In 1896 the Wright Brothers, and Dr. Langley were engaged in a fierce competition to see who would be first to conquer the skies. Langley was favored.
Langley was a distinguished scholar and secretary of the Smithsonian Institute. He had already achieved an impressive unmanned flight using a steam powered engine launched from atop a houseboat in the Potomac River. Langley had raised $100,000 in funding with which to build an extraordinary radial-cylinder internal combustion engine that would produce an astonishing 52 horsepower … powerful enough for manned flight. The Wright Brothers, by contrast were un-credentialed tinkerers, confident that the secret to success lay in their ability to control the aircraft … once they got it in flight. They practiced with inexpensive gliders. The brothers suffered a multitude of minor cuts and bruises following each attempt at flight. But each successive crash brought the two brothers closer to aerial finesse by using the prevailing winds, rather than creating a wind with rapid motorized acceleration.
Then, on October 7, 1903, it looked like the brother's had lost. Langley's plane, which could go from a dead stop to the 60 mph flying speed in only 70 feet, began its first flight with a man at the controls. The forces from the intense acceleration ripped off a wing in very first attempt to take off.
Two months later, Langley had rebuilt the plane (with the last of his investment capital). On December 9, 1903, during the second attempt at launch, the acceleration forces collapsed a wing and the tail, which brought the ill-fated flight to a dramatic end at the bottom of the Potomac River.
Just days after Langley's spectacular failure, a sturdy, well designed craft, powered by a tiny eight horse power engine, costing about $1,000, struggled into the air at Kitty Hawk, defining for all time the moment when humankind … became masters of the skies.
Were the Wright Brothers just “lucky?” Listen to Jim Collins define luck and then make up your own mind. www.symbiosis4u.us/Podcasts/WhatAboutLuck.mp3
In the early 1900’s, America exploded with creative energy and vitality … because early entrepreneurs had thrown the first set of doors wide open … to explosive growth.
In 1994 (when the internet was opened up to commerce), the second set of doors to explosive growth were flung wide open. Those doors to explosive growth are even more wide open now than they were in 1994 … as it were 1903 again and man is testing a new set of wings. But this time, the little guy tip toeing through those wide open doors, is not flying solo. The little guy, ready to fly through those doors, is 300 million strong. The little guy is the American consumer.
The first time that idea crossed my desktop, it was an outlandish concept … until I looked through the doors that are flung wide open. Stay with me while we take a peek through those wide open doors at the changes in our economic system (all economic systems include manufacturers, distributors, and consumers). See for yourself whether this outlandish concept becomes somewhat rational? Here come the numbers!
According to economist Paul Zane Pilzers’ book Unlimited Wealth, when the Wright Brothers caught air at Kitty Hawk in 1903, for every $100 they spent as consumers, the manufacturer would get $80, while $20 went to distribution (getting the product from the manufacturer to the consumer). The manufacturing entrepreneur’s mantra was, and still is, “build a better mouse trap and the world will beat a path to your door.” Listen to a 1 minute commentary by Paul Pilzer on the “Good Old Days”. www.symbiosis4u.us/MP3/PilzerChange121.mp3
By the 1950’s, industrial technology had improved manufacturing so 50% of the consumer dollar went to the manufacturer and 50% to the distribution system. With 50% of the consumer dollar, stores sprouted up like mushrooms in Alice’s Wonderland. The mantra of retail outlets became, and still is, “location, location, location.”
By the second millennium, the distribution system had expanded to give the consumer greater convenience (3 Safeway stores are within one mile of my home), while manufacturing had contracted (gone offshore). In our modern world, 20% (or less) of the consumer dollar goes to the manufacturer. 80% of the consumer dollar is spent on getting the product from the manufacturer to the consumer.
We have shifted back to a 1903 economic base … IN REVERSE.
The Wright Brothers, Henry Ford, Thomas Edison, Issac Singer, and others made their fortunes by focusing on manufacturing. I wonder why none of these men focused on distribution? Was it that “movers” (distribution) received only 20% of every consumer dollar, while “makers” (manufacturers) received 80%?
If the great entrepreneurs of the past century were alive today, do you think they would go into manufacturing? Or would they see that the internet allows manufacturers to sell direct to consumers (the beginning of the end for the majority of brick and mortar retailers). Do you think those early entrepreneurs would focus on ways to “build a better mouse trap” or eliminate the dependence on “location, location, location?” The early entrepreneurs went where the money was … then. They would still go where the money is … now … not where it had been.
Why? Because the money is in distribution now. Crunch these numbers.
Our current Gross Domestic Product (GDP) is $14 Trillion. 28% of that money is government spending (new stats aren’t out for Obama yet). 22% of GDP money is corporate spending. That leaves 50% ($7 Trillion) as consumer spending. 80% of that $7 Trillion is the price our distribution system extracts from consumers in order to move products from the manufacturer to the consumer. 80% of $7 Trillion is $5.6 Trillion. $5.6 Trillion is a very wide open door.
If you spend $1,000 a month in stores. Only $200 is the actual cost to make whatever it was that you bought. You are paying $800 for convenience. How much convenience will you give up in order to get most of that $800 back?
If manufacturers’ mantra is “build a better mouse trap,” and distributions’ mantra is “location, location, location,” what is the new mantra? Michael Dell identified it in 1999 when he addressed the Economics Club of Detroit. The new mantra is “community, community, community.” More on that in a future newsletter.
Here’s the Million Dollar Questions for you to ponder. When manufacturers sell direct to consumers … who gets the $5.6 Trillion that had been trapped by the distribution system? How will you gain access to that money? Watch this eight minute video to consider one possibility. www.symbiosis4u.us/Special/HouseGold.htm
The next decade will be fascinating.
