poisions the time it takes you to reach for the TiVo remote, the truth is that the hierarchy of commercials plays a big role in how jazzed you are about stuff you may or may not even like. So here goes:
Level 1: Commercials that inspire mass product returns, boycotts, and even protests. Crosses: good. Fire: good. Madonna: ehh... but put the three together, and you get something that didn't make a lot of people very fond of Pepsi.
Level 2: Commercials that make you not want to buy something. Some people liked them, but for many people, the Quiznos "spongemonkeys" had a certain "eewww" factor, and those people, when they were hungry for a sub sandwich and came upon a Quiznos, would keep on driving until they got to a Subway.
Level 3: Commercials that keep you indifferent. "Taco Bell has a new product? It's got carne asada and some kind of tangy mayo concoction? Great...when's the ballgame on?"
Level 4: Commercials that make you interested. The teaser trailer for that movie you may or may not see in six months didn't get you making plans to go see it, but it got the seed planted in your brain. That's level 4.
Level 5: Commercials that inspire purchase intention. I don't have enough money to get every DVD that comes out on the market. But when I can, I'm totally getting the Seinfeld Seasons 5 & 6 that comes with the handwritten script and all the special features.
Level 6: Commercials that make you go out and get something. If you like music, and if you have a particular fondness for U2, and you weren't in the Apple store ten minutes after seeing the U2 iPod commercial, then you don't have a pulse.
And for a long time, at least for me, that was the list. But a couple weeks ago a commercial came along that changed everything.
Back in October of 2000, things were pretty good. I was experiencing the dizzying heights of the mania known as eBay Addiction. I had purchased numerous LPs, a couple Willie McGee jerseys, and some out-of-print books, and, not to brag, my feedback score was skyrocketing. There's been a certain ebb and flow to my eBay usage since, but I've never stayed away for long.
When the "Daydream Believer" commercials came out, I absolutely loved them. The commercials called to mind a feeling that lots of people have toward eBay, and the song, plus the imagery of getting "it," whatever "it" is, caused me to do something I didn't think was possible. I love the commercial so much I've had to invent Level 7.
Level 7: Commercials that make you want to give your money directly to the company. Go ahead, eBay. You can have it. Take whatever you want. Seriously. I don't even want anything in return. Not the Traveling Wilburys CD, the Simpsons cel with certificate of authenticity, the life-size Han Solo in carbonite, or the Beatles' Yesterday and Today LP with the butcher cover. Not even the powder blue Lance Alworth jersey. The perfect marriage of product and message has shot you straight to the top of the advertising hierarchy, and as a result I just want to give you my money. That's how much I love your latest commercial.
Tuesday, November 22, 2005
A Way Out for Marshmallow and Yam
Before heading off to Crawford, President Bush did something very important today. Here's my entry from last year's ethics journal, on the timely topic of animal rights:
This year's turkeys aren't going to a farm; they're going to Disneyland to become grand marshals of its Thanksgiving Day Parade, which will bring us a long way toward answering the age-old question of whether animals are capable of feeling ridiculous.
Today was a somewhat exciting day in my family because it was the day that President Bush pardoned the turkey and sent it off to a farm to live out the rest of its days. This is not normally something that registers on the Lauve radar, but my father works for the turkey segment of Cargill, and this year one of his colleagues, who is serving in a rotation as president of the Turkey Federation, went to Washington with his family to present the turkey. So a family I’ve known for a long time got to schmooze with the President and take part in this cute tradition that ensures that a turkey’s life will be spared this Thanksgiving.
Except the fortunes of the turkey are not nearly as pleasant as most people believe. Since the turkey is bred for consumption, he is much too fat to be any good in a natural environment. So he goes off to a farm with a lot of other animals and dies almost immediately. When I told my mother this last night, she reacted as if I was telling her that pro wrestling was fake.
I don’t know how many people would make a stink about this, but I don’t know why they can’t just use a wild turkey (I would guess it’s tough to get one that’s docile enough) or just do away with the ceremony completely. To me it just seems like a waste to doom an eatin’ bird to a fate it’s not suited to.
