Risk & Expected Returns: The Applicability of Rock Paper Scissors

NEGOTIATING WITH:

 

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My two laws regarding negotiating are simple:

1. Don't even begin the process until you are armed with an advisor who is experienced and appropriately incentivized

and

2. Don't counter if you can't walk away.

After three years as a Dad, my dimensional understanding of negotiating has broadened into recognizing the need to eliminate risk from the outset. This principle can be witnessed in our home quite regularly as I often pre-select two or more equally appropriate options and allow our daughter to choose one...or pre-select one option out of two that I know my daughter will find extremely undesirable. The result: a win-win 100% of the time. Slanting the field to my advantage is necessary. I can't win otherwise...and if i do, it's a Pyrrhic victory due to the loss of time and stress that ensues.

You’ve heard it before: “Negotiate like a 3 year old.” ...or is it “Negotiate like a 2yr old”?  Or is it "Don't negotiate with a 2 yr old"?  Regardless... dealing with young children can be difficult to say the least but insightful.  They are irrational. They won’t take “No” for an answer, They can have an unlimited supply of whining and tears to gradually wear you down and their idea of compromise is re-wording the same demand over and over. (I've faced clients like this as well).  These tactics reveal themselves both in daily "transaction interactions" and in the games children play themselves as well.

Take, for instance, Rock Paper Scissors. I thought about how this (like many other things my daughter has reintroduced me to) might translate into my line of  business….and here’s what I came up with:

A parallel application I call "Bully Beg Buy" which can be utilized upon entering into negotiations that are already in progress with two or more parties competing for the same thing.

 

BULLY (A.K.A. ROCK)

Bullying functions when one party inflicts fear on another and fear is a great motivator…not the best, but certainly stronger than calculated gains due to the fact that it breaks through the walls of logic and plays heavily on the emotional reaction to imagined physical or social suffering. The instinct to survive socially or even politically within one's professional circles can be the weaker party's Achilles' heel. The flip side of that coin, however is that in negotiations or transactions that involve more than just two parties, bullying as a means to attain an advantage over multiple parties may not work so well. For example: One party pressuring another party to sell to them. In this simple bilateral negotiation, the selling party may be under duress to sell to the bullying party and so the tactic works…but add to this equation another variable such as an additional interested party or a trilateral (or tripartite) agreement upon which the bilateral negotiations rely. The later party’s consideration supporting the promise of the other two parties, (a contingency by definition) is imperative. In a case such as this or in any where there are more than two parties, it is unlikely that the bullying will have an equal impact across degrees of separation. I have seen this diluted pressure often result in the third party coming to the table out of undue influence... but eventually finding and exercising a way to circumvent the transaction via a loop-hole or by intentionally causing some contingency to fail being met prior to closing. “Bully” is vulnerable and that vulnerability resides, predominately, on an emotional level…which brings us to the power of "BEG".

 

BEG (A.K.A. PAPER)

Consult any management or social psychology reference and you will learn that people like talking about themselves. It’s because of the developed ego and sense of self in which we take great stock. People like to feel important. The #1 word used in every language around the globe is “I”…it is for this reason that, all things being equal, when one party (in the case mentioned above: the selling party) is presented with an opportunity to feel strong, important, powerful and/or benevolent, they will most often choose that over the opportunity to feel like a victim. Especially if a negotiation is already in progress and the pressure of "BULLY" is being felt. It’s in this instance that the bullying has likely been taking an emotional toll on the selling party and "BEG" not only offers some relief but also presents a safe exit.

 

BUY (A.K.A. SCISSORS)

Although "BEG" beats "BULLY", bullying and the desire for physical, social or political preservation are often outweighed by the desire for financial gain. After all, what good is money if your dead or worse…a social, political or business-world outcast? "BUY", however does beat "BEG" and it's benefit of making someone feel benevolent. Nothing makes most people feel more powerful, smart or strong than significant financial gain…remember, they can always imagine purchasing social or political collateral such as popularity and be a little benevolent / charitable with some of those large profits later.

Like Rock Paper Scissors, the trick to this method of negotiating relies heavily on two rather large assumptions. The first: that you know which hand all competing parties are going to throw (thus the arena defined as: negotiations already in progress) and two: that no two parties throw the same hand.

