The Limits of Charisma: The “Sequestration is Dumb” Edition (a.k.a How on God’s Green Earth Did we Get Here)?
Having written about some of the greatest leaders of the 20th century, I have always believed that charisma and leadership have little to do with each other. That idea is hardly new. It has been espoused most eloquently by the late, great Peter Drucker (the “Father of Modern Management”) when I met with him in 2003—as well as in several of his classic books.
Drucker also asserted that charisma, as defined by Merriam Webster as ”a special magnetic charm or appeal,” could also be used as a construct to explain the evil influence of some of the worst leaders of the 20th century, like Stalin or Hitler. But, for the sake of this piece, we will use “charisma” to describe a positive leadership trait.
Before moving on, let’s get back to Drucker for a moment. To underscore the difference between leadership and charisma, he wrote: “Harry Truman had no more charisma than a dead mackerel,” but accomplished great feats of leadership and legislative victories nonetheless. In contrast, Drucker asserted, “John F. Kennedy was perhaps the most charismatic president of his day, but “few presidents got less done.” I take exception with that characterization, since Kennedy both inspired a generation, and saved the world from a potential nuclear exchange during the Cuban Missile Crisis.
Let’s fast forward more than five decades to today’s occupant of the Oval Office. In ways that were similar to JFK, Barack Obama has the gift of oration and charisma, two qualities that helped to get him elected twice. Obama is a gifted and intelligent president. His command of the bully pulpit typifies at least part of what makes a great leader, but only a part. For leaders of states and nations, there is no substitute for authentic leadership and effective legislating. Consider them as two sides of a coin. Opponents of Obama have labeled him the “campaigner in chief,” because whenever a difficult choice must be made by him and the congress, he takes his argument directly to the people, passing “go,” both houses of Congress, and the media in one fell swoop. But presidents must do much more than campaign.
The most effective leaders don’t just talk, they act. They articulate a path forward—a vision of the finish line—and get others to follow; this is true for people they don’t like or who hold different views than themselves…especially those that think differently from themselves. That was the best part of Lincoln—the President (as well as the movie). It is in this regard that Obama has consistently let us down, especially when it comes to the economy. Even though his common sense ideas are almost always more popular than any that emanate in Congress, he still comes up short when it comes to getting others in Congress to follow his lead. Recently Obama has reached out to members of congress by hosting a lunch and a dinner with key members of congress (but not the leaders of either house of congress).
Of course, John Boehner and the other House Republican’s obstructionists (e.g. think Tea Party zealots) have actually made congress less popular than cockroaches (I kid you not). Their responsibility in sinking the U.S. economy into the sequester quagmire is equal—and even greater—than President Obama’s. Most Americans blame Republicans for hurling us into this mess which according to the government, could easily spark the loss of 750,000 jobs just when the United States was getting on solid ground following the great recession of 2008/2009. One very recent Bloomberg headline summed it up as follows: Congress Budget Cuts Damage U.S. Economy Without Aiding Outlook
POISONING THE WELL
And in one way important way, Republicans spoiled the well in a way that Obama will never forget.
Several years back, on the floor of the Senate, Leader Mitch McConnell announced that his main priority was to “make sure that Obama never gets a second term.” That is unprecedented—and politics at its worst. One would think that creating legislation that leads to a stronger economy and the ending of two wars would rank higher than ridding the White House of its current occupant—or any sitting president for that matter. Think of it. What if one of your colleagues at work said the same thing to the entire company you work for—that getting you fired is his main priority. There is no way that would be tolerated by the leader of that organization. But the 2013 Republican party is both a leaderless and rudderless party. That did not happen overnight. They had to work at it to be so out of touch with the American mainstream.
I view Obama, who boasts a more definitive swagger after his second term win, as a determined prize fighter landing blow after blow on the entire Republican party. Don’t misunderstand me. He did not want this sequester to go into effect, but, as many pundits pointed out, he “miscalculated” by overplaying his hand. He thought that the Republicans would cave again because they could not tolerate the cuts to the Defense Department. Clearly he was wrong. And there are more “cliff-like” moments coming at the end of March and in the ensuing months that follow.
In the early days of March, no one knows what effect the Sequester will have on the economy and the financial markets. That’s because this is an unprecedented event for the U.S. (a self-inflicted $850 billion wound). People in far-away lands are incredulous—they can’t believe that the greatest country on Earth cannot get their fiscal house in order. In light of that, who knows what they will think of us if we are unable to come up with a new budget in the next few months. Stay tuned!!
