Lowell's: Under the Hood

Implosion: The Decline and Fall of Lexmark

I have written a great deal about the failure of CentrePointe, the downtown Lexington development which has failed to produce promised jobs and economic contributions to our city.  It has left a scar in the middle of our city which has persisted for the better part of a year.  It has exposed just how flawed Lexington's planning and economic development processes are.

As much as I have commented on CentrePointe, however, it is primarily a failure of omission, of delivery.  There is a far larger and more important story about a failure which has actively destroyed jobs and economic contribution in our city.

It is a story of the colossal mismanagement of one of Lexington's biggest employers.  It is a story of the destruction of shareholder value and the bleeding of high-tech jobs in Lexington.  It is a story about how a $12 billion company became a $1.2 billion company in just 5 years.  It is a story of wasted opportunity.

It is a story which serves as a damning indictment of the failed executives who have presided over this corporate implosion.

This is a story of the decline and fall of Lexmark International.

About 5 years ago, Lexmark had a market value of over $12 billion, and its stock was over $95 a share.  As of this writing, it is worth less than $1.2 billion, and its stock is struggling to stay above $15 a share.  What happened?

Through a series of misinvestments and strategic blunders, Lexmark's executive management has simultaneously squandered a huge pile of cash, strangled most of their inkjet division, and destroyed some $11 billion in shareholder value. 

In this post, we'll explore a big strategic mistake which is leading to the downfall of Lexmark's inkjet division.  Then, we'll look at how management has failed to invest properly for the Lexmark's future.  But in order to understand the true extent of this failure we need to start with how a printer company makes money.

Business Model
Essentially, a printer business has two major components: 1) Printers and 2) Supplies for printers.  (Lexmark has also been trying for years to expand a services business for corporate customers, but we'll keep it simple here.)  Lexmark has two major divisions: the Printing Solutions and Services Division (or PS&SD) which focuses on enterprises and uses more-expensive laser-based technology; and the Imaging Solutions Division (ISD - formerly known as the Consumer Printer Division, or CPD), traditionally a more consumer-oriented division which mainly uses cheaper inkjet technology.

The printers are relatively expensive to buy, but are narrowly profitable or even unprofitable - especially with inexpensive 'low end' inkjet printers - for their makers.  Printer sales can be fairly volatile - up one quarter, down the next.  All of the active printers that a manufacturer has in the market are considered the 'installed base' of printers. 

Compared to printer costs, supplies tend to be relatively inexpensive.  Even though they cost less to customers, they offer a high profit percentage for their makers.  Supplies sales also tend to be much more stable and reliable, because supplies are generated from multiple years of sales of printers.  In other words, supplies are not generally subject to excessive swings like printers are.

Most of the printer industry tries to offset each high-dollar, low-margin printer with several low-dollar, high-margin supplies sold over the life of that printer.  The initial printer sale yields little profit (or a loss - as Lexmark has admitted they lose money on many of their inkjet printers), while supplies sales from that printer help (eventually) drive high profits. 

This business model is often called a razors-and-blades model for its similarity to how Gillette made enormous profits: Sell the razors for as little as possible, and make it up with profits from blades.

As the installed base of printers ramps up, more and more of the company's revenues (and, of course, profits) come from supplies sales.  Eventually, the more stable and reliable supplies business will outpace the more volatile printer business.  Over the past 5 years, supplies have accounted for between 60 and 70% of Lexmark's revenues. 

Upside-Down Economics
In order to get access to the market, most inkjet products are sold through major retailers like Walmart, Best Buy, and Staples.  These retailers wield enormous influence over printer manufacturers. 

Retailers are driven to maximize the profitability of their limited shelf space.  If a product isn't creating enough selling "velocity" for a given space, then the retailer will discontinue, or "de-list" it.  And because manufacturers are in a blind competition with one another for shelf space, de-listing poses an enormous threat to future supplies sales.  Lexmark's competition for retail shelf space is intimidating: it includes market-leader Hewlett-Packard (HP), as well as Canon, Epson, Brother, and Kodak.

To ensure continued access to the retailer's customers (and to the future supplies sales), manufacturers often feel compelled to sweeten the pot for retailers when their selling velocity isn't high enough.  Most often, this comes in the form of price cuts for printers. 

Lexmark was in the vanguard of the low-priced printer movement, offering the same (or more) functionality for lower prices than the competition.  For a few years, this was Lexmark's main competitive edge in the inkjet market.  But in 2003, HP - who had almost always used its market leadership to demand premium prices - changed its strategy and began to match Lexmark's pricing.

Over time, the printer industry kept giving more and more ground in this Faustian bargain with retailers, driving printer prices lower and lower, until they ultimately lost money on many of the printers they sold in order to get access to profitable supplies sales. 

But when a company loses money on its initial printer sale, funny things start to happen to the business model.  If it grows too fast, then the losses from printers can drain the profits from supplies: In other words, building the business for long term profit can require the sacrificing of profitability in the short term.  Conversely, if printer sales drop dramatically, then the business can appear enormously profitable: Management can enhance short-term profit even while destroying long-term business fundamentals.

These upside-down economics can be difficult to manage, especially during strategic shifts: it is expensive and uncomfortable to change, but it is also expensive and uncomfortable to remain in place.  In the case of Lexmark's inkjet-focused ISD, Lexmark executives failed to manage those economics - to the detriment of the ISD business.

Strategic Blunders
For several years, Lexmark executives have signaled their intent to get "higher-usage customers" for ISD.  The premise of these announcements was that Lexmark would sell fewer printers, but that they wouldn't lose (as much) money on printers and would simultaneously gain enormously-profitable customers who used lots of supplies. 

HP has traditionally been very strong among small businesses and other high-usage customers, and Lexmark was attempting to crack into that market.  Repositioning to get higher-usage customers would also be a marked departure from Lexmark's history (and its brand image) of cheap, low-end inkjet products.

Trouble is, the executives never identified any sustainably differentiated qualities in their high-end products which would tempt customers to leave the vaunted HP brand for the Lexmark label.  To date, Lexmark's products are "me-too" products: the same basic functions, features, and performance as the products offered by other printer manufacturers.  The few differentiated features that Lexmark has introduced (wireless printing, for example) have been quickly matched by rivals.

And it isn't clear that Lexmark has, in fact, gained higher-usage customers with the few printers it has managed to sell.  Spot-checking product prices in stores and online, it is common to see Lexmark's "high-end" inkjet products at nearly half the price of competitive products from HP.  This is a clear signal that Lexmark's products aren't getting the velocity of HP's products, and that retailers are extracting price concessions as a result.  Further, as these high-performance, heavily-featured products drop in price, two other upside-down dynamics kick in:

• The magnitude of losses for high-end products might be greater than the losses for low-end products.
• The lower prices likely appeal to the same lower-usage consumers which Lexmark is attempting to avoid

An example: a feature-laden product designed for the, say, $200 price point might lose even more money when repriced to $149 than a sibling product which was designed for $49 and reduced to $29.  And that bigger financial hole might be even harder to get out of if Lexmark "wins" customers who don't print frequently.

So, how did this "repositioning" strategy play out?

With new ISD leadership in 2008, Lexmark began to aggressively abandon low-end printers in the pursuit of the high end of the printer market.  Almost immediately, Lexmark's retail presence was dramatically reduced as it was de-listed at or kicked out of retailer after retailer, ending up with a significant presence only at Walmart and Circuit City - not the kinds of retailers where higher-usage customers would be expected.  Perhaps feeling the sting of being locked out of so many retailers, a more flexible Lexmark began regaining listings earlier this year. 

By the end of 2008, the damage was done: Lexmark lost almost half of the printers sold in 2007.  2008 revenues were down 22% from 2007, while profits were up 47% in the same period.  Remember when we said that a dramatic drop in printer sales usually creates a temporary boost in profits?  Well, in this case, Lexmark's supplies revenue and profit - usually the most stable part of a printing business - have also been dropping, which is a particularly worrisome trend.  This implies significant deterioration in Lexmark's cash cow - its installed base of printers.

In the past 5 years, the attempts to move to the high end have has disastrous effects: Since 2004, ISD has lost two-thirds of its printer sales and 40% of its revenues.  Profits in the division have dropped by nearly 60%.  And the prospects for the future are not good.

Death Spiral
When the most stable generator of cash (supplies) starts drying up, it can put a printing company in a kind of death spiral.  Because of its leveraged, upside-down economics, the company can no longer fund the aggressive growth initiatives which could help pull it out of the downward spiral.

Will the move to higher-usage printers pull Lexmark out of the death spiral?  No.  As we outline above, Lexmark has failed to offer truly differentiated products with a compelling business model, and it appears that the aggressive move upmarket may actually speed the division's demise. 

What's even more troubling are the warning signs of a similar death spiral in Lexmark's larger, more-business-focused PS&SD.  While not as volatile as ISD, the same patterns are emerging to point toward flat or falling supplies revenue: declining overall revenue, declining printer sales, and what appears to be a shrinking installed base.  Once both divisions have entered the spiral, it will be difficult for Lexmark to maintain long-term viability.

Cash Burn
For years, Lexmark's executives have touted the company's amazing ability to generate cash from its supplies-heavy business model.  But how have they deployed that cash for investors' and the company's benefit?  They haven't.  It is another troubling example of the mismanagement of the company.

At a recent meeting with analysts, Lexmark executives crowed about returning $3.2 billion to shareholders through stock buybacks.  As we delve into the effects of those buybacks, we have to wonder what they were so proud of...

