Foreclosures Revisited

As we’ve watched the real estate crisis spiral out of control, I’ve noticed that a lot of people have been puzzled (and sometimes indignant) that various lenders have not made greater efforts to avoid foreclosure operations. The idea is that if you give people a chance to continue making the payments on their home you will continue to make money on them, whereas if you foreclose you will just gain control of a house you may not be able to sell – or might have to let go at pennies on the dollar. Unfortunately, the flaw in that logic is that it assumes that the borrowers in question can actually continue to make payments, if you adjust the terms of their loan or give them a grace period – which, apparently, is not always the case…

Consider, for example, the case of people who will fall behind on their payments again, even with more favorable terms. The lender has no real motivation to help them; they’ll just fall back into the same crisis eventually, and if you wait to foreclose on them there is always the chance that they’ll decide to vandalize the property (it happens a lot), pull off one of the second-house purchase scams we’ve talked about in this space, or some other form of shenanigans. Then there are the people who can get through the crisis on their own, whether by working three jobs, borrowing money from family members, jeopardizing their health, or whatever. The lender has no real motivation for helping these people, either; they’ll make it through on their own. It’s only the people who will be okay in the future but can’t get back on track that lenders have an interest in keeping out of foreclosure – and therein lies the problem…

According to a report cited by The Washington Post online, when you remove these two groups from the equation, the number of “easily preventable” foreclosures is no longer a particularly large percentage of the ones that occur. We could argue, I suppose, that the consequences to our society of these foreclosures, not to mention the human cost of turning people out of their homes, should give lenders an added motivation to keep from foreclosing whenever possible, but this argument also has issues. Having lending institutions go under will not help the current financial crisis; it will only put even more people out of work. Having lending institutions that have received Federal bail-out money fail will not only contribute to the crisis, but will also prevent those institutions from ever being able to pay off the bail-out money themselves. Which means that the ultimate losers would be anybody in America who pays their taxes…

In the long run, neither the government nor the lenders can really afford to keep people who can’t (or won’t) make their mortgage payments from having to pay them. We can eliminate the more egregious loans made before the bubble burst, rescue the people who can make reasonable payments (and those who meant to do so all along) and keep anybody who has even a distant chance of actually surviving in the long run from being driven from their homes. But the people who took out mortgages on second homes they didn’t need, investment properties that only made sense if the “bigger idiot” principle was in play, or anything they had no intention of paying off in the long run is probably going to lose. In fact, we could probably debate the question of whether or not they deserve to lose – but that’s a post for another day…

The Ethics of Conformity

In our culture, by which I specifically mean the American popular culture in the 21st Century, we’re usually told that conformity is a bad thing; that it stifles creativity, prevents independent thought, and makes it possible for Them (whoever the speaker’s particular paranoid dreams conceive of “Them” as being) to indulge in whatever nefarious schemes one might image “Them” as being involved with. And all of this is true, to some extent; creativity is important, and a lot of people in positions of power over the past 300 years or so have had some fairly unpleasant ideas that would still have the force of law if somebody hadn’t refused to conform to those ideas. But people being people, there’s a definite tendency to take any idea to its logical extreme, and in this case the prevailing idea in America seems to be that if the Establishment (whatever that might be) is in favor of something, we shouldn’t be. But is that really the case?

In the study of Organizational Behavior (which I’m teaching this summer and will be studying in more detail over the next two semesters), normal behavior (or “norms”) is broken into two categories: pivotal and peripheral: things which are mandated or required, and things which are relatively discretionary. The general theory is that if people in an organization reject the pivotal norms (e.g. refuse to obey orders or take direction, violate regulations or safety rules, etc.) they are in a state of subversive rebellion, and if they reject all norms of both types they’re in open revolution, neither of which is good for the organization. However, the theory goes on to argue that complete conformity isn’t good for the organization either; what you’re looking for is the state where individuals reject peripheral norms while complying with pivotal ones; this is referred to as “creative individualism.” It’s also a condition that you will almost never see in practice, and will only rarely see promoted by management…

