Monthly Archives: June 2017

Respect the Streak

By Lloyd Graff

Baseball fans love statistics because they tend to make the daily events seem more rational and orderly. We humans crave order and predictability, even when things aren’t orderly and predictable.

Last season the Cubs won the World Series and were at or near the top all season in driving in “runners in scoring position.” Driving in runs is how you win games. It is a lot like the process of closing a deal in business or winning a case if you are a lawyer.

This year, as the Cubs struggle to stay above .500 game after game, they are in last place in scoring runs with runners in scoring position. They score runs by hitting home runs, but cannot get the big hit to bring in runners from second and third base. This seems odd because the young Cubs players are almost identical to the ones who led the Majors in scoring and led the National League in scoring by a wide margin in 2016.

This inconsistency is driving me nuts, not just because I’m a Cubs fan, but because this kind of unpredictability makes me crazy in my business life of trying to make deals. I am coming off two crappy years in the machine tool business. So far this year it has flipped and my machinery company is doing well. Is it luck? Is it adjusting to the mean? Is it because of an improvement in business conditions? Is it the “Trump Bump?” Then there’s my big question; the one that haunts me. Is business just random? Do we give ourselves too much credit when things go well and do we become overly self-critical when things stink?

Superstitious “Nuke” LaLush in the film “Bull Durham”

Going back to baseball. Crash Davis in Bull Durham said it well, “You have to respect the streak.” The streak gives us energy – both positive and negative. When you are slumping everything is a struggle and you make lousy decisions out of fear. The negativity dictates caution. You don’t feel like going to work and you fear making mistakes because you doubt yourself. Depression leads to deeper depression.

But when your luck charges, all things appear to be possible and you start making decisions with confidence rather than running away from them. In the baseball vernacular, you hit it to the opposite field when they pitch you outside because you don’t have to go for a home run every time up. If you don’t get a hit this time up there will still be other opportunities and your teammates will pick you up. Confidence is the difference maker in sports and in life.

I suppose I’m too old to believe in superstitions, but I do because I “respect the streak.” If wearing my underwear backwards is working for me, I’ll do it. Pink pants, drinking apple cider vinegar, listening to the same music each morning, if it abets a hot streak, I’m into it. Luck begets luck. Positive energy must be cherished and enhanced, because it eventually drifts away.

I believe in talent and hard work, for sure, but without good luck and the positive vibe that usually goes with it, it is difficult to sustain confidence. Confidence drives in the runs.

Question: What superstitions do you have?

“Respect the Streak” Scene in Bull Durham

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A Father’s Day Baseball Story

By Lloyd Graff

John Arguello is a favorite writer of mine, these days. He covers the Chicago Cubs intensively and works with a stable of writers and commenters at Cubs Den who really know the game. John understands “inside baseball” but he also pulls in the human side with wonderful sensitivity. He is undergoing cancer treatment at the moment at MD Anderson in Houston but took the time to write this blog yesterday. 

By John Arguello.
Article Courtesy of ChicagoNow.com.

I remember the creaking of the screened storm door opening, then closing quickly, the thin weathered door tiredly slamming shut against the door jamb. Following closely behind came the smell of sweat, it permeated the air, layered somewhere in the middle wafted that distinct metallic odor that comes home with you after working 12 hour days with steel machinery. I didn’t often see my father in his navy blue factory work wear, his fingers still stained with oil, tinged with hints of dried, crusted blood, the well-callused hands thick and swollen. Heavy. It always felt like I was stealing a secret when I caught a glimpse of my dad coming in through the back door on those days — those days when he was so eager to be home again that he didn’t have the time to transform himself seamlessly back to dad before we all had dinner together. As much as I greatly anticipated his return each day, I knew to respect that other side of his life. It was the side he never talked about and so I did not ask. As children, he wanted to keep that part of his life shielded from us. When that door closed behind him, it was as if he left that whole separate world behind him, even if it was only for just a comforting home-cooked meal, a chance to catch his breath, and a richly earned night of sleep, a time of quiet and peace before stepping back in between the factory walls the next morning, ready for the unrelenting clamor of industrialism to fire itself up again.

