A New Cuban Revolution

Capitalizing on emerging capitalism.

There’s a revolution going on in Cuba. There are guerrillas walking the streets of Havana. They bear little likeness to Fidel’s cadre, though — the one that installed a Marxist dictatorship in 1959. Instead they’re free-market reformers, responding to Raúl Castro’s 2010 easing of restrictions on small business entrepreneurship. They are the island’s first capitalists in three generations, and they’re creating from scratch a uniquely Cuban approach to guerrilla marketing.

They’ve embraced the guerrilla approach — that unconventional, low-budget and ever so effective style of advertising — not because they’ve heard it’s trendy here in the States. They’re doing it because they have no other choice. Print and broadcast media in Cuba is still state controlled and doesn’t accept advertising. Internet connectivity is severely limited. The new entrepreneurs of 2010 were faced with the challenge: how to let their fellow Cubans know they were open for business.

They met that challenge with ingenuity we should all find instructive. They accepted their limited resources, their limited access to mass media, and worked around them.

There’s the restaurant owner, for instance, who takes to the streets of Havana in his garishly painted MG Roadster (displaying the restaurant’s logo, of course). Cuba’s license plates are color coded, so he keeps an eye out for the blue plates designating foreign tour groups, and leaves discount coupons on their windshields.

And there’s the mobile phone repair company (which also does a brisk business unlocking iPhones). They wanted to differentiate themselves from their hundreds of competitors, so they’ve branded themselves as a “clinic,” complete with a cartoon mascot: a cellphone wearing a stethoscope. That icon is becoming familiar throughout the island, thanks to professional signage and thousands of flyers handed out.

Perhaps most innovative is a popular Havana burger stand. They offer 25% lifetime discounts to motorists willing to carry bright yellow advertising decals on their cars. They also managed to get 30 marchers, all wearing branded t-shirts, into this year’s May Day parade (one of Cuba’s biggest public events). The result was mass-market coverage that would have been otherwise impossible.

At this early stage, Cuban marketing is still in its infancy. The same can be said for all aspects of Cuban free enterprise. But as long as they go on showing this same level of resourcefulness and resolve, their future is bright indeed.

And along the way they might have some lessons to teach the free-enterprise giant just 90 miles off their coast. Here’s hoping we’re willing to learn them.

The C4:

1. In 2010 Cuban president Raúl Castro opened the way for limited entrepreneurship throughout the island. Within months thousands of small business — restaurants, specialty stores and beauty shops — hung out their shingles. 
2. They quickly found, however, that they had no easy way of communicating with their customers. Mass media is controlled by the Cuban government and conventional advertising doesn’t exist.
3. So they embraced what we call “guerrilla marketing.” They leveraged ingenuity, meager resources and every opportunity for exposure. It worked. It’s still working.
4. It’s a fascinating, real-time experiment in creating a free-market system from the ground up. There are lessons to be learned in Cuba. Wise marketers everywhere should pay attention to this developing story.

Dimon In The Rough

$2 billion loss wakes people up early in the Morgan.

Over at J.P. Morgan, it feels like 2008 all over again.

Three weeks after CEO Jamie Dimon said “tempest in a teapot” when asked about the company’s renewed interest in credit derivative swaps, J.P. Morgan revealed that such trades resulted in over $2 billion in losses. The market immediately punished J.P. Morgan, by wiping out nearly 10% of its stock value in a single day.

Two facts make this loss all the more stark. First is that J.P. Morgan isn’t just an investment house. In the latter twentieth century J.P. Morgan benefited from deregulation, which allowed almost unlimited horizontal integration within the financial industry. As a result, J.P. Morgan is now the largest bank in the U.S.

“Too big to fail” almost doesn’t do it justice.

Secondly, we now know the lengths to which Dimon and company went in order to weaken the so-called “Volcker Rule,” which is designed to limit the amount of its own capital a bank can risk. It’s clear now that loopholes in the Volcker Rule, which J.P. Morgan lobbied heavily for, permitted precisely the sort of trading that just cost the company $2 billion.

There’s one hopeful glimmer, though. Perhaps heeding the Golden Rule of Public Relations (i.e., own up to your mistakes, immediately), Jamie Dimon is loudly and publicly admitting the company’s error.

“We were dead wrong,” he said on Meet the Press. “We made a terrible, egregious mistake. There’s almost no excuse for it.”

What comes next? Probably a lot less lobbying to weaken financial regulation. J.P. Morgan and others in the industry recognize this incident does far more to damage their credibility than it could ever do to their bottom line. So they probably won’t want to be seen jockeying for more loopholes, at least not in the short term.

And maybe that’ll lead to the ideal outcome: a financial industry governed by rules that quash recklessness while still encouraging growth. That is, after all, exactly what financial regulations are supposed to do.

The C4:

1. J.P. Morgan announced last week that credit-derivative trading has cost the company more than $2 billion over the course of about six weeks.
2. The day after the announcement, shares in JP Morgan lost nearly 10% of their value.
3. CEO Jamie Dimon quickly admitted culpability and promised a thorough investigation.
4. Only a robust system of financial checks and balances, that encourages growth through responsible business practices, can prevent those “too big to fail” from dragging us back into the nightmare of 2008.

The Wild Wild Net

Will SOPA circle the drain as privacy succumbs to piracy?

You’d expect a little less anarchy from something originally funded by the government and built by the military.

But anarchic is exactly what the Internet has become. It’s been that way for a long time, in fact; ever since it metaphorically broke free from the government lab and spread across the world.

Not that there haven’t been efforts to rein it back in. The most recent attempts to tame the wild, wild net were SOPA (Stop Online Piracy Act — the House of Representatives’ proposed legislation to fight Web-based copyright infringement) and PIPA (Preventing Real Online Threats to Economic Creativity and Theft of Intellectual Property Act, or PROTECT IP Act — the Senate’s version of the same bill).

You probably remember the howls of dismay that reverberated across the digital landscape after these bills were introduced late last year. Protests culminated with the January 18 blackout of Wikipedia, Reddit and an estimated 7,000 other websites.

Critics argue that the bills’ definitions of “piracy” are so broad they would effectively spell an end to news aggregation sites and just about all user-content hosting services (which means no more YouTube and a serious hobbling of Facebook).

The backlash forced SOPA and PIPA to be tabled in committee — not abandoned, exactly, but at least set aside, probably until after the election.

All of which leaves mixed emotions. On one hand, the wild and woolly nature of the World Wide Web has been an awesome adventure in unfettered free enterprise.

On the other hand, online criminality is rampant. Intellectual property is filched like dime store candy. Predators are everywhere. Naive and vulnerable netizens, the very young and very old, get victimized in unspeakable ways.

If SOPA and PIPA aren’t the answer, then what is? Are we addicted to anarchy, or do we grow weary of the lawlessness? 

One thing’s sure: our virtual world is built solely of electrons and consensus. How it’s governed, if it’s governed — that’ll be by consensus, too.

The C4:

1. SOPA and PIPA are controversial for their broad definitions of copyright infringement. These bills are currently dormant, but are by no means dead.
2. The Web we have today came about by what we — all its users — opted to create. We’ve collectively built history’s most powerful tool for communication and commerce.
3. We’ve also built a criminal’s paradise. Some of its victims are our most vulnerable citizens.
4. What’s to be done about that? It’s up to all of us to decide.