Obama unveiled his proposal for a deficit reduction plan aka jobs plan this morning:  His mantra of “tax the rich” sounded something like this:

“From each according to his ability, to each according to his need”

Economists and financial analysts panned his proposal today, often discounting it as little more than election rhetoric.  Sound bytes designed to pander to his special interest groups.

The troubling factor however is the source of the mentality.

The tax the rich rhetoric “from each according to his ability, to each according to his need” sounds troubling similar to the slogan popularized by Karl Marx summarizing that in a communist society each person should contribute to the best of his ability and consume from society in proportion to his or her needs. 1.

Note this is a Core Obama Philosophy

Note that this is a fundamental political philosophy of President Obama that is rooted in his philosophical beliefs and has nothing to do with fundamental economic facts.

Different than Fundamental Economic Facts

Here is a key “fact” – when the tax rates on the “wealthy” were approximately 70%, they only paid approximately 18% of all taxes.  At the lower 35% tax rate, those wealthy now pay over 40% of all taxes.

So if you want to “tax the rich” – the true effect is to shift the tax burden to everyone else.  Obama understands this but doesn’t care; it’s not economic to him, it’s a philosophical core belief that each should pay according to his ability and consume according to his need.

Inflation and Taxes

The twin tower threats of “Inflation and Taxes” are the dynamic forces that destroy wealth and undermine fundamental economic opportunity.

The American federal government spends more than it takes in in tax revenue.  Today, the US Senate begins debate to raise the legally authorized debt ceiling by 15% from 12.4 Trillion Dollars to 14.3 Trillion Dollars, an increase of $1.9 Trillion in two years!

$1,900,000,000,000.00

Washington covers this spending gap through two methods:  it borrows dollars and the federal reserve “prints” dollars.

The US government has increased debt in the last two years by $3.62 Trillion – an increase of approximately 39%.

The federal reserve has increased the money supply in those same two years by $1 Trillion - essentially printing money.

The Economist magazine in 2009 wrote:

“Having spent a fortune bailing out their banks, Western governments will have to pay a price in terms of higher taxes to meet the interest on that debt. In the case of countries (like Britain and America) that have trade as well as budget deficits, those higher taxes will be needed to meet the claims of foreign creditors. Given the political implications of such austerity, the temptation will be to default by stealth, by letting their currencies depreciate.”

No matter how you look at it, this is destructive.  Every dollar that the federal reserve “creates” out of thin air reduces the value of an existing dollar.  The dollar has already lost 95% of its buying power since the federal reserve was created in 1913. 

The long term implications of the increase in debt, and the interest payments necessary to service that debt will require the federal government dramatically reduce spending, increase taxes, or devalue the dollar.  If current attitudes in washington prevail, there are no signs of future reductions in spending.  More likely are continued runaway spending.

That leaves the twin tower threats of inflation and higher taxes.

In 2005, 32.6% of all adult Americans paid no taxes (zero).  Today, that is estimated to have increased to approximately 50%.  This will force Washington to collect more taxes from the increasing minority of citizens who are actually taxpayers.

Is there any doubt about the risks of the twin tower threats of inflation and taxes and the subsequent destruction of wealth and economic opportunity?

The risk and the threats are very real.

Greg Watson

I personally believe that it firmly supports the role of Ethics in a person’s long term business success.  Read my post on The Speed of Trust – Personal Ethics for a more detailed description of the power of Ethics and trust in the business equation.  Business typically calculates results as Strategy x Execution, but there is a Trust Multiplier that is an important factor in long term success:

(Strategy x Execution) x Trust = Results

Here is Darrin’s 10-Point Ethics Checklist, I hope you enjoy it!

1. The Golden Rule: Would I want people to do this to me?
2. The Fairness Test: Who might be affected and how? Is this fair to everyone?
3. The ‘What if everybody did this?’ Test: Would I want everyone to do this? Would I want to live in that kind of world?
4. The Truth Test: Does this action represent the whole truth and nothing but the truth?
5. The Parents Test: How would my parents feel if they found out about this? What advice would they give me?
6. The Children Test: Would I be willing to explain everything about this to my kids and expect them to act in the same way?
7. The Religion Test: Does this go against my religion?
8. The Conscience Test: Does this go against my conscience? Will I feel guilty?
9. The Consequences Test: Are there possible consequences of this action that would be bad? Would I regret doing this?
10. The Front Page Test: How would I feel if my action were reported on the front page of my hometown paper?

That is a wonderful list Darrin shared.

Greg Watson

The Internet Marketing News Watch reported today on the launch of the “Internet Marketing Tax Guide” which I recently launched – you can read the IMNW report on the internet marketing tax guide for domainers and IM marketers .  The tax guide was written and developed for individuals conducting business as domainers, affiliate marketers, ecommerce marketers, and internet marketers.

