Wednesday, January 19, 2011
Good Article On Dick's Sporting Goods
Sporting good is a fragmented industry and highly competitive. Dick's Sporting Goods is one of the big sporting goods chain (I believe the largest) and one of the best. This article gives some good information about the industry and company: Retail's Rising Star
One of the most important points I think the article makes is about how the sporting goods industry differs around the country, that how people buy sporting goods and what they buy and when they buy differs in a state like Florida from a state like New York. Now having the right products stocked at the right time can thus lead to disaster for a sporting goods retailer.
One of the most important points I think the article makes is about how the sporting goods industry differs around the country, that how people buy sporting goods and what they buy and when they buy differs in a state like Florida from a state like New York. Now having the right products stocked at the right time can thus lead to disaster for a sporting goods retailer.
Saturday, January 15, 2011
Could China Be Overstating Their GDP?
So I was reading a short article by Steve Forbes in which he mentions the Soviet economy, and one of the reasons why its GDP numbers, despite seeming impressive, were actually greatly overblown: basically, because the GDP figures published for/by the Soviet Union included all of the extremely low-quality things the Soviet Union produced. As far as the Soviet economists were concerned, for example, cars from private companies versus cars from a government facility are both equal as far as GDP numbers went (so comparing say fifty cars produced by the Soviets and fifty cars produced by GM was pretty equal).
As a result, the Soviet economy appeared inflated and much more productive than what it actually was.
So I was thinking, China we know just recently surpassed Japan in terms of the size of their economy. However, China's economy also produces a lot of subpar junk at the moment. China manufactures things for Western companies, but in terms of designing and producing their own stuff, "Made in China" doesn't have a great reputation at the moment.
No one in the West buys Chinese-made, Chinese-brand automobiles yet, or Chinese-designed and made computers or electronics or appliances at the moment, and so forth. So what I was thinking is, could China's GDP numbers actually be inflated? Could their economy be appearing larger than what it actually is right now?
For example, I would imagine that in calculating their GDP, Chinese economists probably don't really much rate the difference between a cheaply-made low-quality Chinese vehicle and a much higher-quality Western-made vehicle. Or we could compare real-estate. Chinese buildings are not built to the same standards as in other countries (some have collapsed, one building rolled over because the foundation was so lax), yet I would bet their buildings are counted in the GDP with the same equivalence of buildings put up in the Western nations.
Thus, even though on paper, China may appear to have a GDP larger than Japan's, in reality, Japan may still have the technically larger economy if we could really measure the individual value of all the goods/services China produces.
As a result, the Soviet economy appeared inflated and much more productive than what it actually was.
So I was thinking, China we know just recently surpassed Japan in terms of the size of their economy. However, China's economy also produces a lot of subpar junk at the moment. China manufactures things for Western companies, but in terms of designing and producing their own stuff, "Made in China" doesn't have a great reputation at the moment.
No one in the West buys Chinese-made, Chinese-brand automobiles yet, or Chinese-designed and made computers or electronics or appliances at the moment, and so forth. So what I was thinking is, could China's GDP numbers actually be inflated? Could their economy be appearing larger than what it actually is right now?
For example, I would imagine that in calculating their GDP, Chinese economists probably don't really much rate the difference between a cheaply-made low-quality Chinese vehicle and a much higher-quality Western-made vehicle. Or we could compare real-estate. Chinese buildings are not built to the same standards as in other countries (some have collapsed, one building rolled over because the foundation was so lax), yet I would bet their buildings are counted in the GDP with the same equivalence of buildings put up in the Western nations.
Thus, even though on paper, China may appear to have a GDP larger than Japan's, in reality, Japan may still have the technically larger economy if we could really measure the individual value of all the goods/services China produces.
Friday, January 14, 2011
Fashion Doll Ideas
So I have been thinking, perhaps a way to pursue the fashion doll industry would be to make a go at it with two different brands of fashion dolls. One would be very much based on ultra-cool, stylish fashions, be urban, edgy, Hip Hop-based, rebellious in attitude, etc...whereas the other one could be very much into stylish fashions and be urban, but not as urban or edgy or rebellious or into fashion as the other brand. Whereas the other brand would be solely into fashion, this alternative brand would have girls with backstories, hobbies, and so forth. They would be independent, but not have an "attitude" like the dolls of the other brand.
