The Tipping Point by Malcolm Gladwell first interested me when I was considering what exactly it is that makes something “go viral” or what it is when society suddenly changes direction. Obviously viral marketing is something we are keenly interested in with our business where we specialise in making our Customers business opportunities become reality.
The Tipping Point is that magic moment when an idea, trend, or social behaviour crosses a threshold, tips, and spreads like wildfire.
from The Tipping Point, by Malcolm Gladwell
The book is obviously well researched but at the same time an easy read with interesting anecdotal evidence, studies and situations that are easily related to and, therefore, fascinating. I knocked it over in a couple of days.
The Tipping Point discusses trends in the same context as a virus or epidemic. We’re introduced to the world of Connectors, Mavens, and Salesmen, concepts like the Stickiness Factor, the power of 150 and the power of Context. We find out why, or more importantly how, crime waves that have rocked a city for a decade suddenly stop, how unfashionable shoes suddenly reemerge as hip, and why teenagers still smoke.
I’m not sure that I’ve come away from reading this with any defined or tangible course of action but, at CogentAds we often discuss what kind of people we need to be in order to succeed, and even more the kind of people we need to employ going forward. Looking at scenarios in the book I’m inspired by some of the personality types, behaviours and subtle approaches marketing people take to identifying niche trends and then, in sometimes unexpected ways, get these trends into the mainstream.
Ultimately the Tipping Point makes it clear that small things can, and do, make a big difference. It’s inspiring and thought provoking. Good for stimulating your business strategy thinking. I recommend reading it.
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An easy explanation of Derivative Markets
by GuestAuthor on November 23, 2009 · View Comments
I have been kicking this around for some time and I think I have finally narrowed it down to an explanation intelligible to all. “An Easily Understandable Explanation of Derivative Markets”
Heidi is the proprietor of a bar in Detroit . She realizes that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronize her bar. To solve this problem, she comes up with new marketing plan that allows her customers to drink now, but pay later.
She keeps track of the drinks consumed on a ledger (thereby granting the customers loans). Word gets around about Heidi’s “drink now, pay later” marketing strategy and, as a result, increasing numbers of customers flood into Heidi’s bar. Soon she has the largest sales volume for any bar in Detroit.
By providing her customers’ freedom from immediate payment demands, Heidi gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages. Consequently, Heidi’s gross sales volume increases massively. A young and dynamic vice-president at the local bank recognizes that these customer debts constitute valuable future assets and increases Heidi’s borrowing limit. He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral.
At the bank’s corporate headquarters, expert traders transform these customer loans into DRINKBONDS , ALKIBONDS and PUKEBONDS. These securities are then bundled and traded on international security markets. Naive investors don’t really understand that the securities being sold to them as AAA secured bonds are really the debts of unemployed alcoholics.
Nevertheless, the bond prices continuously climb, and the securities soon become the hottest-selling items for some of the nation’s leading brokerage houses.
One day, even though the bond prices are still climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the drinkers at Heidi’s bar. He so informs Heidi.
Heidi then demands payment from her alcoholic patrons, but being unemployed alcoholics they cannot pay back their drinking debts. Since, Heidi cannot fulfill her loan obligations she is forced into bankruptcy. The bar closes and the eleven employees lose their jobs.
Overnight, DRINKBONDS, ALKIBONDS and PUKEBONDS drop in price by 90%. The collapsed bond asset value destroys the bank’s liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community.
The suppliers of Heidi’s bar had granted her generous payment extensions and had invested their firms’ pension funds in the various BOND securities. They find they are now faced with having to write off her bad debt and with losing over 90% of the presumed value of the bonds. Her wine supplier also claims bankruptcy, closing the doors on a family business that had endured for three generations, her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers.
Fortunately though, the bank, the brokerage houses and their respective executives are saved and bailed out by a multi-billion dollar no-strings attached cash infusion from the Government. The executives are granted multi-million dollar bonuses and celebrate with a company paid junket to Las Vegas.
The funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-drinkers.
Now, do you understand?
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