This year's turkeys aren't going to a farm; they're going to Disneyland to become grand marshals of its Thanksgiving Day Parade, which will bring us a long way toward answering the age-old question of whether animals are capable of feeling ridiculous.
Thursday, November 17, 2005
The Top 50 States with the Strongest Personality
1. Texas
2. California
3. Florida
4. Hawaii
5. Alaska
6. Massachusetts
7. New York
8. Colorado
9. Louisiana
10. Virginia
11. Arizona
12. North Carolina
13. Vermont
14. Tennessee
15. Oregon
16. Utah
17. Indiana
18. Georgia
19. Connecticut
20. Kansas
21. Oklahoma
22. Missouri
23. New Jersey
24. Mississippi
25. Iowa
26. Pennsylvania
27. Montana
28. Nebraska
29. Wisconsin
30. New Mexico
31. Michigan
32. South Carolina
33. Wyoming
34. Minnesota
35. Idaho
36. Illinois
37. Alabama
38. Maryland
39. Arkansas
40. Maine
41. New Hampshire
42. Washington
43. Kentucky
44. Nevada
45. Rhode Island
46. Ohio
47. West Virginia
48. South Dakota
49. Delaware
50. North Dakota
2. California
3. Florida
4. Hawaii
5. Alaska
6. Massachusetts
7. New York
8. Colorado
9. Louisiana
10. Virginia
11. Arizona
12. North Carolina
13. Vermont
14. Tennessee
15. Oregon
16. Utah
17. Indiana
18. Georgia
19. Connecticut
20. Kansas
21. Oklahoma
22. Missouri
23. New Jersey
24. Mississippi
25. Iowa
26. Pennsylvania
27. Montana
28. Nebraska
29. Wisconsin
30. New Mexico
31. Michigan
32. South Carolina
33. Wyoming
34. Minnesota
35. Idaho
36. Illinois
37. Alabama
38. Maryland
39. Arkansas
40. Maine
41. New Hampshire
42. Washington
43. Kentucky
44. Nevada
45. Rhode Island
46. Ohio
47. West Virginia
48. South Dakota
49. Delaware
50. North Dakota
Thursday, November 10, 2005
A Well Deserved Cy
Back in late September, I had a conversation with Chris Carpenter that really told me a lot about him.
At the time, he had had a couple bad starts in a row after having basically nothing but quality starts all year. Needless to say, he was not in the best spirits. "Yeah, it's been a good year," he said, "but lately I feel like all the innings I've pitched are catching up to me. I just can't locate my pitches the way I did earlier in the season."
I tried to reassure him. "You've been the best pitcher in the league all year, and you'll get it back together."
"I sure hope so," he said as he dropped his head, his eyes disappearing beneath the brim of his cap. "I feel like I'm letting the team down with my performance lately. I just don't want to screw things up for them."
"Chris, that's ridiculous," I said. "The team wouldn't be anywhere without you. You've been its star all year. Sure it's been rough at times, but you've carried us through. And yeah, we're in ninth place right now, but without you we wouldn't be above 12th or 13th place. I'd say the team is pretty proud of you."
Slowly, as he thought about what I had said, he began to pick his head up, and he looked at me with a sideways glance that was at the same time frustrated and amused. He stared at me for a couple seconds, and then he said, "I'm talking about the Cardinals, skip, not the Crickets!!"
-----------------------------------------
The Crickets were born out of my friend Adam's fantasy baseball league. It was my first time playing fantasy baseball, and to say that I screwed up the draft would be a tremendous understatement. My first two picks were Edgar Renteria (ranked #39) and Joey Gathright (ranked about #800), and while a few fantasy nerds would tell you that those were not the best choices, I'd do it again in a heartbeat. But my best pick was the first pitcher I chose, Mr. Chris Carpenter. I later told Adam about the pick, and I said that I was able to get Carp because some people thought that his great 2004 year was a fluke. Adam said that, yeah, he kind of thought that it was a fluke, too.