 

Swim With The Sharks: Swimming Lessons at The Local College

    "The single greatest mistake a manager can make is not getting out of the way! Provide goals, resources, and leadership... Knowing when to get out of the way is the key."

    -Harvey Mackay: Swim With The Sharks Without Being Eaten Alive

Going Viral: So Many Viruses That We Missed A Bacterial Infection

We almost had to postpone a trip back to Philadelphia because Catherine couldn't shake a terrible cough and runny nose. We took her to the doctor and she was put on a heavy dose of antibiotics to treat what appeared to be a sinus infection caused by a situation that hadn't previously resolved itself when she was last on the "Amox". This time we treated it with not only the antibiotics but also with regular nasal clearings using a can of saline spray and 27 boxes of Puffs with aloe. 

Much to our surprise, it came back 2 weeks later. We attributed it to the fact that it's the height of allergy season and our 3yr old little girl still sucks her two fingers... presumably after touching everything and anything germ-infested at home, school and under the dogs. After all, a pattern of illness seemed to be developing of 2 weeks on and two weeks off...which could have also been a result of this being her first year of school and thus a bit more social interaction.

Since the fevers were few and far between, we let it go and just continued to arm ourselves like guerrilla fighters with ibuprofen and travel sized packs of tissues.  We realized, 11 days later, that this was not letting-up as as much as we thought it would and scheduled an appointment with her pediatrician. Upon looking into her mouth, this mild mannered and seasoned physician exclaimed: "Wow! Disgusting! Come here and take a look at this!" I looked in Catherine's throat while Dr. Nelson illuminated walnut sized tonsils with an otoscope. It was plain as day... and I was, all at once, ridden with guilt and embarrassed for not having even looked before. If I had, I would not have mistaken those white veins wound around her tonsils like heavy marbling on a steak.

She took a culture after pronouncing with great certainty that it was "Strep". The long cotton swabs emerged from the back of Catherine's tiny throat covered in yellow mucus with specks of blood. I played with my stoic daughter for 15 minutes while we waited for the results of the "quick test". 

Although it came back negative we were sure that it was either false...or at least would be positive within 24 hours... so we proceeded to get back on the antibiotic wagon before the coughing through the night left both my wife and I with more than broken hearts and an not-enough sleep. So, now she's missing her first day of Swimming Lessons and I'm calling off the Nanny so that we can watch as many episodes of "Tree Fu Tom" as I can handle.

Privacy Notice: Going Potty All Alone

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Today was the first time I stood guard outside a ladies room (albeit a single-service unit) for my 3 yr old daughter.  We were at her doctor's office when she had to "go" and after gently setting her into position she told me: "It's O.K. Daddy, I can do it myself now." I stood back as her shoulders dropped and her eyes narrowed with great focus. Her serious little face turned to me and in a strained voice she said "May I have a bit of privacy please?" I told her "Of course!...shall I stand over here by the door?" and she paused before thoughtfully offering an alternative: "You can stand on the other side of the door".  I smiled and tried not to laugh. I told her that I would as long as she promised to call me when she was all done. She nodded in agreement and I softly closed the door...ever so gently...not all the way...but a little more than half-way...just enough for the metal parts to touch...but not click and potentially lock accidentally.  I stood so proudly outside that door almost hoping someone would ask me what I was doing there.

Comparison Approach: The Tempering Pace & Humilty of The Midwest

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Although there is something to be said for the increased level of awareness and sense of urgency that living in a big city of over 1MM people imparts, a slower pace can be refreshing and forgiving by comparison...as long as, like snow skiing, its in a predictable fashion and to the right:)

Speaking of staying right, there are a few things I am finding difficult getting used to in South Dakota. One of the surprising challenges has been adapting to more self-deprecation than we've ever encountered.

Whenever we're outed as not being native South Dakotans, we are asked about where we're from. The conversation invariably leads to the question: "So how do you like South Dakota compared to Philadelphia?"...and before we have a chance to answer, we are met with lines like: "Don't worry, you won't hurt my feelings..." or "I'm sure its not as nice is it?"