With a buyback, management essentially tells shareholders, "We've determined that the best investment we can make is in our own company, so we're going to buy back our own stock."  After a buyback, since there are fewer shares on the market, each remaining share owns a bigger chunk of the company. 

Normally, a buyback is a great thing for long-term shareholders.  Because each share owns a bigger chunk of the company, the share's price usually goes up.  And a buyback usually acts as a signal from management that they believe in their company's health and prosperity.

But sometimes, buybacks are used by management as a weak attempt to prop up the share price of a flagging company.  Buybacks are especially worrisome when they are the primary use of cash by technology companies: Executives are signaling to shareholders that they can find no innovative technology more worthy of investment than simply plowing that cash back into the company's stock.  As a result of depriving technology development and acquisition, a buyback company's technology often falls far behind that of competitors.

In Lexmark's case, the buybacks have backfired.  Over the past 5 years, management has used $3.2 billion to buy back some 59 million shares of Lexmark stock at an average price of approximately $54 a share.  At $15 a share, that $3.2 billion investment is now worth about $900 million - a loss of over 70%. 

But it is worse than that.  The 59 million shares Lexmark's executives repurchased represent about 45% of the shares they started with in 2004.  So each share should have nearly doubled in value.  Without the buybacks, Lexmark's share price would likely be around $8, instead of $15.    All in all, Lexmark's value has dropped by a scandalous 90%.

In 2004, Lexmark was sitting on $1.5 billion in cash and securities.  By 2008, Lexmark had burned through that cash (and other cash it had generated since 2004) through share buybacks.  So, it took on a $650 million long-term loan, and began using that to continue purchasing new shares. 

Rather than deploying this arsenal of cash to fund growth with significant new technologies (which might have helped to differentiate their products - see discussion above), Lexmark invested in its failing status quo.  And, by any measure, that investment failed.  Miserably.

Is this executive incompetence?  Perhaps.

But there is another, equally-distressing, explanation for why Lexmark's management engaged in this failed buyback strategy on such a massive scale: They were protecting themselves.

When a company builds a large mountain of cash, it becomes an attractive takeover target.  In Lexmark's case, this is especially true, because it has also had (until recently) a reliable stream of cash from its supplies business coupled with a depressed stock price.  A private equity firm would look at buying the firm and using the cash and future profits to finance the acquisition.  In 2005, one of the industry's best analysts (Toni Sacconaghi, now with Bernstein Research) suggested that Lexmark was ripe for precisely such a scenario.  

By buying back almost half of Lexmark's outstanding stock, executives could solve multiple 'problems' at the same time:

• They reduced their cash holdings, thereby reducing their attractiveness as a takeover target;
• They could potentially buy out dissatisfied shareholders (further reducing takeover potential); and,
• They could prop up their flagging stock price, with the hopes of deferring shareholder judgment on their failures.

All in all, such a strategy would have allowed Lexmark's executives and board to maintain and concentrate control of the company.  In the process, however, they have failed their shareholders, their employees, and the communities in which they live and work (especially Lexington).  

Incompetence.  Or self-interest.  Neither explanation is satisfactory.  And both are deeply troubling.

A call for change
CEO Paul Curlander, ISD President Paul Rooke, and PS&SD President Marty Canning have all been with Lexmark for over a decade.  They presided over the destruction of 90% of Lexmark's market value.  They have marshaled failed (and failing) business strategies.  They have continually pursued failed financial strategies through stock buy-backs.  They have destroyed some 600 mostly-local US jobs.

By every meaningful business measure, they have failed.

It is time for Lexmark's board to act decisively.  Lexmark needs a vibrant new strategy 1) to survive and 2) to grow profitably.  The current standard-bearers are clearly not up to the task.  My hope is that the board can bring in new executive management who can articulate and execute that strategy. 

As a Lexington business owner, I want and need Lexmark to thrive.  Lexmark's current leaders have failed its shareholders, its employees, and our community.  It is time for meaningful change at Lexmark.

* * *

A few disclosures are in order: 

• As a former Lexmark employee, I'm prohibited from using knowledge and insights I gained while I was employed by the company.  I'm not allowed, for instance, to talk about how board meetings are orchestrated.  I also can't use the insights I may have gained in meetings with current and former executives at Lexmark.  I can't talk about the specific products, internal strategies, and personalities which might have led to the failures which I document here. 
• As a result, this story is stitched together entirely from studying publicly-available financial statements, presentations to analysts, and other public releases from the company and others.
• I have not owned Lexmark stock for over 1 year.
• I have friends, family, and customers who still work at Lexmark.  This in no way reflects their views, or conversations I may have had with them.  I did not consult with any of them before writing this.  These observations are mine and mine alone.
• Finally, this critique is aimed squarely at Lexmark's executive management.  The failures I document here are theirs, not the failures of Lexmark's smart and creative rank-and-file employees.

We Were Wrong

Six months ago, the Lowell's Corporate Office of Fearless Predictions forecast that "Gasoline will be well above $3 a gallon by June, if not sooner."  As part of the prediction, we also said oil prices would reach $80 a barrel.

Well, we were wrong.

As of this writing, most stations in Lexington have gasoline at $2.65, and oil has been around $71 a barrel.

At the time of our forecast, gas was about $1.49 a gallon, and oil stood at $39 a barrel.  We predicted that a number of forces (weaker dollar, production cutbacks, greater demand, and speculation) would come together to drive oil prices upward.  We were generally right about the forces driving prices up, but we were wrong about their strength and timing.

In particular, it appears that the economic rebound and infrastructure build-out we foresaw to drive greater demand really didn't kick in as soon or as strongly as we expected.  We're slowly starting to see some signs of the rebound, but it didn't happen when we said it would.

We still expect $3-a-gallon gas by the end of the summer, and wouldn't be surprised to see $3.50 to $4 a gallon by the end of 2009.

That's what we see in our crystal ball.  What do you think?  Where will gas and oil prices go from here?

Tangled Webb

At the Lexington Forum last week, CentrePointe's developer spun a dazzling and dizzying tale about the history and the future of the pit in the middle of our city. 

His presentation resonated with the receptive Forum audience.  Looking around the room, filled with many of Lexington's other business and civic leaders, I was a bit confounded.  While many in the audience seemed familiar with the ongoing controversy of CentrePointe, few seemed knowledgeable about the actual details.

I then began to realize the scope of the challenge for CentrePointe critics: How do we effectively demonstrate the full extent of our skepticism and concern to the uninitiated or uninvolved (in other words, to the majority of our citizens)?  CentrePointe is an elaborate project with an equally elaborate backstory.  It is a complex web which is difficult for newcomers to disentangle.

Even so, there are at least 5 distinct patterns which lie within the web: 1) Secrecy, 2) Runaway Optimism, 3) Loss of Credibility, 4) Contingency, and 5) Victimhood.  These patterns form the basis of our critique of the project, and should raise important questions about CentrePointe for any public official, business associate, or concerned citizen.  

Secrecy.  From the beginning, CentrePointe was shrouded in secrecy, and the developers have been hostile to reasonable inquiry into the details of the project.  While seeking public commitments for tax increment financing (TIF), they refused to disclose the name of their secret financier.  They failed to disclose that their financier had been dead for six months.  On Thursday, the developer announced two new financial backers, but wouldn't disclose their names either.

The developer claims that private property rights let him maintain secrecy, even as he publicly sought specialized TIF tax status.  The premise of tax increment financing is that today's public debt would be paid for by future tax increases (the "tax increment") which arise from property improvements (increased property values, increased commercial activity, etc.).  While the developer maintains his right to secrecy, the special status which the public granted to his property should require him to be more forthright and more detailed about the project's timing, financing, and business model.  Or, the special TIF status should be removed.

Runaway Optimism.  The few details which have emerged have shown that the developers frequently engage in runaway optimism.  They bank on the flimsiest of commitments, and lean on them to demonstrate the viability of the project.  They are willing to mislead people to believe these commitments are real.  

In last week's presentation, the developer stated that one of the first calls he got upon announcing the project was from Hard Rock Cafe, who wanted to locate in CentrePointe.  This was met with murmurs of approval from his audience.  

Trouble is, it wasn't Hard Rock.  And they didn't initiate contact with the developers.  And they aren't coming to CentrePointe.  As Dr. Nick Kouns chronicles, Kouns initiated contact with House of Blues, who felt that Lexington wasn't a sufficient market for their brand, but met with the developers out of courtesy.  So the 'commitment' was never much more than an exploratory discussion.

Alas, such optimism pervades CentrePointe.  On Thursday, the developer announced that he had 65 'almost-certain' prospects for his 91 condominiums which will sell for an average price of $1.2 million.  Trouble is, only 10 million-dollar properties sold in all of Fayette County in all of 2008.  In today's even-more-depressed market, what would enable the developers to attract 6 times more luxury property commitments, just for an unbuilt CentrePointe alone?  Runaway optimism.

Loss of Credibility.  The trouble with runaway optimism is that, eventually, reality sets in.  And as the developer's gossamer threads of optimism unravel, they reveal his profound credibility problem.  

For the better part of a year now, the developer has continually decommitted from prior public statements.  These decommitments have been on videotape, in print, and to the Urban County Council, and have touched on all major dimensions of the project: its financing, its business model, and its timing.  The pattern which emerges is one in which the developer continually bends facts (and history) in the attempt to prop up his faltering story.

