Escapable Logic

Dr. Weinberger would surely remind us that the author probably would have said "consumer" yet a third time except for the stylistic redundancy. The Economist's authors certainly don't get the difference. The Internet-as-threat corporate assumption captures the management malpractice that Managerial Capitalism practices. In what way could a new, essentially free, global distribution channel be an "online threat"? But that's another issue.

As for The Economist's excitement at their discovery, well, duh. Unless the DotBust had stopped the packets in their tracks in 2000, our daily transactions were destined to move onto the Net and be mediated by the discoveries we make here. As a devout Tcpipian (tee-see-pip-ee-un), I worship the power of packet-switched communications - TCP/IP - to transform our world by delivering the greatest good to the greatest number of users of our shared socioeconomic operating system: a common wealth if ever there was one. Absorbing the Economist's breathless announcement inspires yawns around the TCP/IP campfire, but all such caught clues bring welcome news of heathens being converted. Nothin' but Net was slow to be adopted as the official position of the world's leading economic magazine, but all these revolutions of the past third century were absolutely embedded within Vint Cerf's big bang, and inevitable the moment he and his buddies conceived the packet revolution. It was the beginning of the world everyone gets to live in now. As we say around our altar, "In the beginning was the word and the word was TCP/IP and the word was with TCP/IP."

We Tcpipians simply assume that the Internet changes everything and was always going to. The DotBoomBust was just the latest example of amateur speculators striving to profit from change they really didn't understand. After the fall, the packets kept moving, so the Internet-based economy (distinctive from the Internet economy) remained inevitable.

Sound Insights

There are so many miracles around us, you just know that a disruption point is around the corner. A disruption point happens when the facts of a culture evolve so far past its operating assumptions that its entire superstructure of beliefs and assumptions collapses, to be replaced by a whole new assumption set, cleaner, more useful and relevant. These streamlined new paradigms (sorry, it's still a good word) take a while to accumulate the barnacles of greed and fear that intermediaries slap on our collective world view. It's like switching from Explorer to FireFox.

FireFox is absolutely an economic miracle, as is Linux, Apache, MySQL and Perl/PHP. The guiding assumptions of managerial capitalism simply cannot admit the possibility that these unfunded, unowned, self-organized juggernauts of our economic reality are possible at a level that affects commerce and its global metrics. The old white men whose influence is accepted but illusory cannot conceive of these spontaneous emissions of our collective passion for stuff to just work–highways of the mind and money flow, without the toll booths.

But those are pretty arcane perceptions. How about an example involving in-your-face realities permeating a field that every male and certainly every geek, maintains a sizable mental partition for. Yep, we're talkin' about the biggie: Your Next Stereo.

Guys, you know what I'm talking about. Even if you're not in the market, you feel the requirement to have a clue in this domain. Here they are.

When Economic Miracles Happen, Listen Up

The Economist's point is illustrated by a virtual company in a field I know a lot about, performing miracles that should be literally impossible. I've been an audio geek forever. Like Doc, I also built most of the old Dynaco kits designed by the legendary David Hafler, and later the Hafler DH500. I've still got a couple of those old dorky RCA cables that Dyna shipped: beige wires with brown connectors. I managed the college radio station, DJ'ed a daytime and evening show, and have spliced quarter inch tape on big Ampex decks, etc. My sister was plugged into the NYC jazz scene in the early 60's, so I hung out with Zoot Sims and Al Cohn and Nat Hentoff and assumed with them that the world would continue to improve. I like to read the audio reviews and admire the gear from a distance but still assume at a deep level that no stereo can be worth more than a thousand bucks. It's a sentiment reinforced by the fact that most professional musicians don't seem to care what comes out of the gear, so they aren't caught up by the toys like those of us who really don't know what we're hearing.

In those days, the designers and marketers got it. Here's a quote from the late Bob Tucker, Dynaco's master of ad copy and lucid instruction manuals:

Separately, there are a few areas in even the best designs where cost considerations are evident, but the conscientious audio designer makes sure that to the best of his knowledge, they don't impose sonic strictures. But the more expensive approach does not always bring improvement -- audible or otherwise. Certainly improvement does not necessarily follow from increasing complexity. More likely, the reverse is true. Progress is made when you scientifically systematize and quantify noted effects. This industry has been besieged by a number of unsubstantiated hypotheses (and its share of sales malarkey) of late.

We need more scientific methodology so there is less 'caveat emptor', even if the snake oil has been largely reserved for those who can (or wish to) afford it. Objective double-blind testing has eradicated some long-held audio myths -- to my ears at least. Not that all amps, or preamps, sound alike -- but a lot of good ones are not necessarily distinguishable. Sure, use a more expensive part if it really does sound better, but don't waste a lot of peoples' money if you can't prove it. The best designs evolve from those individuals and companies who maintain a healthy skepticism for unsupported postulates, but are quick to grasp the provable achievements. The real art is bringing the greatest good (music) to the greatest number.