The Internet Marketing Tax Guide provides insights and strategies into the tax consequences and responsibilities of Internet Marketers.  How are domain registration fees handled?  Can I deduct the cost of all of my computer equipement?  Is the cost of a conference held on a cruise ship deductible?  These are just a few of the topics addressed that are important to Internet Marketers.

I routinely integrate the subject of Ethics into every thing that I do.  A person’s true character eventually will always show through in the manner in which they conduct themselves in every aspect of their life.  Personal integrity is all that a true man has once the thin veneer of a surface showmanship is stripped away.  Yet it is this reality that many fail to truly grasp as life’s bumps pierce the thin veneer of their life exposing the character beneath.

Covey says that the Speed of Trust is one of the most powerful forces of life.  Stephen Covey does an excellent job of discussing the life effect of one’s ethical charcter in his book titled "The Speed of Trust" available at Amazon.com.

In his book, Covey talks about how trust flows throughout our lives and directly impacts our relationships in everything that we do.  I consistently choose to live by the rule that integrity, ethics, and honor are the root character of who I am, and that those characteristics are demonstrated in the actions and successes that I experience.  Covey argues that this essence is integrated into your personal and professional life and is largely responsible for your succcesses and failures.

Covey adds the variable of "trust" to illustrate this impact in business success.  Covey states that business success is traditionally illustrated with the formula:

Strategy x Execution = Results

Covey illustrates the role of ethics or trust by adding Trust as a variable to that equation:

(Strategy x Execution) x Trust = Results

The illustration drives home the point that no matter how good your strategy and execution may be, if you are missing that personal characteristic of ethics and trust – your life successes will be reflected in diminished results.

It saddens me when I see this simple truth proved out in real life, where people of otherwise respectable talents make life choices regarding their personal ethics and trust.

Covey goes on to describe the role of trust in our life of relationships – describing five different circles of trust.

Five circles of trust:

1. Self-Trust
2. Relationship Trust
3. Organizational Trust
4. Market Trust
5. Societal Trust

These relationships influence every aspect of our lives.    If you can’t trust yourself (self-trust), will you be able to build healthy relationships and friendships?  If you can’t maintain healthy relationships based on trust, will you be able to participate in larger organizational relationships?  Or will you consistently find yourself on the outside looking in? 

Covey goes on to describe the principle of market trust.  What is your reputation within the market?  Have you established a reputation of associations that cast doubt on your trustworthiness?  And within society, how do you personally contribute to trust in your personal relationships, organizational relationships, and market relationships.

You can examine your behaviours of trust by evaluating thirteen behaviours of trust.  Do you:

• Talk Straight
• Demonstrate Respect
• Create Transparency
• Right Wrongs
• Show Loyalty
• Get Better
• Confront Reality
• Clarify Expectations
• Practice Accountability
• Listen First
• Keep Commitments, and
• Extend Trust

Covey’s book "The Speed of Trust" is one of the most important books that a person can read.   Trust can be an assest and the lack of trust can be a liability, both personally and financially.  It is a fundamental concept that can be a life altering experience. 

Covey breaks character and competence down further into what he calls the "4 Cores of Credibility" – integrity, intent, capabilities, and results.  When you combine integrity, intent, and trustworthiness – you have a rare person; and capabilities and results will follow!

So what was the focus of the news report today?   A greeting card!

The outrage reported is about a card that appears to be offering a glass of wine with the following message:

Front Message:  Pardon Me

Inside Message:  Would you care for some Liquid Clothes Remover?

The card features an attractive image of what appears to be a male offering a glass of wine with an inside message asking "Would you care for some liquid clothes remover?"  (see snapshot below)

So is there an ethical issue here worth reporting?  Hallmark appears to have removed the card from the site following the news story, and below is a snapshot of the product that caused the outrage.  What do you think?

The news report suggests that the card is marketed to children – and that was the focal point of the outrage of the news report.  While it may be true that some of the Product Red line are oriented towards children and that may be a market demographic that has responded to the line, I could find no credible source that Hallmark actually launched any kind of marketing campaign that targeted children with this product line.  And no source that would legitimately suggest that they targeted this specific card towards children.

So is there any real issue here?

Today, it appears that Hallmark has pulled the card from their website.  Browsers to the page that used to display the card are now met with a "technical issues" error message.

Hallmark is one of the leading manufacturer’s of cards.  A trusted source, and a name brand that implies "the very best."  So it is not suprising that rather than risk even the potential of compromising their reputation, that Hallmark would pull this card.