The developer rushed to create the pit in the center of our city last July, and was scheduled to begin construction on CentrePointe in 60 to 90 days.  As the months dragged on, he claimed that the permitting process was holding him back from doing anything else with the property, but that he expected the permitting issue to be resolved in 60 to 90 days.  Only later was it revealed that, even as he made such statements, he knew that his primary financier was dead.  But even though the financier was dead, the developer told the Urban County Council he was certain that construction would begin in 60 to 90 days.  Last week - some 60 days after he announced the death of his financier - the developer expected the financing to be resolved in 60 to 90 days.  

Contingency.  CentrePointe is a complex $250 million development with several intertwined components: over $100 million from 91 condos, a $100 million 250-room hotel, and some $50 million from retail and office functions in lower floors.  There has been a year-long delay in securing financing.  Construction has been delayed many times.  Every piece is contingent on the others, and it all has to come together flawlessly for CentrePointe's business model to 'work'.  And there are enough doubts about every single component that public officials, business associates, and concerned citizens should be worried.

As outlined above, the condo plans seem over-ambitious.  While Marriott has expressed interest in and support for the hotel, they aren't actually financing it, and the higher-than-average occupancy at higher-than-average room rates assumptions used in the CentrePointe business model are far from viable. The fact that the developer is willing to mislead a prominent audience about a major retail tenant raises questions about the rest of the project's business model.  The continual delays in securing financing and beginning construction - coupled with the secrecy of every major aspect of the project - have contributed to the mounting skepticism about whether CentrePointe is truly viable.

Victimhood.  In his public addresses, the developer often adopts a persecuted posture, which often positions him as a blameless victim of the sinister agendas of press, of bloggers, and of ambitious politicians.  He claims not to understand all of the fuss.  He just "wants to shut these people up".  

Let's take a look at the explanations the developer has provided for us:

• The financier was secret because he feared public backlash.  When he died, that was kept secret because it wasn't going to affect financing.  But when the financier's heirs wanted to know whether he had sufficient assets to cover obligations like CentrePointe, the assets were tied up in numbered Swiss bank accounts.  They couldn't get access to the accounts unless they also took on the obligations, which creates a Catch-22: the heirs can't see the assets without accepting the obligations, but won't accept the obligations without seeing the assets.  But even though the heirs can't be certain of the dead financier's assets, the developer somehow is...
• Last week, the developer introduced two new financing sources.  But both sources - an individual and an investment bank - also demanded anonymity.
• Even though the developer has always claimed the financing was rock-solid, last week he introduced three additional contingency plans.
• When challenged on the viability of CentrePointe's condominium assumptions, he claims that 65 of the 91 condos are 'spoken for' through undocumentable 'handshake deals'.  He also names vague tenants for the properties - horse farms in Ireland and Dubai and vintners in Napa Valley.
• He claims that people are lining up for the retail and restaurant spaces, but the one deal he has detailed to the public was both wrong and unconsummated.
• Every time he provides an update on the project, the projected start date is 60 to 90 days hence.  Unfortunately, '60 days from now' never arrives. 

To the extent he is a victim, he is the victim of his own machinations.  If he really wanted to shut these people up, he would simply provide some proof that his critics are wrong.  But the proof which would silence his growing list of critics never arrives.  

* * *

Looking through the tangle of explanations and the patterns outlined above, one is forced to make one of two conclusions about the developer's ability to silence his critics:

1. That he is the unluckiest man alive (every opportunity to exonerate himself is confounded by another unfortunate twist in his story);
2. That he is simply lying (every opportunity to exonerate himself is confounded by another convenient twist in his story).

Until we get a full and clear accounting for CentrePointe's real-world status, I, for one, choose not to be silenced.

An update on CentrePointe

At the Lexington Forum this morning, CentrePointe's developer updated the public on the status of the faltering project in the center of our city.  As he has done in other venues, he laid much of the blame for any CentrePointe controversy at the feet of bloggers and the media.

In his presentation, he revealed a few new details about the secretive project, along with several layers of backup plans.  In this post, I'll outline some of my notes and some questions which arise from the developer's presentation.  In a future post, I'll share more of my thoughts on the development in the wake of this morning's presentation.

Plan A

• The dead financier (call him Mystery Investor 'A' - or MIA, for short) was introduced to the developers by a pre-eminent, distinguished American who was heavily involved in the Justice Department.
• MIA was committed to 5 such projects around the world involving some $800 million, including 3 in the US worth some $550 million.
• He went into some detail on the reason that MIA's estate was held up.  He characterized it as a chicken-and-egg problem.  The heirs aren't sure they wanted access to the 'numbered Swiss bank accounts' until they knew whether those accounts had enough to cover the estate's liabilities (like CentrePointe).  The accounts and the liabilities seem to be a package deal, but the heirs are blind to the numbered accounts: They can't know what the actual assets of the estate are unless they also accept the liabilities.
• Question: If MIA's heirs don't have confidence that MIA had enough assets to cover these deals, then what makes CentrePointe's developers so confident that the money is there?

Plan A Minus

• If the developer's 'Plan A' falls through, he has an intermediate plan ('Plan A Minus'?).  In the last couple of days, he has talked with someone who happens to have 20 to 30 thousand cubic yards of dirt for free, so filling in the site is an option if the current plans fall through.  He also mentioned that he had talked with someone who hydroseeded strip mine sites who might be willing to help seed the place.
• The developer claimed "It is not our intent to embarrass the community" for the World Equestrian Games.  He hates to do it, but is tempted to backfill the pit and plant seed "even for 60 to 90 days, just to shut those people up".  The friendly crowd roared with laughter.  Later he said he thought about "putting in a liner and turning it into a lake".  More laughter.

Plan B

• CentrePointe now has a 'Plan B', complete with a Mystery Investor 'B' (MIB) who has recently come forward to express interest in the project (should 'Plan A' with MIA's estate fall through). They are "ready to go" if 'Plan A' does fall apart.
• Question: If MIB is so "ready to go", then why not relieve the heirs of MIA's estate of their burden and allow MIB to take over financing for the deal? 

Plan C

• Even though MIB is ready to go, there is also CentrePointe 'Plan C' involving a Mystery Investment Bank 'C' (MIC) who will put up $30 million, and the developer briefly mentioned some sort of 'bond arrangement' to finance the rest of it.
• Question: If Plans A and B are really viable, then why does CentrePointe need a Plan C?
• Question: What kind of bond issue supplies the other $220 million needed to build the project, if the investment bank is only ponying up $30 million?

Other notes

• If one of the financing options lines up today, CentrePointe would begin construction in the fall.  15 months after the initial demolition began.
• The developer claimed that 65 of the 91 condominiums at the top of CentrePointe had been committed to by many people, including horse farms in Ireland and Dubai.  (He didn't mention Napa Valley wineries this time.)
• He took pains to correct Herald-Leader writer Beverly Fortune for reporting that the 91 units had an average price of $1.2 million.  "That's just the average... The units will start at $600,000 and go up from there."
• "Hard Rock Café was one of the first to call us" when they heard about the project, strongly implying that they were lined up.  (Since the meeting, I have learned that the developer really talked with 'House of Blues' - not Hard Rock - and that they are anything but 'lined up'.)

The plethora of mystery investors and backup plans might have been intended to reassure his audience.  But they actually raise troubling questions about the future of the project, the developers' ability to obtain financing, and the financial viability of the development's business model.

A modest proposal to end blight

Comprehensive Care Parking Lot

Every morning when I walk into work at Lowell's, I see 8-foot-tall tree-weeds growing through unkempt hedges and spilling over into the public sidewalk.  I see a planter adjoining our building, burgeoning with weeds and grass and the massive stump of a long-dead tree.  I see a pitted, crumbling parking lot with clogged drainage.

Many customers assume it is our lot.  It does adjoin our building.  And they can't see the sign declaring "Comprehensive Care Center Parking Only".

116 Mechanic Street

Across the street I see a tiny old shotgun house with a gigantic half-rotted tree looming ominously over both the house and the main Lowell's parking lot.  After the ice storm and other storms this spring, downed branches lay in the asphalt front yard of the house.  For over two months.

Absentee owners neglect both properties.  Neighboring businesses have conducted the most of the maintenance on the properties over the past couple of years.  In effect, they are abandoned.

As a business owner, I worry about the effect it has on Lowell's famously loyal customers.  Even if they cherish us and the service we provide, I'm genuinely concerned about the ability of such eyesores to repel visitors to the shop.

I often talk with nearby business owners, who share my concern for the negative effects of these properties on our neighborhood.

* * *

Many folks have wondered why I have been so vocal on the CentrePointe mess.  There are many reasons, but one of the biggest is that the abandoned properties surrounding Lowell's have given me firsthand experience the negative effects of blight like the CentrePointe scar.

There are many such highly-visible, blighted, non-productive and apparently abandoned properties in Lexington: CentrePointe in Downtown, Lexington Mall on Richmond Road, and Continental Inn on New Circle at Winchester are some of the most apparent.  But there are numerous smaller examples littering our city.

Just like the properties surrounding our shop, the absentee owners seek to avoid any and all expenses.  They avoid capital gains taxes by refusing to sell their properties.  They avoid maintenance expenses by refusing to invest to make their properties economic contributors to the community.  They avoid property taxes by refusing to improve their decrepit real estate.

Such abandoned properties generate near-zero direct contributions to the economy.  Moreover, they generate negative economic effects for surrounding properties and businesses: They drive away business and drive down property values.

* * *

It is time for such neglect to end.  It is time to make sure that lazy landowners are motivated 1) to improve their holdings and 2) to transform their properties into contributors to our community's economic engine.

