One of the biggest brands in the world is McDonald’s and many people have eaten there and will eat at a McDonald’s this week. Many of those people have read something about McDonald’s for much has been written. Grinding It Out – The Making of McDonald’s by Ray Kroc, Henry Regnery Company, Chicago, 1977. Mr. Kroc is the founder of the company. Similar to all companies, the company went through the normal cycle – it started small and individual stores were profitable. The premise of KISS or Keep it Simple Stupid help ensure the QSC and V (Quality, Service, Cleanliness and Value) remained a constant no matter what the company went through. At the beginning of the birth of the company, the people that are hired or join in the vision of the company will allow it to expand. The higher the quality, the better the alternative solutions which will need to be found are found. How did McDonald’s finance expansion? who did they turn to? the service agreement they had with the original owner had the McDonald’s the ability to sign off on expansion. Most of the time they were not interested but the clause caused troubles with the company lawyers because of its restrictive nature. All little things but they grow over time as people see the future differently.

McDonald’s is fortunate to have very strong relationships with its suppliers. As the company has grown so has its suppliers and when McDonald’s had fewer stores they once borrowed from their suppliers. The point is having great relationship and partnership with the suppliers is a key to McDonald’s success. An interesting story of development is the French Fry. McDonald’s has one the best tasting French fry because of the process of allowing the curing of the potatoes – they improve in taste as they dry out and the sugars change to starch. When the company was developing frozen French fries they were diehards who did not want to change and those who were suffering because of the potato peelings. The septic tanks could not treat the waste properly and smelled which came into the store. This reminds you there are usually more than one side to every story.

Part of the reason for McDonald’s success is how someone gets a franchise. The person applies, then they go to a McDonald’s and learns. When they get the franchise, they may have to locate to the community, spend 500 hours working at another McDonald’s . The final 6 months is courses at Hamburger University in Chicago and then store opens and field representatives are there to help through the problems. The small business person is prepared to operate.

Linking to dividend paying stocks, McDonald’s has grown to become a blue chip stock on the New York Stock Exchange and is a terrific stock to own and in moderation to eat at. Similar to all fast food restaurants they have systems in place to deliver a certain type of food quickly for large amounts of people. When new products are suggested by operators and the public there needs to be testing to see if they can get it to the same standards as the marquee products. McDonald’s continues to do many things right and as long as they continue to do them right remembering it is a people business first.

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

One of the biggest brands in the world is McDonald’s and many people have eaten there and will eat at a McDonald’s this week. Many of those people have read something about McDonald’s for much has been written. One of the books which passed me by was Grinding It Out – The Making of McDonald’s by Ray Kroc, Henry Regnery Company, Chicago, 1977. The author is the founder of the company and why he started the company is a great story. Mr. Kroc was selling the machines which make milkshakes, before that he had worked for a company that sells paper cups. This means over the course of trying to sell through cold calling and calling on repeat sales, he went into hundreds or thousands of restaurants. When he started most restaurants were one location only, as opposed to today’s chain stores. The original McDonald’s ordered 8 multimixers and others owners of restaurants on the west coast were calling about the product. Mr. Kroc was based in Chicago flew out to California to see what the excitement was about. When he got there he was amazed and began to see great opportunity. He stayed for a couple of days watching, learning and then asked about expansion. The McDonald’s brothers were not interested, and Ray offered himself to do the job. He had not gone to California to do that action but what he saw and learnt lead the path to McDonald’s.

Linking to dividend paying stocks, you know there is opportunity everywhere but most of the time we do not take the next step. Similarly with Ray Kroc, he must have gone into hundreds of restaurants before he saw McDonald’s and thought I can duplicate the success and sell more multimixers. That is a big step, it will take different skills but the idea came to him and he acted. Every once in while, you will see great opportunity in the field you know best. Once in a while it will be a success, but in the meantime if you invest in existing successful companies which pay you a dividend, when you need resources to move to action on the what you see is a great opportunity, you will have a starting base.

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

In all industries, there are alternatives for exampling cleaning your home. There is the easy solution of the large manufacturers products which are good and can be found in homes such as mine. There are also alternatives which you can make with a few ingredients around the home. Depending on how much you do, if you do a lot, viewing alternatives can save you money. One such book is Talking Dirty with Queen of Clean by Linda Cobb, Pocket Books, NY, 1998. The premise of the book came from a local radio station in Phoenix open line show. Linda is a guest and offers advice on how to clean items, at a relatively low cost. The products which are needed are club soda, lemon juice, white vinegar, baking soda and if you have carpets – spot shot instant carpet stain remover. In her book and on the radio station Linda tells how to mix the items and the results which should occur. The list of cleaning items hints is as long as the list in your home with many good ideas to use.

