All around the world, people drive Toyota cars, they built up a reputation as good cars to own. The other car companies, thankfully, have made remarkable improvements and are competitive. The architect of the Toyota Production System was Taiicho Ohno and a book was recently published Taiicho Ohno’s Workplace Management, Special 100th Birthday Edition by McGraw Hill, 2013. The book gives insights into how Mr. Ohno approached his job and has lessons for everyone, whether you work in manufacturing or not.

1. Need a strong sense of humility – if the normal person is right 50% of the time, he is wrong 50% of the time. The trick is therefore to change gracefully. Try something, measure the results and if it does not work, correct and try again.

2. Why Mr. Ohno believes we are wrong 50% of the time – look at the letter T. It looks like the vertical line is longer than the horizontal line, in fact they are the same length. It is called an optical illusion or misconception. There are many things in this world that we cannot know until we try something. Very often the results will not be what is expected. If you try and it is not correct, admit a mistake and try again.

3. Misconceptions Hidden within Common Sense – often times things are set down in particular way because they have always been that way based on the premise doing it that way has no big advantages, as well as no big disadvantages. However the better approach is if you eliminate the disadvantages, you will be left with the big advantages.

4. We produce only what we sell. Costs do not exist to be calculated, costs exist to be reduced. The important issue is to try various methods to see which ones reduce cost and which do not reduce cost.

5. If you get the forecasts about sales wrong, the opportunity lost to make a profit causes no actual harm, while an actual loss causes financial harm. It may feel like a loss, but it is not a loss on the company’s books. An example if you made 10,000 units but could have sold 15,000 you have an opportunity loss of 5,000 but it is not a real loss.

6.There is misconception about production  people believe “it cost less to make 15,000 units than to make 10,000 units. However if you only sell 10,000 units, what happens to the other 5,000? Are they put in storage, to gather dust? Is the storage not a cost? Inventory control is a key in thinking of how to produce the 10,000 at the lowest cost possible.

Linking to dividend producing stocks, how does the companies whose shares you own function? The philosophy of Mr. Ohno is to look at failure and costs, two things after producing profits that companies prefer not to focus on. Mr. Ohno believed we fail 50% of the time and how we look at costs in order to reduce them is key. Given the previous statement, do your companies you invested in look at failure as learning opportunities and do they focus on true costs rather than accounting costs.

There are more questions than answers, till the next time – to raising questions

I reread the book Broken Windows, Broken Business by Michael Levine, Warner Business Books, 2005. The theory behind the book is if the Broken Windows Theory works for crime and it does, could it work for business? The theory is if a window is broken and is quickly fixed, there will be less crime. If a window is broken and no one fixes it, there will be more crime. The reason is simple if the window is fixed as soon as possible, it shows someone cares and is looking after the property. If the window is not fixed, then the crime of opportunity will happen. If no one is fixing the property, what else are they not fixing or not worried about? What else can someone get away with? The theory works with property crime; it works in the classroom where students test teachers boundaries; and Mr. Levine’s book says it works in business.

you will mystery shop your business to see how a customer interacts. All employees are service/sales employees. Everyone in the organization does something to affect the customer experience and translate the experience into a sale. It is important to know how does a customer relate when coming into contact with your business? Whether it is Undercover Boss, mystery shoppers, you need to know how your business reacts to your customers on all the different methods the customer relates to you – phone, Internet, sending in a form and reaction times, etc. d- does expectations meet reality? Work on continuous improvements.

you will ensure each customer is met with courtesy, efficiency and a smile. The greetings must be sincere and genuine, before possibilities can happen.

you will exceed customer’s expectations. Every customer has expectations with their interaction to your company. Making it safe and easy to find solutions helps surpass expectations.

you will always make a positive first impression and assume every impression is a first impression. Everyone brings knowledge about customers to their job, some are more difficult than others, some you naturally like better than others, the important thing is to do the good impression each time. People will use the resources they have to tell others of a negative experience and once in while they will also tell of a positive experience. If they have a positive experience, customers are more likely to be repeat customers.

you will ensure everyone does their job to solve the customer’s problem the first time. The reason the customer contacted you was to solve their problem. It does not have to be the reinvention of the wheel, but you should be able to solve their concern or be able to tell them the things that will be followed up to find a solution for them.

