An Ode to Barnes & Noble

Dan WilliamsDan Williams, CFP, Investment Analyst , Brinker Capital

On July 8, 2013 the CEO of Barnes & Noble, William Lynch, abruptly resigned. His rise and fall were tied largely in part to his belief that the future of B&N was in its NOOK digital reader. Lynch also felt that being a brick-and-mortar business would overcome the technology headwind of competing with Google, Amazon, and Apple on their turf, the tablet space. In fairness, he is likely right that people do derive a lot of benefit from being able to physically visit their book store. Still the struggle for B&N, and Borders prior to their demise, seems to be compensation for this social benefit. Now the debate is whether the physical book stores can survive in the Amazon age. In my biased opinion, I believe the answer is yes.

8.1.13_Williams_BookstoresTo say that I am a regular at my local B&N is an understatement. Over my career, I have studied for various FINRA licenses, the CFP designation, and all three levels of the CFA exams. The vast majority of this studying was done at my local B&N. On the rare occasions when I did not have anything to study for, I could not help but continue to go to B&N as it had become such a part of my life. This amounts to a total of about ten years of trips to my local B&N, usually multiple times per week. During this time, I have witnessed a lot of life from my table in the crowded B&N café.  From college interviews, job interviews, dates, people doing quasi-library research (most often on vacation destinations) and people who are clearly looking at books to purchase—of course, not at B&N, but later at a discount from Amazon.com. You can see them all at B&N. And for the most part, these people did not purchase anything from B&N outside of the food items in the cafe. It was fairly typical for me to spend three to four hours on a Saturday studying but only purchase an iced tea and a sandwich. Often, I would grab a new book off the shelf to read, and often I would end up reading a whole book without ever taking it out of the store. It is clear the store was being used less as a place for B&N to sell books and more like a community center or an improved library.

This social benefit of this institution is echoed by Lydia DePillis in her July 10, 2013 Washington Post article “Barnes & Noble’s troubles don’t show why bookstores are doomed. They show how they’ll survive” when she notes:

8.1.13_Williams_Bookstores_2“Here’s the thing: Bookstores, more so than movie rental and record stores, are oases in the middle of cities (and even in suburban malls). We go there to kill time, expose ourselves to new stuff, look for a gift without something specific in mind, and maybe pick up something on impulse while we’re there. Even Borders’ disorganized warehouses left holes in the urban fabric when they disappeared, and Barnes and Nobles would do the same–they’re a kind of public good, at a time when the public is getting less good at supporting libraries.”

However, the free-rider problem is also a known challenge as Lauren Hazard Owen in her July 9, 2013 paidContent.org article “Barnes & Noble throws out its CEO, but that won’t save the company” writes:

“While everyone likes the idea of a neighborhood bookstore, that doesn’t translate into business success. While Barnes & Noble is, in fact, the only neighborhood in a lot of areas, consumers who advocate shopping local may still think of it as a big box store, and they’re not likely to show the same loyalty to it as they might to the charming indie bookstore on Main Street. Instead, they’ll keep doing what they do now: Go in to the store to browse and for the AC, then go home and order books on Amazon.”

The clear lesson here is that providing service to society is only good business if you can be compensated for supplying it. I, however, also know that providing something that people want is a great place to start a business. Ultimately, I think that in ten years we will still have Barnes & Noble at least in some tangible form. First, as I noted above, the café part of B&N works. People who are enjoying their time here are drinking a coffee while doing it. In many ways it is an improvement on the Starbucks experience by having this attachment to the book store. Second, Amazon clearly benefits from B&N existing as an uncompensated partner in many of their transactions. Third, publishers and authors don’t want to be left with an Amazon-only world as book stores represent their physical retail outposts to host book-signings, book-release frenzies, and the like. Fourth, our society seems to value physical book stores (even though they will try to free-ride if they can) as something beyond a retail space.

8.1.13_Williams_Bookstores_3When you have this many interested parties wanting something to exist, I expect it to exist. Maybe B&N survives through a business model with a leaner book store and larger café business model. Maybe Amazon buys B&N and accepts that they will barely break even on the physical book store, but their overall profit will be improved for having B&N around. Maybe B&N, in name, does go away, but Starbucks opens a book store/coffee house location type, recognizing it as part of their positive social image campaign to improve the Starbucks experience—or maybe just the hubris that they can make it work. Some publishers may even band together to create some physical retail super store to replace B&N or cut some deals with to keep them around. The hard part is that it seems best for all parties involved to have someone else step up.

I could be delusional and perhaps thinking with my heart rather than my head as many a beloved business have been washed away by the waves of retail climate change. With that said, as long as there is a B&N,  you can find me sitting there drinking an iced tea blend known locally as “The Dan” (told you I was a regular), reading a book I am perpetually thinking of buying but never do, and watching yet another awkward college interview.

Security mentioned is shown for illustrative purposes and is not owned by Brinker Capital

The Importance of Generational Listening

CoyneJohn E. Coyne, III, Vice Chairman, Brinker Capital

I had the opportunity to speak on a panel at the Nexus Global Youth Summit in New York City last week. More importantly, I had the chance to listen to and speak with a number of those in attendance.

Nexus is a global movement founded in 2011 whose network consists of over 1,000 young philanthropists, social entrepreneurs and influencers. Their unified goal is to increase and improve philanthropy and the social impact of investing. They come from more than 60 countries and represent more than $100 billion in assets. They have the commitment, intelligence, passion and clout to act on it.

I was in awe of the debate and discussion I witnessed among these ambitious, young leaders.  What they shared, how they felt, how they deviated from each other in plan but matched in vigor and passion—it was among the most intelligent discourses I have listened to in some time. The mindset of the social entrepreneurs in attendance turned the ways I have defined this area upside down.

If financial advisors, family offices and wealth managers wish to remain relevant, it is incumbent on us to help facilitate the dialogue within and across generations, understanding that if properly equipped, this rising generation will accomplish things on an unprecedented global scale. And if we, the Baby Boomers and Gen Xers of the world, don’t adapt to the methods of investing and communicating they are evolving towards, we will be left in the dust.

I want to thank Logan Morris at Snowden Capital for including me and congratulate Rachel Cohen Gerrol on this incredible event. I must give a particular shout out to the woman who spoke from Kopali Organic chocolates.  They are delicious, and you have made a convert.

7.30.13_Coyne_NexusSummitFor a more in-depth look into this year’s  Global Youth Summit, please read this event summary published by Forbes, or take a page out of the Generation Y book and check out their Facebook page.