Greece, Spain…Who’s Next? Wenzhou or Wisconsin?
We certainly do live in interesting times, especially if you are like me—a stock market junkie who also follows world events with equal measures of interest and cynicism. Before I continue, I should point out that I started writing this blog a month ago, but I could have just as easily written it three or four months ago. That’s how long these major market headwinds have been around–and most much longer (e.g. Greece). Given how fast things move in the financial markets, and more importantly in the world at large, the enduring nature of our most pressing problems is worth noting.
This is a piece about the stock market, and how long the U.S.—and most other global markets—have behaved in such an insular, illogical fashion for so long. It is as if the outside world did not exist, which is what has traders so frustrated for so long—and why I have agonized over this market for months. In fact, I have hated this market since June.
Why?
Like so many other investors and money managers, I have been awaiting some financial disaster—a “Black Swan” event or a “Lehman moment”—that would simply crush U.S. markets. That’s why I have been largely short the market since June, with Facebook at the top of my short list (and Apple a close second since before the troubled iPhone 5 release. But I closed that winning position quite recently). In other words I made a major bet that the markets would fall since early summer, and that just didn’t happen. However, with terrible earnings thus far in Q3, all of that looks like it might finally change—and change fast. Either way, until quite recently, the last months have been nothing short of stock market torture.
I am not alone in calling this “the most hated market rally of all time.” Many money managers have not participated in this market “melt-up.” Research reveals that in 2012 well over 90 percent of portfolio managers have failed to keep pace with the returns of the S&P 500 (which is up 15% through three quarters, its best performance in years). That means that there are literally tens of thousands of traders and money managers who were judging the market on macro events, and as a result, like me, were under-invested. But when the central bankers—first Mario Draghi in Europe and then Ben Bernanke in the U.S.—promised to do “whatever it takes” to prop up respective economies, that artificially propped up most global markets by more than ten percent since late July. I say artificially because that sort of open-ended monetary policy seldom leads to the kind of authentic growth that can lift economies for the long-run, and not just financial markets for the short-term.
The reasons for my continued market pessimism should surprise no one. There is the horror-zone that is Europe with negative-growth countries needing to be bailed out by at least one other country in which its citizens don’t want any part of any additional bailouts (hint: they invented the blitzkrieg). Then there is the much talked-about “fiscal cliff,” which reveals the absolute inanity of the U.S. government. It is a travesty that they cannot get a thing done. Give congress a lamp and a light bulb, and you will still be sitting in the dark a month later. Congress won’t budge an inch on the “fiscal cliff” with its automatic spending cuts and expiration of the Bush tax cuts. The GOP won’t risk making Obama look competent a few short weeks before the election. As a result, businesses are frozen in place. Since they don’t know what the tax situation will be next year, they are loathe to hire new workers, which only adds to uncertainty—and markets detest uncertainty.
Then there is the China slow-down, which is a huge factor sparking another huge problem: the slowing of growth in the U.S., as evidenced by a multi-year high of corporations missing their top line numbers (in the current quarter only four of ten companies have made their top line revenue targets thus far—despite the fact that these numbers have already taken a haircut or two. That’s down by more than 30 percent from an average earnings report). Also, China gives us reports year-over-year without any quarterly adjustments, which obscures the meaning of their numbers even more.
You can stop reading here, or get more detail on the key headwinds described above. If you are still with me, let’s get back to Europe.
Most of Europe is in either recession or depression or heading in that direction—with things getting worse with each passing week (although many talking heads on financial networks will talk of declining Spanish bond yields as evidence of an improving economy. Spoiler alert: they’re wrong). The most beleaguered country—Greece—is experiencing a full-blown depression. With overall unemployment rates of 25%, and a jaw-dropping 55% for young people of working age, Greece is sadly an unmitigated disaster in which things will get worse before they get better. European leaders are finally learning that austerity measures are the enemy of growth, a lesson they should have learned long ago (but are still not changing their stance much on austerity measures). Instead of an accurate representation of the state of these broken economies, what we usually get are platitudes on “progress being made” and “more time should be given” [to Greece]. It appears that Europe’s politicians will say most anything to kick the can down the road to preserve the euro—and the 17-country euro zone—for as long as possible. However, that can only work for a a finite amount of time as the truth of Greece’s inability to pay off their debilitating debts become apparent to everyone [Citigroup puts the chances of a Greek exit from the euro zone at 60%, down from 90% a month earlier].
However, Greece is not lonely at the bottom, nor is it Europe’s most severe problem.
