8-23-17 BUSINESS BY CARLSON

Content provided by Paul Vaaler of the Carlson School

It’s D minus 1 in Minnesota. Yes, we are only one day from when the the Minnesota State Fairgrounds emerge from the mists like Brigadoon and come to life: police officers and sheriff’s deputies from every county and city of the state will be strolling through the hippodrome or by the Ranger station; the smell of mini-donuts, cheese curds, and all things fried and on a stick will be wafting through the Midway; anyone running for elected office will make an appearance, shake hands, and meet any citizen of any stripe as if the terms “Internet” and “media consultant” had never been invented; and WCCO Radio will have set up at Carnes Avenue between Nelson and Underwood Streets to start spinning its home-spun wisdom for any and all to hear and see. You just can’t beat it, at least not for the next 12 days.

But wait, even with the imminent emergence of Brigadoon in Falcon Heights, there are still local and not-so-local business stories to relate. Here are a few:

Minneapolis-based Target just finished a $10 million make-over of its downtown Minneapolis store next to the company’s corporate headquarters. Here’s where you can learn more about the make-over: http://www.startribune.com/target-s-nicollet-mall-store-makeover-gives-glimpse-into-plan-to-retool-stores/441056103/. The newly-revamped store is a far cry from the vinyl-floored, florescent bar light-lit stores you and I shopped at in the 1970s and 1980s. Now there are parquet floors, wood paneling, track-lighting and great-looking clothing, grocery, and wine/beer/spirits displays. Target has definitely upgraded its chic. But is it still cheap-chic, the wonderful descriptor and apparent secret of Target’s success in the first 40 years of its business life? Or has Target finally become like its parents, Dayton’s and Mervyn’s, in its middle age? Answers to those questions are critical to understanding the future of this storied Minnesota firm. Target CEO Brian Cornell is going to spend nearly $1 billion in the next decade to give similar make-overs to more than 1500 stores in the retail chain. The idea is to make the stores more attractive destinations for customers to visit rather than just stay at home and buy their retail goods from Amazon via the Internet.

Some business terms evoke both a product and a brand: Kleenex (branded tissues); Xerox (branded dry-paper copies); and Jeep. Our fathers and grandfathers used one to drive from Kasserine Pass to Prague during World War II. Today, Jeep brands are synonymous with driving through the American outdoors. So it’s more than a little jarring to hear that Jeep may soon be Chinese-owned. China-based Great Wall Motor Company is preparing a bid to acquire the Jeep line of vehicles from Fiat-Chrysler. And Fiat-Chrysler seems to be quite receptive to the idea. Here is where you can learn more about this potential deal: https://www.nytimes.com/2017/08/21/business/jeep-fiat-chrysler-great-wall-china.html. F-C’s CEO, Sergio Marchionne, is interested in selling Jeep to Great Wall, and maybe the rest of the corporation valued recently at about $19 billion. Marchionne’s reasoning is pretty simple. The costs of R&D in autos are too high for smaller producers. Acquisition by Great Wall of Jeep, Jeep and Ram, or the whole of F-C would inject much-needed capital to fund the next generation of hybrid, all-electric, and or hydrogen powered, driverless cars. And the Chinese have the cash. Great Wall is sitting on billions in idle cash while the Chinese government is sitting on trillions in US dollar reserves. How would the Trump administration look at a such a deal? After the departure of self-avowed economic nationalist Steve Bannon, probably positively.

My Law School faculty colleague, Richard Painter, has been an eloquent (and persistent) commentator on the conflicts of interest that plague a US President who also owns and continues to benefit from (if not actively manage) various businesses catering to people also seeking the US President’s political support. Richard makes what I think to be a pretty persuasive argument that this mix of business and politics violates all sorts of political ethical standards and US Constitutional constraints –see the Emoluments Clause. Let’s leave that aside for a moment. The mix of business and politics actually provides us with an interesting opportunity to gauge Trump’s popularity. Usually, that’s assessed by periodically polling the American people. But in a world where only good (high approval) polling numbers are true and bad (low approval) polling numbers are fake news, let me offer an alternative. Let’s instead look at event bookings at Trump’s Mar-a-Lago resort in Florida. After his election last November, bookings were brisk. More recently, however, many organizations have been cancelling those bookings. This week, the cancellations included Gateway for Cancer Research, the Unicorn Children’s Foundation, and the Palm Beach Preservation Foundation. Last week, it was the Red Cross. More than a dozen large philanthropic organizations have cancelled events at Mar-a-Lago. These organizations are scrambling to avoid association with a (currently) very unpopular US President. So Gallup, Ramussen and other pollsters beware. We can learn more about the popularity of our first “business” president by watching the bookings ebb and flow at Mar-a-Lago.

I often look with some skepticism at number crunching –and I do this for a living– but I’m willing to consider an estimate from freelance writing Stacey Leasca that last Monday’s solar eclipse cost the US $700 million in lost productivity. Here’s where you read more about how Leasca backed out that estimate: https://www.forbes.com/sites/timworstall/2017/08/21/todays-eclipse-isnt-causing-a-700-million-loss-in-productivity-it-just-isnt/#7d9734842a4f. Many of us took Monday off to see what may have been a once-in-a-lifetime total eclipse tracking from Oregon to South Carolina. That’s a loss, but one that is planned. Leasca’s estimate relies more on the millions of us who slipped out from work for that long lunch hour –two, three four hours– with pay. If the cashier at the grocery store stepped out for two hours rather than one, then we lost his productivity and he caused a longer line at the check-out counter, resulting in more lost productivity. But here’s another way to think about last Monday’s moment of celestial majesty. All of us gawkers were reminded of something so much…bigger than our daily routine. It was the ultimate science lesson, mixed in with more than a bit of spirituality. Let’s not call it lost national productivity. Let’s call it national continuing education. We’re all a little better informed (and maybe just a little better) people for last Monday’s shadows.

Next Wednesday (and Thursday), I’ll be out at the WCCO Radio booth located at the Fairgrounds on Carnes Avenue between Nelson and Underwood Streets. I’d love to meet any and all of you able to stop by the booth and watch the Business by Carlson segment running from about 8:20-8:30am on August 30. And if you can stick around until 8:50am, I think Dave Lee will let me ask some of you trivia questions about the Carlson School and the University of Minnesota and hand out some great Carlson-Minnesota kitsch. Do come. And have a great rest of the week!

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