Saturday, January 8, 2011
Why Politicians Love Keynesian Economics
So lately I've been doing some reading by the economist John Cochrane. According to him, Keynesian economics and fiscal stimulus have actually been mostly rejected by macroeconomics for decades now. That no major economics textbook teaches Keynesian policy or fiscal stimulus except for its fallacies, no respected economics program teaches Keynesian policy or fiscal stimulus except for its fallacies, and no major academic journal in economics has seen a policy simulation based on a Keynesian model in decades.
Fiscal Stimulus, RIP (also check out Mr. Cochrane's other articles on stimulus at his website: John Cochrane's Webpage
He says that the advocates of fiscal stimulus say that the economics profession lost its mind starting around 1975, but in his opinion (and that of other economists), it actually began to finally regain its mind around this time after having already lost it for many years prior. This is the view I would be much more inclined to hold as well, because starting in the 1930s with the introduction of Keynesian doctrine, economics also became dominated by socialists as well.
If you had walked into an economics department in the 1950s or 1960s and said socialism doesn't work and free-market capitalism is the best way to organize an economy, you'd have been considered a borderline radical or a nut. The late great economist Milton Friedman was for many years regarded as such and was called many nasty things by people who disagreed with him.
The late economist John Kenneth Galbraith for example, a Keynesian to the core, was also a believer in socialism, having traveled to Mao's China and praised it as a wondrous example of how to organize an economy (nevermind Mao killed more people via his socialism than pretty much anyone else in history, mostly through starvation).
ANYWAYS, I am going way off-topic, the point of this post then, is that, if modern macroeconomics mostly has rejected Keynesian policy except for a few holdouts such as Paul Krugman, Brad DeLong, Joseph Stiglitz, etc...(well-known stimulus skeptics include Greg Mankiw, Eugene Fama, John Cochrane himself of course, Robert Barro, and John Taylor), then why do so many politicians adhere to it?
Well, my personal thoughts on this are that politicians adhere so much to Keynesian doctrine for about four primary reasons:
1) Leftist-leaning politicians are in particular prone to lean towards Keynesian policies. I think this is because many on the Left never quite got over the fact that socialism failed. An important point to remember is that it wasn't until the Soviet Union finally dissipated that it became very apparent that socialism (central planning) flat-out did not work, that it could not work. Even conservatives and libertarians who knew this all along, were shocked at the degree of decay and devastation that was within the former Soviet Union when it finally broke apart.
I will us some quotes from Natan Sharansky's book The Case for Democracy: The Power of Freedom to Overcome Tyranny and Terror:
"In the early 1980s, when some were actually arguing that the Soviet Union could be challenged, confronted, and broken, the possibility was dismissed out of hand. The distinguished historian Arthur Schlesinger Jr., espressing the sentiments of nearly all of the Sovietologists, intellectuals, and opinion makers of the time, said that 'those in the United States who think the Soviet Union is on the verge of economic and social collapse, ready with one small push to go over the brink are wishful thinkers who are only kidding themselves.'" (bolding mine, and from the Introduction, page 7).
"When Reagan took office, and indeed throughout almost his entire presidency, few people believed that the USSR was seriously in danger of implosion. In 1984, the distinguished Harvard economist John Kenneth Galbraith noted admiringly that 'for the first time in its history the Soviet leadership was able to pursue successfully a policy of guns and butter as well as growth...The Soviet citizen-worker, peasant, and professional---has become accustomed in the Brezhnev period to an uninterrupted upward trend in his well-being.' That same year, Galbraith would also claim 'that the Soviet system has made great material progress in recent years' and that 'the Russian system succeeds because, in contrast with the Western industrial economies, it makes full use of its manpower.'" (bolding mine, and from the chapter Mission Possible, page 133).