That honor goes to Spain, Europe’s 4th largest economy. This proud nation is in crisis. They accepted $100 billion euros to bail out their banks, but that was just to prop up failing financial institutions. The rest of the country is mired in a double-dip recession, and the country needs to be capitalized or risk running out of money. Unlike Greece, Spain cannot be swept under the euro zone rug for months to come. The country is too big, and its problems much bigger; yet their leader, Prime Minister Mariano Rajoy, stubbornly refuses to request a bailout for the country. And in the “new” Europe, a country must officially request a bailout, and all the growth-killing austerity measures that goes with it—to get any funds from the European Central Bank. But who can blame Rajoy? Every other leader who received bailouts have been voted out of office. It does not help that Rajoy is a serial procrastinator, and is not likely to request a bailout anytime soon, despite weekly press reports to the contrary. He may simply follow Europe’s lead and kick that same can down a different road—a road that leads to additional pain, more debilitating austerity, and ultimate insolvency.
Next up—China. According to numbers coming out of that country, growth is slowing quickly, with growth expected to come in at about 7%-8% for all of 2012. That would be amazing for the U.S. or Europe, but not for China (the U.S.is growing at a rate between one and two percent). In many ways, China poses a far more vexing problem than Europe. Another important aspect of the China problem is that their numbers are likely a canard. China is of course not a democracy, which makes any numbers emanating from that country suspect. That’s why, for example, anchors on CNBC use things like Chinese electricity consumption numbers as a more accurate guide to measure Chinese economic growth. I believe that when the real numbers are finally revealed in 2013, it is far more likely that China had grown by perhaps by four to six percentage points in 2012. We know that dozens of countries in the U.S. have missed their top line revenue targets in the second and third quarters because of slowing growth in China and the euro zone, but more CEO’s have pointed to China as the biggest problem, especially technology companies. This is true with the best U.S. tech names like IBM and Intel. Some large company CEO’s have said that China “feels” like it is growing at two to three percent rather than the seven or eight percent sworn to by China. There is also a monumental change in leadership coming soon in China, which only adds to anxiety in a way that the fiscal cliff has added to fear and anxiety in the U.S.
One city in China—Wenzhou—gives a more accurate picture about what is really going on inside world’s second largest economy. Quite recently the Washington Post ran an article entitled: “Some see China’s in Debt-Ridden City of Wenzhou.” The article made the point that the debt issues of this city bears some resemblance to the Bear Stearns of 2008, which was the first shoe to drop in the debilitating liquidity debt crisis of 2008-2009. The piece also mentioned that a prominent professor from Beijing saw Wenzhou as a “signal that high-interest private lending might trigger a debt crisis.” China’s total debt is estimated to be somewhere from 10 trillion to 14 trillion renminbi (about $1.6 trillion to $2.2 trillion). That pales in comparison to the U.S. with more than $16.1 trillion debt, which comes out $51,472 per American citizen. Hence the title of this posting.
If we are not far more prudent with our fiscal and monetary policy going forward, is it possible that the U.S. becomes the next Spain? It is surely possible, especially since congress is such a dysfunctional organ of our government. Since the stock market is forward looking, I would expect the market to be weak (meaning down) over the next few weeks as uncertainty rules the day. We will know more after the U.S. elections and the ringing in of the new year. Until then, consider buying some protection for your portfolio (e.g. buy some SPXU which is the inverse of the S&P 500), stay tuned and fasten your seat belts.
How Low Can Facebook Go? Look to Business Books to Tell the Tale
This trusim is something I alluded to in my last blog posting, and for me, this is a fascinating reality: “If it isn’t a book, it isn’t a stock.” Having just celebrated my 30-year anniversary in the business book industry, I certainly have seen my share of “phenomena” books. Electronic day trading was a phenomenon in 1998 before dying a quick death by late 2001. In the early 1980s, in the wake of the stunning success of In Search of Excellence, every publisher and their mother brought a book out with excellence in the title. That worked for a few weeks before that market died.
Unlike a hot topic like electronic day trading, most social media books have been spectacular failures from the start. I don’t even need the Nielsen Bookscan numbers to know that, for I know intuitively that this genre of business book would die on the vine. How did I know? Because social media books are the classic case of publishers barking up the wrong tree. Publishers have an incredible penchant of publishing the hell out of the wrong topic at the wrong time. Sure, a few social media books did well, but they are the exception, not the rule. While social media is still growing by double-digits in developing nations across the globe, few top tier publishers are bringing out any new books on this topic. Why? Because people who are active on Facebook and Twitter spend hours on these platforms—and no time reading books on the topic. They don’t have to. They know how to access and use these sites so why do they need a book telling them how important it is or how it will influence their lives or society as a whole?