Apparently Carpenter was listening, because he put together a remarkable year. I was lucky enough to see him pitch twice this year; in the first game he pitched eight shutout innings to defeat Andy Pettitte, and the second, also in Houston, was his 20th victory. I was honored to be able to attend that game, which at the time made a Cy Young seem almost certain. Carpenter slipped a little down the stretch, and you could make a great argument for Willis or Clemens or Pettitte (though they went a combined 0-4 against Carpenter), but it's great to see him get the Cards' first Cy Youong award since Bob Gibson. He started three of the Cardinals' five postseason victories, and he was one of two players on the team who really deserve whatever postseason accolades come their way. Way to go, Chris. There's a spot in the 2006 Crickets' starting rotation waiting for you.
At the time, he had had a couple bad starts in a row after having basically nothing but quality starts all year. Needless to say, he was not in the best spirits. "Yeah, it's been a good year," he said, "but lately I feel like all the innings I've pitched are catching up to me. I just can't locate my pitches the way I did earlier in the season."
I tried to reassure him. "You've been the best pitcher in the league all year, and you'll get it back together."
"I sure hope so," he said as he dropped his head, his eyes disappearing beneath the brim of his cap. "I feel like I'm letting the team down with my performance lately. I just don't want to screw things up for them."
"Chris, that's ridiculous," I said. "The team wouldn't be anywhere without you. You've been its star all year. Sure it's been rough at times, but you've carried us through. And yeah, we're in ninth place right now, but without you we wouldn't be above 12th or 13th place. I'd say the team is pretty proud of you."
Slowly, as he thought about what I had said, he began to pick his head up, and he looked at me with a sideways glance that was at the same time frustrated and amused. He stared at me for a couple seconds, and then he said, "I'm talking about the Cardinals, skip, not the Crickets!!"
-----------------------------------------
The Crickets were born out of my friend Adam's fantasy baseball league. It was my first time playing fantasy baseball, and to say that I screwed up the draft would be a tremendous understatement. My first two picks were Edgar Renteria (ranked #39) and Joey Gathright (ranked about #800), and while a few fantasy nerds would tell you that those were not the best choices, I'd do it again in a heartbeat. But my best pick was the first pitcher I chose, Mr. Chris Carpenter. I later told Adam about the pick, and I said that I was able to get Carp because some people thought that his great 2004 year was a fluke. Adam said that, yeah, he kind of thought that it was a fluke, too.
Apparently Carpenter was listening, because he put together a remarkable year. I was lucky enough to see him pitch twice this year; in the first game he pitched eight shutout innings to defeat Andy Pettitte, and the second, also in Houston, was his 20th victory. I was honored to be able to attend that game, which at the time made a Cy Young seem almost certain. Carpenter slipped a little down the stretch, and you could make a great argument for Willis or Clemens or Pettitte (though they went a combined 0-4 against Carpenter), but it's great to see him get the Cards' first Cy Youong award since Bob Gibson. He started three of the Cardinals' five postseason victories, and he was one of two players on the team who really deserve whatever postseason accolades come their way. Way to go, Chris. There's a spot in the 2006 Crickets' starting rotation waiting for you.
Monday, October 24, 2005
The Case for MLB Opening the Roof
On the eve of the first World Series game ever to be played in Texas, there is much consternation at the House That Special Purpose Entities Built. Major League Baseball has announced that if the weather is nice, it will intervene and order the roof open for game 3. While I have major problems with a sports league making such a mandate, there is a case to be made for it. Essentially, we're caught in a prisoner's dilemma.
Let's assume, for the sake of argument, that every team in Major League Baseball has a retractable roof. If you accept the premise, which is tough to refute, that baseball played outdoors is better than baseball played indoors, then the best situation for everyone is for all roofs to be open all the time. In any given city, however, the best situation is to keep your own stadium's roof shut for home games because it will allow your team's fans to have a greater effect on the game. So while optimizing overall utility, or happiness, or whatever, for all baseball fans requires roofs to be open, teams acting in their own interests will always act unilaterally to maximize individual payoffs, leading to a suboptimal outcome.
If its participants maximize their own utility, the prisoner's dilemma must end in a suboptimal outcome, unless there is an outside authority to enforce cooperation. Enter Bud Selig. John Nash would be proud.