(note John Kenneth Galbraith, the same economist who also had travelled to China and praised Mao's economy)
"In 1985, Paul Samuelson, the Nobel Prize-winning economist well known to American college students for his introductory textbooks on economics, was even more lavish in his praise for the Soviet's command and control economy: What counts is results, and there can be no doubt that the Soviet planning system has been a powerful engine for economic growth...The Soviet model has surely demonstrated that a command economy is capable of mobilizing resources for rapid growth.'" (bolding mine, from Mission Possible, pages 133-134).
So we can see from the above just how strong the Leftist belief in socialism was up until the Soviet Union collapsed. That socialism turned out, to use a modern phrase, to be the be Epic Fail of the Century, really irked many of them. Keynesian economics, of course, provides the second-best alternative. A free-market economy is what's needed, but it must still be guided by the "wise hand" of the government. To have to acknowledge that this doctrine of economics is also not true is just too much for many a Leftist.
2) A second reason is that Keynesian economics is the perfect justification for big-government spending. Politicians and bureaucrats love to spend money. That's how they win votes or win prestige. Elected politicians love to promise "freebies" to the general public, and bureaucrats who run government agencies are given an allotment of money to spend. Their job is to spend all of it and then they can demand even more money for their agency. If they fail to spend all of it, then the government will reduce their budget because they apparently didn't need all that money in the first place. To the head of any government agency, this of course doesn't look good. You want to get the largest budget possible for your agency, that is what wins you prestige and advancement. Failing to get a larger budget can get you fired.
In my own opinion, the Left has somewhat warped Keynesian doctrine because it doesn't call for structural increases in government spending; it doesn't literally call for big government. It in fact calls for fiscal consevatism, to run a balanced budget with a healthy surplus in good economic times, so that when a recession hits, you can gun up spending to stimulate the economy out of said recession, upon which you then curtail spending after the economy recovers so you can focus on paying down the debt and deficit you built up.
Instead, the Left has kind of perverted Keynesianism to justify permanent increases in spending. But nonetheless, any policy that calls for massive-scale government spending, and also claims that it doesn't matter how the money is spent even, just that you spend it, will be music to a politician's ears, even if only meant for recessions or to be temporary.
Hence, the Left is very reluctant to have to acknowledge that Keynesianism is no longer viable. We can see this especially with the Democratic party's so-called stimulus under President Obama, which was more of a wishlist of spending programs on all sorts of things Democrats have wanted to spend money on for decades.
3) It doesn't sound good from a political standpoint. One of the myths that much of the general public seem to adhere to is that the President, and to some degree Congress, "manage" the economy. This is of course, mostly nonsense. Congress can write laws, which create regulations over the economy, they can create regulatory agencies, and they can raise or lower taxes, all of which can have an affect on the economy, but otherwise, the economy is a mostly self-functioning mechanism of extraordinary complexity. The President even less-so, as the President does not technically raise or lower taxes, write laws or create regulations. They have to have the cooperation of the Congress for all of this if they want to do it. When Ronald Reagan "cut taxes," what that really means is the Congress passed tax cuts that Reagan asked for.
So if the economy is bad, and a politician is running for office, it doesn't really sound good if they say to a crowd, "Yes, the economy is bad, but there really isn't anything I can do about it. The government has little to no ability to actually stimulate the economy, all we can do is mantain a relatively hands-off approach and hope for the best." That doesn't work, at least not during elections.
The only exceptions would be if taxes are prohibitively high, and/or regulations are too excessive, then reducing regulations, reducing tax rates, allowing privatization of nationalized industries if a country has such, working to reduce a debt and/or deficit if it is too excessive, these kinds of things are ways a politician can create a direct economic turn-around. But once these things have been done, there isn't much else a politician can do.
No politician wants to say they are powerless to "fix" the economy or they won't get elected. The simplistic idea is, "The other guy/party was in office, the economy tanked under him/them, so 'obviously' he/they 'managed' the economy badly, therefore, vote for me and/or my party and we'll manage it correctly."