In between that grind was our little window. We knew the routine. After a replenishing dinner it was an ice cold beer, which he took at his evening throne, the soft brown leather recliner in the corner of the room that cushioned his landing from from the long hard day. It was during this time that I would approach my dad, tell him about school, but it wasn’t really school I cared to talk about. That’s what he wanted to know. That is why he did what he did all day long. For us. Every penny that did not go to paying the bills went to us kids, mostly for our future, so that one day we could have it much easier than he did.

I was just a boy then. I wasn’t focused on the future. My life was right there in front of me. And just as now, my passion was baseball. My dad and I are very different in so many ways. He is pragmatic, results-oriented, linear, matter-of-fact. As child, I was a dreamer, curious, rebellious, inventive. I imagine that may have made him worry quite a bit at times.

What we did have was baseball. That was our thing. Whenever there was a time I needed to connect with my dad, baseball was there to act as a conduit. As you may have already surmised, my father is not the storyteller I am (that comes from my mom’s side of the family), but I asked him to tell me stories anyway. He would tell me about the clutch-hitting Ron Santo, the ultra efficient duels of Ferguson Jenkins and Bob Gibson, the slick glove of Don Kessinger, sweet-swingin’ Billy Williams, the Milt Pappas game featuring the worst non-strike call in the history of baseball, and on and on. My father provided the facts and structure behind the stories and my imagination raced enthusiastically to fill in the blanks. I don’t think he knew at the time that he would inspire such a passionate baseball fan. I think for him baseball was an occasional escape from the mundane reality of his working class life. As a child, a dreamer, it wasn’t that simple for me. A much as I excelled in school and big plans were being made all around for my future, I only wanted to be a ballplayer. Because, why not? When you are a child, anything seems possible. My dad, as usual, was more focused on the practical side of things and for him it was just easier to compartmentalize it all. School was school. Work was work. Baseball was baseball. There was a time for each, but they did not co-exist in the same world for him.

And so over time, baseball and I went on our separate paths. It’s not that I stopped following the game. I still followed it closely and passionately…but now it was separate from the rest of my life. It was just the practical thing to do. It was the responsible thing to do. It is exactly what my dad would have done. There would always be room to carve in a separate space for both.

But for me things don’t work that way. I see everything big pictures. Everything is connected. In my world, there are no neatly dividing lines except the ones we ourselves choose to draw. That worked for my dad, but I never dreamed I’d be the one actually drawing those lines as I got older.

My dad and I drifted apart over the years as well. It was not some kind of major rift or anything. More like an achingly slow continental drift that happens gradually over the span of a generation. I sometimes felt I let him down and didn’t live up to the promise and potential he always knew I had. I did well enough in life, made an earnest living. I exchanged my dad’s blue collar lifestyle for a white one. I exchanged the drone of factory machines for the drone of corporate life in America. That certainly seemed like progress. That’s the way things should be moving, is it not?

Except it didn’t feel that way.

About 10 years ago, around his 70th birthday, my dad and I began to reconnect again. It started with a speech the family asked me to write about him for a surprise party they had planned for him.

It was meant as a tribute to my father and everything he has sacrificed for us over the years. But something else happened as I delivered that emotional speech in front of the large gathering of our family and friends. Those lines I had drawn for myself suddenly became blurred and I found my voice again.

Nobody heard that voice louder than my dad.

“You should be writing”, he would later say. “You have a gift that I could never really have and that don’t think I ever fully understood. I wish I could have realized it earlier.”

To hear this from my father meant the world to me. My mother is more my kindred spirit in terms of our artistic sensibilities, but to be able to reach my dad on this level of openness was different. My father had always been practical, always drawing lines and wearily closing doors to shut out the noise and keep his different worlds separate and distinct

I think about myself now as I do my job as a writer, spending long days at the park out in the open air and sun, out near the field, with few physical barriers separating me from the the game I have loved my whole life, even if that game is often a slightly altered version with loosely defined rules and no pre-defined limits. If anything the quirkiness of time and rule in these games makes it even more appealing to me. It’s peaceful, quiet, only occasionally interrupted by the sweet crack of the bat after a long home run.