My modest proposal: Implement a 'blight tax'.  Lexington landownders whose property qualifies as 'blighted' would have to pay a moderately severe annual blight tax.

The definition of 'blighted' would need to be worked out, but should include an assessment of the property condition, as well as proof of substantial progress on needed improvements.  We could start with Division of Code Enforcement standards.

To overcome their avoidance of maintenance expenses, property taxes, and/or capital gains taxes, I'd propose that the blight tax have some teeth: Say, 35% to 50% of assessed property value per year.

In the CentrePointe case, the blight tax would generate $8 to $12 million per year of revenue to the city until the developers improve their land.  When historical buildings were demolished to make way for CentrePointe, many rationalized that the old buildings were greater eyesores than the pit which remains today.  I disagree.  But a blight tax may also have helped prevent the demolition-by-neglect which occurred on that block over the years.

I would imagine the former Lexington Mall and Continental Inn properties would generate amounts similar to CentrePointe, given their sizes and their locations on busy thoroughfares.

Such tax revenue could be specifically allocated to offsetting the effects of blight: community improvements to sidewalks, bike paths, streetscapes, parks, community centers, business incubators, community ventures, and the like.  If property owners avoid the blight tax by making their properties more valuable (i.e., by improving them), then all the better.

To create a vibrant city, we need to ensure that Lexington doesn't have the economic scars that blight leaves behind: dead spots which contribute little (or which actually destroy) monetary value in our community.

My proposal is the blight tax.  What's yours?

Homesick

An open letter to Lexington's leaders from the next generation
by Carson Morris

"How do we build a city the next generation will be homesick for?"
                                                        - Rebecca Ryan (via Tom Eblen)

Dear Leaders of Lexington,

  Carson Morris, Superstar

As you return to Lexington from your trip to Madison, Wisconsin, flush with ideas and possibility in the wake of your visit, I wanted to let you know that we stand ready to help make Lexington better. 

While 260 of you were experiencing Madison directly, several hundred of us were following your visit in near-real-time, thanks to those few of you who shared the event using Twitter.  And while you were talking with Madison, we were actively talking about you, Madison, Lexington, and our future.  We had a vibrant discussion.

And when I saw Rebecca Ryan's question, I hoped that you really took it to heart.  Because it means everything when I decide whether to stay in Lexington or not.  And it should inform every decision you make about our city: How do you build a city I will be homesick for?

Making me and my generation homesick won't really be about "stuff" and status.  I know many of you were talking about tangible things - jobs, industries, neighborhoods, amenities, buildings, bike trails.  But that isn't really what we value.  Those things don't really make us want to stay here.  Making UK a top 20 research institution?  That may be great for attracting companies to Lexington, but I don't see how that keeps me here.

If you want me to be homesick, you'll have to connect with my heart.  Then, when I leave, Lexington will tug on my heart.  It will call to me.  Lexington will be the one place on earth I want to be. 

How do you create a Lexington for my generation?  How do you make us homesick for Lexington?  As you settle back into your regular routines, I wanted to help you set an agenda to implement the lessons of Madison for me and my generation.  Here are a few of my ideas.  I'm sure my friends will have many more:

Listen to us.  For years, we've listened as you tell us what our generation wants and needs.  And then we leave town to go to school or to find a job.  And those other places seem built for us, so we never come back.

Too many times, your tuners are set to "broadcast" instead of "receive".  As leaders, you are used to being listened to.  We understand that.  But I and my generation need to be heard.  And we need to know that you hear us.

The Madison experience was a great case in point.  For months now, our generation has been urging you to adopt Twitter (and other social media platforms) to talk with us.  In Madison, a few of you suddenly began using Twitter.  While we appreciate your new openness, we also wonder why you didn't grant us the same credibility as those you talked with in Madison.

If you want us to stay, you must listen to us more.

 
Engage us.  At one point yesterday, Mayor Newberry declared that "I don't think there has been a time in Lexington's history where we've had the level of civic engagement we have now... Lexington needs your engagement in our community now."

This is a profound and true statement from our mayor.  We do need your engagement (including you, Mr. Mayor). Now. 

We're already having conversations about the future of our city.  We're already saying what matters to us.  We're already talking about leaving. 

In order to engage us, don't wait for us to find you: you need to come to where we are and join our ongoing conversations.  Follow us on Twitter.  Spend time in our schools.  Read and comment on our blogs.  Share your thoughts and what you think about ours.  Debate with us.  Ask us what you can do.  Then do it.  Build on our ideas.  (P.S. We have a LOT of ideas.)

If you want us to stay, you must engage us more.


Value us.  As community leaders, you have so many opportunities to keep us in Lexington.  One of the biggest: demonstrate how much you value our talent and our intellect and our creativity. 

When I get to high school, hire me as a summer intern.  Let me work on special and important projects.  Encourage me to engage my friends in the efforts to grow your organizations. 

While I'm in college, toss me the keys and give me the opportunity to create something you might never imagine.  Will I stumble?  Absolutely.  Could you lose money?  Possibly.  But - if I'm successful - we both will profit.  And, either way, knowing that you value me will make me incredibly loyal - to you and to our city.

When I graduate and get a job, ask me what kind of places I want to live in.  What I want to do after hours.  What kind of neighborhood I want.  What is important to me.  Then - and this is the vital part - go build it for me.  It will benefit us both.

(P.S. Also do these things for your current generation of citizens and employees.  Then stand back.  Your success will blow you away.  It might keep some of the current generation in Lexington, too.)

If you want us to stay, you must value us more.


Respect us.  Listening.  Engaging.  Valuing.  It is all about showing fundamental human respect for us and our viewpoints.  If you demonstrate that kind of respect in your actions and in your attitudes, several wonderful things will begin to happen.

First, the right kinds of "stuff" - jobs, buildings, neighborhoods, amenities - will begin to emerge to tug on our hearts.  Our community - and our love for our community - will become much more vibrant.

Second, our economy will begin to flourish.  Giving us a platform to express and implement our ideas will help create the idea-rich economy that you learned about in Madison.  Having our voices and views incorporated into the community's future gives us a stake in making that future happen.

Third, our brand will improve.  As Daddy has mentioned previously, you don't get to decide our brand.  Blue horses or spotted yaks are irrelevant to whether I choose to love my city and to whether I choose to stay in Lexington.  A better brand emerges from being a better city.  And that starts with respecting your citizens and employees.

If you want to build a better Lexington - the kind of Lexington you are envisioning upon your return from Madison - you must listen to us.  You must engage us.  You must value us.  You must openly and actively demonstrate your respect for us. 

Then, you will have built a city that my generation will be homesick for.  That could be your legacy.  We're already here.  And we want to engage you.  We want to help you succeed.  Join us.

Thanks,
Carson

Carson Tate Morris
2 years, 5 months old
Citizen, Future Voter, and Superstar

Unfortunately. Private.

There were two common refrains at Tuesday's Urban County Council confrontation between our vice mayor and the developers of CentrePointe. 

One was the word "Unfortunately" continuously invoked by the developers.  While "unfortunately" led some 6 sentences in the developers' prepared statement, it also led nearly every response from the developers to difficult questions from the Council.  Unfortunately, the developers didn't foresee the economic downturn.  Unfortunately, things change in projects like these.  Unfortunately, bloggers and the press and rumor-mongers have pointed out immense and inconvenient flaws in our business case.  Unfortunately, it is apparently their free-speech right to do so.  Unfortunately, people die.

Well, um, unfortunately, REAL businesspeople are supposed to anticipate and overcome such circumstances (not be paralyzed by them).  Anything less amounts to sheer speculation.  Which is what Lexington has encountered with CentrePointe.

The second refrain was actually more worrisome and more puzzling.  It came from members of the Council who acted as apologists for the developers (developers whose actions can only be characterized as bumbling).  These same councilmembers - Lane, Stinnett, Myers, McChord, and Beard - felt compelled to offer apologies for forcing the developers to account for their continuous inaction.

The refrain they used was "private".  Councilmember Myers asserted that this is private property assembled by private developers with private funds, that the developers could do whatever they wish with it, and that the council had no business forcing CentrePointe's developers to explain their incompetence.

Balderdash.

Before more libertarian readers resort to labeling me a socialist, let me assert my firm belief in property rights.  Unlike some of my more radical friends, I believe that property and capital and money have driven the vast majority of improvements in our living conditions and overall social well-being.  To be sure (and as we have seen quite clearly of late), capitalism often has an ugly downside driven by unrestrained greed.  But the long term gains have far outweighed that downside.

The crater created by CenterPointe's developers is certainly private property.  It belongs to them. 

But here's where the stalwart defenders of property rights are wrong: Private property always comes with civic responsibility.  Owners of private property cannot use their property in ways which destroy value for surrounding properties or surrounding businesses.

Let me illustrate this principle with a recent and vivid example:  A year and a half ago, in the Andover neighborhood, there was a private home that was infested with rats.  The community and the Health Department mobilized to eradicate the rats and eradicate the problem.  Nearby property owners (including yours truly) were rightly concerned for both our safety and our property values. 

Apparently, these same councilmembers would claim that the rat-infested house was private property, and, thus, the community had no right to defend their health or their property values.  Would councilmember Myers sit on his hands if a rat-infested house was next door to his house?  Apparently so.  Would councilmember Lane approve of a neighbor's right to spread pig manure (and noxious fumes) to fertilize their lawn in his Hartland Gardens?  Apparently so.  After all, it is their property, and they can do what they wish with it.  Right?