So let’s consider the business ethics of the situation.

Did Hallmark do anything wrong?  Did Hallmark do anything unethical in their creation or marketing of this specific card?  Does it change your opinion if you believe that children might buy the card?

The facts of the situation are very clear, Hallmark did nothing wrong.  There is no evidence to suggest that the card was created or marketed in an inappropriate or unethical manner.  Hallmark’s history and today’s apparent action to pull the card suggest that Hallmark cares very deeply about even the hint of impropriety.

So while it may not be a card that I want my granddaughter’s boyfriend to give her, I will still be proud to have him give her a Hallmark card.  Hallmark’s slogan "When You Care Enough To Send The Very Best" still holds true in my opinion.

Would you like to know who the Top 5 sites are who are sending 280,261 people to watch your competitor’s video?

Video is one of the hottest new viral marketing tools that we use to drive traffic to our websites.  For every video that we create for use on one of our websites, we also create a second version that we publish on YouTube.  If you can create a unique and entertaining video, it quickly can acheive a viral marketing effect as friends share it with their friends.

YouTube is giving you the referrer stats to your competition’s top referrer’s …

John Reese recently sent me an email message with an interesting competitive research tool that allows you to look at how your competitors are doing – and more importantly know who the TOP 5 referrer sites are to your competitor’s videos.

YouTube has just added a new "referrer" statistic on all of their Video Pages … if you look directly below a video, you will see a tab labled "Statistics & Info" (see image to the left) … click on that tab, and it shows the Top Five websites that are sending traffic to that video …

Once you have clicked on the Statistics & Info tab, you can see a list of the Top 5 sites linking to this video.

What does this mean?

If you have any competitors who have videos posted on YouTube, you can immediately see the Top Five websites that are sending traffic to *THEIR* videos … great competitive information on who actually is driving traffic to your competition … those five websites then become great resources that you can target.

In the video stats example above, would you like to know about a site that sent your competitor 200,746 clicks to their video?  Over two hundred thousand people watched their video from that site!  That is a fantastic piece of competitive data to know!
 
Possible ideas that you can use to target those five websites:

• offer them custom videos (created by you of course) that they can use for their sites …
• offer them a free copy of your products for them to review …
• if you have an affiliate program,
• contact them about reviewing your product and offer to set them up with an affiliate account.
• if you have the ability to offer them a higher commission rate, give them a premium commission …
• offer them custom unique articles on their topics (with a link back to your website of course)

Why are these five sites so valuable? 

Because these are sites that are driving REAL traffic …

How else could you use this information? 

You can review these five sites and see if they have Google AdSense on them … and if they do and you do any AdWords PPC (pay per click) advertising, you could do a site specific ad buy through Google and buy ads on that specific site thus diverting traffic from your competition to your site.  And did you know that with a few special techniques that you can actually buy Google AdWords ads on a specific URL?
 
And of course, if you have any videos of your own posted on YouTube … log into your account and disable the display of these stats so that your competition does not use your referrer stats against you … like you are going to do to your competition  …
 

One of my favorite professors was focused on new product development.  The course was an exciting course with a lot of theoretical concepts – concepts such as how to create product innovation teams, cycle time, customer fit, etc. - as well as an emphasis on controlling development costs (we will get back to this often overlooked topic).

The typical "theoretical" NPD development cycle is as follows:

1. Idea Generation
2. Idea Screening 
3. Business Analysis
4. Development
5. Test Marketing
6. Commercialization

One of the most interesting statements came during the opening introduction to the course with the statement:

More than 95% of new product development projects fail to earn an economic return!

This same professor had defined me as a "serial entrepreneur" and a 95% failure rate is not something that a serial entreprneur would ever be willing to accept.  Yet that is what corporate america is routinely experiencing in their new product development cycel – 95% of their new products FAIL TO EARN AN ECONOMIC RETURN!

So I thought I would take a few moments to analyze the first few steps of "traditional" NPD process.

Idea Generation:  The course spent a significant time discussing methodologies of new idea generation.  For many, this step is challenging.  I would suggest that it shouldn’t be – if you find it challenging, then you have the wrong people on the team.  One of my favorite quotes is:

There is no shortage of good ideas, only a shortage of good men capable of executing on them.

Idea Screening:  This is an important stage.  It is human nature to favor ideas that conform to our existing biases about who we are and what we do.  Some of the greatest product innovations have occurred  when businesses have been willing to consider ideas that take them in an entirely new direction  Yet *most* people naturally do not want to consider ideas that are outside the traditional scope of their business or experience.

Business Analysis:  Finally we arrive at the business analysis stage.  The traditional "business analysis" uses both quantitative and qualitative methodologies to evaluate strategic, financial and customers.  However the "customer" analysis typically focuses on wants and needs while leaving out on of the most critical issues.