And then as I walk home after the game, I suddenly realize how tired I am.  I begin to feel how hot the Arizona sun beats down on me. As beads of sweat roll down my back and along the sides of my face,  I become eager to get indoors and feel the respite of our cool, air-conditioned home.  Then as I wearily reach to close the back door behind me, my sweaty hand slips on the door knob and I briefly catch a wisp of that familiar distinctive odor I remembered as a child.

Happy to be home at last, I sit down, crack open a beer, and begin to write…

Question: Who taught you the game?

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The Color of Law

By Jerry Levine

It’s been 150 years since the end of the Civil War and 50 years since the signing of the Civil Rights Act. However we still have a divided society – whites on one side and blacks on the other. Richard Rothstein in his book The Color of Law argues that the racial divide stems from a deliberate segregation of housing fostered largely by federal, state and local governments in cahoots with bankers, real estate developers, labor unions and the general public. He discusses many issues resulting from housing discrimination, including unemployment, household income, wealth accumulation, education and crime.

Rothstein begins about 100 years ago with a history of restrictive covenants and “redlining” mortgage lending practices in housing markets across the country. Public housing had very similar restrictions as private housing; and, unbelievably by today’s standards, this was Federal Housing Authority (FHA) policy. Restrictive covenants were upheld by the Supreme Court, with three of the sitting justices at the time recusing themselves from the decision because they themselves lived in homes with restrictive covenants. In addition to restrictive covenants, violence against new black home owners moving into an all-white neighborhood was a huge problem from the ‘20s through the ‘60s. There was rarely an arrest or prosecution of perpetrators. 
Rothstein also discusses the issue of white flight, both in public and private housing. The FHA justified its racial policies because they were worried that both black home ownership and white flight would contribute to FHA mortgage defaults. So, the FHA built white-only or black-only projects. Blacks were frequently denied both FHA and VA mortgages, and thus they might only be able rent a home, which prevented them from accumulating wealth as home values appreciated. Blacks frequently ended up obtaining risky private contract mortgages where missing one mortgage payment meant foreclosure. Newspaper stories just last week in my home city of Chicago indicated that blacks still pay much higher property taxes than whites for comparable housing. To help meet expenses and insure against foreclosure, many black home owners rent part of their house to additional families to help cover costs. This over-crowding leads to neighborhood deterioration, crime and over-crowded schools.

Rothstein maintains that racial segregation was created by government action, and once entrenched, segregation is difficult to reverse. He argues that did not need to happen. He argues that starting about 100 years ago, if the government had declined to build racially separate public housing, and had not allowed suburbs to adopt exclusionary zoning laws, and had told developers that they could not have FHA guarantees unless the houses were open to all, and state courts had not blessed private discrimination, and if churches, universities, and hospitals had faced loss of tax exempt status for their promotion of restrictive covenants, and the police had arrested rather than encouraged perpetrators of violence, and if real estate commissions had denied licenses the brokers who used unethical blockbusting techniques, and school boards had not drawn attendance boundaries to insure segregation, and if highway planners had not been allowed to demolish African-American neighborhoods to build new roads, and if African-Americans had the same access to labor markets as other citizens, we would live in a very different country. I love his idealism, but to accomplish what he wanted during what I remember of that period of time seems Herculean.

I believe the real culprit was not the government, but the basic prejudice of many Americans, especially then. Political leaders can push for change, but in the end in a democracy like ours, the will of the people prevails. The good news is that attitudes have been changing for the better. I personally see a vast change from the attitudes of my immigrant grandparents, who lived in their own little ethnic enclave and barely spoke English, to my very successfully integrated, diverse children and grandchildren. My family and friends are a mix of people of all shapes and sizes, religions and colors, with differing sexual orientations. This country is changing. Unfortunately, it takes such a long time.

Question: Why does everybody hate Trump?

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It’s Tough to be the King

By Lloyd Graff

Jeff Immelt, head of General Electric Corporation, is getting the boot as head of the company. Travis Kalanick is being asked to step aside as head of Uber. The news came out the same day. Two kingpins of business being pushed aside almost simultaneously. The parallels are so delicious, I had to write about it.