There is also great competition entering the Facebook space: for example, Pinterest, the “online billboard,” is quickly emerging as the next big thing in social media.
This brings us back to the stock market. As I have mentioned before, I have been short Facebook (that is, betting it to go down) since the end of May. I have always believed that there is a dearth of leadership at the $60 billion company, especially in the chief executive’s office. I knew that if publishers could not make a go of social media books, then the biggest company on the block would have a hard time making it as a publicly traded company. The problem isn’t that the customers aren’t there. With nearly a billion users, they have the eyeballs that would make 99 percent of companies salivate. The problem is that they haven’t found a way to monetize their hundreds of millions of users. And when sales can’t keep up with users you have a problem. And when the entire industry is shifting to mobile, a much smaller platform for advertisements, you have an even bigger problem. While I think there is a good chance Facebook will figure it out eventually, it will require time and a kings ransom to get it right. While the firm has money, they don’t have much time. In late 2012 there are far fewer investors out there and more traders than ever. Fewer and fewer people are buying and holding stocks. That means that companies have less time than ever to right the ship. If Facebook can’t get mobile revenues into the multi-billions by say, Q1 2013, I could see the stock sinking into the high single-digits. Single digits? That’s impossible right? Ask Zynga, a firm that, at the time of this writing is trading at $3 per share after hitting a high of just under $16 per share in April of 2012. Or the discount coupon company Groupon (another company I am shorting), which is down almost 80 percent since it went public last November.
The truth is that no one knows what will happen to Facebook stock. But one thing is for sure: as a book category, social media books are likely to go the way of Friendster and MySpace.
BEST BUY: “Amazon’s Showroom?” Not so Fast.
Tune into any financial news network or pick up the business pages of your local newspaper and you will hear the following about electronics giant Best Buy:
* Best Buy is the next Radio Shack (not good—Radio Shack is a $4 stock, down 75 percent since last July’s $16 price).
* Best Buy’s business model is a dinosaur, a relic of a by-gone era.
* Best Buy is Amazon’s showroom (meaning people check out the merchandise at Best Buy before going home to buy it at Amazon and other e-tailers).
The last claim is particularly annoying, because it has been uttered by such luminaries as CNBC’s Jim Cramer and other financial “geniuses” countless times in the electronic and print media. But what these pundits neglect to tell us is that Best Buy price matches on all new, boxed items (in some markets). But I am getting ahead of myself.
Call me old fashioned, hell, call me a dinosaur but I happen to think that Best Buy’s prospects are quite bright. And it isn’t because they are trying to be the next Apple store, which many of those same pundits have asserted in recent days on those same financial channels. Then why am I so bullish on Best Buy? Much of this has to do with my personal experiences at my local Best Buy (located in a Chicago suburb called Downer’s Grove, Illinois). First some history about me and my personal buying preferences.
I do indeed like to touch and play with gadgets and electronics before I buy them. But once I do, I have the patience of an ant. Once I have decided that I want, say, a particular laptop computer or TV, I have to have it, and I have to have it right then and there. Not tomorrow, not in a week, not in ten days. Nothing thrills me more than walking out of that store with that computer under my arm as I show the over-sized bouncer at the door my store receipt. And if you think I am impatient, you have never met my twin boys. But I am getting ahead of myself again. Bear with me as I tell you this week’s computer war story.
Two days ago I went to that Best Buy in search of a new PC. Mine was home dying like some ill-fated, cancer-ridden patient on life support. It is worth noting I am a great Best Buy customer. I had purchased several computers over the last six years—each with multi-year “Black Tie” protection warranty plans (that’s the plan that covers everything unless you do something really stupid like throw your computer off a building). I know that store well, so upon entering, I headed right for the computer section. One of the first items that caught my eye was a “clearance” priced Toshiba with a good sized screen, nice touch-pad, and all the bells and whistles including Windows 7. The price? $329! I couldn’t believe it. The last Toshiba I bought there cost me more than $1,000 and this one seemed even nicer. Long story short, I bought it on the spot with a two-year Black Tie warranty, along with Windows software. I took it home and to my delight instantly fell in love with it. That’s when my wife and I decided that I would go back to the store the next day and buy not one—but two more of those Toshibas for my almost eight-year old twin boys (it would be their first computer). They had been begging for their own computers for many months and the time—and price—seemed right.