Linking to dividend producing stocks, two of the reasons companies are producing dividends are they do customer service well or have a strong monopoly with few choices. The second option is diminishing rapidly, thus the emphasis has to be on customer service. Meeting expectations is a daily task and most business are on the Internet which means 24/7. It is not easy to surpass expectations all the time, or the work continues. As a shareholder, your task is when interact with the companies you own shares in it, how was it? If it is not good, you can ask is it just you or do you think there are others? you can vote with your feet and sell your shares. If it is good, then there are other questions.

There are more questions than answers, till the next time – to raising questions.

I reread the book Broken Windows, Broken Business by Michael Levine, Warner Business Books, 2005. The theory behind the book is if the Broken Windows Theory works for crime and it does, could it work for business? The theory is if a window is broken and is quickly fixed, there will be less crime. If a window is broken and no one fixes it, there will be more crime. The reason is simple if the window is fixed as soon as possible, it shows someone cares and is looking after the property. If the window is not fixed, then the crime of opportunity will happen. If no one is fixing the property, what else are they not fixing or not worried about? What else can someone get away with? The theory works with property crime; it works in the classroom where students test teachers boundaries; and Mr. Levine’s book says it works in business.

To replace an existing customer, the cost will be 9 times as much as keeping an existing customer. The first rule to save money is to focus on your existing customers. The problem is you may not know why they leave, but one thing you do know is middle income people vote with their feet. If the customer has a bad experience or not a good service, they will go somewhere else and given the Internet, there is great opportunity to try something else. The Broken Windows Theory says do not give a bad service but ensure you do it right the first time. The rules are:

you have to pay attention to every detail of your business.  Mr. Levine is writing to the business owners as they have to live and breath the business. Paying attention to the details, means all the little things a customer sees that allows for the customer to have a continuing good experience. When the business opened, it made a promise to its customers, if you do not deliver your promise, the business will not last long. If something is wrong, people will notice and customers make the correct choices.

you will correct any broken windows – both physical and broken opportunities. Broken windows is not just the physical layout, although that is what people will see first. It is important if the building needs slight repairs, the repairs are done. People will wonder why are the repairs they see are not done. Sometimes it is the opportunity that is lost – is there a logical and good add on to your business that makes common sense and shows you understand your customer. A classical example is IKEA and the ballroom for children – it shows they understand their customers have kids, to help the parents shop the ballroom was added on.

you will screen, hire and train employees to notice broken windows and to correct them. In an ideal world, your employees bring the same values to the business as the owner, however we often do not live in an ideal world. Your business gives expectations to customers, is the reality meeting the expectations? Do you hire the people and ensure they have the ability to match reality to expectations? If you hire people and give them 30 seconds to solve problems after a customer has been on hold for 15 minutes, reality and expectations will not meet. Each partner has to find the balance to ensure employees can shine and training/support is taken advantage of.

you will treat customers as they are the only customer you have. If everyone is treated well, then they are less likely to leave. Within the context of profitability of the customer, everyday you should do as much as you can to ensure they have a good experience with your company. The writer once went to a local barber to cut his hair, the barber would always say if you came half a hour earlier or yesterday, no wait. You come now and you wait. Since he offered no reservations, it was irritating. I went to someone else that appreciated the business. You likely have a similar story.

Linking to dividend producing companies, even if a company has a dominant market share it has to follow the broken windows theory in one way or another. My sister-in-law has one of those signs in the hallway which in theory is connected to my brother, and the sign says If is dirty, clean it; If it needs to be fixed, fix it; etc. I think the sign is there so she does not have to remind my brother to do the chores that need to be done without her continuing to say to do them. Similarly the broken windows theory says if you are in a business everyone needs to do all the things, not a piece of them. If people only do a piece, customers have choices, when there is choice people will exercise a choice. If a company does not live and breathe customer service, expectation and reality do not meet so profits and dividends will suffer.It is worth asking the companies you invest in how much does a new customer cost them? How do they ensure the expectations meet reality? How does your company live customer service?

More in part two.

There are more questions than answers, till the next time – to raising questions.

In every economy, there is more than meets the eye. There is the private sector where  larger firms with their brands are well known; people working in the institutional sector such as government and its agencies including educational. As well as host of smaller firms which are slightly below the radar because they offer alternatives to the larger firms. In a separate category is the underground economy which operates in cash. Today the emphasis is on the alternative firms some are better, some are the same. It is often they seem smaller until such time as they grouped together before you realize it is a  big market. An example is the natural health market including yoga and health food stores.