Let's assume, for the sake of argument, that every team in Major League Baseball has a retractable roof. If you accept the premise, which is tough to refute, that baseball played outdoors is better than baseball played indoors, then the best situation for everyone is for all roofs to be open all the time. In any given city, however, the best situation is to keep your own stadium's roof shut for home games because it will allow your team's fans to have a greater effect on the game. So while optimizing overall utility, or happiness, or whatever, for all baseball fans requires roofs to be open, teams acting in their own interests will always act unilaterally to maximize individual payoffs, leading to a suboptimal outcome.
If its participants maximize their own utility, the prisoner's dilemma must end in a suboptimal outcome, unless there is an outside authority to enforce cooperation. Enter Bud Selig. John Nash would be proud.
Saturday, October 22, 2005
Plato vs. Aristotle in the World Series
More than ever before, this year's World Series is not just a clash of two teams but a clash of opposing philosophies on the playoffs. You could say that this debate goes all the way back to the original Tony Kornheiser and Michael Wilbon, Plato and Aristotle.
I've always enjoyed the fact that we have many different ways of crowning a champion. College basketball gives 64 teams a shot at the title, while college football pits the top two teams against each other (and was entirely determined by a vote until a few years ago). What I think is regrettable is that since more playoffs bring more money, there is a seemingly irreversible trend toward having more teams participate in the postseason. Some people enjoy the excitement of expanded playoffs, while others think that it's a poor way of choosing a champion. Which begs the question: just what is a champion?
One of Plato's most important ideas was the theory of forms. He believed that there existed a world outside of space and time that held universals, or archetypes, and that what we experience in our own existence is just an approximation of what exists in the world of forms. The most common example used is that of a chair. Plato said that when we call something a chair, we do so because it has "chairness"; that is, it calls to mind the ideal form of a chair. We will never experience a true chair, only our own earthly approximations of a chair.
Aristotle thought differently. He said that if something is made of wood (or something else suitable for making a chair) and is in a shape such that it can be sat on, then it's a chair. There are no forms; the particular is the thing.
So to Aristotle, the champion of a sports league is probably the team that walks away with the trophy. But to Plato, the true champion exists in the world of forms, and playoffs should tell us which team best exemplifies this ideal.
Once upon a time, the best team in each league won a trip to the World Series. Starting in 1969, each league was split up into an east and west division, whose champions would play in a league championship series. In 1995 the number of playoff teams was doubled once again, as a central division was added and a wild card slot was awarded to the team with the best record that did not win its division.
Those who take a Platonic view believe that the team that wins the most games is most likely to be the "true" champion, just as a larger sample size yields a greater chance that an observed result is the "true" result.
The wild card has greatly increased the chances that a team that has demonstrated itself to be not as good as a division rival can still have a shot at the title. Luck, and other factors, can account for 2 or three game differences between a division winner and its nearest rival, but the 22-game deficit with which the 1998 Red Sox won the wild card is pretty clear cut. Ditto the 2001 Athletics, who finished 14 games behind the Mariners. Of course, neither of these teams had much success in the postseason, but what are we to say about the 1997 and 2003 Marlins, who won the World Series despite finishing behind the Braves by 9 and 10 games, respectively?
Well, that depends on where you're coming from. Someone sharing Plato's views would probably argue that a long season is a better determination of the champion than a short playoff, but an Aristotelian would argue that a champion is whatever Major League Baseball says it is.
Which brings us to this year's World Series. Throughout the year, the Chicago White Sox have displayed quite a bit of what Plato might call "championhood." All year they have had one of the two best records in the league, and they have been solid in every aspect of play (hitting for average, hitting for power, baserunning, pitching, and defense). Plato would be proud.
The Houston Astros, as has been pointed out, have been built for the postseason. They have three dominating pitchers, a solid bullpen, and an almost unhittable closer carrying a team that is proficient but not dangerous with the bat. Actually, even proficiency took a while to develop. When the Astros started 15-30, and during some offensive droughts that were spread through the season, they routinely wasted great pitching performances by scoring one run or fewer. Though they had the eighth-best record in baseball during the regular season, if they prevail in the Series they will have done everything Aristotelians require to call them a champion, namely winning eleven postseason games.