Of course not.  Private property comes with civic responsibility. 

* * *

With CentrePointe, we have a rathole downtown.  The rats, while not physical, are more insidious and more destructive:

• There's the bulldozer rat that razed buildings, jobs, businesses, and revenue last July.  The rathole has produced no jobs, no revenue, no businesses, and no buildings.
• There's the ugly-city rat that an out-of-town visitor takes back to their home as tourism dollars and tourists mysteriously disappear from downtown.  I suspect there will be many of this breed of rats available for the World Equestrian Games next year.
• There's the blight rat which drains surrounding property values and sucks patrons out of surrounding businesses.  
• And, finally, there's the developer rat, who repeatedly fails to deliver on public statements about CentrePointe's timing, funding, and business model. 

Councilmembers Stinnett, McChord, Myers, Lane, and Beard appear to sympathize with both the rats and with the rathole.

I do not.  And I don't appreciate our representatives who do.  And I'm not alone.

Private property comes with civic responsibility.  We need leaders who recognize that fact.

I choose both

"The test of a first-rate intelligence is the ability to hold two opposing ideas in mind at the same time and still retain the ability to function. One should, for example, be able to see that things are hopeless yet be determined to make them otherwise."
                                                -- F. Scott Fitzgerald (via Ace Weekly)

"You must be the change you wish to see in the world."
                                                -- Mohandas K. Gandhi

There is a revolution brewing in Lexington.  Fed up with the intransigence and bureaucracy of 'old' Lexington, 'new' Lexingtonians are gearing up for an overthrow of the old regime.

As a lifelong rebel and iconoclast, I love it.  As a business owner, I want the more vibrant Lexington (and downtown) that these changes promise.  As a father of a two-year-old, I want my son to have the greatest opportunities to learn, live, play, and work - and want his birthplace to provide those opportunities.  Lexington must change, or it will not grow.  If it does not grow, Lexington will wither and die.

Still, I'm a bit troubled...

More on why in a bit.  First, we need to describe the new and old Lexingtons.  (Or, if you Twitter - and you should - #OldLex and #NewLex.) 

OldLex is rooted in our city's and our region's traditions.  It wants to build on the heritage of our horse farms, our coal, our bourbon, our tobacco, and our basketball.  It values formality and processes and order and control, and is often obstinate in the face of change.  OldLex tends to respect big international companies, large events, and wealth.  It generally shuns technology. 

NewLex is borne of our city's innovative and intellectual potential.  It yearns to be free of restrictions and limitations imposed by centuries of tradition.  It values innovation and creativity and transparency and freedom, and usually gleefully wallows in the messiness and chaos of change.  NewLex tends to respect speed, intellect, local-ness, and the environment.  It embraces technology.

So there, in admitted caricature, are the two cultures of Lexington.  They currently stand in perplexed opposition to one another.  They blink in bewilderment at the other's actions (or inactions) and question the other's motives.

I am a confirmed NewLex kinda guy.  As a reader of this blog, I suspect that you also lean toward the NewLex camp.

But, as I mentioned, I'm troubled by something in the conflict between NewLex and OldLex.  I also hear the same concern echoed in comments on my blog and in NewLex Twitter discussions.  In summary, it is this: The desire for continuity is almost as strong as the desire for change.

While we decry the adoption of outdated icons of horses as the central identity our city, we still love the beautiful horses, the farms, the racetracks, and the uniqueness they bestow upon our city and state.  

We wish that some of the $36.5 million that just went to our new basketball coach had gone instead to improve our schools or our university.  But we do love our 'Cats, our Coach Cal, and our championships. 

We cannot fathom why our city's representatives haven't adopted more transparent practices and implemented more current technologies, but what, really, have we done to facilitate that?  (Have I already forgotten how mystifying Twitter was just a couple of months ago?)

As much as we advocate overturning the old ways of thinking and the old ways of doing things, we NewLexers sure like a lot of the old things.

And we should like them.  The horses, the basketball, and the bourbon are all significant and important parts of our heritage and our identity.  They are a part of what makes us 'US'. 

And in that heritage lies our one bond with our OldLex foes, and, I believe, our single best opportunity to effect real and necessary change in our city.  As NewLexers, we must challenge ourselves to embrace and leverage our past as a springboard into our future.  

Can a vibrant horse industry exist alongside an even-more-vibrant Eds-and-Meds economy?  I think so.

Can we use Lexington's defunct distilling industry and empty warehouses to build a vibrant arts and cultural (and distilling!) community?  I think so.

OldLex certainly comes with many flaws.  But, if we're honest with ourselves, NewLex can be just as problematic.  We often come off as brash and abrasive.  I kinda like being brash and abrasive.  The problem is that 'brash and abrasive' doesn't get the hard work of changing our city done; It brings such work to a halt as OldLex digs in their heels.  

NewLex often appears impractical.  We are full of plans and ideas, but frequently come up way short on tangible actions and, ultimately, results.  We must learn to transform our ideas and plans into actions on the ground.  We must, in short, be the change we wish to see in the world.

So I make a declaration that may not be popular with all of my NewLex compatriots: I choose both.  I choose the heritage that makes Lexington great.  I choose the creativity and intellect that will drive us into the future.  I choose to act with transparency and speed.  I choose to love the singular beauty of our horse farms.  I choose to reject the parts of (Old AND New) Lexington which hold our city back from becoming truly great.  NewLex?  OldLex?

I choose both.  I choose Lexington.

April in Review

April has been a busy month in the shop and on the blog.  Here's a sample of what we've been writing about this month:

• Lowell's School Tools and the Bluegrass Vehicle Report.  We provided data about the vehicles we drive in Lexington and surrounding areas, as well as tools for parents and teachers to use to make the data come to life for their students.
• Why CentrePointe will fail.  Our all-time most popular post analyzes why Lexington's CentrePointe project is doomed even if it is built.  (Also published in Ace Weekly)
• But it isn't enough to simply grouse about the failure of CentrePointe.  We need to understand what went wrong, what to do about it, and what to do with the empty block downtown.  We need a plan.  Toward that end, we offer The UnTower Manifesto as a starting point for moving beyond CentrePointe. (Portions cross-posted to Ace Weekly and Barefoot & Progressive)
• We weren't always serious in April.  We speculated on the real source of the Toyota truck logo.
• What do you hate about Lowell's?  We ask you what you don't like about Lowell's.  We want to be better. 
• Why Twitter matters.  Twitter has become something of an online sensation of late, with everyone from Oprah to the White House jumping on the Twitter bandwagon.  We talk about how to make it work, and why Twitter is more important than it may seem.
• A better brand for Lexington.  We talk about what it will take to truly re-brand Lexington.  Hint: It doesn't involve a blue horse or Pentagram.  (Also published in Ace Weekly, and cross-posted to Transform Lexington)

Many thanks to our friends at Ace Weekly, Transform Lexington, and Barefoot & Progressive for amplifying much of what we wrote here this month.

Enjoy!

A better brand for Lexington

Lexington's leaders are busy picking a new brand for our city.

Sorry, gang.  You don't get to decide.

Last week, the Urban County Council's Planning Committee considered the city identity possibilities of the blue horse that Pentagram (an international design firm) crafted for the Lexington Convention and Visitors Bureau.  The committee forwarded the discussion on to the full Council. 

Unfortunately, the Blue Horse Debate is a waste of time, talent, money, and attention.

Our representatives fail to realize that Lexington's brand is largely out of their hands.  And it certainly isn't in Pentagram's hands.  Whether they choose to promote a blue horse or a spotted yak is irrelevant to Lexington's brand. 

Telling versus Earning
Marketers (and leaders) suffer from a kind of conceit.  The marketers' conceit is that they can tell us what their brand means.  They fail to realize that brands are reputations which are earned.

A brand isn't a declaration.  It isn't an intention or a vision.  It isn't what leaders say it is, no matter how well it is designed and researched.  It isn't a great ad campaign or a really slick logo or a lyrical tag-line.  It is certainly not a marketing function.

Brands arise from all of our experiences with that product or that city, not from what the leaders of any company or city want them to be (or say they are).

The best brands don't tell people they're great.  They earn greatness.

If people believe that Lexington is a boring town, then (unfortunately) that is part of our brand.  If people believe that we are a technology backwater, then that, too, is part of our brand.

This is scary because our brand is pre-set in peoples' minds, and it takes a lot of hard work to be good enough to dislodge entrenched perceptions.

It is scary because it isn't about saying we're better; it is about actually BEING better.  Really better, not just in-our-marketing-plan 'better'.  Not just approve-a-message/logo/strategy-in-a-meeting 'better', either.

We have to earn a reputation for better schools, better businesses, better technologies, better leaders (and not just at LFUCG, either), better conversations, better people, and better visions of the future.  And we can't buy that reputation from any design or branding firm.

To improve our brand, we have to truly transform Lexington.

Inertia
So why do our representatives persist in their silly pursuit of the blue horse?

Over the years, I've frequently witnessed something I call institutional inertia.  Institutional inertia happens when individuals in an organization don't really feel responsible for (or influential upon) the success of the organization.

In those cases, the easiest thing to do is just stay the course, even if that course is doomed to failure...  When inertia raises its ugly head, it is often, maddeningly, the powerful (those who think they have the most to lose) which become the most hostile to change and most determined to stay the destructive course.  Doing nothing is always easier than doing the right thing, especially when doing the right thing is a lot of hard work.

