Dan's Profile

Fascinating. It’s amazing how many companies have been caught flat footed by the supply chain changes that are allowing fast fashion to take off. As you point out, holding excess inventory and then having to pump it into discounters is a death spiral for a brand like Ralph Lauren that’s trying to maintain a premium image.

I wonder if there will be consolidation in the fashion industry as a result of these supply chain changes and fast fashion? It strikes me that the best way to compete with the access to data that Amazon has would be to roll up a number of brands like Ralph Lauren into a holding company that’s better able to monitor macro trends, and would also offer supply chain enhancements through scale efficiencies.

I agree this is really interesting! I think the most concerning part of Brexit for a global company like Toyota is the uncertainty it creates. Many scenarios are being discussed in which the UK leaves but remains very close to Europe with relatively few trade barriers. In this case, Brexit wouldn’t be too bad for Toyota in and of itself. What’s particularly difficult for a global company like Toyota is the high level of uncertainty today that makes investment decisions difficult. In that context, it’s interesting that Toyota has announced plans to invest into the Derbyshire plant. I wonder if this investment is politically motivated – by investing more in the UK today, Toyota is more likely to have a seat at the table as the UK is negotiating Brexit to advocate for lower trade barriers on automakers. As you point out, if trade barriers are severe, then Toyota will likely need to increase production in the UK, which this factory might also help it accomplish, so the investment may provide benefits in a variety of scenarios.

I’m intrigued by the above comment – do executives have a fiduciary duty to try to sway public policy in their interest? In the case of Brexit, it may seem simple. I’d wager most of our class thinks Brexit is bad for the UK and bad for the world. We’re therefore more likely to buy the argument that businesses should have caused more of a storm around the impact of Brexit on UK business (though to be fair I think this point was very much at the forefront of the public debate).

Most large businesses, of course, do have lobbying arms dedicated to exactly this cause – trying to sway public policy decisions. But if businesses have a fiduciary duty to try to sway political discourse, then we also believe, for example, that businesses have a fiduciary duty to support things like the current US tax plan which significantly reduces corporate taxes. The end result of this logic would be that businesses have a fiduciary duty to support a 0% corporate tax rate. But others might argue that a 0% corporate tax rate is harmful to society at large by failing to provide enough funding for public goods… Which leads me to this point of view: public policy decisions are complicated. What benefits a business in the short-term may hurt it in the long-term. Arguing that businesses have a fiduciary duty to take one side or another in a policy debate doesn’t make a lot of sense. Businesses are a major force in our society and they should weigh in where they think they can make a difference – but that difference should be defined much more broadly than fiduciary responsibilities.

Moving away from fossil fuels as much as possible is certainly a strategic move for the Navy. I agree that it’s an important focus and I hope the Navy continues to invest in alternative energy as a strategic goal. One point I would add is that in my opinion the Navy’s move away from fossil fuels needs to be as broad as possible to encompass different existing and emerging technologies. Biofuels, while greener than fossil fuels, still pose a lot of the same operational and strategic challenges of traditional fuel (namely you need to transport the fuel!). I believe the Navy has also invested heavily in nuclear power for portions of its fleet (subs in particular but I believe other ships as well), which has the advantage of not requiring refueling.

Many of these initiatives gained steam when fuel prices surged in the early 2000s. It will be interesting to see what happens now that fuel is (comparatively) cheap, and has remained so for almost a decade (since the crash in 2008). I wonder if political appetite will remain for this type of spending if fossil fuels remain relatively cheap for the next decade?

To take a bit of a contrarian viewpoint, I’m not sure ABInBev has a huge responsibility here. I’d argue that the real water crisis revolves around poor infrastructure in many developing countries. As the UN report cited your piece says, “There is enough fresh water for everyone on Earth. However, due to bad economics or poor infrastructure, millions of people (most of them children) die from diseases associated with inadequate water supply, sanitation and hygiene.”

There are some localized water shortages that may affect ABInBev. But I’d argue that by and large the issue at hand isn’t that ABInBev is using too much of a scarce resource by turning it into beer or growing barley, the real issue is that in places like much of India, rural Paraguay (where I spent time building latrines to address exactly this issue), etc. the water supply is contaminated due to human pollution and animal pollution. It’s such an important issue and working to solve it would radically improve the world (diarrhea from unclean water is one of the leading killers of children globally). But it’s not an issue that I see ABInBev as particularly implicated in! I do think it’s admirable that they’re working on this issue, and I certainly hope they continue to do so for the sake of the communities they operate in, but I’m not sure they have an obligation to do this work more than any other company operating in countries with water infrastructure problems.

Nordstrom is in a precarious position. I have trouble seeing how Nordstrom can beat Amazon at its own game (supply chain excellence). If Nordstrom is embracing a digital supply chain, in my opinion it should be in service of better customer experience / focused on its retail space. In that context, creating showrooms and focusing on in-store stylist experiences, as you mention they have done, makes a lot of sense. But a world of showrooms and in-store stylist experiences is very different than the big retail footprint they have today.

If it’s a game of logistical expertise, Nordstrom will go the way of Barnes and Noble. Nordstrom needs to convince customers not only to come into their stores to try clothes on, but also to buy clothes in store vs. showrooming and completing the purchase on Amazon. For example, could Nordstrom’s in-store experience focus on personalization of clothing? Tailoring a suit or a dress is the first step here, are there other items of clothing that might be better if they were more personalized? Is there a way to do this at low cost? Or could Nordstrom’s focus more on exclusive deals with retail brands that agree not to sell the same products online? I don’t see how Nordstrom’s wins in the long-term if it’s selling the exact same products you can find on Amazon. In-store shopping matters, but Nordstrom’s stores are still huge and result in big inventory holding costs. While Amazon might not kill retail, I’d think it will kill department stores as smaller showrooms that don’t hold inventory replace them. It’s not clear to me how Nordstrom’s competes.