When I returned that next day, a salesman named Jim came right over to help me. Jim was great—helpful, incredibly respectful and upbeat. As was their customer service rep, Elliot. Still, I decided to ask for a manager to see if he or she would cut me a price break on the computers or accessories I was buying. After all, I had bought my wife a pricey Mac back in June, and now I was buying three more computers within 24 hours. I figured that makes me a “platinum” customer, and I had hoped that Best Buy management would see it the same way. That’s when not one, but two managers came over to help (I felt platinum!). The first manager took immediate control of the situation. Her name was Krystle H., and she made me feel like a million bucks. How did she do that? By immediately recognizing my value as a frequent customer and by discounting all three Toshibas, even the one I bought the day before. I had never received a retroactive price adjustment by a retailer and it felt great. Then she did the same thing on the Skull Candy headphones I was buying, as well as a few more accessories. Another manager named Andrew L. got into the act and also helped (he also engaged me in conversation about the Best Buy/online retailer debate). The only thing I paid full “retail” for was the Black Tie protection programs, as those prices are etched in stone. Still, I got a terrific price break on just about everything else and never felt better about a major purchase in my life. I was delighted to show the bouncer my store receipt on the way out!
Now, all of that begs this question: have you ever negotiated with a Website? (eBay does not count). Obviously not, but that doesn’t mean the Amazons of the world are not great places to shop. It’s just that its not for me. Besides, when things go south with the computer you buy online, where do you bring it to get it fixed? But those are just details. Why will I always choose a Best Buy over an online retailer? The answer is Jim and Krystle and Andrew and Elliot. I love people and I love to do business with people. I may buy my books online but I will never buy larger-ticket items online. I simply have way too much fun negotiating for lower prices…something that online shops know little about.
What Business Book Publishers Look For in an Author
If you are involved in the business world, you know that things have gotten a lot tougher in recent years. The housing crisis, which persists to this day, along with the great recession that began in late 2008, have conspired against the business book world in a big way. In today’s challenging economy, sans Border’s, it is harder than ever to get a business book published. Many authors, particularly first time authors, ask me this key question: what do publishers look for in a business book author? Here are some answers, not necessarily in the correct order. Publishers look for:
* Super smart authors with great and original ideas
* Authors that have a great on line presence. This could mean an email list of say, 100,000 names, or a very big following on Twitter, Facebook, and other social media
* Authors with a superb Website and blog with tens of thousands of users
* Authors that give dozens and dozens of speeches per year, or host a similar number of seminars
* Authors whose last book was an unmitigated success (and conversely, publishers avoid failed authors—that is—authors whose last book has failed)
You get the idea. When you get right down to it, publishers look for authors that have the ability to sell thousands of copies of their own book. That’s because the author platform, which is determined by the answers to the aforementioned questions, often means the difference between success and failure for a book project.
Some authors then ask the next logical question: if I am going to do all of the marketing and selling, what do I need a publisher for? That’s a fair question. Publishers actually bring a great deal to the table, but of course, not all publishers are created equal (I will save that thought for another blog posting). But in the meantime, consider this: a good publisher can lend great prestige to a book, helping you to build your brand in a way that would be impossible any other way. A good publisher will also help you to develop and shape your manuscript, and come up with the right package for your book (e.g. title, cover, subtitle, chapter titles, subheads within chapters, etc.). They also do much to market and distribute your book to brick and mortar bookstores as well as online resellers like Amazon. This is true in the U.S. and around the globe. With the most popular business books, they pay for special bookstore placement in airports stores and other national chains (e.g. table placement for your book with Barnes and Noble). They also have publicists on staff that attempt to get as many mentions for your book in the print and other media, as well as book reviews, and when appropriate, radio and television interviews. Lastly, their rights departments attempt to sell your book to as many international publishers as possible, which often means additional streams of income (this is especially true with management and leadership books, as well as books on global topics).
So to sum up: publishers look for authors with great platforms that can sell tons of books. In return, however, publishers bring their considerable resources to bear to maximize your book’s potential. It is fair to say that publishing is a two-way street: however, the traffic on the road has never been more treacherous.
Permit me to add a postscript to this piece: if it occurred to you that I spent little time discussing the quality of the content of your book idea, you are not alone. After writing this posting I was struck by the fact that there was only one mention of the actual book idea. The truth is that many business publishers examine an author’s platform before closely reviewing the content of the manuscript. I think it is a sad commentary on how the business book industry has evolved. But it is also reality. It doesn’t make me love what I do any less, it just means that I have grown to be a bit more cynical than I would have hoped.