And paying someone to design an 'identity' is an easy-but-doomed course for improving Lexington's brand.  There is no 'magic bullet' for crafting a better brand for our city.

If we want a better brand for Lexington, then make sure our city is an attractive, welcoming place for our visitors.  Ensure that our people are knowledgeable, warm, and friendly.  Create rich, distinctive, and memorable experiences for both our citizens and our visitors.  Foster the growth of vibrant businesses and arts communities that make Lexington a compelling place to work and play.

Then, perhaps, Lexington will earn the better brand we are seeking.

Update: 4/28 Cross-posted to both Ace Weekly and Transform Lexington.

Full disclosure: In a previous job, Rob severed his firm's relationship with Pentagram.

[where: 200 E Main St, Lexington, KY, 40507]

Making Twitter work

A couple of weeks ago, Oprah began using Twitter.  Some saw her adoption of the service as a milestone that Twitter had gone mainstream.  Others decried it as a sure sign that the Twitter fad was about to flame out.

Why all the fuss about Twitter? 

I have to admit that I just didn't get it.  At first.  In this post, I'll talk about how I learned to love Twitter. In my next post, I'll talk about Why twitter matters.

How Twitter works

Twitter is a microblogging service which allows users to post messages of 140 characters or less.  These messages - called 'tweets' - chronicle what the user is doing / reading / thinking in that moment.  You can follow other users, and they can follow you as well.  [Note: There are privacy settings in Twitter which allow you to protect who sees your tweets.]

Because the messages are limited to 140 characters, a kind of Twitter shorthand code has developed to convey key concepts.  Responses to other users contain an 'at' sign (@) before their user name - so, for instance, other Twitter users respond to my posts with an '@robmorris2'.'

When discussing a particular topic, users often apply a hashtag (a pound sign - #) to their post.  Right now, there are a lot of #swineflu hashtags in the twitterverse as people tweet about the current flu outbreak in Mexico, the US, and New Zealand. 

Many users want to share interesting stories or blog posts with their followers.  But because regular web addresses (URL's) can run 60 or 70 characters, many people use URL 'shorteners' to compress a web address to just 16 or so characters.  So many of Twitter's addresses are from the bit.ly, is.gd, tr.im, or similar odd-looking domains.

When users want to share someone else's tweet with their followers, they often 're-tweet it'.  They do so with 'RT' and the user's @name.  So, when I saw a Dave Winer tweet that I thought was worth sharing, I shared it this way: "RT @davewiner: Why NPR is Thriving (They’re Not Afraid of Digital Media). http://tr.im/jH5o".

Critical Mass
Twitter gives you some basic tools to help you find and add other friends who use the service.  When I first started using Twitter, I added a few close friends.  I twittered something about what I was doing, careful to use my 140 character allotment.

And nothing happened.  I really wondered what this Twitter fuss was all about...

Only one of my friends really used the service more than a few times a month.  And he (@billder - well worth following) was in Portland, used a bewildering array of #'s and @'s, was talking with folks I didn't know, and I wasn't quite sure what to make of it all.

I posted to Twitter once or twice a week through January.  And then I drifted away until April.

After listening to an audiobook of What Would Google Do? by Jeff Jarvis (@jeffjarvis on Twitter), the prominent blogger of the BuzzMachine blog, I decided to give Twitter another try.

I followed many more folks the second time around: local and national news sites; favorite authors, bloggers, and personalities; technology sites; interesting companies and their executives; and whatever else I found interesting.

When I got up to about 50 people, Twitter started to get really intriguing.  With more and more interesting people sharing more and more interesting thoughts, links, and re-tweets, Twitter suddenly became much more vibrant.

Going Real-time
But there was something which still didn't work for me: the Twitter web page.  As a static page with maybe 20 tweets on it, I had to keep reloading.  If a lot of folks were tweeting, I often missed important tweets from friends in the flurry of tweets from other, more prolific users.

It was (and is) all a bit chaotic. 

But there are solutions.  Twitter has allowed software developers to graft their products onto the Twitter platform.  There are a bevy of such products out there: Seesmic, Twhirl, TweetFon, Tweetie, and many others.  Each has different features and functions.

My current favorite is desktop software called TweetDeck.  With TweetDeck, Twitter finally came alive and started making sense for me.  In other words, I finally 'got' Twitter. 

There are four key features of TweetDeck which make it work for me.

First, TweetDeck auto-refreshes.  This means that I get nearly-live updates as soon as they happen.  For me, it transforms Twitter from a static web page into a real-time social messaging system.

Second, TweetDeck lets me create groups of people that I can follow.  This means that I can group folks according to how important they are to me or by which parts of my life they belong to.  By default, TweetDeck has an 'All Friends' column which contains live tweets from everyone I follow.  But I created another column which has tweets from folks that I really want to pay attention to.  The 'groups' feature let me create some order out of Twitter's chaos, and helped ensure that I didn't miss important local or topical or personal tweets.

Third, the software made tweeting easier.  TweetDeck has a lot of built in stuff to respond to (@) or re-tweet (RT) other users.  It lets me shorten a URL right inside the interface. 

Fourth, TweetDeck has a search function which allows me to monitor what anyone in the twitterverse is saying about a particular topic (like, say, "Toyota") live.  So I can get a sense of what is happening with things that are important to me right now.

These four features of TweetDeck (some of the other Twitter software has them too) brought Twitter to life for me.  They allowed me to connect with new people and have new conversations that would otherwise never have happened. 

Making Twitter Work
What made Twitter 'work' for me was 1) making sense of its shorthand, 2) following a critical mass of other users to make things interesting, and 3) using a 'live' interface (for me, TweetDeck) which catapulted the service from a website into a many-to-many conversation.

In my next post, I'll talk about Why Twitter matters.

Why Twitter matters

[In my previous post, I described how I made Twitter work for me.  If you'd like to see how I got the most out of Twitter, click here.]

It took me a while to understand Twitter, as documented in my last post.  I'm certainly not the most prolific or most informed user, but I've come to gain some insights about Twitter that I haven't seen a lot of other commentators pick up on.  These are by no means exclusive to Twitter, but I think it is the platform which most embodies these characteristics today:

1. New kinds of connection.  More than any other medium I've come across, Twitter enables new kinds of social interactions.  Conversations become multilateral public events, instead of one-way or two-way forms of communication.  And those conversations can coalesce around personal, local, or topical interests.  I can dip in and out of many different conversations happening simultaneously.  If I have nothing interesting to say about an interesting topic, I can just observe while others contribute.


2. The new news.  As a news junkie, I used to troll blogs and websites for the latest information on what was happening in business, in technology, in Lexington, and in the world-at-large.  Now, Twitter serves as my news station.  I can easily ignore tweets which I don't find interesting, but follow links which are of interest.  What is best is that this news is already vetted by folks I respect and trust.
   
   Further, Twitter's hashtag convention allows me to follow what topics are 'hot' through tools like TwitScoop, which is enabled by default in TweetDeck (see my last post if this last passage looks like Greek to you).  The news on Twitter often unfolds long before mainstream media picks it up.  In Ace Weekly (@AceWeekly), Kakie Urch (@ProfKakie) put together an excellent analysis of how Twitter acted as the new news in the #amazonfail case, including how long it took traditional media to even notice, while the twitterverse was exploding in outrage.  (As I write this, a friend of mine, @JasonOney, is mounting a campaign to save the NBC series Chuck, using the #savechuck tag.  And he's got friends marching with him.  Look out NBC.)


3. Twitizenship. What the #amazonfail and #savechuck cases (among many thousands more) demonstrate is a new form of online citizenship, characterized by immediacy, openness, and cause-centered organization.  This 'twitizenship' can create what some call 'flash mobs': groups which form nearly instantly in either the virtual or physical worlds.  Twitizens expect speed, transparency, and action from both businesses and civic leaders.
   
   My favorite recent example: Kickeball at CentrePointe Parque.  Where?  Let me explain.  Using Twitter and Facebook, a flash mob formed around the idea of playing a kickball game on the pit of rubble in Lexington where CentrePointe is not being built.  So, last Friday at 5:30 PM, they had a game - and a wonderful bit of public theater and civil disobedience.  It was quick.  And you can read the best account here (Thanks, @KeeganFrank) and see the best video here (Thanks, Mick Jeffries).  You should check out these accounts, because the local media completely whiffed on coverage over the ensuing 24 hours.  I left work to go to the pit and witness the game (but not to participate - I was chicken, and I didn't want to get arrested).
   
   This is a fun example, but I hope my main point shines through: Twitter allows citizens to form into and disband from interest groups at lightning speed.  These groups have higher expectations of their leaders and of businesses, who must respond with greater speed and openness.  Those who fail to respond will surely #fail. 

Twitter's platform allows for new social formations which are important, and will be changing the way we interact, the way we get our news, and the way we create a better city, state, nation, and planet.  Governments, businesses, and citizens must adapt to this changed world, or they will be left behind.

Those are my thoughts on why Twitter matters.  What are yours?

Sayre presents Kilowatt Ours at the Kentucky Theatre

Our friends and neighbors on Sayre School's Green Council are presenting a free showing of the documentary Kilowatt Ours: A Plan to Re-Energize America at the Kentucky Theatre at Noon on Wednesday 22 April.  The film is open to the public, runs at about 55 minutes, and there will be a question-and-answer session with Jeff Barrie, the film's director, afterward.

Find out more about Wednesday's showing here, and see a short preview on the film's website here.