Sometimes I think we have a better opinion of Sioux Falls, South Dakota than some of the folks who are from here. As a good friend of mine, Dr. Mason Cobb pointed out: "There is very little we are "doing without" here...rather there is so much we're "doing with." and I couldn't agree more. The amenities and services from foodstuffs (Fresh seafood flown in to Cleaver's Market from Hawaii regularly) to arts & culture (South Dakota Symphony and Russian Ballet performances at the Washington Pavillion) abound. 

Perhaps its because even after having pre-conceived notions, of days filled with hunting buffalo and making mead wine, dispelled; some people still hold fast to their prejudices and find it hard to let go of the feeling that they are much bigger than everyone else. The fact I find curious is not that the Midwest has a reputation that pre-dates it's recent "Renaissance" but rather the fact that the mindset of Midwesterners has not evolved in-stride with their cities.  It reminds me of some contestants on "The Biggest Loser" who even after shedding over one hundred pounds,  getting into unbelievable shape and receiving a total beauty and fashion make-over...still hold a perceptible awkwardness in their posture. Perhaps the Midwest is better this way. There is something more attractive about a beautiful woman who doesn't know (or carry herself as if she knows) just how beautiful she really is (Diane Lane). This Midwest humility, whether self deprecating due to a long-standing inferiority complex or out of a genuine nature of modesty will take some getting used to. Regardless, I think we'll all be the better by being tempered by it.

Replication: A Few Interesting Similarities Between South Dakota and Pennsylvania

Far from being South Dakota's doppleganger, Philadelphia, PA has a population density 10xs greater than that of Sioux Falls, SD and is mentioned in way more songs... but there are some interesting similarities between the two.

Although Pennsylvania is aptly named for the amount of lush foliage and bucolic rolling tree-covered hills that more often call to mind more European landscapes than those of the open and primarily flat prairies of the Midwest; both states share a relatively similar size and shape.

The physical location of each state's major city: PA's Philadelphia and SD's Sioux Falls are not only located in the southeast corners of their respective state but also share the unique proximity to several other regional hubs a relatively short drive away. For Sioux Falls it's: Omaha, Nebraska,   Minneapolis-St.Paul, Minnesota  and Des Moines, Iowa whereas Philadelphia is proximal to: Wilmington, DE,   New York City,   Cherry Hill, New Jersey,  Baltimore, Maryland  and Washington, D.C. .

Both States have major "sister cities" a 5-6hr drive to the west. In Philadelphia it's Pittsburgh and in Sioux Falls, it's Rapid City. Both of which are the state's largest city closest to it's western boarders and neither one really has a hockey team.

Both states share significance with regards to historic battles (Indian Wars vs. Wars for Independence) and are home to some of America's most inspiring symbols of freedom and democracy as well...most notably: Mt. Rushmore, Independence Hall & The Liberty Bell. 

Both states also share some space with more socially (and electronically) independent sub-cultures of religious groups founded largely in-part by men named Jakob. In PA, the Jakob Ammann formed Amish & Mennonites and in SD, the Jakob Hutter founded Huttterites. Both trace their roots back to to the Radical Reformation of the 16th century and are easily identified by their simple living, plain dress and wonderful baked goods at local farmers' markets.

Fortune Magazine and US News both conduct annual reviews and ratings for over 24,000 public schools throughout the country. The more notable (ie; Radnor, Lower Merion, Haverford, Trediffryn/Easttown, Unionville-Chadsford, etc...) in the affluent western suburbs of Philadelphia  (known as the Main Line) rank in the high 700s to low 800s out of 24,000+....ironically the same rankings as the local public schools in Sioux Falls, SD (namely: Roosevelt, Lincoln and Harrisburg.) Whether we elect to send our daughter to public or private school, the fact remains that public school systems this strong, speak volumes about both areas politically as well as culturally. 

We've only been here for about four months so stay tuned for more interesting similarities between these two states.... 

 

Re-Branding: Omega 3s In Disguise

 

Here's the step-by-step for my Honey* Salmon Nuggets that a few have asked for.

*1-2tbsp of melted honey in the egg and also drizzled on top once out of the oven.