Linking to dividend paying stocks, it was likely Linda is an expert in her field and she had the ability to be a teacher. With the radio show, people connected to her and that fed into other projects which lead to the book. Looking back they made sense to do but it was not likely planned until the connection with the audience grew and they trusted her. Many of the methods in the book are something people did before P & G made it easy to use the Mr.Clean products and if everyone moved to the alternatives Mr. Clean would suffer. It is highly likely they will not, but in every industry there are alternatives. As an investor you need to consider how likely are people willing to use them?

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

In most towns and cities there is a sweets outlet and it is strange if there is only one place. Most of us like sweets or items which come with sugar in them, what most of us do not know or really want to know is the history of bringing sugar to market. This is why Elizabeth Abbott title is Sugar – A Bittersweet History, Penguin Books, Toronto, 2008.

Yesterday’s column looked at slavery and there is much more than can easily be written if you believe all people should be equal. After slavery was abolished at least officially, however in England the owners were bought out by the government, In Haiti which fought a war with France and won their independence, in order to export its crop the country had to pay a settlement to France which lasted 50 years. People were paid for their labour, and the amounts were on the low side. To keep the amounts on the low side, governments brought in indenture servants. These people had to work for a few years and the idea was they would receive a lump sum award at the end of the 5 years together with their freedom. The people came from India, China and other countries. Only an wide eyed optimist would think the system worked for all. In reality, the same issues we now face regarding minimum wages were being faced with the transformation from slavery to wages. From the Caribbean point of view, after slavery was abolished, it was not long before people realized the soil was not as fertile as it had been. Sugar cane production uses the nutrients in the soil; crop rotation was poorly followed and planting crops which offset the cane uses was rarely done. The only time crop rotation was done, it was done by the natives to the islands before the Europeans takeover, and most of them had died off. In many ways this is the solution to farming in the Caribbean.

For investors this means finding alternative method or other places to grow the cane sugar. Alternatives included beet sugar, other places included the Pacific Ocean islands – Hawaii with its rich volcanic soils; Australia, Florida and a host of other countries. Sugar is well intertwined into our economy and for many of us – our pleasures. Years ago, in England, for those working in the mills, the tea and sugar was their main treat and reason to keep on working. Now days it is more likely a sugar treat for example, chocolate, ice cream, treats from the candy store. Some of which were given to children at Halloween. Shortly it with Christmas holidays and treats will be eaten.

Linking to dividend paying stocks, the names change over the years as the industry consolidates. New inventions which allow the masses to enjoy candy and sugar is an own going process. Similar to all commodities the price of sugar rises and falls, although the size of the candy bars do not seem to get bigger. As an investor, you will look forward to companies with a continuous ability to grow the pie, the other day it was noticed a brand of chocolate bars now has 10 different flavours, and many of the flavours were similar to ice cream flavours. There will always be a demand for sugar and even though it has a very interesting past, the reason for investing is the same as in the past – it generally provides a good return.

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

In most towns and cities there is a sweets outlet and it is strange if there is only one place. Most of us like sweets or items which come with sugar in them, what most of us do not know or really want to know is the history of bringing sugar to market. This is why Elizabeth Abbott title is Sugar – A Bittersweet History, Penguin Books, Toronto, 2008. Similar to most crops in agriculture now most of the large operations are done by machines – specialized harvesters and other tractors and farm equipment. However if you look to the past, the work was done by humans. In sugar and cotton, the answer to meet the demand of Europe was to use slaves.

From an operational point of view, the first sugar were expensive and only something the upper income would use. Much of the sugars used came from honey and bees. Eventually cane sugar was discovered and it grew in climates the Europeans were discovering. In 1492 Columbus sailed the ocean blue, looking for a quicker way to the South Asian islands and their spices. Columbus arrived in the Caribbean and was given gold. He and his crew were quickly struck with gold fever and went on to takeover the gold fields in Mexico. The gold made Spain the richest country in the world and they had money to figure out what to do with the islands. Sugar cane was introduced and soon it was producing to meet the demands of Europe. Every year the demand for sugar grew and Britain and France eventually established colonies they jumped into the sugar trade.

From a purely economic point of view – the slave trade made economic sense. Using England as an example, the ships were built and outfitted in England which caused economic activity, the ships sailed south to Africa to pick up a cargo of people, they sailed across the Atlantic and picked up sugar and other products to bring back to England to be processed. The extra value of commodities is in the processing of the commodity and in England, the manufacturers passed laws against manufacturing facilities on the islands. The cane sugar which had gone through its first level of processing was brought back to England to be processed and distributed throughout the country. This allowed the English to enjoy their tea and sugars. In the above example, the families who owned or financed the ships and their cargos cemented their bonds together through intermarriage. In England, the West India Group ensured a number of their members sat in Parliament to both enhance their operations and to ensure Parliament did not vote against the economic activity.

