The Donut Division

First, at Pittsblog, there was the Custard Class, through which I expressed my surprise that Pittsburghers who prefer custard-filled donuts demand only one flavor of custard.

Next came the Cupcake Class, a phrase and concept that ranks among the most influential of Pittsblog products (even if the phrase itself, like the Custard Class, owes a great deal to Chris Briem).  The Cupcake Class is a pseudo-Floridian parody of the Creative Class concept that in a backhanded way speaks to what really matters in regional economic development.  The success of $4 cupcakes in Pittsburgh means in small part that there are people in town doing so well (or behaving so irrationally, or both) that they have cash to burn on overpriced pastries.  The success of $4 cupcakes in Pittsburgh means in much larger part that there are some clever and hardworking entrepreneurs among us, and kudos to them.

Today comes the Donut Division, so named because Dunkin' Donuts is back in town in a big way, and the local DD store across the street from my school in Oakland seems to be wiping the floor with the competition.  Every morning when I arrive I look across the street to see whether the line is short enough for me to squeeze inside and grab some coffee and a donut; usually, I have to pass.  In my classroom I survey the sea of student faces and do a silent, mental survey of coffee cups.  Where once there was an abundance of Starbucks, now the room is awash in Dunkin'.  There are some Panera's holdouts -- but the students confirm that they've made the best of a bad situation.  They, too, couldn't get into Dunkin' Donuts.

My Oakland location means that this particular DD is patronized almost exclusively by Pitt students, with a sprinkling of Pitt faculty, Pitt staff, UPMC faculty and staff, and the folks who work along Forbes Avenue.  Calling this group the "Donut Division" seems unfairly anecdotal and an empty vessel for economic or sociological observation.

But that sort of limitation belongs in academic journals, not in blogs.  So:

One possibility is that the Donut Division, rather than the Cupcake Class, represents the future of Pittsburgh.  Donuts or no donuts, college students and college graduates are one key to Pittsburgh's future, of course, whether or not they come from Pitt.  If those students are smart enough to spend $1 per donut rather than $4 per cupcake and to spend $1.50 on a cup of joe rather than $4 per latte, then they're as smart as we want them to be.  The future's so bright, I've gotta wear shades.

A second possibility is that Oakland's Donut Division is representative of a broader equilibrium in Pittsburgh.  Pittsburgh is a region of $1 donut lovers, as family-run pastry shops around the region will attest; the attention that I and others have given to cupcakes in recent years may be an inauthentic and inappropriate distortion of regional preferences.  Some here remember the ill-fated effort by Krispy Kreme to expand into Pittsburgh, a strategy thwarted by corporate greed more than anything else.  Even Dozen, the local cupcake-based empire, has acknowledged the limits of local snobbery: it has sold a beer-flavored cupcake. The DD awaits the ultimate re-validation of its premier status:  not coffee cups in Oakland classrooms, but a China Millman review of the best donuts in Pittsburgh.  Nothing over $1 should be considered.

The truth, of course, is that none of this matters.  (Sorry to give away the joke, but I keep getting interview requests from writers who want me to really tell them why cupcakes are so popular.)  The Custard Class, the Cupcake Class, the Donut Division:  these are all the same thing.  It's breakfast, or a snack; tastes vary.  So-called "behavioral" economists will tell you that not every dollar in our wallets is valued the same in our weird semi-rational brains, just as not every calorie is equal in our imaginations.  We keep informal running accounts (of both dollars and calories!); some "count" against our overall wealth or health.  And some don't.  Discretionary spending at the margin, and discretionary eating, is somehow necessary, and maybe even efficient (not to say healthy), to living a tolerably happy life.

The Custard Class, the Cupcake Class, the Donut Division -- all of them, in other words, are keeping Pittsburgh from having a collective meltdown over the miserable excuse for a baseball team that masquerades as a once-proud franchise.

Don't Look Now: Journalism!

For months, I have been on the brink of cancelling my print subscription to the Post-Gazette.  Not because I like to read the paper on the Web, for free; I don't (like to, or read it there, generally).  But because aside from the Sports section -- which offers me almost nothing, as a soccer fan -- the paper is usually almost devoid of locally-generated journalism.  Substance.

But twice -- twice! -- in the last couple of weeks I have opened the morning news and found real journalism there, the sort of thing that restores my faith in the local Fourth Estate, even if only briefly. 