What Business Book Publishing and the Stock Market Have in Common
If you follow the stock market closely enough you know that today’s market is a study in volatility. But that wasn’t always the case. When I bought my first stock in 1974—Gulf Resources at 14 1/4—only about 15 percent of American households were invested in the market, and trading volumes were anemic. Markets were sleepy. That changed a decade later. By the late 1980′s, despite the crash of ’87, stocks became all the rage. Everyone seemed to get in the market, volumes ballooned, and stock market investing became a global phenomenon. The great bull market, which started in 1982, continued with a vengeance in the 1990s. In fact, the great bull market that commenced in 1982 did not end until the dot com crash of 2001-2002. So how is the stock market like the business book market?
The great bull market in business books also started in 1982 with the publication of Peters’ and Waterman’s In Search of Excellence and Ken Blanchard’s The One Minute Manager. From that point on business books became a booming industry, with many of them, including the two aforementioned titles, gracing The New York Times Bestseller List. However, like the stock market, business books were not new. The father of modern management, Peter Drucker—who I devoted an entire book to in 2009—had been writing a whole genre of business titles since 1946. However, there was a vast difference between Peter Drucker and Tom Peters, co-author of In Search of Excellence. Peters was considered cool, a by-product of a new era in which CEOs were the new American heroes (think Lee Iacocca and Jack Welch). Business books, like stocks, were no longer considered to be something for only a slim slice of the population. Business books were now considered hip, and they seemed to be everywhere. They even became fodder for cocktail party conversation.
Fast forward to today: in 2012, volatility in the stock market—as measured by something called the VIX index—has become the norm. The financial markets are characterized by turbulence. The same is true for business book publishing. The demise of bookstore chain Border’s has been a great loss for the publishing industry. There are now fewer places to “place” books, which has had a chilling effect on the book business (in all genres, not just business books). In addition, the proliferation of free information on the Internet and the fragile state of the U.S. economy has made business book publishing a very tumultuous industry. Layoffs have become the norm in book publishing (and on Wall Street). Perhaps the greatest comparison between the two industries is its unpredictability. No one knows what tomorrow will bring. Who could have known that Border’s would fold and Amazon would emerge as a major book publisher? Who could have known that eBooks would become such a major force in the industry after starting out in the 1990s as a major flop? The stock market and the business book market have one more important link: they tend to move together. Business book sales rise when the stock market goes up. It’s a case of rising tides lifting all boats.
I could go on, but you get the idea. One thing is for sure: both turbulent industries will bring us plenty of surprises in the months and years ahead.
BESTSELLER: How Many Copies Do You Have to Sell to Become a Bestseller?
Last year I wrote what became my most popular posting ever—entitled “How many books do you have to sell to be a bestseller?” Since then, remarkably, people in more than 54 countries have googled ”bestseller” and have found that posting. Today I want to shed more light into that all-so-elusive bestseller space. Since my specialty is business books, I will devote much of this blog posting to that subject. However, I will also give you a more macro-view by comparing business to the larger non-fiction bookshelf. Although on this particular week, there is no comparison.
In this particular week in late August of 2010, the top two bestselling non-fiction works are two different paperback versions of the same book, Eat, Pray, Love, by Elizabeth Gilbert (Penguin), an incredible phenomenon that has sold well over 5 million copies since it was published in February, 2006. This book was a rare gem in the publishing industry from the start. In August of 2010, a movie version of the book was released starring Julia Roberts, which put the book back in the epicenter of the publishing world once again (there is even a preview of the movie that you can watch on the Amazon site). The movie, which grossed close to $25 million its first week at the box-office, explains why the book sold almost 140,000 copies the week the movie was released (as measured by Nielsen Bookscan, which covers about 75% of all book sales in the U.S.). That is an extremely impressive and rare achievement for a 3-year old book—especially when one examines the rest of the non-fiction bestseller list. The fifth bestselling book, for example, Love at Last Sight by Kerry Shook, sold under 11,000 copies that same week. In fact, only five non-fiction books topped 10,000 copies in this week in August, with Eat, Pray, Love, topping the list.
Now let’s turn to the business category where there are very few books turned into movies (quick quiz: can you think of any business book that became a good movie? Find the answer at the end of this posting). On this particular week in August, the bestselling book of the week more than doubled the second bestseller. The #1 book, which has topped this list many times since it was published in early 2007, is StrengthsFinder 2.0 by Tom Rath (Gallup Press). On this particular week, this fabulous book sold just over 9,000 copies, and just under 300,000 for all of 2010 (to date). The second bestselling book, The Big Short, by the same author as The Blind Side, Moneyball, and Liar’s Poker—Michael Lewis—sold 4,200+ for the week, and almost 400,000 copies in 2010.