Linking to dividend paying stocks, it is hard for most companies to have a past which laws or morals of today were not broken. It matters what a company does now and in the future or does it represent your values. Often laws change slowly, but there are reasons why law changes slowly – people are benefiting from the existing methods.

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

One of the most interesting and complex things you will look at is yourself. The makeup of all humans rests in the human genome – the complete set of human genes – comes in 23 separate pairs of chromosomes. Knowing they exist, it is possible to do something with them to help people. The human body contains 100 trillion cells. Inside each cell there is a nucleus, inside each nucleus is two complete sets of human genome. One came from the mother, one came from the father. This is why the story is complex.

We know many things, but we do not know how the complex body of ours manages everything so well, slowly we are learning. Once we learn, it maybe possible to do something but because we do not know, the process goes slowly. The chromosomes are categories as life, species, history, fate, environment, intelligence, instinct, conflict, self-interest, disease, stress, personality, self-assembly, pre-history, immortality, sex, memory, death, cures, prevention, politics, eugenics, and free-will. Some of those categories lead scientists to look at them first. For example, the greater the understanding of how disease works and how the human body reacts to defeat diseases means it is possible to inject something to help defeat the diseases which makes us better and live longer.

The book is an interesting read even if you know little or pay attention to the science world.

Linking to dividend producing stocks, the companies we think of in this field is the pharmaceutical companies which bring drugs to the public and after spending millions plus inventing them, can manufacturer at pennies and sell for dollars, which ensure profits in the industry. What we do know is the human body is complex and at times there are complications with drugs (which equals law suits) and this is why the field is so interesting and complicated at the same time.

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

In terms of auto manufacturers, how Toyota arrived and became the number one car seller and has remained in top is a interesting read and is the subject of How Toyota Became # 1 by David Magee, Penguin Portfolio Books, NY, 2007.

If a company has a focus on the long term or a couple of generations from now, it will seemingly not focus on achieving short term results. Toyota is fortunate to be in a position where it can and does loook to the future. One aspect is do not give others reason to doubt the philosophy – keep the executive arrogance to a minimal. Do what regular people do – if they ride the trains, you ride the trains. It helps keep your decision making and remember what you do not know. For example – edgy, niche products attract some and can be very interesting to work on, but they do not attract the majority of car buyers. Toyota looked at the youth market, did not connect. They went back to the drawing board did more research and  set up the Scion brand for the market.

In all facets, the company learn the customer (do research), live the customer (continue to do research to fix) and empathize with the customer to make the experience better. An example of this is truck buyers – there is a popular idea of who truck buyers are, but research shows women drive trucks. They would appreciate features to make it easier which were not in the most popular brands. Toyota geared their trucks towards them and achieved sales, for the same features help the mythical truck driver.

The company has a widespread reputation of a conservative company, however the reality is it spends a great deal of time and money on research and once it makes a decision it is full steam ahead. One example of this is for years, Toyota made their vehicles in Japan and exported to the US, then then decided it was time to be in the US, they did a joint venture to learn and finally built a plant in Kentucky which began to win quality awards. This execution once a decision has been made beats competitors by 30% or more, which is worth billions in extra revenue.

The Toyota Way which is taught at Toyota Institute can be summed up as: a doing person is all that is needed. It does not matter who they are or where they are. We do not need geniuses. We need people  willing to question, questions and question. Once they find out the root cause of a problem, solve it immediately. Then disseminate and share.

Another thing learnt is start meetings with mistakes in order for people to learn. You do not learn from success, mistakes are what shape Toyota. We treasure mistakes says the President of the US Division. However, the idea is to make fewer and fewer mistakes. The thinking is the people hired are the right people, if you only talk about the success no one learns. If you talk about problems everyone can work on them together to solve them.

All the above need a management structure and hiring basis to allow it to strive and work for the betterment of the company in both good and lean times. In many organizations to implement the Toyota system means empower of teams and decisions do not go down the food chain with no questions asked.

Linking to dividend paying stocks, in all likelihood some or many of the measures can be seen in many companies as value has to be seen to be given and received. There are and will be different methods to manage companies as long as they make profits, there will be few who disagree. Once they do not make profits, then change is on the table. As an investor, hopefully you are considering the long term to receive dividends as well as capital gains. Generally long term means going through the economic cycles and being profitable at both ends, because of monopoly or monopoly like pricing or more properly creating great value for the customer.

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

If you live in North America the automobile has influenced your life, the shape of the cities, the design, the movement, something about the autos has influenced you. When you look around the cars – there are many models and manufacturers and at one time the big three GM. Ford and Chrysler sold the most number of vehicles. Now there are a fewer manufacturers including Toyota. How it arrived and became the number one car seller and has remained in top is a interesting read and is the subject of How Toyota Became # 1 by David Magee, Penguin Portfolio Books, NY, 2007. The reason why books such as this one are important is as companies grow systems develop for very good reasons, but the systems develop tend to lessen the great innovation and energy which the founders saw as the problems with the competition. In other words the larger the company develops the more it looks like the old competition it thought was not doing the job of providing value to the customer.How does Toyota not become like its competitors?