Years ago in Denver, I knew a couple of guys who started a little stereo shop called Listen Up and built it into one of the most successful high end audio and home theater stores anywhere. That's where I watched as Mark Levinson taught the industry how to BMW-ize audio gear: evolving from lean and mean into overwrought gear, overdesigned as a meme, not as a benefit. Listen Up itself seems to have similarly jumped the shark in its web design, as its convoluted URL suggests. If you're in Safari, you can't even go there.

Where's the Love?

Over the last couple of decades, the fun went out of visiting audio showrooms. I miss the camaraderie of the old days, hangin' with sales guys who listened to music, not gear, taking the time to enthuse over the latest Naxos release. Instead, I've felt my inner, discriminating customer forced into the dry role of gear consumer, and I've been put off by the amazing hype that's grown up around audio gear. Even as low end systems improved exponentially, the cost of high end systems rose through the stratosphere, buoyed by hype and the credulity of males who didn't understand the gear, the music or the fact that most speakers are listenable at 3 watts.

I also know enough about the biz model to feel all the thumbs on the scale of their pricing: inefficient manufacturing, byzantine distribution channels, snobbish dealers convincing the rubes that they really need $4,000 wires (wires!) to connect $20,000 speakers to $10,000 amps. The whole rococo edifice is driven by the meatspace distribution ritual by which manufacturer's inventory is scattered through all the showrooms, devouring cash while dealers mortgage their homes to feed the arcane "floor plan" financing that burdens most of the gear you see outside of the big chains. The only real shot at college for their kids is to soak you for the cables.

It's a byzantine cathedral of commerce when maybe all we need is a wedding chapel.

Houston, We Have Breakthrough

Last month I read an interesting review in Ultimate AV Magazine by John Gannon, a reviewer of high end audio gear, evaluating speakers from a little (I assumed) company near Denver that is building fine loudspeakers and a stellar reputation for listening to, responding to and amazing its customers. Mr. Gannon first notes that the last two high end speakers he'd reviewed were built in China and they were damn good, though he suspected they were made by the same box builder. As the intro to a detailed audiophile review, he felt compelled to explain how some speakers can be so good at their price:

Not long after those reviews, a buzz began in the Internet chat rooms about a new speaker company taking advantage of this new situation—and sharing the savings with the average consumer by selling their speakers directly through their website. This leapfrogged two middlemen: the local factory representative and the displaying dealer. I've spent much of my life on retail sales floors, and at first I was skeptical—how would they give the convincing demonstrations that so many folks need before they decide which speakers to buy?

Well, the visionaries in the AV123 group, which imports and distributes Rocket Loudspeakers by Onix and is led by industry veteran Mark Schifter, already had that figured out. Products can be returned within 30 days, no questions asked, as long as they're in original condition. This allows any potential customer to audition them at home for far longer than most retailers can handle. Because the room and associated equipment can greatly affect the speakers' overall presentation, this policy is most welcome.

But Schifter's group does more than just market products. In an arrangement that goes deeper than the standard relationship between an original equipment manufacturer (OEM) and a marketing firm, AV123 owns more than half of the plant in China. The factory may make products for other companies, but when it comes to the Rocket speakers, Schifter says he controls the quality and craftsmanship throughout the manufacturing process.

It turns out that Nothin' but Net is not news to Schifter. The rise of his Net-based vision was purposeful and long-range, now well into its second decade. For 13 years, he's designed his ClueTrained value chain as carefully as the speaker enclosures. Here's an article from Stereo Times, written by Mike Rofared in the last month of 1999, The Netway or the Highway:

This is how products and technology which just a year or two ago were not only unavailable to most, but which also cost, for example, seven or eight thousand dollars, will soon be available for less than seven hundred dollars. Quite simply, this phenomenon can be summarized by what I like to call "The Netway." Ah, yes, another mystery solved with a catchy title, you say? But then explain to me, if you will, how the Netway come into being in just a few blinks of the proverbial eye?

My answer is simple. For although it has been said that "behind every good man there is a good woman," I will say that so it is true that "behind every good product or marketing idea, there is a person or persons of great vision." And when you're talking about the Internet in the microcosm that is audophilia, such a person is Mark Schifter. For the uninitiated, Mr. Schifter, in the minds of many industry pundits, went way out on a limb several years ago (or was it only 1992?) to predict that the Internet would change the consumer electronics industry forever. Schifter's prophecies also suggested that the Internet would force changes on the traditional distribution systems of consumer electronics, and would promote, no, demand international partnerships between manufacturers in one country and consumers in another.