Health is an complex field, we all wish everyone to have good health – eating the food groups, exercise daily and being able to do what you need to do. Everyday and every year, more people have something that years ago did not show up. Maybe it was not tracked, maybe it was called something else, or maybe it is new. As much as the big pharmaceutical companies have and do have a significant role to play, most of us have at more than one  drug or products from the big companies, the best result is something people do naturally. In the health food stores, many of the companies are relatively small and do not have shares in the stock market. Even though the firms are in the alternative market, they have to make a profit or sell product to stay in business, how much seems to be a constant discussion.

Linking to dividend paying stocks, the alternative market is dominated by smaller companies, every once in a while consolidation does come and there are opportunities as the companies grow. As you choose the best for your personal health, use the same principles for your investing. Invest where there is a long term constant return including dividends and you will be financially and physically healthy.

There are more questions than answers, till the next time – to raising questions

For generations upon generations, the very wealthy have bought expensive gifts. Whatever the tile – the Lords, Dukes, Czars, Raj’s, Emperors bought items because they both had the money and the items are truly wonderful. In the example of jewels, they  came from Paris because that is where they were set in beautiful amazing jewellery. The owners of the jewellery stores and fashion houses dealt with anyone who had the money to spend. This statement is true today as it was three hundred years ago as it will be true two hundred years from today. Two hundred years plus ago, the Haitian plantation owners were the biggest customers of the Paris fashion houses. The plantation owners owned slaves and at the time the land was very, very fertile, resulting in great surplus income being produced and spent in the fashion houses of Paris. If you switch you time horizon to now, many middle income people buy a lottery ticket and if they won the large prize, after paying their debts, many fantasy about buying a luxury item or two. We all have our idea of what luxury brand we would like to own – be it cars, jewellery, art or something else. One method to do investment research is look at what countries or where your favourite luxury brand is selling. That should give you ideas of where there are opportunities.

Linking to dividend producing stocks, luxury brands have a timeless appeal for the brand tends to keep its value and often increases over time. The reason is the low production runs or one time designs. There is another story about people trying to fake the luxury brands, but that is a different story, just consider the constant appeal. The brands may not be the best stocks to hold, but if you own dividend shares which produce a constant income over the years, both the income flow and capital appreciation may allow you to buy or rent the luxury item you always wanted.

There are more questions than answers, till next time – to raising questions

A while back the author read a couple of books about the end of the slave trade and who profited from it? given last month was Black History Month, this is a timely issue.  The trade triangle went from from England to Africa to US and back again. The ships left England empty, picked up people and sold them in the US returning to England with money from the auctions and raw cotton. The cotton was manufactured in the English textile mills and sold around the world. Invariably there were many people involved in the slave trade from ship builders, to the owners of mills that needed the cotton. There was also a significant role for investors. Everyone likes to have a high return on their investment and as long as it is legal, so much the better. In the UK, the investors who bought into the syndications tended to have highest savings or those connected to the titled positions – duke, earl, etc. It was a rare family in the UK Parliament without an interest.  Although there were risks of ship losses, people losses, if and many did return from a successful voyage, the rewards were 50% plus on the investment. When you receive high returns, the reason not to do it can be easily dismissed. Perhaps the people on the ships are treated better and so forth. Pictures of what reality on the ships was really like help to change attitudes.

Eventually, the government of the day decided to change its policies because governments have other than business interests – one reason was war with France. If the UK was out of the slave trade, English goods could be sold as slave trade free, France, was also deep into the slave trade with Latin America, would have higher unemployment and the war would be stopped. In trying to convince the investors, the eventual method was the tried and true one – buy them out or buy the limited partnerships and allow no more. The price of the buy out cost the government 40% of the existing budget and sent the UK into debt for a number of years leading to much lower prices of English bonds. It was at this time, Nathan Rothschild bought English bonds at a heavy discount. The many English lords who received money put their money into something beside the bonds. Eventually, the English economy recovered and as the bond or gilt went back to par, Nathan was worth considerably more money.