The Toyota company was founded by the Toyoda family who first experience success in the textile industry and made the transition to automobiles. Many of the lessons, Mr. Toyoda learnt in textiles were transposed to automobiles. The biggest lesson is the strive for continuous improvement. The improvement is done through people suggesting a better way and being rewarded with cash, as well as studying and adjusting to see the most efficient and effective method. There is a story about how clean the shop floors of a Toyota factory are – it is because Toyota has and continues to work on it. Most of the parts come in recyclable, returnable packages or if suppliers want to supply Toyota they and Toyota come up with solutions to packaging. In addition, if there are empty containers they are stacked up to go back to receiving, where the package is sorted into bins which can be recycled. The net result is little waste, plant cleanliness is sustainable and Toyota saves money on garbage pickup. The other auto companies are no where near where Toyota is.

Continuous improvement applies to all parts of the business including the time it takes to do manufacturing. People think there is a better or easier way, this can include what it some steps were eliminated and it made sense to do the change. For example, the workers were taking 8 steps to do one part, a better way was to send the materials to do the same thing in 4 steps. One of the principles is thus if a process or an activity does not add value, get rid of it. This principle goes throughout the company from the cafeteria to the factory floor to corporate office.

Another principle is to speak up immediately when problems are recognized and ask why 5 times to get to the root cause. The process does not ensure there are no mistakes that get through, but it does ensure is people are trying to solve problems or do no harm.The reasons for the 5 whys it ensures the company is trying to solve the problem from not happening again, not a quick fix solution. Once the root cause is discovered the problem can be fixed.

Customers like pleasant surprises or getting more than expected from the advertisement. When the company is delivering the value, customers will tell everyone. A great example is the Lexus division. Those who drive or test drive the Lexus will like it as the car is built to be the best vehicle in its class. Within two years of launching the vehicle the Lexus was the largest luxury brand.

Linking to dividend paying stocks, the reason to examine good companies is to determine why are they consistently good. If it is their people, but people change; is it their culture, but culture can change. Toyota stresses the entire package not just one or two or three of their principles. It helps when the company has the backing of the family and other companies have Wall Street pressures on them, but that is a reality. In part 2  the column will look at more reasons.

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

Noise is a constant it is around us and sometimes the noise is something we like and we want it loud, others times the noise is something we do not want and we want it quiet. An interesting book which looks at the subject is the book Noise – A Human History of Sound and Listening by David Henry, HarperCollins, NY, 2013. The book is based on the radio program which ran on the BBC in England.

From the theatres of part 1 the next chapter is about persuasion. When US President Barack Obama spoke in Chicago’s Grant Park it was a great speech. It showed Obama’s eloquence was one of his key election weapons. It persuaded his supporters to feel hopeful and his opponents to feel generous. It encouraged them all to believe in the things he did. It was partly what he said, and partly a manner how he said it – of cadence as well as content. The art of persuasion is about changing minds, it is about the audience’s skills. It is the listener who has to interpret the words and perhaps detect the falsehoods or manipulations designed to get their vote. Many years ago, in Roman times the master was one of the world’s greatest orators: Marcus Tullius Cicero.

Cicero showed that in ancient Rome good oratory before the voting public was the supreme political skill: you had no hope of gaining public office if you could not speak well. The public is just as cynical as today as there is a fine line between being persuaded and being cajoled and misdirected. The tricks of the trade include:using rhetoric to join two ideas together; ideas are unfurled in threes; drawing attention to a subject by circling it rather than discussing it directly. Use repetition of ideas as well as the end of the sentence for the audience to grasp easily the direction you want them to do. The voice will use different tones and reflections and using the audience’s reaction to enhance the speech for they will have to do something.

From the speaker to the noises of the city to the noises of the sporting arenas – some noise is welcomed. Think about the 12th Man in Seattle – the crowd noise. In other venues such as a concert hall or golf games, that is too much noise .During the football  games it is welcomed and encouraged. In the Middle Ages the best way to communicate was by the bell. The sounds of the bell because people tended to live close meant either church services or a call to action if danger was nearby. In the Industrial Age the bell was topped by the factory whistle. There are other sounds the book discusses such as the noise of war and music.

Linking to dividend paying stocks, when the company makes a profit and pays a dividend there are sounds to be heard from Wall Street to Main Street as the payments are delivered to the shareholders. Part of being a good President of a company is to give the annual report to the shareholders and all listeners wish to hear a good speaker. There are methods to deliver a good speech, however continually delivering increasing dividend payments to shareholders for many have many listening to your words.

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