So, by rooting for a participant in this year's World Series you're actually participating in a philosophical debate that has been argued for centuries.
Applying Greek philosophy to baseball may sound far-fetched, but actually it's quite appropriate. You see, Plato was quite a baseball fan, and the game inspired some of his most important ideas.
"Gee, Mr. Peabody, I didn't know that Plato watched baseball!"
"Why yes, Sherman. Surely you've heard of the...allegory of the dugout?"
I've always enjoyed the fact that we have many different ways of crowning a champion. College basketball gives 64 teams a shot at the title, while college football pits the top two teams against each other (and was entirely determined by a vote until a few years ago). What I think is regrettable is that since more playoffs bring more money, there is a seemingly irreversible trend toward having more teams participate in the postseason. Some people enjoy the excitement of expanded playoffs, while others think that it's a poor way of choosing a champion. Which begs the question: just what is a champion?
One of Plato's most important ideas was the theory of forms. He believed that there existed a world outside of space and time that held universals, or archetypes, and that what we experience in our own existence is just an approximation of what exists in the world of forms. The most common example used is that of a chair. Plato said that when we call something a chair, we do so because it has "chairness"; that is, it calls to mind the ideal form of a chair. We will never experience a true chair, only our own earthly approximations of a chair.
Aristotle thought differently. He said that if something is made of wood (or something else suitable for making a chair) and is in a shape such that it can be sat on, then it's a chair. There are no forms; the particular is the thing.
So to Aristotle, the champion of a sports league is probably the team that walks away with the trophy. But to Plato, the true champion exists in the world of forms, and playoffs should tell us which team best exemplifies this ideal.
Once upon a time, the best team in each league won a trip to the World Series. Starting in 1969, each league was split up into an east and west division, whose champions would play in a league championship series. In 1995 the number of playoff teams was doubled once again, as a central division was added and a wild card slot was awarded to the team with the best record that did not win its division.
Those who take a Platonic view believe that the team that wins the most games is most likely to be the "true" champion, just as a larger sample size yields a greater chance that an observed result is the "true" result.
The wild card has greatly increased the chances that a team that has demonstrated itself to be not as good as a division rival can still have a shot at the title. Luck, and other factors, can account for 2 or three game differences between a division winner and its nearest rival, but the 22-game deficit with which the 1998 Red Sox won the wild card is pretty clear cut. Ditto the 2001 Athletics, who finished 14 games behind the Mariners. Of course, neither of these teams had much success in the postseason, but what are we to say about the 1997 and 2003 Marlins, who won the World Series despite finishing behind the Braves by 9 and 10 games, respectively?
Well, that depends on where you're coming from. Someone sharing Plato's views would probably argue that a long season is a better determination of the champion than a short playoff, but an Aristotelian would argue that a champion is whatever Major League Baseball says it is.
Which brings us to this year's World Series. Throughout the year, the Chicago White Sox have displayed quite a bit of what Plato might call "championhood." All year they have had one of the two best records in the league, and they have been solid in every aspect of play (hitting for average, hitting for power, baserunning, pitching, and defense). Plato would be proud.
The Houston Astros, as has been pointed out, have been built for the postseason. They have three dominating pitchers, a solid bullpen, and an almost unhittable closer carrying a team that is proficient but not dangerous with the bat. Actually, even proficiency took a while to develop. When the Astros started 15-30, and during some offensive droughts that were spread through the season, they routinely wasted great pitching performances by scoring one run or fewer. Though they had the eighth-best record in baseball during the regular season, if they prevail in the Series they will have done everything Aristotelians require to call them a champion, namely winning eleven postseason games.
So, by rooting for a participant in this year's World Series you're actually participating in a philosophical debate that has been argued for centuries.
Applying Greek philosophy to baseball may sound far-fetched, but actually it's quite appropriate. You see, Plato was quite a baseball fan, and the game inspired some of his most important ideas.
"Gee, Mr. Peabody, I didn't know that Plato watched baseball!"
"Why yes, Sherman. Surely you've heard of the...allegory of the dugout?"