4) Ideology. Unfortunately, for most people, economics is not really a quest for truth. It isn't really a quest for knowledge about how economies actually work, it is more a set of debating points to argue for a set of policies which one has arrived at due to an ideology. Acknowledging that Keynesian economics is not viable is a severe blow to the ideology of the Left, because it means government needs to have a far more diminished role in the economy than they think it should have.
Fiscal Stimulus, RIP (also check out Mr. Cochrane's other articles on stimulus at his website: John Cochrane's Webpage
He says that the advocates of fiscal stimulus say that the economics profession lost its mind starting around 1975, but in his opinion (and that of other economists), it actually began to finally regain its mind around this time after having already lost it for many years prior. This is the view I would be much more inclined to hold as well, because starting in the 1930s with the introduction of Keynesian doctrine, economics also became dominated by socialists as well.
If you had walked into an economics department in the 1950s or 1960s and said socialism doesn't work and free-market capitalism is the best way to organize an economy, you'd have been considered a borderline radical or a nut. The late great economist Milton Friedman was for many years regarded as such and was called many nasty things by people who disagreed with him.
The late economist John Kenneth Galbraith for example, a Keynesian to the core, was also a believer in socialism, having traveled to Mao's China and praised it as a wondrous example of how to organize an economy (nevermind Mao killed more people via his socialism than pretty much anyone else in history, mostly through starvation).
ANYWAYS, I am going way off-topic, the point of this post then, is that, if modern macroeconomics mostly has rejected Keynesian policy except for a few holdouts such as Paul Krugman, Brad DeLong, Joseph Stiglitz, etc...(well-known stimulus skeptics include Greg Mankiw, Eugene Fama, John Cochrane himself of course, Robert Barro, and John Taylor), then why do so many politicians adhere to it?
Well, my personal thoughts on this are that politicians adhere so much to Keynesian doctrine for about four primary reasons:
1) Leftist-leaning politicians are in particular prone to lean towards Keynesian policies. I think this is because many on the Left never quite got over the fact that socialism failed. An important point to remember is that it wasn't until the Soviet Union finally dissipated that it became very apparent that socialism (central planning) flat-out did not work, that it could not work. Even conservatives and libertarians who knew this all along, were shocked at the degree of decay and devastation that was within the former Soviet Union when it finally broke apart.
I will us some quotes from Natan Sharansky's book The Case for Democracy: The Power of Freedom to Overcome Tyranny and Terror:
"In the early 1980s, when some were actually arguing that the Soviet Union could be challenged, confronted, and broken, the possibility was dismissed out of hand. The distinguished historian Arthur Schlesinger Jr., espressing the sentiments of nearly all of the Sovietologists, intellectuals, and opinion makers of the time, said that 'those in the United States who think the Soviet Union is on the verge of economic and social collapse, ready with one small push to go over the brink are wishful thinkers who are only kidding themselves.'" (bolding mine, and from the Introduction, page 7).
"When Reagan took office, and indeed throughout almost his entire presidency, few people believed that the USSR was seriously in danger of implosion. In 1984, the distinguished Harvard economist John Kenneth Galbraith noted admiringly that 'for the first time in its history the Soviet leadership was able to pursue successfully a policy of guns and butter as well as growth...The Soviet citizen-worker, peasant, and professional---has become accustomed in the Brezhnev period to an uninterrupted upward trend in his well-being.' That same year, Galbraith would also claim 'that the Soviet system has made great material progress in recent years' and that 'the Russian system succeeds because, in contrast with the Western industrial economies, it makes full use of its manpower.'" (bolding mine, and from the chapter Mission Possible, page 133).
(note John Kenneth Galbraith, the same economist who also had travelled to China and praised Mao's economy)
"In 1985, Paul Samuelson, the Nobel Prize-winning economist well known to American college students for his introductory textbooks on economics, was even more lavish in his praise for the Soviet's command and control economy: What counts is results, and there can be no doubt that the Soviet planning system has been a powerful engine for economic growth...The Soviet model has surely demonstrated that a command economy is capable of mobilizing resources for rapid growth.'" (bolding mine, from Mission Possible, pages 133-134).