Immelt is the Robert Redford of business executives. Perfect hair, Savile Row suit, London-made wingtips. If he wasn’t the head of GE for 16 years, he could at least play the role. He took over from Jack Welsh, the master earnings manipulator (Mr. 11% profit growth year after year) a couple days before September 11, 2001. I always felt Immelt personified GE beautifully – handsome on the outside, complex and conflicted on the inside. He should have been CEO in the 1980s and ‘90s, playing golf with Generals and Presidents, and then wheeling and dealing over cocktails at “The Club.”

But Immelt’s world changed radically after taking the job. The financial world lost respect for dishwashers and lightbulbs. Half of GE’s revenue came from GE Finance. After 2008, the financial folks lost respect for the financial folks. General Electric stock got stuck in the La Brea Tar Pits. Even today, after hundreds of plant closings, acquisitions, and selloffs, the company’s stock value is 27% less than when Immelt took over in 2001.

Ironically, Immelt announced that the company would sell the light bulb business last week—his last big announcement.

Thomas Edison, the founder of the company which would become GE, would have understood the personnel move. Crusty old Tom, inventor and entrepreneur, considered by his peers as one miserable SOB, probably would have kicked out smooth Jeff Immelt earlier than Nelson Peltz did, whose Trian Fund Management is GE’s Biggest stockholder.

Travis Kalanick of Uber. Courtesy of www.gerardlebovici.wordpress.com

On the miserable human being scale, Tom Edison and Travis Kalanick of Uber would have vied for top banana.

In nine years Kalanick has built Uber from a tiny startup to a household name. The value of a taxi medallion in New York City was $1 million in 2013. Today you would be hard pressed to get $200,000 for one. Uber is valued at $70 billion, with 40-year old Kalanick’s stake at $6.3 billion. He is mega rich and evidently almost universally despised by those who know him. He has built a “grasping” culture at Uber, but one that has worked brilliantly at empire building.

Jeffery Immelt, bred from corporate parents, graduate of Dartmouth, well spoken, beautifully coiffed, knows all the old corporate rules. He certainly has the patina of a gentleman. Travis Kalanick’s father sold newspaper advertising in L.A. and his mother, Bonnie Horowitz, taught him to be tough. He went to Cal Northridge with a total passion to make it BIG. He made it HUGE, but Travis just could not stop being Travis.

His undoing this past year stemmed from his desire to move past Google, Ford and Tesla and everybody else in autonomous cars. He moved much of the business to Pittsburgh and basically tried to buy the Robotics department at Carnegie Mellon University—cheaper than paying $15 billion for Mobileye like Intel just did. He looted the department by offering riches to the good geeks of Pittsburgh. Then he took the audacious gamble that Thomas Edison probably would have admired. He hired Google’s technical head of its autonomous car project Anthony Lewandowski to lead his headlong rush into robotic vehicles.

Google was not pleased. It sued Uber and Lewandowski and things started to fall apart for Kalanick. He also got nailed for not reining in the boorish, sexist behavior of Uber’s employees.

Travis needs some of Jeff Immelt’s adultness and Immelt probably wishes he had some of Kalanick’s brashness.

This weekend they both got pushed aside – not exactly fired – but the money guys on their respective boards told them they were no longer in charge.

It’s business. It ain’t Beanbag.

Question: Who would you rather have dinner with Jeff Immelt or Travis Kalanick?

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The “What if” Question

By Lloyd Graff

I have spent my entire business life identifying price anomalies and taking advantage of them to make money. “Buy low, sell high” is my secular religion.

I am now confronted by a situation that screams BUY for me as a “comp” watcher, but everybody I know tells me I’m nuts.

This is the situation.

I live in the South Suburbs of Chicago in a lovely suburb of well-cared-for 2000- to 5000-square-foot homes on 20,000-square-foot lots. My home is 28 miles from downtown Chicago by car, 40 minutes by commuter train. It is peaceful, has nice parks and is surrounded by golf courses, including the Olympia Fields Country Club, where the 2003 U.S. Open was played.

My wife and I bought our 3000-square-foot home 39 years ago for $130,000. We have put a lot of money in it. We have an 800-square-foot workout area, mostly carpeted in the lower level.

Lloyd Graff’s home in Olympia Fields, IL.

We might be able to sell our house for $200,000, probably $180,000.