Most managers, for better or worse, tend to see their role as largely enforcing the pivotal norms – making sure that directions are followed, that corporate regulations are obeyed, and that the employees are doing what higher management wants them to be doing. Since most management jobs are evaluated on this basis (and most managers will be fired if they fail to keep the pivotal norms in use), it’s difficult to blame the managers for acting this way. The problem occurs when you have managers who can’t tell the difference between the pivotal and the peripheral; for whom every employee action is a mandated requirement of the job and you will by God conform to them all or else. These individual tend to be unpopular, and may in fact be hurting the organization through their actions. But it’s still hard to blame them for doing what appears to be necessary to keep their jobs…

So my question is this: If we, as managers, are being required to enforce non-pivotal norms – standard behaviors or actions that have no real importance to the jobs being done – do we have an ethical responsibility to reject those requirements? Should we, ourselves, adopt the position of creative individualism, or at least tell our personnel to adopt it, and attempt to comply only with those norms that benefit the company while trying to evolve better ones? Or do we, as officers of the company, have an ethical requirement to comply with our own orders, and do what the company’s executives have directed us to do, even though we know it will erode morale, lower job satisfaction, and eventually cause the company to stagnate and become obsolete?

It’s worth thinking about…

The Grad School Diaries: The Boston Paradox

A long, long time ago it was still possible to name a rock band with an actual word, not something out of a text message, and several bands actually chose place names for their identifier, notably including Chicago, Kansas and Boston. Boston was my favorite of these; one of my favorite bands of that or any other time period, in fact, and their second album, “Don’t Look Back” includes one of my all-time favorite compositions, “Used to Bad News…”

Probably the best-known song on that album, though, has to be a power-ballad called “A Man I’ll Never Be” – sort of a meditation by/on a guy (or perhaps on being a guy) whose spouse/significant other believes that he is something much more than he really is. The implication in the lyrics is that he has never lied to her; he is simply what he is – but not what she believes that he is: “You look up at me, and somewhere in your mind, you see, a man I’ll never be…” It’s about trying (and, by implication, failing) to live up to another person’s image of you, regardless of how much you care about that person and how badly you want to live up to her good opinion of you. It’s the sort of thing that can resonate within you at times when, for example, you’ve just come in 12th of the 15 people in your class, received the lowest grade that isn’t actually failing, and your wife still thinks you’re the smartest thing around…

In stories and epics and poetry and such, we’re taught that men are supposed to draw strength from such commitments; that the determination not to let down that one person who means the whole world to us is supposed to bring us the power of ten, or some such thing. What I get is a vague feeling of not quite being able to live up to what I am supposed to be; or as the song lyrics go, “If only I could find I way… I’d be the man that you believe I am…” Like the viewpoint character in the song, I’ve never pretended to be anything I’m not; I’ve never even accepted that all of the spectacular things people have kept telling me I have the potential for were real. I’m just not the image that she sees; it’s literally a man I’ll never be…

Or is it?

Part of the point of this exercise is metamorphosis; it’s not just redemption of my somewhat wonky intellect for the failures of my youth. That is, it’s not just my last, best effort to go back and NOT make a hash of my life the way I did 20-odd years ago, any more than it is an attempt to turn back the clock and give the love of my life the twenty years she SHOULD have had in the first place, if that story had turned out the way it was supposed to. Becoming a Ph.D. isn’t just a matter of learning a huge pile of information and being able to cough it up on command during your comprehensive exams in Year Three; it’s about learning a new way of thinking, gaining a new perspective on your discipline and on the world you study; of becoming something beyond what you were before. What I had not considered until now was that perhaps it has to be both; maybe it isn’t possible to transform as a scholar unless you are also changing as a person. Maybe it can’t be one without also being the other…

I’m trying to transform from something of a failure; a lazy intellect who never amounted to much and just wandered through life telling stories, into one of the best scholars in the world, at least within my rather specialized discipline. In all of this world, there are only a handful of B-schools better than this one, and more than half of those have no Strategy program as such. If I pull this off, even as the very worst scholar ever granted a doctorate by this institution, I will have changed. It’s still unclear how different I’m going to end up being; I suspect I will always be all of the other things I have learned to be in my travels: storyteller, manager, fighter, and teacher. But it occurred to me today that of all of the (extremely modest) talents that have gotten me this far, none has ever been more important than that ability to adapt: to grow, to change, to become more than I was. And if this is my greatest challenge, with the greatest price to pay for failure, maybe it is also the chance to finally be all of those things that everyone believes I can be…

Stay tuned, folks; this is starting to get interesting…

What Business?