So we can see from the above just how strong the Leftist belief in socialism was up until the Soviet Union collapsed. That socialism turned out, to use a modern phrase, to be the be Epic Fail of the Century, really irked many of them. Keynesian economics, of course, provides the second-best alternative. A free-market economy is what's needed, but it must still be guided by the "wise hand" of the government. To have to acknowledge that this doctrine of economics is also not true is just too much for many a Leftist.
2) A second reason is that Keynesian economics is the perfect justification for big-government spending. Politicians and bureaucrats love to spend money. That's how they win votes or win prestige. Elected politicians love to promise "freebies" to the general public, and bureaucrats who run government agencies are given an allotment of money to spend. Their job is to spend all of it and then they can demand even more money for their agency. If they fail to spend all of it, then the government will reduce their budget because they apparently didn't need all that money in the first place. To the head of any government agency, this of course doesn't look good. You want to get the largest budget possible for your agency, that is what wins you prestige and advancement. Failing to get a larger budget can get you fired.
In my own opinion, the Left has somewhat warped Keynesian doctrine because it doesn't call for structural increases in government spending; it doesn't literally call for big government. It in fact calls for fiscal consevatism, to run a balanced budget with a healthy surplus in good economic times, so that when a recession hits, you can gun up spending to stimulate the economy out of said recession, upon which you then curtail spending after the economy recovers so you can focus on paying down the debt and deficit you built up.
Instead, the Left has kind of perverted Keynesianism to justify permanent increases in spending. But nonetheless, any policy that calls for massive-scale government spending, and also claims that it doesn't matter how the money is spent even, just that you spend it, will be music to a politician's ears, even if only meant for recessions or to be temporary.
Hence, the Left is very reluctant to have to acknowledge that Keynesianism is no longer viable. We can see this especially with the Democratic party's so-called stimulus under President Obama, which was more of a wishlist of spending programs on all sorts of things Democrats have wanted to spend money on for decades.
3) It doesn't sound good from a political standpoint. One of the myths that much of the general public seem to adhere to is that the President, and to some degree Congress, "manage" the economy. This is of course, mostly nonsense. Congress can write laws, which create regulations over the economy, they can create regulatory agencies, and they can raise or lower taxes, all of which can have an affect on the economy, but otherwise, the economy is a mostly self-functioning mechanism of extraordinary complexity. The President even less-so, as the President does not technically raise or lower taxes, write laws or create regulations. They have to have the cooperation of the Congress for all of this if they want to do it. When Ronald Reagan "cut taxes," what that really means is the Congress passed tax cuts that Reagan asked for.
So if the economy is bad, and a politician is running for office, it doesn't really sound good if they say to a crowd, "Yes, the economy is bad, but there really isn't anything I can do about it. The government has little to no ability to actually stimulate the economy, all we can do is mantain a relatively hands-off approach and hope for the best." That doesn't work, at least not during elections.
The only exceptions would be if taxes are prohibitively high, and/or regulations are too excessive, then reducing regulations, reducing tax rates, allowing privatization of nationalized industries if a country has such, working to reduce a debt and/or deficit if it is too excessive, these kinds of things are ways a politician can create a direct economic turn-around. But once these things have been done, there isn't much else a politician can do.
No politician wants to say they are powerless to "fix" the economy or they won't get elected. The simplistic idea is, "The other guy/party was in office, the economy tanked under him/them, so 'obviously' he/they 'managed' the economy badly, therefore, vote for me and/or my party and we'll manage it correctly."
4) Ideology. Unfortunately, for most people, economics is not really a quest for truth. It isn't really a quest for knowledge about how economies actually work, it is more a set of debating points to argue for a set of policies which one has arrived at due to an ideology. Acknowledging that Keynesian economics is not viable is a severe blow to the ideology of the Left, because it means government needs to have a far more diminished role in the economy than they think it should have.
Thursday, January 6, 2011
Articles On Systems
http://www.boxtheorygold.com/ - check the articles section, this guy appears to have some good articles on the subject of building business systems.