Let’s fast-forward a week and see if anything meaningful changed: On the non-fiction front, the number one and two books were still Eat, Pray, Love. However, sales of the two editions of the book had fallen by almost half, to about 73,000 units (a dramatic fall-off that we see more often with movies than books). On the business book front, StrengthsFinder 2.0 kept its #1 status and actually increased in sales, to almost 10,000 copies, a nice 10 percent pop from the previous week.
What did it take to make it on the top 50 business bestseller list that publishers are so focused on? In the last week of August, a period that used to be the kiss of death for business publishing (because the whole publishing world was on vacation), the 50th bestselling business book sold almost 850 copies. (Since Bookscan only captures about 75% of sales, the real number is likely over 1,000 copies). That is an impressive statistic, and is a reflection of the times in which we live. Given the tough economy, fewer business people are taking multi-week, summer vacations. Those that still have their jobs are searching for books that can make them more effective at work. In days of old, no one in publishing worked in August. But that has changed forever. When I contacted the top ten business book editors the last few weeks, all but one were hard at work, sitting at their desks, searching for that next all-so-elusive bestseller. I hope that gives you some idea about how many copies a business book has to sell to make it on to a bestseller list. Of course, and I will cover this in a future posting, it’s the velocity of sales that ultimately determines whether a book makes it on to a bestseller list or not.
ANSWER: So what business book made for the best movie? My vote goes to Barbarians at the Gate, that terrific book by Burroughs and Helyar. First published in 1990, it is one of my favorite business books of all time, selling many hundreds of thousands of copies before it was turned into an engaging, fast-paced HBO movie starring James Garner in 1993.
Literary Business Off to a Great Start
It has been too long since you last heard from me but that’s only because my writing and agenting business has been going so well. I have been working like a dog in my one-year-old-plus company, and I am delighted to report that things could not be much better. That’s because I have had the good fortune to work with some of the greatest people I have ever worked with—including the great authors I have worked with in my 27 years in corporate America.
I take great pride in the work I have done with co-host of the new hit CNBC show Strategy Session—Gary Kaminsky. Gary has emerged as one of CNBC’ s brightest new stars, a sagacious and singular figure that knows more about the financial markets than most anyone I know. He is a rare client that has become a good friend, and my agency owes him a huge debt of gratitude. That’s because my business is a referral business, and Gary has sent other CNBC colleagues my way and I have benefited greatly from these important relationships.
In fact, I am now working with one of the other ingenious market experts and CNBC personalities—the Chief Market Strategist of Virtus Investment Partners—Joe Terranova. If the name sounds familiar it should—Joe is one of the stars of the highly successful CNBC show, Fast Money. It took me almost two years of prodding to convince Joe to write a book; he is simply too modest and didn’t think the time was right for a book until now. His book has garnered great interest from the publishing world and will be published by one of the great business publishers next year.
That’s about it for now. I must get back to work if I am going to make my deadlines!! I will be checking in far more often so please be sure to check my blog every so often.
A New Business Model and a New Bestseller?
Every so often a literary agent gets the chance to represent a book that is so unique in every way that it is a privilege to represent. Last week I was given the opportunity to handle such a property. However, I must confess, that I did not immediately “get” the book, largely because it breaks most every rule of business book publishing. First a bit of history.
Two European authors—Alexander Osterwalder and Yves Pigneur—spent years putting together a stunning book on business models entitled BUSINESS MODEL GENERATION. The two authors had a great deal of help with the design and content of the book, as it was co-authored by 470 Business Model Canvas practitioners from 45 countries, which in itself is highly unusual for any book, business or otherwise. The authors self-published two versions of the book, starting with a gorgeous 4-color hardbound version that lays flat when you set it down on a desk or table.