What's amazing about Schifter's totally virtual business is that they are selling the most intimate sensory experience you will seek from any product not coated with Astroglide. But somehow, they've teamed up with their customers to create more expectations of value online, in silence, than other manufacturers can create in the blaring showrooms they're forced to support in most cities. The other thing that's happened is that the good reputation that Mark Schifter had built over the last 30 years has exploded into a global near-reverence for how he and his people treat their customers. Unlike the Economist, they don't know the word consumer. Instead, their customers are co-creators of their collective experience: of its products and of the message they are carrying to the world together.

So here's the story I pieced together from customer comments and third party reviews of Perpetual Technology's business model, which is totally dependent on Net-enabled communications, globalization, a vibrant customer forum and a friendship between 2 audiophiles, one Chinese and one American. They've run through 3 manufacturing plants and opened their new, 180,000 square foot facility in China last fall, complete with living quarters, cafeteria, laundry, day care, motor scooter repair– even more than the VCs funded during the DotBoom. But Mark and his Chinese partner are doing it with customer money, and with that money, he says, "We have created a family." The quote is from a video clip from last fall's Consumer Electronics Show. If you want to really get the Economist's cover story, watch the five minute video and skip the clueless reporting from the world's leading magazine on economics & business. Besides, it's disappeared behind their costwall already, evidence enough that the customer doesn't rule at the good ol' Economist.

After decades of designing and building and selling audio gear, Mark Schifter formed a friendship and business partnership with Mr. Pu, a manufacturer in China. Together they built a world-class plant and started building the gear they way they wanted to (mostly loudspeakers), and learned how to ship their lustables in container lots directly to the Perpetual Technologies warehouse in Broomfield, north of Denver. Since my grandbabies live in the adjacent zip code, and having organized the adjacent interchange on the Denver-Boulder Turnpike serving them, I could not ignore the story of globalization done so right that it brings tears to the eyes of this devout Tcpipian.

Mark Schifter and Mr. Pu are taking advantage of the craftsmanship that hasn't yet been first-worlded out of China. I assume there are few MBAs in China. Every reviewer of their speakers is amazed by the quality of the rosewood or macassar veneers and Steinwayesque ebony they use to skin the super-dense MDF enclosures. I know this sounds like a commercial, but none of this would be possible without their Xpertweb-like aggregation of people who operate like partners, not employees.

It turns out the world's best raw loudspeakers are really not that expensive, even such exotica as the renowned French Vifa Ring Radiator tweeters. What drives the cost of speakers north of your first mortgage is the amazing overburden of plant, marketing, MBA's, distributors, inventory, staff, receivables and all the other yadas that have turned the American economic miracle into a quagmire of painful unresponsiveness and hype that aims to hide the elephant.

Can You Hear Me Now?

Perpetual Technologies' business, you discover at AV123.com, is a shopping cart wrapped around a discussion forum. As far as I can tell, there is no customer outreach program besides the Community Forum at the AV123 web site. Like any business, they try to keep the product info fresh, but there's only so much you can do when you're selling hardware. The action's at the second tab after "Products": "Community", where Mark and his small staff commune with the customers intermittently, while the customers commune with each other 24/7/365.

This is where the company's folklore is created, vetted and preserved for posterity. This is where Mark Schifter has been elevated to a kind of Patron Saint of each customer's quest for the Holy Grail of audio yumminess ("Members: 2,273, Threads: 7,772, Posts: 138,879"). Those are the metrics of the new economy, not units shipped or revenues.

Mark cannily celebrates and promotes the connection with his family of customers. He's running a global enterprise, selling a 40 foot container of high value gear every week, plus making OEM goods for his competitors in his 180,000 s.f. facility. He travels all the time, but where is his heart? You'll find him hanging with his customers and employees on the forum (vBulletin Version 2.3.5, Jelsoft Enterprises Limited), whether he's in China or Boulder.

The tribal legends and myths abound. Receiving a complaint about some speakers that weren't sounding right to their new home, Mark flew to Phoenix to troubleshoot them in the customer's home. He invites people in the Denver area over to listen to his set up, pardon the mess in the basement. When Mark had some health problems recently, he reported it as spontaneously as a new speaker veneer, and the outpouring was instant and human, like your favorite uncle deserving your support.

On my current trip to Denver, yearning to relive that old audition feeling, I called AV123 and a pleasant young man named Steve Ozmai regretted that they don't have a showroom, since they just send the gear out and trade it back in 'til everyone's happy. Apparently they do have space to re-ship a 40 foot container of components every week, each one wrapped in its white cotton bag with the matching white gloves. Steve's email contained nothing novel for him, just for me, the former audiophile customer relegated to expendable consumer:

7.1 Channel Explosion, with Full Reverb

This is the power of authentic voices married to the correct vision. Does business get any better than this? The crucial skills for leaders evolve, and we're at the end of the rule of the perfectly groomed plastic CEO, fiddling with his coat button as handlers direct him to the podium to explain why the goals are unmet but the bonuses remain robust.