Build, onwards.

“When you build, you’re thinking of the future and acting in the present. To me, this is the essence of leadership: to see a goal, somewhere in the future; to commit oneself to making it real; and to change – often in difficult ways, at personal cost – to achieve it.”

This was an awesome read for me. Hope you enjoy it as well!

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October 22, 2013 · 4:03 pm

Start Something That Matters – Blake Mycoskie (3)

Hi there.

It’s been three postings already since we started discussing about SSTM. In this post, we will discuss how the ‘crowd factor’ enhances the TOMS business model.

The crowd factor

This is a pretty obvious aspect, but a definite counterargument for the “better ways to help” criticism. The fact that there are better ways to give to the people in need is quite undisputed. In fact, you can donate your time, money, and other resources to maximize giving. This much is simple.

However, not everyone will donate their money and time to these causes. I believe there are two key factors why:

–          On donating time, people are often uncomfortable to step out of their comfort zones. Although donating time can be an exciting prospect for the giver, it takes a great amount of courage and determination to set aside this time to help others.

–          When people donate money, they want to see where it goes. Specifically, as increasingly noticed by non-profits and NGOs around the world, people want to see something tangible and visible ‘in exchange’ for their donations. This is not your typical give-and-take, but they want to see the results of what their goodwill has been. UNICEF and other leading NGOs such as World Vision provide one-on-one donor for a child, and provide continuous updates on the child’s status. This is the “tangibility” and “visibility.”

 

Giving is special when the average Joes and Janes unite

Giving is truly special if it is done by a crowd that unite under a cause. The math is simple. A million people donating a dollar each, and ten people donating ten thousand dollars each are two quite different numbers. If a million people unite under a same cause, it strengthens not only the cause, but the supporters as well. It verifies that the cause you are working towards is worthy of attention from the other million people. This is strength in numbers.

Indeed, there are people to whom this “better way to give” argument applies. These are people who are active givers and donors – people who are actively involved with a non-profit (or two), or who donate a large portion of their income for charitable purposes already. It is a pity that there are much too few of these great people.

For these people, they will end up finding a way to give. Even if the UNICEFs and World Visions of today did not exist, they are the truly charitable ones that will fly over to war-stricken areas to donate their skills, and start funds to help people who are in need. Although these people could be TOMS fans, TOMS targets a wider range of people. This is quite similar to the economic principle of price discrimination.

To the average people who are too ‘busy’ living their respective lives (to be honest, some of our authors are guilty of ignorance as well), the prospect of engaging in giving through shopping for fashionable shoes appeal greatly. Really, it is not only about the giving. I am buying my own shoes, which happen to be fashionable, but I get to help someone in need too.

The charitability discrimination

Price discrimination is defined as “sales of identical goods or services are transacted at different prices from the same provider” as per Paul Krugman’s book on international economics. It essentially means that if I want that candy and willing to pay $5 for it, and my friend wants it for $2, as long as the cost structure makes sense, the seller will sell it to both of us at these different prices.

As applied to charity, this sounds a bit different. From the charity perspective, the good being “transacted” is the actual act of helping (i.e. providing the same pair of shoes, for TOMS).

Let us assume that my fictional neighbor, who is a part of Doctors without Borders and regularly donates 20-30% of his income to various charities, will ‘buy’ this good by actually purchasing shoes and giving it to those who are in need. Maybe he will buy a thousand pairs while he is at it, too. Perfect.

But for me, a poor recent university graduate, my willingness to purchase this ‘good’ is low. If I buy a pair of TOMS, my theoretical purchase price for this giving-shoes “good” is:

The price that I paid for a pair of TOMS – the happiness that I get from TOMS = price I paid to give another pair of shoes to a shoeless child in Argentina

Our apologies on this theoretical translation. What we mean to say is, TOMS has effectively created a method to get the majority of people who were previously not ‘willing’ enough to donate, donate. It is in human nature that we are born good. We want to help people, but at the right ‘price.’ TOMS, by this creative merging of giving and shoe-buying (and lots of marketing and public-relations activities and superior brand-building), has created an entirely new crowd of givers, that when put together, is a force to be reckoned with.

Our takeaway for today is simple. There are many ways to give. TOMS is just one of them. If one argues that there are better ways to give than TOMS, it seems like no better argument than “Don’t go to Wal-Mart. There are other ways to buy your groceries.” How is this even an argument? TOMS has redefined the giving paradigm. This is why I believe that the Charitable Corporation is the next big thing in business – giving should not be a side activity for corporations. CSR should not be a separate division, but instead a part of operations.

Giving should be a way of life.

 

How do you like to give? Do you donate yourself? How often, and why? We want to hear from you.

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Start Something That Matters – Blake Mycoskie (2)

Hi there.

Welcome back. In the flurry of excitement that usually comes with ‘new things’ – we forgot to sort out an important issue. As it will be updated in About Us page, we have a couple of writers. Each of us have very distinct writing styles, and we hope that you find the mix of our styles doing more good than bad to the overall blog.

Getting back to Blake’s book, we were talking about the mergeability of charity and profit-seeking business…

Charitable Cause + Business = Good Business?

There are many opinions about Blake’s newly-introduced business model. Some say that it is an embedded corporate social responsibility (CSR) strategy, and that the organization’s goal is ultimately to give out shoes. Some would argue that TOMS is a primarily charitable cause, and this image distinguishes TOMS as a “non-profit organization” (but really, TOMS is not one).