Why has housing inflation ignored my neighborhood? Will young people discover the price disparity between comparable suburbs or neighborhoods in Chicago and rush in to take advantage, or will homes continue to go begging where I live?

I have left out some pertinent information. The area where I live used to be primarily comprised of white people. Today it is a “mixed” area of whites and African Americans. I stress “mixed” because as I look out my big kitchen window I see a soccer game being played in the schoolyard with half of the kids being white and half being black. This is not the ghetto. This is not gang infested Englewood, where I live.

I prefer to stay away from the racism issue for the moment. There is more interracial marriage than ever in America today. If Dancing with the Stars, that icon of American television, is any guide our society is becoming more accepting of black and white coupling than ever before.

Big money is pouring into development of sites that used to be primarily Black on Chicago’s near Southside. Oak Park, Evanston and Hyde Park are integrated communities with booming property values, and the public schools in those areas are definitely not the best in Chicagoland.

I ask myself this question, if I ran a hedge fund would I be a buyer or a seller where I live? Would Warren Buffett buy or sell the South Suburbs of Chicago?

Warren Buffet and Carl Icahn are cold blooded investors. I think they would ask the real economic questions. How much is race fear worth? How much should you deduct for B- public schools? How accessible are private schools and what do they cost? How much money will it cost to make the South Suburbs of Chicago sexy?

If a house in Evanston is $1 million and the same house in Olympia Fields is $200,000, how long will it take and how much money and effort will it take to pull the value up to $500,000?

Creative people in business like to ask “what if” questions. It is a way to tap into creativity and stretch oneself.

The Buffetts and Icahns of the world constantly bring in people to pose “what if” questions. Buffett had his eye on Heinz for 20 years, but in his mind the price was always too high. A few years ago he asked or was asked by Paulo Lemann of 3G Partners, a Brazilian investment banker that bought Burger King and turned it around, if it would make sense to buy Heinz if 3G cleaned up its inefficiencies. And Bingo. Buffett had the money. 3G had the ruthless expertise to squeeze out the fat and they made a deal.

What are the “what if” questions about real estate in the area I live in? Can you convince a gutsy advanced group of young white people to take advantage of a bargain? How long would it take for the followers to push up the price of the housing market if the intrepid few came?

I understand that America is still beset with racial fear and anger, but times, they are a-changing, too. I think it is quite possible that at some price disparity and with shrewd marketing, white folks will buy a house next to black people and communities will change shades. And home prices will rise, not fall.

Question: Is America less racist than it used to be?

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Tools of Justice

By Lloyd Graff

It’s the American Horatio Alger story. Invent the next Xerox machine and get rich. Or get screwed.

Dan Brown was a smart Irish kid from the south side of Chicago. His Dad wanted him to learn a trade and become a plumber, so he took all of the shop courses in high school. His Mom thought he was a really intelligent kid who should go to college, and had him on a college prep track.

He ultimately went to St. Xavier College (now university) majoring in biology and chemistry, falling short of his goal to go to medical school. Dan never lost his father’s knack of a handyman, or the appreciation of those trade skills, he naturally combined them with his science education. After college, Dan ended up in the chemicals and plastics industry where he created the first of his now 40 US Patents, pioneering some new processing technology and gaining valuable business experience, Dan started his own product design consultancy in 1991.

One day in 2002, his son Dan Jr. was attempting to work on the lawnmower with a pair of pliers. Dan Sr. saw the danger in that endeavour and father and son bickered over the proper tool selection for the job. There really was no good tool for the job. Dan, the inventor, set out to make a gripping device that would be better than a wrench or pliers for this kind of ornery everyday task that flummoxes the home fix-it person.

Dan Brown, inventor of the Bionic Wrench. Photo credit John Gress. Courtesy of the New York Times.

Dan, with his product design expertise, developed his Bionic Wrench to do those jobs. He was sophisticated enough to create strong intellectual property, and go to the expense of nailing down solid patents for his clever device. He found a solid American stamping house, Penn United, to build the product and began selling in specialty niches, proving the merit and viability of the tool.

Dan believed his real opportunity to establish the brand was to market with television supported advertising and shopping channels like QVC. He found difficulty breaking into the big box retailers who focused primarily on low cost products sourced in China. Dan’s vision for his new invention was a “Made in America” business model, a very challenging task in the hand tool market.