So bring your lunch down to the Kentucky, and see Kilowatt Ours with us on Wednesday.

[where: 214 E Main St, Lexington, KY 40507]

The UnTower Manifesto: 1. Truth

[Note: The UnTower Manifesto is a three-part series about responding to the failure of CentrePointe.  You can read the full story of that failure here.]

As the CentrePointe project becomes the UnTower scandal, a general consensus has developed which agrees that CentrePointe will never be built on the crater that its developers rushed to create. 

A critical question, then, is this: If CentrePointe will not be successfully constructed, how should Lexington move forward in the wake of the UnTower scandal?

There is the obvious question of how to proceed with the colossal scar in the middle of our city.  But there is also the less obvious - but, ultimately, more important - issue of changing how Lexington works in order to prevent the next UnTower catastrophe.  Let me start there, and we'll return to the issue of what to do with the site.

Toward a Better Lexington
The details of how UnTower happened have slooowly trickled out from the developers.  Their secrecy, lack of candor, intimidation, outright deception, and possible fraud have sharpened questions about how decisions have been made throughout the project's approval process.  UnTower has exposed how opaque and how ill-informed our mayor's and our Urban County Council's decision-making processes have been.  And, if you look closely enough, the scandal shows us how Lexington should improve.

So, how did this fiasco happen?  The details have been covered many times from many, many, many quarters, so I'll simply summarize the key themes:

• Throughout UnTower, the developers have maintained great secrecy about the financing and the business model behind their development.  As details have emerged, neither looks viable.
• The developers claim their project is 'private', but have pressured the public to provide approvals and special Tax Increment Financing (TIF) for the project, with much of the TIF dependent upon a vibrant long-term business model which they don't have.
• The developers, the mayor, and some council members have not shared how and when they learned about key elements of and issues with UnTower which led to its ultimate demise.
• The developers, the mayor, and much of the council have responded to pointed and informed questions about the project with vague, non-responsive answers.  Often, they refused to respond at all.
• While there was public discussion about the decisions our government was making, the conversation was muffled by their timing and format.

In the end, the whole affair had a distinct 'backroom deal' flavor to it which left more questions than answers: How were these decisions made?  What information went into the decisions?  What information was withheld?  What information was fabricated? Who talked with whom about the project?  When did they talk? 

All of the questions have raised a bigger question: How is it possible that our community doesn't have absolute clarity into how decisions are made by our elected representatives?

In my business, if we failed to clearly explain how a vehicle was repaired, we'd lose customers.  If we came across as less-than-honest, our loyal customers would fire us.  If we refused to meet with a customer to address their complaints, they would tell their friends and family.  If we didn't make things right when we screwed up (and, yes, that does happen occasionally), our reputation would suffer.  In the end, our business would fail.

With UnTower, our community's 'business' failed us.

Clarity.  Explanation.  Honesty.  Availability.  Accountability.  These are the pillars of a transparent business that customers can believe 'does things right'.  A healthy, vibrant business which grows and prospers.

We wouldn't accept anything less than these qualities from a business.  And we shouldn't accept anything less from Lexington.

In an age of websites, blogs, Twitter, and Facebook, every business has had to engage in conversations with customers on the customers' terms.  The ubiquity of the internet means that these tools are available to nearly everyone, nearly everywhere.  The latency of the internet means that the conversations don't have to happen at the same time - they can build over time.  The internet's ubiquity and latency forms the foundation of a new and better town hall.

Why should we all have to cram into a room at the same time?  Why should we have to play 'beat the clock' when talking about issues which are complex and nuanced?  Why should we have to forgo pressing business or personal matters to attend a meeting which is designed to be convenient for our representatives?

The internet provides the perfect public forum for every citizen to express his or her public policy views, ideas, and thinking.  Even better, our ideas can build on one another as we tinker with and improve the ideas of our neighbors.  Plus, conducting civic conversations on the internet can happen around the clock.  Citizens can participate in the public discussion when and where it is convenient for them, not for the elected representatives who serve them.  Isn't that the way it should be?

Further, every single representative should publish their conversations, thinking, dilemmas, trade-offs, beliefs and positions (and the transactions between them and other interested parties - like developers or investors or campaign contributors).  These records should be posted online for all citizens to see, comment on, debate, and improve.

The council members' emails are listed on the city's website, as are the mayor's newsletters.  But these are old, closed, one-way forms of communication.  They aren't vibrant community discussions.

So, do I want to see tweets that the mayor's advisor is picking up eggs?  Or a Facebook entry featuring the halloween costumes of the councilwoman's children?  Not particularly.  But we deserve to see real-time updates of their thinking on critical community issues.  We should know why they have changed their minds at the last minute.  They should tell us who they talked with and what they said.  After all, they are public officials.  We should see into a transparent civic machine which serves all of us.

What is clear is that a 19th-century civic apparatus has hamstrung our 21st-century community. The ancient contraption allows far too many secrets to hide within.  Whether our representatives and our governments use blogs, Twitter, Facebook, or some other platform matters far less than whether they start participating in open conversations with the people they serve.

The technology already exists.  Millions of people already use it.  Thousands of your constituents use it every day.  It's easy.  It's free.  And it will make Lexington better.  What are you waiting for?

[Continued in: The UnTower Manifesto: 2. Consequences]

[where: E Main St & N Limestone St, Lexington, KY 40507]

The UnTower Manifesto: 2. Consequences

[Note: The UnTower Manifesto is a three-part series about responding to the failure of CentrePointe.  You can read the full story of that failure here.]

The consequences for UnTower should rest on the people who perpetrated the scandal: The mayor, some council members, and the developers.  Let's start with the mayor.

In other venues, I've seen the mayor talk with his skeptics with apparent openness and graciousness.  He was quite articulate.  He listened to their concerns and seemed to hear them.

But the last several months have shown a repeated abdication of his duties in the face of scandal.  This pattern first emerged with the airport staff's misappropriation of public funds in their credit-card-and-travel scandal, where the mayor displayed a perplexing tendency to drag his feet.  Now, as CentrePointe devolves into the UnTower scandal, the mayor has shown a similar lack of initiative to lead on his citizens' behalf.  Instead, he has resorted to 'happytalk' to defend what is clearly a failed project.

Meanwhile, the vice mayor has been active and vocal in challenging both scandals.  The effect: a grassroots effort to draft him to run for mayor in 2010, complete with its own Facebook fan page and glowing coverage in local media.  The current mayor seems to have no such dialog with the citizens he serves, and seems to have generated little enthusiasm for a 2010 run.

The mayor needs to begin to lead with candor, action, and transparency - beginning with complete clarity around what happened to create UnTower - or his constituency will chase him from office.

The same can be said for the members of the Urban County Council - especially those who rubber-stamped the UnTower project without adequate scrutiny or analysis.  They must assume a more actively transparent posture - including using the tools and technologies to have conversations with the people they serve - or they, too, will be removed from office by their increasingly-informed electorate. Their citizens will no longer tolerate the kinds of hijinks and misdirection that characterized UnTower.

Finally, there are UnTower's developers.  What should happen to them?

The scar in the middle of town is their property.  But the destruction of the block and the special tax status endowed on the block were public events, with public investments and public impacts.  If anyone doubts the public impacts, just talk with businesses bordering the UnTower eyesore about its effects as a customer-repellent.

So here's my modest proposal for penalizing their deception.

First, the council should explore all options for rescinding the block's special Tax Increment Financing (TIF) status.  TIF was granted under conditions which no longer seem to apply, and the developers no longer appear to have earned that special status.

Second, the council should - to the extent it is able - strictly re-define acceptable future uses of the property in light of the UnTower scandal.  Given that the developers contributed to the scandal with their hollow promises and continual lack of disclosure, I would hope that our council would be particularly stringent with requirements for how the property functions as part of our community and that they would set a strict timetable for the developers to act.

The developers misled us to gain advantage; now they should pay the price.

[Continued in: The UnTower Manifesto: 3. Beyond UnTower]

[where: E Main St & N Limestone St, Lexington, KY 40507]

The UnTower Manifesto: 3. Beyond UnTower

[Note: The UnTower Manifesto is a three-part series about responding to the failure of CentrePointe.  You can read the full story of that failure here.]

The final piece of the UnTower puzzle is what to do with the pit now that the historic buildings are gone and the promised tower cannot be built. 

Up front, let me declare that I don't have all of the answers regarding what needs to be done with the block.

But I do have some general principles which we might start to apply to the site.

• Create a vibrant destination which attracts in-town residents, weekday workers, other folks from throughout the Bluegrass, and tourists.
• Make that destination a distinctive place which no other city has (and this doesn't need to be a towering monument to ego)
• Create public and private spaces within the destination which allow the community to create shared experiences while also providing a much needed economic boost
• Balance the types of uses within the development to include an attractive mix of retail, nightlife, dining, and lodging options
• Ensure local businesses have significant presence within the development to help supercharge the local economy
• Ensure that the space is well-integrated with the surrounding community and that its design promotes circulation throughout surrounding businesses and public spaces
• Build it soon.  Remove the eyesore that the UnTower scandal left behind.

So lets look at these principles in more detail.

Destination.  If we want the UnTower block to directly feed the local economy, we need it to function as a destination for both our visitors and our community.  The previous imposing design did not encourage local residents to participate in the space.

Distinctive Place.  The new development should, to the extent possible, function as a signature place for Lexington.  Much like Keeneland and our horse farms showcase Lexington as a city like no other, the new development should showcase our city, our region, and our people.  Portland, Austin, Miami, Chattanooga, Denver, and even Louisville have these memorable and distinctive signature places.  Lexington should, too.  A distinctive place will draw people (and dollars) into our community; A forgettable one will not.