In my opinion, this is an excellent combination of a strong story and compelling storytelling that leads to emotional appeal. TOMS manages to market itself as the champion of shoe giving. Blake’s official title in TOMS is – very befittingly – the Chief Shoe Giver. This is what drives the TOMS’ success – a story that has universal appeal, with several marketing condiments such as large-scale events that strengthen the image – such as the One Day Without Shoes event, held worldwide.

This business model has drawn much critics:

–          TOMS has been denounced as a ‘profit-seeker disguised as charity’.

–          Many argue that there are much better ways to help the children in poorer countries, other than buying TOMS. These methods would include microfinance, donating goods directly, and other much more ‘efficient’ methods of giving directly to those who need it.

–          TOMS is also accused of squeezing out local shoemakers in the regions that the famed Shoe Drops occur.

I strongly believe that this defines a new business model in our society. As for my opinions on the above criticisms for TOMS:

The profit-seeker in disguise

TOMS is a for-profit organization. Although associated with a very strong image of giving, TOMS seeks to make money, and preferably lots of it. In disguise – I would argue otherwise. Blake’s original mission of donating shoes has now become a sensational, globally-renowned event called Shoe Drops. He is giving out the shoes. And he is making money.

In essence, this criticism argues that if you want to give, you should not keep any for yourself – which makes very little sense if put simply. If applied to corporations, the public sentiment seems to believe that it is a socially inept thing to make money while helping others. Individual donors get tax breaks from the government to donate, and they get the refund and the praise altogether. This appears to me as a very classic example of a double standard.

Better ways to help the children

Obviously, there is no direct rebuttal against this criticism. However, this criticism is also misguided in essence. Those who buy TOMS are happy to give, but their sole purpose is not to give. There is a dual purpose that is served more or less equally, which are giving shoes, and buying shoes of their own. There are always better ways to help the children in need. Instead of buying your own shoes, you can buy two pairs with the same money, and donate them both. However, to serve these two purposes at once, TOMS provides a very convenient and popular way of doing so (on popularity, we will discuss this in our next post).

I try to keep my posts to around 500 – 600 words. Let’s carry on next time – we apologize if this post carries on for too long. This has been a passionate topic for one of our writers. 

What do you think about the TOMS business model? Should corporations make more money from helping the people in need? Is this taking advantage of them? We want to hear from you.

Follow us on Twitter @Read_Innovate.

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Start Something That Matters – Blake Mycoskie

Hi there.

Start Something That Matters is our first book. This is the story of Blake Mycoskie, the founder of TOMS Shoes. Actually, this book is the driving factor from which we got the idea to start the blog.

In short, this book is more like an entrepreneur’s guide to… be entrepreneurial. Blake started TOMS with nothing more than a vision. I know this sounds like dozens of other “Entrepreneurship for Dummies” books out there. But each entrepreneur’s story is different, and TOMS was special for two reasons:

  1. Blake started off with very limited access to capital.
  2. Blake successfully merged charity and profit-seeking.

No Capital

This aspect stood out to me immensely. As a poor recent university graduate, and a severely under-informed wannabe entrepreneur, I was not aware of the numerous seed funding opportunities out there. However, Blake has taught me a very important lesson, both in entrepreneurship and life in general. To sum this lesson up, I borrow the words of Benjamin Franklin:

“Time is money.”

I overuse this phrase, and as you read on in the blog, you will find this phrase come up from time to time. As applied to entrepreneurship, this struck me rather differently. When I talk to people who have aspirations of owning their own company (other wannabe entrepreneurs like me), a lot of them would spill their hopes of becoming a hotshot entrepreneur, and stepping into glossy C-suite offices before their thirties. The excuse to why that has not happened is usually very similar: either time, or money. Although Benjamin Franklin has been wise to point out the ‘mergeability’ or ‘interchangeability’ between the two, these two are often perceived and acted upon as separate resources.  

Blake, in his book, argues otherwise. He, and his firm, are the living proofs that this separation is not true. In fact, there are many examples, worldwide, that this is not true – when people act on their great ideas, it is with sheer passion that they survive the inevitable cash crunch. People do not start great companies with a load of money in their bank accounts. In fact, Blake argues that the less money you have in running a start-up, the better – the venture becomes lean, and people learn to save. When the people learn to save, it is engraved in the venture’s culture.

In a start-up, the founder’s time and opportunity cost translate directly to valuable assets. Blake started TOMS with a couple of boxes of sample TOMS shoes, and he spent his every moment acting on, and thinking about, the TOMS business. He was the designer, the customer service representative, the sales guy, the delivery guy, and lastly (and probably the least important then), the CEO.

Capital constraint is the least important thing that should restrain entrepreneurship. Money is not an issue – if you have the passion large enough to cover for the monetary shortfall.

Or alternately, you could star on the Dragon’s Den, dance with the Dragons, and sell a stake in your business (and your soul too).

We will continue with the charity aspect in our next post.

 

What do you think are the key aspects of starting a business? Why is TOMS so successful? How was our first blog post? We want to hear from you.

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October 19, 2013 · 4:28 am

Why we started this blog.

“A truly good book teaches me better than to read it. I must soon lay it down, and commence living on its hint. What I began by reading, I must finish by acting.” – Henry David Thoreau

We all gotta start somewhere. As the site administrators of the blog, we will be regularly posting great articles and insightful books that we read. We are new to this – so please bear with us as we grow better!

Thank you – The Reading Entrepreneur

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October 19, 2013 · 3:16 am