Don’t go away, it’s time to play! WHAT BUSINESS ARE THEY IN? Some time ago I explained the concept that the business a company appears to be in (and sometimes even the business that they think they are in) are different from the one(s) they are actually in. For example, a generic coffee house (like a Starbuck’s or a Peet’s Coffee) may appear to be selling you coffee and inexpensive food, but since the coffee they’re selling you for $3 would cost you less than 40 cents at home, and the muffins and rolls are four times what you’d pay in the market, clearly that isn’t the basis for this type of business model. Starbucks and their competitors are selling you convenience, not food, as their primary business; consider that one of those home coffee makers that pours brew directly into a travel mug would pay for itself in less than a month (you’d save $2.50 every time you used it) and generate a very large savings over its two-to-three-year service life – but you’d still have to set it up, clean it, buy the beans (and milk and sugar and so on), wash out your cup, and so on. At a Starbucks, you are effectively paying somebody else to do all of that for you, and for a lot of people, that seems to be an acceptable deal…

What a Starbucks is not is the sort of non-exclusive neighborhood social club that the coffee house started out as, and which supposedly still represents their single most dangerous class of competitor. People will practically live in a good neighborhood coffee house; they’ll buy dozens of meals and drinks there every week and never go home unless they have to. No matter how hard they try, Starbucks can not sell you a social experience, a community, or a life-style; even in cases where they have no direct competition in your neighborhood, you just can’t develop that sort of atmosphere in a corporate-owned shop that looks just like 8,000 other locations worldwide, has the same décor, equipment and furniture, and sells the same product as every other shop in the chain. But if you thought that was going to stop them, you really haven’t been paying attention, either to the Starbucks Corporation or to this blog…

For the past couple of weeks we’ve been hearing reports like this one about a new Starbucks operation called “15th Avenue Coffee and Tea” which is intended to provide a completely different experience from your neighborhood Starbucks. In addition to obvious things like recycled wood and metal furnishings and decorations, the new shop will also sell beer and wine, offer bread and pastries from a local artisan bakery, sell restaurant-style food, and feature various community tie-in efforts. It’s a very clear effort to re-brand a Starbuck’s as one of the neighborhood coffee houses they’ve been trying to drive out of business pretty much since their corporate expansion began, and a lot of people in Seattle are already posting skeptical comments about it, but to me it brings up two more immediate issues…

First, what business is this new operation supposed to be in? It’s not making money on markup, like a regular corporate coffee shop, and it’s not likely to generate the sort of local following that keeps a real neighborhood coffee house in business. Moreover, people don’t go to the coffee house for beer, wine or restaurant-style food. It’s possible, of course, that this new operation will find (or generate) its own clientele, creating an entirely new niche within the food service industry, but it’s hard to imagine how this would integrate well with the rest of the company’s operations. Which brings us to the other question: will adding higher-priced items to their menu and spending money on expensive store renovations really help a company that is being clobbered by the current economic downturn and the corresponding drop in disposable income? Is the neighborhood coffee house really the threat Starbuck’s should be gunning for, or will the much cheaper coffee products being offered by McDonalds (and convenience-store chains like Circle-K, 7-11 and Speedway) be the competition that does them in? It should be interesting to see how this turns out…

Catch the Ball

People who are not, themselves, sports fans will sometimes get upset with fans who express disappointment for poor performance on the field of play. They will say things like “Don’t complain about that player dropping that routine fly ball; you couldn’t do any better.” To anyone who is a regular fan of any professional sport, however, this is exactly the point: I can’t do any better, but I am not being paid $20 million per year to play this game. In baseball, for example, you need only be able to hit the ball once every three at-bats (about once in 20 tries, on average) and catch it perhaps three or four times in three hours in order to be considered a superstar and paid tens of millions of dollars. If all the team wants is a guy who will strike out four times, lose the ball in the sun, and run too slowly to do any good on offense or defense, they could just hire me for Center Field and save themselves the millions of dollars. I’d do the job for a living wage, assuming I could do it at all – and so would at least half of the fans in the stands…

