0:13 hello and welcome to business lessons from the military I'm your host Kevin bemel and we're here at our new uh time 10:00 a.m. Tuesday Mornings that's Pacific time and of course it's 1:00 in the afternoon on the East Coast an hour in for you Central and mountain time and we talk each week for about a half an hour about military Doctrine military history the practices of great military leaders and how we can apply these to our civilian uh businesses and and
0:50 professional careers although that may be somewhat redundant our professions I guess I should say um and and distill lessons from them and for the last um well for the last several months we've been talking about Marine Corps War fighting Doctrine and in particular over the last few weeks we've been talking about intelligence the Spy versus spy kind and how we can use what Marine Corps War fighting Doctrine tells us about the Gathering and use of intelligence in order to uh Advance our our professional
1:28 prospects so as as we do in every good uh military presentation we have to have a PowerPoint as you you would know if you've been in the military you'll remember this there we go with our nice military pattern so um everything we do of course on the way to while shows revolves around the three pillars of attainment we we focus on this show primarily in the Pursuits pillar and the finances Realm and and over the last few weeks we've talked about the objective of intell of
2:05 intelligence we've defined it um we've talked about the challenges in of of dealing the challenges of intelligence in dealing with them and you can see that go there and then we talked about the characteristics of good intelligence so um if you're interested if you missed any of those shows and would like to catch up please go to our YouTube channel that that's youtube.com theeway to wow and you can view all of those episodes as well as um previous episodes of um my other shows
2:41 and and I invite you to to do that and and while you're there maybe consider subscribing so that you'll always be um notified um when a uh a new episode posts So today we're going to talk about the classes of intelligence um and and basically intelligence falls into two classes descriptive and estimative okay and and they are just what they sound like so some
3:17 intelligence is descriptive of what currently exists or what existed in the past it's fairly not fair it's fact-based okay it's it's a it's about a situation that that you know did or currently exists estimative intelligence is looking to figure out what may happen in the future it's anticipative okay and so by its nature
3:55 it's less concrete it's it's less certain right because it's it's an estimate it's estimative okay and so those are the two basic classes of intelligence we're going to dive into these two classes in more detail all right so let's talk we're going to talk about descriptive intelligence first and as I mentioned a moment ago descriptive deals with either the existing circumstance
4:30 or the previously existing circumstance it's it's past and current so let's say we're Gathering intelligence about um one of one of our competitors let's say we're in the coffee business okay um and of course if we're in the coffee business we have to take a look at what is Starbucks doing okay so descriptive intelligence would tell us um how many markets Starbucks is in Starbucks is in currently how many stores they have what
5:06 kind of products they sell are currently selling um what what their volumes currently are um what kind of turnover they have um in this case I'm talking about financial how much you know how much money U comes in in sales um what their net income is what their profits are Etc okay and all of that um can be determined probably from open sources now Starbucks is a publicly traded
5:41 company right it's it's traded on um I think the New York Stock Exchange although I I could have the The Exchange wrong but in any event it's required to file certain documents periodically 10ks Etc um which 10ks are basically an annual report and so we can download that information for free through Edgar and we can gather a great deal of intelligence of a descriptive nature about Starbucks okay now likewise
6:18 previous previously existing descriptive intelligence would be in essence what was Starbucks like in the past right so how many stores that they have I believe was founded in 1971 so they had basically I think one store in 1971 how many stores did they have by 1980 by 1990 by 2000 by 2010 right we can get an idea of the scope of their growth all right and we could we could even these days probably
6:53 plot Year bye the changes in the number of stores they had and the number of markets they're in okay there were times when Starbucks closed stores including during um the recent uh covid um pandemic right um we can we can track their sales we can track their profitability we can track um the volume of the coffee that they sold um the number of products and types of products that they sold right there were times when Starbucks sold um hot breakfast items and and
7:29 um their former CEO Howard Schultz um and ended up not liking it because of the smell that it created and it overwhelmed the the scent of the coffee and all that so they got rid of them and we could look at all of that and again much of that would be available either in their annual reports or in newspaper reports about uh Starbucks or in um uh industry trade group uh information that we could get so all of this is is is basically open source or at least most
8:05 of it is meaning it's available to the public um and we can figure out the pretty much the whole history of Starbucks by the way we could get um copies of Howard Schultz's books he's written at least two may maybe three um and he talks a lot about much of this kind of information right so we could even kind of get inside the head of the founder and CEO of Starbucks and gather that information you know at least as accurately as as he tells it in his books okay and we can be fairly certain