Response Time: Another Quick Re-Heat Meal

Hot Dog, Asparagus & Mozzarella Filled Pillsbury Crescent Rolls. Ready in like... 10mins. I freeze these and then re-heat them in the toaster oven (or microwave) for a fast meal when time gets away from me...as it occasionally does.

Connectivity: Reaching a Target Market of 2-5yr Olds

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A good friend of mine asked my opinion on an app that he and his wife are developing. They are creative designers and academics. Therefore it came as no surprise that the app was aesthetically pleasing and educationally focused...but there was no addictive quality to it. There was nothing cute or fun or silly about it. After learning that his target market was 2-5yr olds (and their parents), I remembered something my 3yr old daughter taught me: 

It's much more fun to make and take pretend phone calls from a fresh banana than it is from an old cell phone.

When marketing to children, it's imperative to remember two things:

First - Children want to have fun.

Second- They want to do things All-By-Them-Selves.  

If you wrap up something good, healthy or educational in that...it's as good as sold. 

When things are too "high-brow" or only "mentally healthy", it's on a shelf that is within a parent's sight-line but too high for a child to see. When it's all "silliness and cartoons"  it's on the bottom shelf and only within easy reach of a toddler. The trick is to get the product or service placed right in the middle so that both audiences can see the value.

At the end of the day we, as parents, are often willing to indulge the desires of our children...so long as they aren't unhealthy or dangerous, we'll allow it.

I think a distinct "fun factor" woven into their brand equity...and thus all of their apps wouldn't mean they would be abandoning their reputation for serious childhood development...It would result, more, in a brand that holds a certain..."creative monotony" like the "TOCA" apps. Each one predictable but fun and unique. Beyond enticing to today's demanding children... and if masking some formative developmental process or educational exercise, likely to serve parents in a similar fashion as melted cheese on broccoli.  

 

Green Development: Have Fun Using Everything In The Pantry

There are a number of motives for building green including environmental, economic, and social benefits.

Kitchen sustainability initiatives similarly call for integrated and synergistic "design" ideas...only they correspond to new menu items and the "retrofitting" of existing recipes as opposed to raw land and existing structures.

This "green" approach extends an ingredient's life-cycle in each creative new use employed with the purpose of finding a synergy between children's changing demands and the desire to get the most out of every product in the pantry.

Sustainable meal preparation brings together a vast array of practices, techniques, and vision (most often that of a child's... as the Green Pancakes and S'mores Waffles pictured above) to reduce and ultimately eliminate the impacts of cooking on the bank account. It often emphasizes taking advantage of older resources (all the way in the back of the pantry) in fun new ways.

The Right Tools for The Right Job: Chopsticks for Kids

Catherine had been asking for her own chopsticks ever since she first saw Mommy and Daddy using them...but her lack of dexterity never seemed to deter her from trying, so hard, to eat with them.

With the use of a rubber band, any take-away sticks can easily be transformed into "training sticks".

The tremendous sense of pride and enjoyment that results from "Doing it!!!" is well worth the additional two minutes of our time.

Listening Skills: Her First Bowl of Rice Krispies

One of the most valuable things I've learned from my wife (and Peter Bregman) is that... 

Listening is magic!

"...Listening isn't easy. The more we listen to others, the more likely we will react — or overreact — to what they say. Listening, it turns out, is much harder than speaking. We have to allow things we might disagree with to hang in the air. We have to move over a little and create space for those things to linger.

That kind of listening takes tremendous courage.

But if we're interested in learning — about ourselves as well as others — then it's worth it. And if we're interested in being connected to others, showing them respect, helping them feel better, and solving problems between us, then it's more than worth it. It's essential."

Peter Bregman

Harvard Business Review Columnist and Strategic Advisor

Bread & Butter: Spotting Talent to Fuel CBDs

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While having brunch with my family at a downtown delicatessen the other day, I had the surprising good fortune to enjoy a slice of the best raisin bread I've ever had. So good in fact that I asked the server if they could give me the contact information for the bakery that supplied it...only to discover that it wasn't made by a bakery at all but by a local guy out of his mother's garage-turned-commissary. 

After several phone calls and a long lunch, I realized that this baker represented more than just an advisory engagement opportunity for me.  After determining his options for a sustainable business platform I quickly realized that this young man (and his uncanny ability to produce some of the best breads I've ever eaten) represented something more profound: The endangered demand for quality products in lieu of convenience. 