Where this applies to a business principle is when we get into cases where the company is employing people (sometimes very large numbers of people) who can’t do the job either. A prime example would be the now infamous United Airlines Case, where the airline’s baggage handlers managed to damage a passenger’s $3,500 guitar, and the company then gave him the runaround for nearly a year before finally telling him he was out of luck and the airline wouldn’t consider making good the damage they had caused. While this is a stunning example of truly incompetent customer service at its worst, to me the most amazing thing is that this appears to be so common an occurrence that the Airline employs people in Chicago, New York, Dallas, and apparently outsources hundreds of additional customer service and call center jobs to India – and this is STILL the best effort they can produce…

Now, if you all you had was a few people in a small office block just off the airport in Chicago, for example, and this was the best you could come up with, that would be one thing. We could dismiss the foul-up as simply being the result of too little resources, not enough time, too few person-hours in the call center, or whatever. For that matter, if you were employing this vast, International network and eventually got a good, professional outcome, that would also be all right. You could think: “Well, United does spend a lot of money on their Customer Service operations, but they get good results in the end.” My question is, do you really need a global customer service network expending millions (hundreds of millions?) of dollars on salaries and telephone equipment, not to mention bandwidth, office space, and overhead, to just tell someone “no, we will not honor your claim?” Couldn’t the ramp agents in Chicago just have handled that? Or a single recorded voice on a toll-free message number? What about a cardboard cut-out of a Flight Attendant holding a sign that says “We’re not responsible for damage or loss or anything else that a sane person might expect us to take responsibility for?”

Of course, we don’t have the details of what went on in this case, and we can’t really say what efforts (if any) the different United Airlines personnel at the various locations actually made. From a customer service or public relations standpoint, however, it does not matter. The outcome was exactly the same as if they hadn’t had a single employee do anything, despite the apparently millions of dollars spent to maintain the customer service operations. If all United Airlines wants to do is squander money while letting their customer and public relations slide down the crapper, I’d certainly be willing to take it off their hands…

Or, alternately, there are a couple of baseball teams out there that could really use a new Center Fielder…

The House Always Wins

We’ve talked about JetAmerica in this space before; it was the new ultra-discount airline that was setting up operations to connect several smaller Midwest airports (including the Capital City Airport in Lansing) to New York via Newark and Florida. I say was because over the weekend we got word off the newswires that the fledgling carrier had decided to engage with the FAA in a dispute over whether they were actually a charter service or a scheduled airline. Now, you might reasonably ask what difference it makes; after all, both types of business make their money flying people to secondary commuter airports aboard cramped, uncomfortable and occasionally unsafe jet airliners. It doesn’t sound like it should matter what JetAmerica was calling itself, as long as it complied with air safety and sound business requirements. Apparently, the people behind the company thought so, too. But you would be wrong in that assumption, and so were they…

As reported online by The Associated Press, JetAmerica was originally founded as a charter service (they’re renting the airplane from someone else, and outsourcing both the crew and the maintenance operations), which meant that they didn’t have to pay for the expensive landing rights that a scheduled airline needs to operate at most airports. However, the FAA disagreed with the company, stating that if you provide regular scheduled service between public airports for a set fare, you’re an airline whether you call yourself one or not, and you do have to pay for landing rights (called “slots”) every time you want to take off or land. JetAmerica apparently tried to argue with the FAA (they’re still trying to plead their case, in fact) but in the end was unable to get permission to start flying slot-free, and unable to afford to pay for landing slots at Newark – predictably, since the FAA is the agency that gets to decide these matters…