Linking to dividend paying stocks, in every industry, cycles come and go and as an investor you need to pay attention when opportunities happen. In the above example, government actions to end the slave trade while worthwhile to the general public, the actions had an devastating affect on the price of bonds for the same public. Government’s have an impact on the economy, their interests are not always aligned with business. Prices will go up and down, however getting paid a dividend or interest always softens the blow, and allows for the transition to more profitable days.

There are always more questions than answers, till next time – to raising questions.

One the weekend the writer had the occasion to ride the rails or go for a train ride. While a train ride is good, the profitability of it means the government has to give it a  subsidy. During the ride the passenger train passed a freight train and that is a different outlook for your pocketbook. When North America was being settled, the government of the day quickly realized sailing goods and supplies from one coast to another was not going to keep the country together. The history of both Canada and the United States is the governments were driven to link the country together with the railway. Millions of dollars were raised to do the feat. Eventually the goal was realized and then the profitable operations of the railway had to be considered (it was a good thing much of the railway debt was guaranteed by the government). Very soon every town with thoughts of growth wanted a railway and more government guaranteed dollars went into the railway networks. In the last number of years, the survivors of the shakeout from regular economic activity and stock promotion have lead to what are now considered solid railway lines.

The railway companies long ago gave the passenger side to a quasi-government agency and make the bulk of their money on commodities and moving containers. The railway companies move coal, wheat, oil and a host of other products. If the big three are doing well, then railways are making money. The latest boon for railways is the Bakken oil strikes and moving the oil to market. The shale oil is an area without a good network of oil pipelines, which means the next best thing is railway cars. Until the pipelines are built, railways cars will be transporting oil. Hopefully the oil is being shipped at competitive rates for the Rockerfeller money was built on undercutting the competition and getting large rebates from the railway companies. Expecting the oil is shipped at competitive rates, there are a number of companies to start looking at: Burlington Northern and  Santa Fe Railway, CN, CP, Union Pacific, CSX, Norfolk Southern. As well as the companies that make the oil containers for the railways.

Linking to dividend paying stocks, the big railway companies pay a dividend and as the economy begins to move along, the railways will continue to benefit. If you have a love of railways or just like to see them pass by with long profitable trains, the shares are worth looking into.

There are more questions than answers, till the next time – to raising questions.

In North America our society runs on the use of energy and in particular electricity. The wonderful thing about hydro from an investor point of view is after the capital costs of building the project, the cost to maintain the facility is low and the income is high. The water flows, goes over the dam, the water also turns the turbines beside or inside the dam which makes the electricity. The water should turn the turbines for the next 100 years plus. The only things to worry about is too much water or too little water. However given river management systems, there is a high degree of probability there will be enough water flow for the next 100 years. As long as there is enough water the electricity is produced and everyone in an urban setting needs hydro to live. .

Linking to dividend producing stocks, the investor owned utility is a classical case of what dividend buyers are aiming for. In the case of the dam and the turbines, the competition is not building another dam or the utility has a monopoly like conditions. As long as the regional economy is reasonably stable, electricity is needed or there is a demand for the product. There are alternatives – people can use less by conservation but there will be a demand for electricity. Even though the regulators will help keep competition out, the management needs to be watched to keep its costs down. The dividend should be safe even as the economy changes. When companies have similar conditions, those are the type you can invest in and review at your leisure.

There are more questions than answers, till the next time – to raising questions

On many streets through the winter, at least in areas where it snows, the snow ends up piled on the road. During the end of winter as the sun shows itself on a regular basis, the snow begins to melt which is great. However the snow which was piled up on the street has transformed from snow to a layer of ice. The ice becomes a barrier for the melting ice and snow to get to the drains on the street, resulting in puddles or mini lakes. The water either has to build up to a large level to go around the barrier or some ice needs to be chopped away before the water can drop. The issue is how much ice needs to be chopped before the water can drain?

Linking to dividend paying stocks, while achieving the highest rate is wonderful, using the analogy of the ice, there is not that much ice and eventually the puddle will dry. The better solution is not to remove all the ice, but some of it allowing for a stream to drain the puddle and continue to allow the remaining snow to melt on a nature control environment. The warming weather will eventually remove the ice. If the solution for the ice blockages is to make path for a stream, then a reasonable and constant dividend policy can be considered the best choice. While you may be tempted by the highest dividend payout ratio, sometimes it is better in the long run to look to companies with a history of paying dividends and increasing them over the years.

There are more questions than answers, till the next time  – to raising questions.