David Napolitano is making incredible bread and supplying a small local specialty grocer along with two or three eateries in town but the demand for his product is sure to outpace his ability to produce it. In order for David to continue making bread at a profit, he is forced to either a.) Charge a price beyond what the market will bear. b.) Outsource the production to a larger scale manufacturing facility---in which case product quality will suffer or c.) Collaborate with a complementary concept (such as a cafe, restaurant or bulk olive oil retailer) with both a scaleable platform (ie; starting as an artisan "open kitchen" bread studio) and significant financial resources in place to incorporate an additional revenue center into their operation for payroll to support a wider supply and delivery radius or ancillary supply channels like boutique / luxury hotels, etc...

Its sad to imagine my daughter growing up in the absence of  "downtown neighborhoods" with retailers like this. But almost gone are the days where local artisans and craftsman line the streets with their shops ie; specialty bakeries, cobblers or coffee roasters indigenous to every town. Granted....more and more Dean & Deluccas and Food Halls style gourmet eatery markets are popping up in most major US cities but outside those densely packed urban areas, suburbanites are driving to lifestlye-centers and super-grocery chains instead of the local town butcher, baker, candlestick maker or farmers' market.

Central Business Districts (CBDs) are the lifeblood and identifying character of any community but without operational systems for replication and mass production in place....master bakers (or coffee roasters, etc...) are saddled with the reality that although they will always be able to pay the rent, surround themselves with like-minded individuals and perhaps have a nice life living above their shop toiling away for 80hrs a week...they'll never realize the fortunes reserved for one stop shop food warehouses and most chain restaurants. Many will argue that franchises are the answer. Most of whom (save for a few with incredible brand equity and operational support in place) most often charge franchisees without sufficient experience (but plenty of passion) $30k for the right to use their name, "formula" and recipes but generally fail to deliver on the all important and imperative component ...the "secret sauce" or "genuine experience" which is only really provided by those who walk and breath their product or service...as the aforementioned artisan.  Its that "wow factor" that is delivered by committed people who love what they are doing and are working in concert with an experienced team.

In exchange for maintaining the integrity of their small-batch products many artisans like Napolitano are often exiled into obscurity... Unless they write a book or land on a food network show or... garner regular support from their neighbors. They are often underpaid and undervalued by the masses who pay their cable companies more than they pay their teachers...and choose their bread based on value and calories or even more ironic....the amount of carbohydrates per slice. 

Meeting David was like meeting Picasso. You could no less mass produce his product than you could mass produce him. Making bread is more than a culinary art. You're not just working with inert ingredients and measuring spoons. Yeast is a living thing and working with dough requires, touch, taste, smell, sound...its a living breathing thing affected by everything from sea level to humidity.  When I considered the great chefs I've worked with, I realized that although they were incredible artists and efficient kitchen managers...they were also able to cross-train and coach. Mentor and develop.  And that's what David needs...a venue in which to build systems, infrastructure and staffing levels that support a cross-training and development programs. He needs help creating a platform to turn people into bakers making bread his way so that he can share it with (or from) more downtown shops and not be forced to grow old above any one of them.

Its not enough to be great at what you do. The real value is in collaborating with and developing people within structured and managed systems. Perhaps that truth will transcend restaurants & hospitality and will, someday, prove relevant to my daughter in some other way. Until then, I'm stuck with my own frame of reference...and my own delicious raisin bread.

 

Impact Fees: The Hidden Costs of Two Income Families

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When both Mom and Dad are both working full-time, it doesn’t leave much time to take care of the basics. Grocery shopping and filling the car up with gas can often prove a challenging fit into one’s schedule… let alone the little things like: laundry, house cleaning, lawn & garden care, dog walking and feeding, picking up the kids because you can’t leave work at 3:00 in the afternoon…little things like that.

The amount of time it takes to run a household adds up fast…especially when you consider the fact that unless you have another family member living with you (like a mother or mother-in-law) you need to pay someone to help with the day-to-day chores and errands.

The bottom line? If you’re thinking about going back to work once the kid(s) are in school full-time, you should consider the direct impact by weighing the tangible expenses of doing so…or rather ensure that your return to the work force will yield an income that outweighs the cost savings of staying home (calculated below).