The real question, from where I sit, is what possessed these people to begin operating without resolving this question in advance? It is possible, of course, that they asked the FAA for a ruling in this matter months or even years ago, became bored waiting for an answer, and decided to go ahead with their operations and clear up any problems that occurred “when and if.” It’s also possible that they were able to raise a small amount of capital and gain access to their rental airplane, and were simply hoping to launch operations and make enough money transporting discount passengers that they could afford to pay for their mistakes (or just buy the landing rights) with the proceeds. We’ll never know for sure, unless the company decides to make its records public, but it seems probable that somebody saw an opportunity and a loophole in the rules, and decided to run for it while they could…

The problem with this as a business model is that when it works, it has the potential to create new businesses and even new industries, but when it fails all you get is bad feelings, wasted money, and a lot of egg on your face. The AP story says the company is having to return their first $500,000 in ticket sales, but our local paper puts the number as closer to $5,000,000, and that’s not even considering the damage to the local economy or the effects that another big, splashy bankruptcy could have on the airline industry or our national economy at this juncture. The unfortunate fact is that most (if not all) wildcat operations of this type are based on the belief that it is possible to beat the odds. But as every real gambler knows, sooner or later, the House always wins…

Proofread Your Work!

The other day I had to take a few points off on some papers I was grading because of obvious typographic errors – misspelled words, diction issues, grammatical errors and such. I hated to have to do it – I’ve never liked instructors who pick nits when they’re supposed to be judging the quality of the scholarship being presented – but I really had no choice. I’m supposed to be teaching these people, and in the world of business I’ve personally seen enough cases where a single careless mistake has cost people dearly; not calling my students on such mistakes would not being doing them any favors. Which is why I was so jazzed to find a Reuters article about how a single spelling error on your resume can completely destroy your chances of getting a job…

According to a study carried out by Accountemps and reported by Reuters, a survey of 100 senior executives indicated that 20% of them would shoot down a job applicant for a single typo, and another 28% would do so on the second mistake. In fact, only 19% would consider someone with 4 or more typos on their resume, which was about the level at which I started deducting points. Most companies point out that someone who is careless enough to submit a resume with typos on it is probably not the most detail-oriented person in the world, or at the very least does not grasp the idea of making a good first impression. Employers worry that people who would hand in a resume with typos would also fail to proofread contracts, grant applications, or bids on projects, any of which could have catastrophic results…

What often goes unsaid, but a number of hiring managers have told me over the years, is that such errors do not speak highly of the applicant’s opinion of (or respect for) the company, the interview, the job, or the interviewer. The common feeling seems to be that handing in such a product is slipshod, demonstrates that the applicant has not spent enough time on the document to get everything right, and therefore does not care enough about the interview (or the person reading the resume) to bother about getting it right. From a number of years spent writing resumes (and helping people apply for jobs) I know that the truth is actually the opposite; the applicant is so overwhelmed by how much they need the job and/or how badly they want the position that they make silly mistakes and do things they’d normally never consider doing. Which does not change the fact that the company’s first impression of you is something that a middle-school student can already tell you is a stupid idea…

In the long run, of course, it’s unlikely that anything I do in this class is going to have any real impact on my students. They will enter the work force someday, however, and if even one of them thinks to have someone proofread their resume before they send it in, then my summer will not have been entirely wasted. And there IS reason to believe that they might heed my warning and have someone check over their work before they send those resumes in: not one of the papers handed in on either of the next two assignments had so much as a punctuation mark out of place…

Best Answer?

Suppose for a moment that you’re in charge of an international company that has spent many years developing and promoting your branded products. It’s not the biggest or most profitable product line in the world, but it’s yours and you’ve paid the money to make it what it is. How would you react if you found out that there was a tourist attraction in the San Francisco Bay Area that was making money off of your brand without your permission, and without bothering about royalties or licenses or anything like of the sort? Would you file an injunction, tell them to cease and desist, possibly demand that they stop using your trademarked properties and turn over whatever they’ve made on the unlicensed usage over the years? If so, would you expect to be excoriated in the local press? Because that’s what seems to be happening…