Monday, October 10, 2005
The Southwest Parable
I saw the most fascinating commercial yesterday. It came from Southwest Airlines and urged viewers to go to Set Love Free and join the fight against the Wright Amendment. For those who don't know, the Wright Amendment is a piece of legislation that has limited the ability of Southwest to fly from its home airport of Dallas Love Field. As the other carriers left for DFW Airport, Southwest was left with Love all to itself, which caused a backlash from the major airlines that manifested itself in legislation banning interstate flights from Love. As enacted, the amendment allowed flights to and from the states surrounding Texas, and it has since been expanded to a few more states.
Just as the natural enemy of the hole is the pile, the natural enemy of the corporation is the government. Government intervention has always played a role in the fortunes of business, but how fatal can it be? The following story is for anyone who thinks that "things would be different if only we could get Uncle Sam off our backs":
Back when the earth was young, airlines operated much differently than they do today. There were a few carriers, and the government told them where they would fly and how much they would charge. It was nice--airlines made some good money and lived a very comfortable, color-by-numbers existence.
Enter Southwest Airlines. Southwest began operations in Dallas in 1971 after fighting (for 12 years) litigation intended to put it out of business. It aimed to become a low-cost carrier for the state of Texas, but its purpose was not fully realized until the Airline Deregulation Act turned the airline industry on its ear in 1978. The act subjected airlines to market forces, which prompted markedly different responses from Southwest and the rest of the airlines.
Most airlines sought to return to the stability they had seen under regulation. They organized themselves into hub-and-spoke patterns that gave each major airline a dominant territory and allowed it to (more or less) dictate prices within that region. Sometimes new carriers would enter and serve the same routes. Sometimes aggressive pricing and airport rules would drive them away; sometimes they would stay and cause a drop in prices. At any rate, the hub-and-spoke system allowed airlines to retain some of the comfort regulation had given them.
While government intervention was ending for other airlines, it was just beginning for Southwest. Regulation was a welcome current that lifted all planes, but the Wright Amendment was intended to keep only Southwest down. But rather than flee from Love Field (which is located in the heart of Dallas as opposed to DFW's suburban location), Southwest embraced it. It has incorporated the heart into its marketing communications, and it also chose the ticker symbol "LUV" when it joined the New York Stock Exchange.
Rather than trying to mirror the days of regulation, Southwest decided to compete in a new way. Southwest went from city to city rather than using hubs, and it stayed away from the behemoth airports that other airlines were flocking to. This, in addition to Southwest's using only 737 aircraft, led to quick turnaround times and high utilization. The airline also eschewed travel agents and frills and pursued an aggressive fuel hedging strategy in allowing itself to compete on cost and offer the lowest fares in the industry.
Air travel was naturally hit hard by the events of September 11, 2001. After flights were grounded for days after 9/11, the struggling airlines were bailed out by Congress through a $15 billion financial aid package.
So, all the airlines should have vivid memories about how the government has affected their operations. Hub-and-spoke carriers will have fond memories of how the government brought them guaranteed profits in the era of regulation and then gave them free money when their ability to serve customers was called into question. And Southwest will emit a distinctive scowl as it thinks about how the Wright Amendment has, to this day, hampered its business at its flagship airport.
The effect of government intervention on the airline industry is clear. And yet, it doesn't correlate with financial results. The "big" carriers have been devouring cash for years, and no amount of money from Congress is about to change their dire collective outlook. Southwest has been profitable for 32 straight years, despite government and competitors trying to keep it down. Southwest was delighted when deregulation came, and it did not need the 2001 bailout.
It’s not uncommon for businesses to view the interference of the government as a key factor in determining success or failure. Recently, the Sarbanes-Oxley Act, an overambitious attempt to correct the wrongs of Enron et al., has become the whipping boy of businesspeople, who say that it’s hurting the ability of smaller businesses to keep up (compliance costs resulting from the act are really high). While legislation certainly plays a role, the example shown by the airlines proves that it’s not deterministic. The bigger factor (and it's not even close) is the ability of a company to adapt and to reach customers, which arguably could be retarded by the government help that many firms would love to have.