Some weeks ago I was contacted by author Alex Osterwalder asking if I would represent him and the book (I was referred to him by one of my other authors). My first reaction was to refuse taking on the book. After all, even though the author self-published 5,000 copies of the book and sold them all through his website (businessmodelgeneration.com) , there was no “official” record of those sales so I knew that publishers would be quite skeptical of the book. And that was only one roadblock. There were also several other obstacles the book faced that would make selling it to a top notch publisher an uphill battle:
* The authors were not based in the U.S., which often complicates matters
* The book has a “clunky,” awkward title (Business Model Generation does not roll smoothly off the tongue)
* The book has a very high price tag of $46.99, more than double the average price of a bestselling business book—and in an impossible economy to boot
So I did not take on the book. Then, some weeks after the authors sold out their 5,000 copies, they reprinted 10,000 copies of the book. Now here is where things get really interesting. On February 3rd, 2010 the authors managed to get a third party seller to sell the book on Amazon. Finally, the authors would get some help in selling the book beyond their own websites (the other site is businessmodelalchemist.com). But once again, there were obstacles that made it very difficult to sell the book on Amazon:
* It’s not even Amazon selling the book on Amazon, but a third party vendor
* It is very difficult to even figure out the price of the book on (see the Amazon page for the book)
* There is absolutely no discount offered for the book (usually Amazon discounts books by 40 percent)
* The Amazon page is so bleak, it makes the book appear as if it is out of stock
One would think that all of those obstacles would derail the book, but a funny thing happened to the book on the way to the bestseller list. The minute the book became available on Amazon, buyers came out of the woodwork to purchase the book. Within 48 hours the book ranked as high as #74 on Amazon, an amazing feat for most any business book and especially this one. Since then, the two versions of the book have occupied two of the top 25 slots on Amazon’s list of bestselling management books every single day. This kind of success is so rare that I would classify this book as a “phenomenon” book, one that beats huge odds to become a bestseller (and this is before any publisher has entered the picture). This time I did not repeat my mistake and happily agreed to take on the project.
Last week I contacted a handful of my favorite editors/publishers and this time I was not surprised when every publisher I notified expressed interest in the book. Given the success of the self-published versions it was hardly surprising that interest among publishers would run high. By this time next week we should have found a great home for the book, with a publisher that sees the book for what it is: an exceptional product that is helping to build a community of people who appreciate all of the blood, sweat and tears that make this a one-in-a-million book and opportunity.
My Publishing Outlook for 2010
I must forewarn you that I am an optimist at heart and always will be. However, I am also a pragmatist and have learned that “facing reality” is one of the most important business philosophies if one is to succeed. That said, I believe 2010 is going to be a very good year for business books.
2009 was anything but.
Many publishers were forced to scale back their programs, lay off scores of good editors, marketing people, and other professionals—all while combining and reorganizing various imprints. They did all of this against an ugly backdrop of an awful economy and a liquidity and housing crisis that sunk the Dow to multi-year lows in March of 2009. If you are wondering what the Dow has to do with business book publishing, the answer is “everything.”
Sales of business books—all business books, not just investing and finance titles—are very much dependent upon a strong stock market. Now that the Dow is over 10,000 once again and consumer confidence is up for the second month in a row, sales of business books will likely improve in the first quarter of 2010. However, we are not out of the woods yet. We are still seeing publishers continuing to cut positions and reorganize publishing divisions. But I believe that we are in the seventh inning on that—much nearer to the end than the beginning. Those publishers that do not cut back so sharply will fare the best when things turn around. Some publishers are positioning themselves to come out on top by continuing to aggressively acquire new titles to be published in 2010 and 2011. Of course, a great deal depends on the books and publishing programs of various houses. Unfortunately, several topics have already been over-published—think Bernie Madoff and the Liquidity crisis— and that trend will continue (publishers always follow trends and tend to saturate markets very quickly).
However, there are many great business editors out there who are acquiring and publishing original and compelling books. These innovators will be the ones most amply rewarded when the economy comes back. And the economy and the financial markets always come back…eventually. I happen to be one of those who believe that it will be sooner rather than later.
- The Limits of Charisma: The “Sequestration is Dumb” Edition (a.k.a How on God’s Green Earth Did we Get Here)?
- Greece, Spain…Who’s Next? Wenzhou or Wisconsin?
- How Low Can Facebook Go? Look to Business Books to Tell the Tale
- Betting Against JP Morgan’s Jamie Dimon
- BEST BUY: “Amazon’s Showroom?” Not so Fast.
- Facebook, Mark Zuckerberg & The Search for the Next Jack Welch
- What Business Book Publishers Look For in an Author
- What Business Book Publishing and the Stock Market Have in Common
- Literary Agents Level the Playing Field
- Ghostwriter Needed?
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About Jeffrey
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As former Vice President and Publisher of McGraw-Hill's trade business books division, Jeffrey Krames has personally edited and published more than 275 business books, including many award-winning, best-selling titles on business luminaries that include Jack Welch, Michael Ovitz, Ross Perot, William Paley, Michael Dell, Bill Gates, Herb Kelleher and Lou Gerstner among others. Read more...
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