Are they willing to buy what you want to offer – and at what price?

The traditional NPD process leaves this question to the fifth step – Test Marketing – after they have incurred significant development costs!

This is the single most significant causes of failure for most new product development processes or new businesses.  It is absolutely critical that a "proof of concept" be demonstrated in the context of specifically identifying the potential size of a market, percentage of the market that is willing to buy, and the various price point that they are willing to purchase.  That assumes that they are willing to pay anything at all!

Many new product development projects fail to earn an economic return – not because the product idea was necessarily a bad idea.  In fact, many products are in great demand – everyone wants that solution or that product.  But the question of whether or what they are willing to pay was never asked.  Or more importantly – tested and proved.

In the Internet Marketing world (which is simply a distribution channel) – we have excellent tools to evaluate new product concepts.  We have tools that allow us to research search volume for keywords in the search engines.  All too often, the budding internet marketer follows the traditional new product development cycle:

1. They generate ideas,
2. They screen ideas,
3. They develop their business analysis based on the estimated search volume of people searching for related terms.  
4. They spend months (or sometimes years) developing a new product.
5. They beging their test marketing (or take it immediately to the market)

And typically – 95% of them fail.

They fail to generate an economic return.

The internet marketer is often barraged by a variety of messages – if they had only followed this marketing strategy or used or bought this marketing tool or joined this membership site – they will be able to learn that magic bullet that would have allowed them to earn an economic return.

There are always tips and tweaks that could have allowed them to improve their marketing and distribution.  But in most cases, the "traditional" new product development process that they followed failed to simply give them the answer to the most important question.  Are people willing to buy what I want to offer?

Yet this most important question could have been answered in their early business analysis step.  Saving them months or years in the development process.

One of the most common failures is the attempt to build a business strategy around free organic traffic from the search engines.  The typical business strategy often says "why should I pay for traffic or marketing when I can optimize and build a website and get free traffic from the search engines?"  The marketer then builds a website and spends  six months to a year building traffic to the site, creating high quality content, building links, writing articles, and finally develops a product.  They have done "everything right"!

They launch their product – only to find that traffic "aka potential customers" don’t want to buy what they are offering or at a price that they were willing (or able) to sell it for …

The marketing guys recommend all sorts of tweaks to the ad copy – we are getting all of this traffic, so it must simply be a conversion problem right?

Often – the real answer lies in the demographics of the market that is associated with the keywords that are drawing your traffic.  That market demographic just is not willing to buy (often at any price other than free) what you are selling.

Did the marketer do anything wrong?  Not according to the traditional new product development process (NPD)!

But the problem could have been avoided  if the traditional 5th step of test marketing had been moved in front of the Business Analysis step or at least incorporated into that phase.

An excellent methodology to test the conversion rate of keyword demographics is to run a series of test marketing campaigns using PPC (Pay Per Click advertising).   

A simple test marketing campaign can be developed by creating a list of keywords that you *think* will convert and be relevant to your new product idea.  A PPC campaign can be run where you spend $50-$100 on each of these keywords to drive traffic to a simple sales page.  You do not actually have to "charge" anyone to test how many people would have been willing to have made the purchase.

If you can convert 1 in 200 prospects to a sale on a simple sales page, you now have a Proof of Concept that suggests that you should be able to convert at a higher level with a more sophisticated sales process and fully developed product.

You also now know what keywords convert and which ones do not – which can help you in how you develop your product and how you develop and optimize your website and sales process.

And if the project did not convert traffic into sales – you now know that you should move on to the next idea in your idea screening process.

Effective test marketing that includes testing the customer’s willingness to buy is a critical step that should be moved significantly forward in the new product development process.  By advancing this step, you may be able to avoid being part of the 95% of the new products that are developed that fail to earn an economic return.

If we were to compare the size of the small business economy with the rest of the world, the US entrepreneurship and small business economy would rank third in the world behind the US medium and large business economy and Japan.

The size of the US small business economy would rank ahead of Germany, the United Kingdom, France, and Italy.

Entrepreneurship and small business represents the best of the driving forces that have sustained the US economy, jobs, and wealth preservation while other segments of the economy have struggled with outsourcing, commodity inflation, and international competition.

The Iowa Caucuses are begining to wrap up and the Obama factor is driving Obama to a win.

Statewide Obama is getting 37% … but in precincts where the Obama factor kicked in drawing stunning numbers of new voters into the process, Obama won 50% of the votes.  A powerful factor that can not be ignored as the canidates move to New Hampshire and beyond.

Disclosure:  I did not vote for Obama.