The Bionic Wrench, developed by Loggerhead Tools and completely built in America, was ready for Prime Time in 2005. It won the Popular Mechanics new product design award and among many other design and innovation awards. It launched at the end of 2005, having its first success with a Direct Response TV (DRTV) campaign at Canadian Tire, Canada’s retail giant in 2006. However, like many other businesses, LoggerHead was hit hard by the recession, which had derailed most all start-ups in its path, not to mention quite a few existing businesses.

Emerging from the recession, his son Dan Jr. had started working full time in the business. In 2009, LoggerHead started working with Sears, and after two years of trial orders, LoggerHead had its first DRTV test with Sears at Christmas 2011. The product was a resounding success, selling out before Christmas and outselling all other tools in its category. The Bionic Wrench was the most profitable product of the category and the best seller as an American Made product, proving the concept and business model.

Dan’s dream became nightmare the next year, after a solid 2011 Christmas for the wrench. Sears and its Craftsman brand went after the $19.99 highly giftable product in 2012, debuting their own knockoff. Sears and Craftsman contracted with Apex Tools Group, a billion dollar division of Bain Capital, to make the Bionic Wrench’s clone in China. But Dan Brown was not going to let this happen without a fight, he successfully organized a legal team and sued both Sears and Apex for willful patent infringement of the patented Bionic Wrench.

Sears and Apex hired law firms to defend them, Kirkland & Ellis LLP, and Winston & Shrawn LLP. Kirkland is the second largest law firm in the country, and Winston isn’t far behind. This was no typical David and Goliath battle, this was a David versus two Goliath battle. In this type of case, patent owners only can get justice if they have the millions needed to get to court. This is virtually impossible for start-ups, and large corporations know this, giving rise to a practice known as efficient infringement.

In cases like the Brown’s, when a knockoff appears, it can quickly destroy a company, and in this case the proven American Made business model. Inventors must seek a source for financing a multimillion-dollar lawsuit to protect their business, while at the same time competing against their own technology in the form of a low cost knockoff in the marketplace.

Faced with this paradox of enforcing his property rights, the inventor has the nearly impossible financial quest of having to organize this legal battle against the infringers; in a system where you only can get the justice you can afford to pay for, a literal contradiction of your rights.

But the Browns partnered with Paul Skiermont, of Dallas based Skiermont Derby LLP, and his legal team, who took the case on an alternative fee basis. Skiermont believed in the Browns and their intellectual property, gambling his time and efforts on getting a piece of the final judgment if LoggerHead proved its claims.

Sears and Apex are multi-billion dollar companies who know that small guys don’t have the money or the guts to take them on. The Browns were the rarity because they refused to give up and be cannibalized by a knockoff of their own design and patents in the marketplace. The Skiermont Derby team went to battle with the Goliaths who had knocked off the Bionic Wrench.

After four years and a two-week courtroom battle in the U.S. District Court of Judge Rebecca Pallmeyer, on May 11, 2017 the jury awarded a $6 million judgment to LoggerHead Tools for patent infringement. The next day the same jury heard arguments for willfulness and again ruled in LoggerHead’s favor on “willful infringement” by both Sears and Apex Tool Group. It is now in the hands of the judge, who can punitively award as much as triple the damages with that willfulness verdict to LoggerHead.

The Browns are thrilled with their win, but Sears and Apex will likely appeal, as these legal battles often extend on for years. An individual inventor faces a brutal gauntlet of legal and competitive hurdles to successfully bring a product to market and sustain a business. As a society, we need to be supporting, nurturing and protecting these American job creators, but as seen in the LoggerHead case, this is far from the reality.

Like many of those Southside Irish baby boomers, Dan Brown was the first in his family to go to college. And although he never did become a plumber like his dad wanted, or get to medical school as his mother dreamed, ironically he did recently become a doctor (PhD), successfully defending his doctoral thesis just ten days after the trial ended.

It is not impossible for a savvy tough-minded pair of Chicago south side Irish guys to win and survive, but it sure ain’t easy, even for a “bionic” team.

Question: What have you invented?

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