Rich Lord's recent series on the local Wizards of Oz -- the lever-pulling men behind the curtain of Pittsburgh politics and economic development -- was courageous, even if it was illuminating more for what those men did not say than for what they did (Chad Hermann illustrated the point in his typically clear and pointed way).

And Chuck Finder's work on Sunday on brain injuries in youth sports, particularly in the local church of football, took a long-simmering national story about injuries in professional sport [I posted about this topic a year ago] and brought it home, literally, in a wonderfully but tragically vivid way. 

The subscription stays.

Please, sir, I want some more.

Border Guard Bob Takes a Seat

So many topics, so little time.

From Tim McNulty's PG report on "Smith Micro Software," a small CA software company that plans to relocate to Pittsburgh and hire as many as 230 people:

"I want the top two students at each university," [the founder, a Western PA native] joked, before adding, "We want to keep the kids coming out of these schools within Western Pennsylvania."

It is a sign of distinct progress in this region that the founder was joking, that Tim McNulty knew that he was joking, and that Tim and his editors though enough of the moment to include the face that he was joking in the story itself.

At least, I hope that all of those things are really true.

But seriously folks:  I really hope that Smith Micro Software sets out to hire the top students from universities across the country, and that it makes students within Western Pennsylvania compete for jobs.

Noncompetes and the PA Energy Biz

My argument about the foolishness of PA's willingness to enforce noncompetition agreements for employees that want to switch jobs -- read it here -- hit at a great time.

The Pittsburgh Business Times recently reported that local coal and gas giant CONSOL is suing a former employee for breach of a noncompete.  The employee in question wants to work for another energy firm.

From the PBT:

When Deemer [a senior geologist working on the company’s Marcellus Shale operations] left CONSOL on July 16 and the company learned she was headed for a position with Talisman Energy USA Inc., another Marcellus Shale exploration and production firm, her former employer sued her for breach of contract and Talisman for aiding in the breach, according to court documents.

In the case, CONSOL claimed that, in her capacity as a senior geologist, Deemer knew where the company had natural gas assets, the quality of those assets, what technologies CONSOL was planning to use to develop them and when, and how much profit they would yield. Deemer signed the noncompete agreement as part of her participation in CONSOL’s equity incentive plan.

Things like "where the company had natural gas assets, the quality of those assets, what technologies CONSOL was planning to use to develop them and when, and how much profit they would yield" are, quite plausibly, trade secrets that belong to CONSOL.  If CONSOL could prove that the geologist had disclosed them or was likely to disclose them to her new employer, then CONSOL is likely entitled to a legal remedy -- maybe even an injunction of some sort.

But because CONSOL can stand on top of a noncompete, none of that is necessary.

Oh, and the PBT has an additional note pointing out how noncompetes may backfire in an industry that asks even indepedent contractors to sign them -- as the natural gas business is doing.

On this Labor Day, celebrate the freedom to work where you choose -- not just where your old boss says you can.

Beating the "Light Up Night" Gremlins

Not quite a year ago, I posted some thoughts about how local towns could beat back threats by the Pittsburgh Downtown Partnership over rights to the phrase "Light Up Night."

With news emerging that the PDP is following through on its threats -- demanding small but meaningful "license" fees from towns that want to hold their own light up nights -- I have another idea.

Step 1:  Pay the fee.

According to this morning's Post-Gazette story about the PDP and its trademark claim:

Communities who sign licensing agreements will be able to link their event to the Downtown light-up night events on the partnership website, but they must use the PDP's "Light Up Night" logo in their literature. They also must agree to hold their own event on a different night than Pittsburgh's "Light Up Night," which will be held Nov. 19 and 20.

That would supposedly make each other town part of "a regional Light Up Night celebration."

Step 2:  Next year, don't pay the fee.   Hold a local Light Up Night.  Don't use the logo.  Wait for the PDP to sue.  If there is no suit, then great, but wait until the year following.  If and when the PDP sues, then:

Step 3:  Argue that the PDP had forfeited *all* of its trademark rights in the phrase "Light Up Night" by engaging in what trademark lawyers know (and fear) as "naked" licensing -- licensing a trademark without simultaneously doing a deal to transfer the "goodwill" that the mark signifies.

Is this a winner of a strategy?  There's no saying for sure.  I was a practicing lawyer for a long time, and I spend a lot of time thinking about and teaching trademark law, but I can't offer legal advice, and no one can guarantee an outcome.  But it sure would be fun to watch this play out!