8:43 about um um the accuracy of our descriptive intelligence okay all right so um descriptive intelligence essentially breaks down into basic intelligence current intelligence and then it's also the base for estimative intelligence so let's look at each of these three um one one at a time now when we talk about basic
9:20 intelligence basic intelligence is much of what we talked about um in the descriptive intelligence C atory especially in the previously existing okay this is kind of the the the the the state of the business um and and as well um it's it's the state of the the market that's essentially unchangeable okay so for example um Americans are coffee drinkers okay and
9:55 and that has been true for pretty much the entire history of our of our country country right so that kind of basic intelligence it's not particularly time sensitive okay but it's the it's the foundation if you will for understanding the business um overall and for understanding individual players within that business okay so um if we were looking at it from a military perspective and
10:31 the the um example given in um this is this is the Marine Corps warfighting Doctrine document okay so this is this is where all this information come from but by by the way this is open source you can find this uh this document on the internet and download it as a PDF okay so basic intelligence um as from a a military standpoint would be the climate of a region okay in other words um the tropics are they're they're they're generally hot they're humid um
11:07 things may cool down for a few weeks in in the sort of debt of winter um but um you know the the climate kind of is what it is okay um that would be in comparison to current intelligence where sticking with the military example for a minute current intelligence would be what is the predictions for weather for the next few days or the next week okay and do you see that the climate I I know we talk
11:42 about climate change but the reality is the climate doesn't change dramatically from year to year the climate does change it has always changed okay but the climate doesn't change a lot from you know 2022 to 2023 um however weather can vary significantly in in in even just a a few minutes let alone a few hours or a few days right so today here in Los Angeles the high temperature is 22 22 degrees
12:19 Centigrade tomorrow okay the high is supposed to be uh 17 degrees Centigrade now for those of you who who you know work with Fahrenheit that's a temperature differential of almost 10 degrees right that's a big change in um how warm the weather is going to be or how cold the weather is going to be right but the the climate is not changing really at all um in in here in Los Angeles over that 24 hour period
12:54 okay so going back now to our coffee industry example in particular Starbucks so basic intelligence would be kind of what what's going on in the coffee industry in general and has gone on you know for a long long time so things like where are coffee beans sourced from that really doesn't change a whole lot from from year to year the the the coffee growing region is is essentially an equatorial um area of of the Globes so
13:29 it's it you see a lot of coffee grown in Central and South America which is where the equatorial region is you see it in in Africa and you see it in some Asian countries right so just kind of picture where the equator wraps around the globe right and then go you know kind of north and south of that that's really the area where coffee is grown and it's generally grown in in sort of you know mountainous regions right so one of my favorite coffees is Jamaican Blue Mountain M right it says Blue Mountain right in in the name of the coffee okay so those
14:04 kind of things don't really change okay what does change is the yield from year to year so whereas where the coffee is grown doesn't really change a whole lot that's basic intelligence current intelligence would be what is the coffee yield going to be this year okay and and although it may be somewhat speculative maybe it hasn't been harvested yet still those those um uh the coffee yield for the
14:39 current year can be pretty um accurately determined based on you know how many berries are growing on the trees and and the um you know Growers ability to harvest them um etc etc etc right so so that would current intelligence is what is the yield likely to be okay and this this body of basic intelligence and current intelligence okay then becomes the base for estimative intelligence
15:15 which we'll talk about um in in a few minutes so looking at Starbucks then if we're trying to figure out you know where they've been and where they are right so we can look at basic intelligence okay this is where this is where um coffee is grown okay and which types of coffee are grown where so there's generally speaking there's Arabica and um robusto I believe is the other kind okay so um to the best of my
15:53 knowledge Starbucks uses only arabica beans in their coffees although there are some um experiments going on I think um with robusto um because so just just a bit of coffee history um it used to be that almost all the coffee we drank in America was robusto um and and the the sort of folders and and all of those coffees the sort of mainstream coffees we would get in the grocery store that's where they came from the beans were um the it was a
16:31 larger part of the crop they were less expensive etc etc um and and and and it's why historically if you can think back you know 30 40 years or more well I guess yeah a little more than that with Starbucks has been around at least since the 80s so go back 50 years typically coffee was more bitter um didn't have as much flavor Etc um that was sort of the way coffee was and and one of the innovations that Starbucks brought was araba bean coffee which um is thought to
17:07 be more flavorful Etc richer um deeper color Etc so um that's how starbu that's the Coffee Bean type on which Starbucks and a lot of the other companies whether it's Pete coffee um Seattle's best Etc that's what they built their business on so now more recently um there's been some experimentation done with um growing Robusta a a little bit differently and roasting it differently and fi and they're finding that robusto may have the same um sort of Vari