The kind of thing that Southwest has that allows it to prosper goes by many names: a business model, core competencies, synergy, a mission, a vision. Let's just call it love. And to paraphrase one of history's greatest philosophers:
If I have planes and routes and cash,
And I have help from Uncle Sam,
And I have Uncle Sam holding down the other guy,
But have not love, then I have nothing.
Just as the natural enemy of the hole is the pile, the natural enemy of the corporation is the government. Government intervention has always played a role in the fortunes of business, but how fatal can it be? The following story is for anyone who thinks that "things would be different if only we could get Uncle Sam off our backs":
Back when the earth was young, airlines operated much differently than they do today. There were a few carriers, and the government told them where they would fly and how much they would charge. It was nice--airlines made some good money and lived a very comfortable, color-by-numbers existence.
Enter Southwest Airlines. Southwest began operations in Dallas in 1971 after fighting (for 12 years) litigation intended to put it out of business. It aimed to become a low-cost carrier for the state of Texas, but its purpose was not fully realized until the Airline Deregulation Act turned the airline industry on its ear in 1978. The act subjected airlines to market forces, which prompted markedly different responses from Southwest and the rest of the airlines.
Most airlines sought to return to the stability they had seen under regulation. They organized themselves into hub-and-spoke patterns that gave each major airline a dominant territory and allowed it to (more or less) dictate prices within that region. Sometimes new carriers would enter and serve the same routes. Sometimes aggressive pricing and airport rules would drive them away; sometimes they would stay and cause a drop in prices. At any rate, the hub-and-spoke system allowed airlines to retain some of the comfort regulation had given them.
While government intervention was ending for other airlines, it was just beginning for Southwest. Regulation was a welcome current that lifted all planes, but the Wright Amendment was intended to keep only Southwest down. But rather than flee from Love Field (which is located in the heart of Dallas as opposed to DFW's suburban location), Southwest embraced it. It has incorporated the heart into its marketing communications, and it also chose the ticker symbol "LUV" when it joined the New York Stock Exchange.
Rather than trying to mirror the days of regulation, Southwest decided to compete in a new way. Southwest went from city to city rather than using hubs, and it stayed away from the behemoth airports that other airlines were flocking to. This, in addition to Southwest's using only 737 aircraft, led to quick turnaround times and high utilization. The airline also eschewed travel agents and frills and pursued an aggressive fuel hedging strategy in allowing itself to compete on cost and offer the lowest fares in the industry.
Air travel was naturally hit hard by the events of September 11, 2001. After flights were grounded for days after 9/11, the struggling airlines were bailed out by Congress through a $15 billion financial aid package.
So, all the airlines should have vivid memories about how the government has affected their operations. Hub-and-spoke carriers will have fond memories of how the government brought them guaranteed profits in the era of regulation and then gave them free money when their ability to serve customers was called into question. And Southwest will emit a distinctive scowl as it thinks about how the Wright Amendment has, to this day, hampered its business at its flagship airport.
The effect of government intervention on the airline industry is clear. And yet, it doesn't correlate with financial results. The "big" carriers have been devouring cash for years, and no amount of money from Congress is about to change their dire collective outlook. Southwest has been profitable for 32 straight years, despite government and competitors trying to keep it down. Southwest was delighted when deregulation came, and it did not need the 2001 bailout.
It’s not uncommon for businesses to view the interference of the government as a key factor in determining success or failure. Recently, the Sarbanes-Oxley Act, an overambitious attempt to correct the wrongs of Enron et al., has become the whipping boy of businesspeople, who say that it’s hurting the ability of smaller businesses to keep up (compliance costs resulting from the act are really high). While legislation certainly plays a role, the example shown by the airlines proves that it’s not deterministic. The bigger factor (and it's not even close) is the ability of a company to adapt and to reach customers, which arguably could be retarded by the government help that many firms would love to have.
The kind of thing that Southwest has that allows it to prosper goes by many names: a business model, core competencies, synergy, a mission, a vision. Let's just call it love. And to paraphrase one of history's greatest philosophers:
If I have planes and routes and cash,
And I have help from Uncle Sam,
And I have Uncle Sam holding down the other guy,
But have not love, then I have nothing.
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