The basic legal landscape is this:

The PDP does *not* own the phrase "Light Up Night," no matter what the federal Trademark Office might say, and no matter how much the PDP complains that its fundraising efforts have been muddied.  The PDP has the exclusive right to use the phrase "Light Up Night" in connection with certain goods and/or services.  (Actually, it may not; that was the point of my earlier post on the subject.)  The basic idea is that when consumers see or hear that phrase, they think "some specific supplier produced that good or service."  If that supplier doesn't have anything to do with that good or service, then the trademark isn't doing what it is supposed to be doing, because consumers aren't getting that consistent experience.  McDonald's Corporation can license the Golden Arches to its franchisees -- but McDonald's has to require that the franchisees adhere to McDonald's quality standards, or use McDonald's supplies, or submit to McDonald's on-site inspections, or some combination of those things.  Trademark law punishes the mark owner who allows the mark to be used in this unconnected way.  "Naked" licensing leads to forfeiture.  Anyone can use that mark for anything.  Boom!

Is the PDP bundling a transfer of "goodwill" into its offer to extract little license fees from local towns?  Despite the reference to a "regional" celebration, the PG story makes it sound like the PDP is not.  (Collaborating on a "regional" celebration shouldn't count as a transfer of goodwill, because such a "regional" celebration would be a new thing -- not part of an existing PDP service.  Requiring local towns to use the logo wouldn't count, either.)  What a transfer of goodwill that really means is that the PDP would not only want a little money, but that the PDP -- like McDonald's -- would also want a little control. 

In other words, before paying the fee, towns have to figure out whether they're getting into bed with the PDP over things like planning and execution of their celebration.  Is that stuff in the licensing documents?  If not, then the strategy might work.  If so, then the strategy won't work -- but, of course, that's one more great reason not to sign up.  The region's municipalities have enough problems in their relationship with the City of Pittsburgh.  Why should they hand over a bit of local business to Downtown poohbahs?

Pitt Panthers Opt Out of the Cupcake Class

Tomorrow night, Pitt's football team opens its 2010 season with a tough game, at the University of Utah. No walkover opponent to start things off this year.  No sirree.  Kudos to Pitt -- for opting out of the Cupcake Class.

Next week for the Panthers:  The Wildcats of the University of New Hampshire.  A cupcake?  Hardly.  UNH has made several consecutive trips to the FCS playoffs and is ranked #9 in the coaches' preseason poll.  Remember the Mountaineers!  No -- these Mountaineers.

Growth

Via Pop City, I learned this morning about yet another program in Pittsburgh that is going to talk about startup companies: How to start one, why Pittsburgh needs more of them, where you can find help, etc.

Startups are fun to talk about, even if there is sometimes more talk than action. Startups are sexy. People who come in to talk about successful startups and what successful startups "mean" are the lottery winners of the new economy. The pitch for these program is almost always, "come talk to the winners." This program, for example, is offered via the following tag line: "It's critical to our economy that we create an atmosphere that supports start up companies and fuels small business growth. Join us as we hear from those in Pittsburgh and elsewhere who have been successful in doing this."

Well, OK. But can you say, "selection bias"?

What I would love to see are additional programs that

-- feature people who bet the farm on a startup, and then crashed and burned. Instead of a panel on success, how about a panel on failure? Failure has causes; failure holds lessons. Many more new businesses fail than succeed. A robust environment for business tolerates failure; it doesn't just nurture success. How can Pittsburgh create *that* atmosphere?

-- feature people who came and and took over someone else's startup, then grew it from startup to stable company. These would be both investors and managers. Starting a company and growing a company require related but distinct sets of skills. There are a lot of brilliant researchers and faculty members around Oakland; many of them harbor dreams of taking their cool inventions and building successful companies around them. But the inventive skills that brought forth those inventions will not suit those people when it is time to solicit funding, hire a staff, and deal with the marketplace. If the going gets good, the founder will often get replaced. There are skilled and experienced managers out there who are *really good* at building companies; they simply need a product, or a service, to build that company around. Often, that transition is accompanied by heartbreak and tears and even lawsuits. It's also a transition that is often necessary if the company is going to escape the gravitational pull of the founder's ego. Who are the players in those transitions? What are the interests at stake? And how can Pittsburgh's business climate make those kinds of transitions successful?