The State of the American Dream
The United States government is effectively calling the shots now at General Motors. Legislation has been proposed that would start capping the pay of at least some private sector employees. President Obama’s proposed health plan would put yet another 1/6 of the U.S. economy under government management. The party in power in Washington wages class warfare against the “rich,” “profits,” and “speculators.” With such demonizing of wealth and the increasing involvement of the federal government in the private sector one might think that the “American Dream” is dying, that the idea of an entrepreneur building a better mousetrap and striking it rich is as obsolete as telephones connected by a wire.
The American Dream, though, is not dead. At any time of day you can turn on your television and see the realized dreams of inventors on display in infomercials from direct marketing companies like Telebrands, Ontel, IdeaVillage, QVC, and HSN.
I recently had the opportunity to see those dreams at a early stage when I was invited to pitch Telebrands on an idea of mine for a consumer product along with about 30 other entrepreneurs and inventors at Telebrands’ headquarters in Fairfield, New Jersey.
Telebrands’ business model involves a fairly rapid turnover of their product line, replacing all but only the very best sellers after only a year or two. That creates a voracious need for new gadgets and gizmos. Hence the inventors days.
As one might expect with gadgets and gizmos, the majority of inventors were men, but there were a few pitchwomen as well. With Telebrands’ most successful product to date being the Ped Egg foot smoother, this should come as no surprise. Most of the products directly marketed on television are aimed at women one way or another. There was ethnic and geographic diversity among the inventors as well with some coming from as far away as Key West, Oklahoma, and Las Vegas.
There was also quite a variety of ideas/products being pitched. Some were circumspect for intellectual property reasons, but like any proud parent, most of the inventors were eager to share their stories and what product they were pitching. The products ran the gamut: a child’s lamp shaped like an angel whose halo lights up, a tanning bed that lets you tan on both sides without turning over, cooling wash cloths, a device that collects rainwater to water your plants, a grasping assist designed to reach tight spots like retrieving items from your garbage disposal, something that lets you hold a baby while leaving your hands free, a spa/hot tub cleaning system, and an applicator system that looked like a cross between a toothpaste tube and a sponge painting pad. But wait … there’s more! What pitchathon would be complete without at least one “ab cruncher” device?
While the Pitchmen marketing model is ok for gizmos, the seed of American enterprise is the scalable product line. That dream has been severely diminished by the demise of venture capital, which was killed by “SOX”, the Sarbanes-Oxley Act. The entrepreneur used to look forward to the day when his product line of inventions would result in an IPO, a public stock offering, at which point real riches might be made, along with entry into the vast middle echelon of the business world. But SOX raised the ante so high that venture capital has virtually dried up. Now we see the advent of enabling corporations, as exemplified by the Khubani organization, which provide the framework for production and marketing, licensing the inventor’s gizmo and otherwise writing the inventor out of the rest of the erstwhile dream. Under SOX, as with much of the present Administration’s philosophy, if you aren’t big in the first place, then you have no place at the trough (private or public), so stay small, and be glad for the crumbs offered by those who already are big enough to deal with the red tape. Innovation may not be dead, but the path to riches is a lot harder these days.
What Myno said.
Through what avenue with the next semiconductor or internet boom take place? Not through direct sell late night TV with products that last half a year in the marketplace.
And not a small percentage of that ambition and creativity are going to be applied to avoiding taxes.
While the Pitchmen marketing model is ok for gizmos, the seed of American enterprise is the scalable product line.
The Pitchmen marketing model is just a tool, like any marketing model. While Telebrands and competitors may have a fairly rapid turnover of their product line, they are, after all, in the branding business and recognize the value of a good brand that can be extended into new products. The other day I was in a CVS or Rite-Aid and I was checking out the tv merchandise and I saw that Telebrands has expanded the Ped Egg line to include new products.
Now we see the advent of enabling corporations, as exemplified by the Khubani organization, which provide the framework for production and marketing, licensing the inventor’s gizmo and otherwise writing the inventor out of the rest of the erstwhile dream.
The inventor cares about two things, proof of concept and money. Sure, some may want to be entrepreneurs and masters of their own destiny, but mostly they want to convince folks that their idea is sound and earn some coin off that idea. After seeing that clothes hangers are a big thing with Telebrands, when I got back from New Jersey I designed an adjustable hanger (with the avg woman in America being a size 14/16 and the number of men who wear XXL and larger shirts, most standard hangers are actually too small for many garments). Now why would I want the hassle of trying to raise tens, maybe hundreds, of thousands of dollars for production molds, and even more for marketing, when I can let someone else deal with those headaches and get a royalty check? There are reasons why most musicians don’t start their own record companies.
Rather than writing inventors out of the scene, the tv marketers often return to their successful inventors for new product ideas. Success feeds on success.
Through what avenue with the next semiconductor or internet boom take place? Not through direct sell late night TV with products that last half a year in the marketplace.
Selling to consumers is different than business to business. Pitching Telebrands (or their competitors) on a product needs a different pitch than selling the same product on an infomercial. Still, sales is sales. I’m sure that the late Billy Mays would have been successful as a manufacturer’s rep, selling business to business.
It should be noted that the most successful items direct marketed on tv can transcend the “half year half life” of most of that merch. Mays helped establish Oxy-Clean as a nationally recognized brand, growing their sales to hundreds of millions of dollars annually. One of the majors, like Proctor & Gamble or Lever, bought out the family business that created the brand.
While inventors realize that a deal with a tv marketer most likely will not be a long term arrangement, they hope that their product will be the next Oxy-Clean or Ped Egg, an evergreen brand that can be extended.
Goody, goody, goody. I’ve seen the future, and it’s crap that’s not good enough for Walmart. If this is the best we can do…