A story being reported in the Mercury News online edition this week details the legal action being taken by the Pez Candy Company against the Museum of Pez Memorabilia in Burlingame, California. It seems that for the past 14 years this microscopic shrine to all things Pez (they have every one of the 550-plus dispensers that the company has marketed over the years) has been making a modest living displaying (and selling) various Pez-related products. It wasn’t until word got out about the Museum’s custom-built 7-foot 10-inch snowman Pez dispenser, billed as the largest Pez dispenser in the world, that the company finally heard about the museum and started legal action. Upon which they were immediately jumped on by the Mercury News and several other local media outlets…

It’s one of those questions where it’s all too easy to see the company’s side of the dispute: the people who own the Museum are making money off of a trademarked product that belongs to someone else, and they have made no effort to get permission from the legal owners, let alone purchase the appropriate usage rights. If the Pez Candy Company does not enforce the trademark in this case, it will be all but impossible for them to do so the next time someone rips off their intellectual property without permission, and within a few years their brand will be worth nothing at all. However, that doesn’t change the fact that the Museum is a tiny local operation that has, if anything, helped to increase awareness of the Pez product lines and improve sales through the company’s legitimate distribution channels over the years. Which, in turn, means that attempting to destroy it (and its custom-made giant snowman Pez dispenser) may not be the best possible answer to the problem…

Unfortunately, according to the story in the link, the owners of the Museum are insisting that they’re not doing anything wrong, and the only legal defense cited in the article is that since the Museum is actually helping develop the brand, the Company should embrace it. We can only hope that their trademark attorney comes up with a better idea, because that argument does not address the trademark infringement in the first place; the Pez Company is the injured party in the case, and saying that they “should” do anything you’d like them to do is entirely pointless. Offering to give them the difference between what you’ve made by infringing their trademark and the extra sales they’ve gotten because of your efforts might be an idea; suggesting a license fee for using the name and other elements (retroactive to whenever the Museum first started turning a profit, perhaps) would be an even better idea. Treating the situation the way you would a neighborhood dispute over use of something you’ve borrowed (without permission) is asinine, however…

Without the full facts of the case, of course, we can’t be sure how unpleasant the company is being. It’s entirely possible that they aren’t offering any options beyond cease and desist, or for that matter that they wouldn’t listen to any. I just hope that some party associated with the case suggests some before it’s too late…

The Trouble with Franchises

We’ve talked a lot in this space about franchise business units, and the obvious advantages they have both for the parent company and also for the entrepreneur who wants to break into a specific industry but doesn’t want to have to re-invent the product or compete with the leaders of that industry. The drawbacks for the company selling the franchises (the franchisor) are that you may be giving away a huge amount of business in return for a relatively tiny franchise fee (and/or a small percentage of the action), and of course that you’re trusting every one of your franchise purchasers (franchisees) to not do anything to make a mockery of your brand, your image, and the company reputation you have spent so much to develop. The drawback to the franchisee, of course, is that the parent company may require you to do things that are in their best interest but not yours, and may manipulate you and/or your contract to do so…

An article that turned up this week in the Advertising Age online report talks about how our old friends at Burger King are trying to get all of their franchisees to go along with a four-month $1 double cheeseburger promotion. There’s no doubt that the promotion would bring people into the Burger King locations; it would be the industry’s lowest price on one of the better-ranked products in its class. In fact, it would be such a good price that the franchise holders would lose money on every sandwich they sold, and since the promotion has no limits on the number a customer can purchase, the whole thing turns into a gigantic loss-leader, with the franchisees footing the entire cost of the promotion. Needless to say, the franchise holders mostly voted a resounding “no!” on this promotion, and some of them are saying that they will refuse to honor it…

In response, the company is demanding a re-vote, saying they will count all of the previous “yes” votes as still being yeses, and anyone who does not vote in the insultingly short time-window will also be counted as a “yes.” In return, the company is promising to tone down several of its ad campaigns that the franchise holders seem to collectively feel are problematic. You might expect that this would mean the widely-disliked “Freaky King” spots, but in fact it refers to some of the more suggestive imagery used in things like this print ad for the “BK Super Seven Incher”. Personally, I think this ad is one of the most ridiculously blatant attempts to sell junk food using sex since Carl’s Junior made use of a television spot showing Paris Hilton washing a car in a barely-there swimsuit while eating one of their larger burgers (and one of the most ridiculous in general), but that’s not really the point…