Public and Private Spaces.  The most effective places (like those in the cities above) combine public spaces with private enterprise.  Thus, memorable shared experiences can also feed the local economy.

Balanced Use.  Others have proposed using the block for a single kind of use - say, a new basketball arena.  Such dedicated uses of the property would be counterproductive to our economic engine.  To get the biggest economic bang for the buck, we should encourage a unique and balanced mix of stores, restaurants, attractions, clubs, and perhaps a unique 'boutique' hotel.  (My best-ever customer experience was at a Kimpton Hotel, which made for a hugely positive impression of Portland in general.  What if Lexington could wow its visitors like that instead of giving them a bland cookie-cutter hotel?)

Local Businesses.  To supercharge the impacts of the dollars spent within the new development, we should try to ensure that many of the businesses located there (30%? 50%?) are local businesses.  This will yield two big benefits.  First, it would contribute to the distinctive character of the place.  Second, it would keep a significant portion of that money in Lexington.

Integration.  When CentrePointe was proposed, many derided the design as too fortress-like and too disconnected from the city fabric.  The UnTower scandal offers an opportunity to correct that mistake.  The new development could more thoroughly integrate with several aspects of downtown development.  The site borders Phoenix Park, Courthouse Plaza, and the History Museum / old Courthouse / Cheapside complex.  An 'open' design would promote circulation through those spaces (and into surrounding businesses) and would better integrate with our other urban initiatives (such as our street improvement plans).

Build Soon.  Regardless of the type of development we ultimately put on the UnTower block, we probably have missed our window for using it to improve our city's appearance for the World Equestrian Games in 2010.  Nonetheless, we cannot allow the crater left by UnTower to remain. 

Is this list comprehensive enough (or even correct)?  Probably not.  Feel free to point out what I got wrong or what I missed.

In any case, this is the kind of civic discussion that the citizens of Lexington must engage in if we are to build a better community - and if we are to heal the scar in the middle of our city.

[where: E Main St & N Limestone St, Lexington, KY 40507]

What do you hate about Lowell's?

OK, so 'hate' is a strong word for it.

But as much as we try to be the best mechanic in Lexington, we know we're not perfect.  We know that there must be some parts of your experience with us which could be better.

So tell us.  Let us have it.  We can take it.  And we need it.

To get the conversation started, here are some aspects of our business you might want to riff on:

• Our location
• Our pricing
• Our service
• Our website
• Our blog
• Our lobby
• Our restroom
• Our people
• Our honesty
• Our attitude
• How we checked you in
• How much time we took
• How well we explained what we did
• How we checked you out
• Something we did
• Something we didn't do
• Something we should do

Please let us know how Lowell's can get better.  Use the comments section below, call the shop at 233-1173, or email us at lowells [at] iglou [dot] com.

We can't promise we'll do everything you suggest, but we will work to make your overall experience with Lowell's a better one.

And thank you.

[where: 111 Mechanic St., Lexington, KY, 40507]

The Real Source of the Toyota Truck Logo

Frank Zappa's moustache:


see more Celeb Look-A-Likes

Why CentrePointe will fail

A few months back, I openly wondered about the viability of the CentrePointe project, which thus far has only managed to crater an entire city block of historical buildings.

Since our post (which came long after the controversy started), there has been a continued flurry of discussion around CentrePointe in the community.  But nothing has happened on the construction site. 

In all of this turmoil, one fact has become crystal clear: CentrePointe will fail.

The project will fail in one of two ways:

1. The project will fail to be constructed, or
2. The project will be constructed, and then fail financially

I say this not out of emotion or disgust aimed at the project, the developers, the mayor, or their conduct (although all may be worthy of disgust) - but because the justifications for the project fail to stand up to basic business logic.

Instead of acknowledging the flaws in their business plans, CentrePointe's developers have continually invoked wishful thinking to rationalize their actions. 

I've seen this kind of fatal optimism in business many times before.  Business executives often think they can make a project succeed by just wanting it badly enough.  (Unfortunately, optimism isn't a viable business strategy.)  In their blind pursuit of their goal, they disregard the facts. 

So, lets explore the facts around CentrePointe ('CP' from now on), which really can't be ignored any longer.  (Read more from the Herald-Leader here, here, and here.)

• CP has had an unnamed international financier who committed $250 million to the project.  This week, we learned that the mystery investor died.  Without a will.  The project certainly won't commence until a) the financier's estate goes through probate court, and b) the heirs agree to continue support for CP.  Odds the financier ever existed: Iffy.  Odds heirs will support CP: Doubtful.

• CP is supposed to house a J.W. Marriott luxury hotel.  Meanwhile, Marriott's CFO (who is their soon-to-be CEO President and COO [correction]) has repeatedly announced that even the best projects - a group that CP cannot possibly belong to (see more below) - are stopped in their tracks.  Odds Marriott will end up in CP: Doubtful.

• The Marriott would have 250 rooms going at $190 per night.  The price is 50% higher than competing hotels, yet the developers' analysts estimate occupancy rates at startup which are better than those (less expensive, more established) hotels.  Odds of getting higher occupancy at a much higher price: Very slim.

• There are 91 luxury condos at the top of CP, which would sell for $1.2 million each and which would generate over $100 million for the project.  The analysts estimated that 45 of those would sell before construction starts.  And all 91 condos would be sold in 3 years.  In all of Lexington, there were 31 million-dollar properties on the market at the end of 2008, and only 10 such properties sold during the entire year.  So... CP's developers would flood the market with luxury properties -- essentially quadrupling the number that are on the market -- and expect to sell them faster than historical rates.  Odds that Lexington could absorb a 300% increase in ultra-luxury properties in only 3 years: Zero.

• CP's developers have to sell 4.5 years (45 condos at 10 condos per year) worth of luxury property inventory before construction starts.  And that assumes that every million-dollar prospect would prefer to live in a 2700-foot high-rise condo instead of a country estate. Odds that CP's developers can sell 45 million-dollar condos before construction starts: Zero.  (Note: This week, CP's developer claimed that 61 of the 91 condos were 'spoken for'.  This is patently false, and reveals a worrisome desperation from the developers.  Unless 'spoken for' means that someone said "I wish that I could live in a place like that..."  Which is also worrisome.)

• CP's analysts assumed that the $1.2 million condo buyers would have an average income of $220,000.  That's an incredibly aggressive price-to-income ratio of nearly 6, which ranks with inflated San Francisco, New York, San Diego, and Los Angeles averages - before the real estate bubble burst.  Snakebitten banks are much more critical of an applicant's ability to pay in this economic environment.  Lexington's average price-to-income ratio: 2.35 - indicating an income of over $500,000 to afford the condos and drastically limiting the pool of eligible buyers.  Odds of finding enough eligible prospects in Lexington: Very slim.

So what are we to conclude about CentrePointe from these facts?

1. The developers' tendency toward secrecy and intrigue are unacceptable in light of the public investments in and public impacts from this project.  We deserve transparency.
   
2. The project is not financially viable.
3. The primary financing (if it even exists) is shaky at best.
4. The analysts' projections are unrealistic and misleading.
5. The project cannot generate the promised tax revenues.
6. The developers are prone to either fantasy and/or outright deception; either case bodes poorly for the feasibility of the project.
7. CentrePointe will fail.  Miserably.

Lexington must now accept the failure of CentrePointe and begin to move beyond the CentrePointe fallacy.  We must hold accountable those who recklessly ramrodded the flimsy development through our city council.  We must prevent future irresponsible allocations of our common wealth.  And our community and our public officials must begin carefully contemplating what's next for the block that CentrePointe obliterated.

Update 4/13: Crossposted to Ace Weekly as "Optimism is Not a Business Strategy"

Update 4/14: Tom Eblen did an excellent parody of the CentrePointe situation here.  Very cool.

Update 4/17: OK.  Let's just get the whole story out on the table.  The UnTower Manifesto: What went wrong, what to do about it, and what to do about the scar it left on our city.

[where: E Main St & N Limestone St, Lexington, KY 40507]

Lowell's Bluegrass Vehicle Report

Today, we are pleased to release the Bluegrass Vehicle Report 2009.  Using state registration data, Lowell's compiled statistics on vehicles in seven Bluegrass counties.  We've put the results together in a fun and informative format which shows details about the automotive marketplace in and around Lexington.

In addition, Lowell's is releasing Lowell's School Tools.  School Tools is a companion guide to the report which helps teachers, parents, and student create their own fun and interesting findings from the automotive data.  More about School Tools can be found here.

Among the more interesting results from the Report:

• Toyota is the #1 brand of vehicle in Lexington.  The 33,624 Toyota vehicles on the road put Toyota ahead of both Ford (31,018) and Chevrolet (29,712).  Toyota nameplates are on 15.4% of the cars on the road.
• A lot of Toyotas.  All of those Toyotas, placed end-to-end, could fill all 4 lanes of New Circle Road, completely encircling Lexington.
• A lot of gas.  Lexington drivers consumed over 156 million gallons of gasoline in 2008 -- more than enough to fill Rupp Arena from floor to ceiling.

You can see all of the results here:

Bluegrass Vehicle Report 2009

View more presentations from Rob.

Or, you can download a PDF of Bluegrass Vehicle Report 2009 (1886.4K).

[where: 111 Mechanic St, Lexington, KY 40507]