The Importance of Business Systems
So one of the primary components to building up a business of any kind, that many people miss over, is systems. Systems are what let the business operate independently of you, the owner, and prevent you from having to micromanage every little aspect of the operation. Not recognizing this fact, I have a feeling (I don't know of exact statistics), is one of the reasons why so many businesses fail. Because so many of the people who start them just don't realize this.
The first person I saw to really point this out was Michael Gerber, in his book "The E-Myth." This book really opened my eyes up to how a business should be run, as I had never thought of it in this way. Some entrepreneurs will understand this kind of thing instinctively, but many others must be taught it. For example, many of the entrepreneurs and businessman of the 19th century understood all this about the need for organization, efficiency, details, standardization, etc...for an industry instinctively.
Michael Gerber's main points are that few of the people who start businesses are actually entrepreneurs and most people do not start businesses for entrepreneurial reasons. He says one of the main problems with people starting businesses is that they start them thinking that because they know how to do the technical work of a business, that they know how to run the business itself.
For example, being a fantastic hairdresser doesn't mean one knows anything about how to run a hair salon, or say a chain of hair salons. Being a great computer programmer doesn't mean one knows anything about how to run a software company. Being a brilliant chef doesn't mean one knows anything about how to run a restaurant, or a chain of restaurants. And so forth. Thus the person, who had a job and would like to seek "freedom," ends up now having to do their original job, but also having to do a bunch of other jobs that they likely do not even like in addition to not knowing really how to do them.
This then leads into the other big mistake of trying to do every little aspect of the business as opposed to systemizing things. Thus "the business" is what arises up as a result of the efforts of the person starting the business, as opposed to planning the business from the get-go and implementing systems. The true entrepreneur, on the other hand, will think up the concept of the business from the get-go, and think about everything from a business plan, to marketing, to systems implementation, so that it becoems a professionally-run operation.
This is very important because the systems do a few crucial things (also pointed out by Gerber):
1) They create a sense of ORDER out of the chaos of the world. The world we live in is extremely chaotic. Crime, pollution, loud noise, weather, life overall. As a result of all this chaos, people crave order. Businesses are a big part of this. When a person goes into a business, a chaotic business will turn them off. What turns people onto an enterprise is if it is ordered, efficient, where they can expect the same experience each time. For example, whether you go into a Starbucks in Los Angelos or a Starbucks in New York City, you get the same experience each time. Same with McDonalds. You know what to expect. And the reason a Starbucks operates the same anywhere, or a McDonalds, or a Wal-Mart, or whatever, is because of systems.
2) Systems allow quantification. Think about the different components of the business. Finance, accounting, marketing, sales, ordering merchandise, etc...(just a few off the top of my head). How can one really determine if their business is doing this stuff efficiently without use of systems? Quantification allows one to increase efficiencies and quality of service to customers.
3) Systems allow freedom. One thing pointed out is that while initially you may work in your business, you want to get where you are working on it, not in it. If you are working in it, you can't work on it. And in order to work on it, much of it must be able to function without you. This is how the freedom aspect comes in. The idea for most people in starting a business is to enhance their life, not take from it. And in order for the business to do this, you must have systems in place. What the systems allow is for the business to operate independent of the owner, so that they can enjoy other aspects of their lives.
One protest sometimes given to the idea of even trying to start a business by some people (I have seen it on Internet forums) is that they do not want to be "chained to a brick and mortar store" (or chained to any physical business). One woman said, "I would rather DIE than be chained to a B&M." These people have no concept of the idea of systemizing the business. They would end up working in the business as opposed to on it. Essentially, they would have bought themselves a job. Without their daily presence, the business can't function and they can't make any money.
Systems allow the business to function without them, so they can go see their child's baseball game or attend the PTA meeting or do whatever. A world-class business need not be big at all. One could operate a single bakery, but it be extremely professionally-run and truly world-class, to the point that some people might even think it is part of a chain, even though it is not. But because it is systemized, the owner doesn't need to be there every single day. They can hire a manager to run it with whom they meet weekly. This is part of how a chain of restaurants or stores is grown. Obviously if one starts a restaurant and wants to build a chain, they cannot be present at every single restaurant they open. Managers and systems are needed.