17:46 qualities as a Raba it was really just the way it was grown and made previously that made it kind of dra okay so in in any event I'm I'm kind of climbing into the weeds here a little bit but but it's a it's important that we understand this is all sort of basic intelligence right and we've noticed coffee prices you know have gone up a lot um o over the years right um because of the switch to arabica beans among other reasons right so um basic intelligence would tell us okay here's
18:22 what you know here's where arabica beans are grown here's what the typical here's what the crop sizes have been in the past um and and here's how that's affected um you know uh prices for coffee beans that that coffee companies buy okay um current intelligence then would include not just information on Arabica but to the extent that robusto is is coming back into the mix where is you know where are the areas where robusto is grown um what are the crop
18:57 yields what are the prices looking to be right because that current intelligence will help us flesh out the picture of where the coffee industry not only is at now but then it completes that foundation for use in in in U deriving estimative intelligence okay all right we're doing okay on time here I think all right let's let's move on though all right so estimative intelligence then anticipates
19:32 the future and it's looking at potential developments okay so I've I've talked about some of these uh at least one of these with the with the potentials um sort of bringing back of robusto beans into the premium coffee mix so to speak okay so um estimative intelligence would look at where are these experiments with robust robusto beings at currently okay it might um it might mean going
20:08 someplace and and tasting the coffee that's being made from them if possible okay or maybe even um doing some experimentation on one's own um to understand it um but certainly to read about what's going on with it because that could anticipate the future if indeed robusto presents the opportunity it it appears it might I.E to make premium coffee that um that has a a level of of complexity and richness that
20:45 Arabica does so then this could potentially open up a huge supply of coffee beans to Coffee companies um in in in in a way that could dramatically lower their costs okay now it's not it's probably not going to be as low as robusto was in the past because the beans have to be treated better than they were in the past which is what makes them a viable option nonetheless um historically robusto has been less expensive to grow um it's been
21:24 a larger part of the coffee crop as I understand it right and so so as we look at what's happening with that we could anticipate we you know our our our um intelligence estimate our estimative intelligence about what may happen in the coffee industry going forward would likely have to take that into account if we assess that indeed this robusto is a possibility um for the premium coffee Market going forward okay so you have a
21:59 potential development the reintroduction if you will of another type of coffee beans into the market that then how is what would that mean in terms of um growth of Stores um growth in Mark growth of markets um um sales of coffee um you know Pro net income and profits for coffee companies right so um to give one example um in China um Starbucks for many years was the largest coffee
22:34 company okay now a a local maybe better word is domestic Chinese coffee company called luckin has become the largest coffee company in China one of the reasons it's been able to do that is it can sell coffee at a fraction of the cost that Starbucks sells it so in many ways Starbucks is a luxury for for people in ch I'm talking mainland China by the way um so the the the the cost is
23:11 relatively High when it's compared to the income of the the typical Chinese person okay so along um and so as a result people might you know go to Starbucks maybe once a week maybe a couple times a week maybe three times a week now compare that to the United States where I suspect you know the the average uh you know Starbucks Patron goes there you know maybe every day maybe more than once a day okay um because although coffee is you know
23:47 relatively speaking expensive here in the United States at Star at Starbucks Coffee still compared to our salaries it's it's a pretty um uh it's a pretty much an every every day kind of of thing right so imagine then if um so so then uh luck in coffee has been able to grab a huge market share by selling a product at a lower price point that that the Chinese will accept in substitution for Starbucks okay so as a result Starbucks market
24:23 share has declined in China all right well let's say these experiments with um robusto pan out and indeed Starbucks is able to bring in this new new sort of type of coffee if you will and sell it at a lower price point than their arabica coffee while still maintaining a quality differential okay what what would that what would the future be like under a scenario like that right this is a form
24:59 of estimative intelligence okay and this is largely by the way what um analysts do so you you when we talk about we're talking about analysts in terms of like analysts for a um for large um trading broke stock trading companies so um UBS has a a group of analy uh analysts uh so does credit Swiss and they they tend to cover Mark certain markets um certain categories of stocks and and and also the certain individual stocks so if if
25:35 um if a UBS analyst for um coffee companies is looking um at the market and trying to figure out you know what kind of recommendations um do I want to make um about coffee companies what they're going to do is start out by gathering just descriptive intelligence right from probably open sources like we were saying okay and then they're going to develop estimative intelligence based on what they think
26:12 the future may hold based on potential developments in the marketplace but the their estimative intelligence is not going to be as accurate as their descriptive intelligence it can't be because these things haven't happened yet okay they are for one of a better way of putting it educated guesses right about what may happen in the future and potential investors will then read these um reports that the analysts put together and figure out they'll make