House Cleaner: $7,200+/yr.

Babysitter / Nanny: $12,000 - $35,000+/yr.

Dog Walker: $7,800/yr.

Summer Camp / Swim or Country Club:  $2,000 - $10,000+/yr.

Landscaping: $1,500 - $4,000+/yr.

Dry-cleaning: $1,000 - $2,000+/yr.

___________________________________________

$31,500 - $66,000+/yr.

In short, unless you’re re-entry into the job market guarantees a salary of at least $50,000+/yr.… it’s likely you won’t break-even (on paper).

But what should also be taken into consideration, if you are one of the very fortunate (and very few) Americans who are in the position to even view a 2nd income as an option, is the fact that people who do what they love are happier people. And happy people not only make better friends and better lovers but better parents too. So, if your family can sustain itself on one (or one and a half salaries) ask yourself what you love more…the fulfillment of keeping a home or the fulfillment of your former line of work.  

Back In The Driver's Seat: Re-Joining The Work Force

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Now that Catherine is a full-time student, I can focus on getting back to a full-time job.

When we moved to Sioux Falls South Dakota, my rolodex became irrelevant. With no known firm behind me, no local experience and a plethora of avenues potentially open to me, I didn’t know where to start...or if it was even worth trying. After unpacking and clearing my dry-erase "deal board", I decide to replace the names of old clients and recently completed projects with the names of established local brokers, developers and restaurateurs who were likely here long enough to witness the beginning of Sioux Falls' boom first hand. The goal was to speak with 50 of the more successful business leaders to better understand from where Sioux Falls has come, where they see growth headed and what factors they perceive as potential obstacles in the way of continued growth. 

Small towns and cities like Sioux Falls are typically "good old boys clubs". Getting to know who's who is not only important to gain insight on the local market and how business is conducted, but also to know where everyone's respective toes are so that none of them are inadvertently stepped-on in the process.

When friends and colleagues back East first learned that I was moving to the Midwest, the assumption was that: I would have the market and the consumer base figured out in a matter of weeks, open a few restaurants in the first year and negotiate several large deals in the first few months. Although Sioux Falls is 1/10th the size of Philadelphia, the market is no less dynamic. The failure to recognize that would be more a sign of arrogance than of ignorance. This city is small but its experiencing rapid expansion. The growth is visible everywhere. It’s like being on a college campus. Continuous construction is everywhere and the energy is palpable. Residential construction alone has topped $56MM this year compared to $20MM in 2012 and $11MM in 2011.

The most challenging aspect of getting back to full-time work after a brief hiatus...and a new perspective, is that there now seems to be more opportunities out there than I realized. Exploring the job market in Sioux Falls is like being in New Orleans during Jazz Fest. So many great things all going on at the same time... that the quandary almost results in inaction.  In so many ways, moving to Sioux Falls is like starting over. So much so that I questioned whether or not hospitality and commercial real estate were really the right paths to continue down.  Sioux Falls is a professional blank slate with the potential to bring one's skill sets to a myriad of professions from Design to Finance.

What I learned...or rather was reminded of, after speaking with many of the old guard here, is that given my druthers, I'd do what I've always done. Although I've often dreamed of trying my hand at things like marketing and advertising, I am a CRE deal and restaurant development junkie. Any fears I may have had about passing up alternative professional opportunities were laid to rest after having coffee one morning with a prominent attorney in town who spoke of his breadth of experience in various fields of law. He "would grow bored of any one specialty after 3 or 4 years so [he] would study some new disciplines and take on new clients to keep things interesting." This ability to regularly re-invent oneself professionally and succeed in doing so, would be impossible in any large city where most service related industries are dominated by tens if not hundreds of practitioners who take the lion's share of available clients based on their extensive experience alone.

This market seems to be one where the consumer is investing more in the individual than the size of their firm. A market where personal relationships and competence rule. A market where opportunities that exist today will likely exist tomorrow. With a 3% unemployment rate and companies losing more money because of their inability to meet staffing demands; perhaps getting back in the work force won't be as difficult as I imagined...but certainly not as easy as some may think.