For the entrepreneur who would like to own multiple small businesses, systems are crucial as well.
The first person I saw to really point this out was Michael Gerber, in his book "The E-Myth." This book really opened my eyes up to how a business should be run, as I had never thought of it in this way. Some entrepreneurs will understand this kind of thing instinctively, but many others must be taught it. For example, many of the entrepreneurs and businessman of the 19th century understood all this about the need for organization, efficiency, details, standardization, etc...for an industry instinctively.
Michael Gerber's main points are that few of the people who start businesses are actually entrepreneurs and most people do not start businesses for entrepreneurial reasons. He says one of the main problems with people starting businesses is that they start them thinking that because they know how to do the technical work of a business, that they know how to run the business itself.
For example, being a fantastic hairdresser doesn't mean one knows anything about how to run a hair salon, or say a chain of hair salons. Being a great computer programmer doesn't mean one knows anything about how to run a software company. Being a brilliant chef doesn't mean one knows anything about how to run a restaurant, or a chain of restaurants. And so forth. Thus the person, who had a job and would like to seek "freedom," ends up now having to do their original job, but also having to do a bunch of other jobs that they likely do not even like in addition to not knowing really how to do them.
This then leads into the other big mistake of trying to do every little aspect of the business as opposed to systemizing things. Thus "the business" is what arises up as a result of the efforts of the person starting the business, as opposed to planning the business from the get-go and implementing systems. The true entrepreneur, on the other hand, will think up the concept of the business from the get-go, and think about everything from a business plan, to marketing, to systems implementation, so that it becoems a professionally-run operation.
This is very important because the systems do a few crucial things (also pointed out by Gerber):
1) They create a sense of ORDER out of the chaos of the world. The world we live in is extremely chaotic. Crime, pollution, loud noise, weather, life overall. As a result of all this chaos, people crave order. Businesses are a big part of this. When a person goes into a business, a chaotic business will turn them off. What turns people onto an enterprise is if it is ordered, efficient, where they can expect the same experience each time. For example, whether you go into a Starbucks in Los Angelos or a Starbucks in New York City, you get the same experience each time. Same with McDonalds. You know what to expect. And the reason a Starbucks operates the same anywhere, or a McDonalds, or a Wal-Mart, or whatever, is because of systems.
2) Systems allow quantification. Think about the different components of the business. Finance, accounting, marketing, sales, ordering merchandise, etc...(just a few off the top of my head). How can one really determine if their business is doing this stuff efficiently without use of systems? Quantification allows one to increase efficiencies and quality of service to customers.
3) Systems allow freedom. One thing pointed out is that while initially you may work in your business, you want to get where you are working on it, not in it. If you are working in it, you can't work on it. And in order to work on it, much of it must be able to function without you. This is how the freedom aspect comes in. The idea for most people in starting a business is to enhance their life, not take from it. And in order for the business to do this, you must have systems in place. What the systems allow is for the business to operate independent of the owner, so that they can enjoy other aspects of their lives.
One protest sometimes given to the idea of even trying to start a business by some people (I have seen it on Internet forums) is that they do not want to be "chained to a brick and mortar store" (or chained to any physical business). One woman said, "I would rather DIE than be chained to a B&M." These people have no concept of the idea of systemizing the business. They would end up working in the business as opposed to on it. Essentially, they would have bought themselves a job. Without their daily presence, the business can't function and they can't make any money.
Systems allow the business to function without them, so they can go see their child's baseball game or attend the PTA meeting or do whatever. A world-class business need not be big at all. One could operate a single bakery, but it be extremely professionally-run and truly world-class, to the point that some people might even think it is part of a chain, even though it is not. But because it is systemized, the owner doesn't need to be there every single day. They can hire a manager to run it with whom they meet weekly. This is part of how a chain of restaurants or stores is grown. Obviously if one starts a restaurant and wants to build a chain, they cannot be present at every single restaurant they open. Managers and systems are needed.
For the entrepreneur who would like to own multiple small businesses, systems are crucial as well.
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