26:47 their decisions at least in part based on the analysis that they get so this analysis is indeed intelligence it's not it's not intelligence the way we some sometimes think of it in terms of spying right and we don't have to spy on other companies industrial we don't have to perform industrial Espionage to gather intelligence in a useful way to make um either investing decisions if it's analysts or to make decisions about running our own companies um versus what our competitors are doing okay the
27:22 intelligence can be the same intelligence can be used for different purposes right and so we can take the same um UBS analysts in um reports and we can use that intelligence um to make decisions about what direction we want to go with our companies okay so oh we're yeah we're coming up on time here I think that is it for classes of intelligence right yes it is okay so that is um our topic for today in business let from the military um and
27:59 and you can see by the way um um probably more um distinctively here than um some of the previous uh shows that we've had where um intelligence fits into the larger picture of of business okay now in this case we're talking about large companies because you know uh I've been using the example of UBS UBS doesn't cover you know momand popop restaurants or things like that they cover large companies having said that
28:35 um if you know if if if I owned um maybe a you know an individual um coffee shop I don't mean like a coffee shop in the old days that sered food and all that stuff I mean like a specialty coffee store okay maybe I have a oneoff place okay nonetheless the information that um UBS reports could be very um useful to me um because although in the end they're making they're Gathering that intelligence for the purpose of understanding where large
29:11 amounts of dollars should be invested still their information on likely uh Coffee Bean yields um the direction that the large coffee companies are going in all of that can help me as I run my smaller business because if if for example Coffee Bean yields are very low I can anticipate that the price of of my raw material coffee uh coffee beans anyway is going to go up right and so how is that going to impact my business what decisions do I need to make going
29:48 forward in order to um you know keep keep it keep my business going Stay Stay profitable Etc right um and and I I I've used coffee just because frankly I had coffee this morning right but we could do the same thing in any other business um I read in the Wall Street Journal this morning um about the uh Whiskey Business here in the United States especially among craft distillers so there's there's a lot of consternation because um there is um the the the EU the
30:23 European Union um has um proposed osed um a 50% tariff on Whiskey imported from the United States okay which would essentially make it too expensive um for most people in Europe to buy okay they're going to buy something else they'll buy either domestic whiskey or they'll buy some other kind of spirits okay so knowing that's the case then you know what are these companies you know that that is um current intellig
30:58 okay if you will that's it's descriptive intelligence it's current intelligence there's negotiations ongoing as to what's going to happen with respect to the Tariff because right now the tariffs are on hold while the United States and the and the EU try and negotiate a deal right so if you're a small whiskey producer where you know today you're making decisions about how much whiskey is going to be available to sell four or five years down the road because that's how long you age it right So based on the the descriptive intelligence what does that mean in terms of estimative intelligence and and
31:35 the article in the journal this morning basically was like they don't know what the heck to do right and so because these are small companies where if they end up with a lot of excess inventory it could have a very negative impact on the viability of their businesses right so some of them are saying well I'm just not going to risk expanding into Europe because um even though it looks like they may um uh extend the the a moratorium on tariffs for another couple of years but what happens then because
32:11 that's about the time I'm going to be ready to sell what I produce today right and it's so uncertain um you know we can't really determine what the potential developments are right so all of these things come into play and this is where Gathering intelligence the quality of the intelligence the thoroughness of it um and and and the um nonbiased nature of especially the estimative intelligence becomes so
32:46 critical okay so actually we're a little over time now but uh you want wanted to throw that other example in there so I I I really you know examples often times are the best way to understand a concept so uh thank you very much for watching and and hanging in there for a few um extra minutes um tomorrow at 12:30 pm Pacific Time 3:30 pm. Eastern time is my show people making money my guest is Von Marie Thomas she's um an accountant to small businesses and in trust and estate
33:22 matters um you may have caught her show her appearance on my show uh trust and Estates weekly a few weeks ago um this time um Von Marie is really going to talk about her career how she got where she got and I I think you will find her story to be quite interesting so I invite you to join me tomorrow and then next week starting at 10 o'clock in the morning Monday we'll be back for the next edition of trust and Estates weekly and then seven days of of course from today at 10: a.m. uh we will be back for
33:57 for the next edition of business lessons from the military continuing with our discussion about intelligence so once again thank you very much for joining me hope you enjoyed it and also and perhaps more importantly found it useful for your businesses signing off then Marie darling you are my Bell have a great afternoon folks