When you sign a franchise agreement, you are effectively contracting with your franchisor to provide services that would be impossible for a small business to afford on its own, such as national advertising and low-cost raw materials purchased in bulk. In return, you are paying a fee to the franchisor, and usually giving them a cut of your business, as well. If they then use their contractual relationship with you as leverage to require you to pay for their promotional items (the loss-leader burger, in this example) or refuse to provide you with the marketing support you need to be successful, then in my opinion they are in breach of the spirit of the agreement, even if they stay within the letter of your contract. It’s effectively negotiation in bad faith, as well as bad management practice and bad business, and I really hope somebody somewhere challenges all of this in court and takes the parent company to the cleaners…

Alternately, I hope that when the story of these practices gets out, the price people are willing to pay for a Burger King franchise drops through the floor. Which it might, if enough of us keep talking about it…

The Ethics of Punishment

We were discussing the case (now familiar to anybody on the Internet who has been paying attention for the past week) of the musician who had to resort to recording and posting a song on YouTube to get United Airlines to pay for the damage they did to his guitar (and then refused to make good on) last year, when the question of what to do about it came up. Not what to do about the incident itself; the dust is finally starting to settle, and unless someone at United Airlines has a time machine parked out behind the barn there’s not much they can do about it now, anyway. The question is, what do you do to the employees who created the situation in the first place? Because I can almost guarantee you that it’s more complicated than it looks…

First up, there’s the baggage handlers themselves. These are usually the lowest-paid members of the ground crew, and certainly the worst-compensated employees relative to how demanding their jobs are. There’s no question that enormous pressure is put on these individuals to move bags (and guitar cases) on and off of the aircraft as quickly as possible, and also very little question that the issue of damage to the bags is given a much lower priority by their employers. If the baggage handlers involved in this case were exhorted to move baggage as quickly as possible and told to pay no attention to potential damage (either because the company would deal with it or because of all of the disclaimers the passenger agrees to when they purchase their ticket), can we really blame them for the outcome? More to the point, can we ethically dismiss them for just doing what they were told, especially considering that their orders were neither illegal nor unethical (just really stupid)?

Then we have the counter personnel, ramp personnel, and call center personnel, all of whom apparently kept saying there was nothing they could do, and passing the case (and the now irate customer) on to someone else. Certainly, it would have been nice if someone along the chain of command had taken responsibility for the problem and used a discretionary budget to solve it. But suppose that none of these personnel had the authority to take responsibility for such a claim, or the budget to make things right. Can we punish them for the results? What if they really didn’t know how to handle such a claim (if the company had never provided them with training on how to do so or the information on where to refer such a case? If these were simply line employees, doing exactly what the company told them to do, can the company then fire them because those orders were not correct for the circumstances and the employees down on the pointy end were not given any discretion?

Then there’s the claims manager who eventually decided that the case did not conform to corporate regulations for damage compensation, and decided to deny the claim (not realizing the firestorm of negative PR this would create. Should she have known better, or has the company made it her job to serve as the gatekeeper, and present aggravated passengers from soaking the company from large sums of money just because they can cause a huge PR firestorm? That is, if there was a real reason contained in the company’s policy that curtailed settling the case and compensating the customer for his loss, not just some petty regulation over time of day, day of the week, time since the damage occurred, or some similar triviality, can the company fire her for just following the written policy they had evolved?

Of course, it does go without saying that anyone who was rude, unhelpful, hostile or insulting to the customer should be fired at once, before they create more such firestorms just because they are miserable little people. And anyone who could have resolved the case and didn’t (because it would cost too much or take too long or just require them to exert themselves for a few moments), or anyone who decided against settling the case over some trivial regulation should be fired immediately if not sooner. But if all of the United personnel in this story did exactly what their employer was requiring them to do, can the company hold them responsible for the ultimate crisis, and punish them, either with termination or some other sanction?

It’s worth thinking about…

The Grad School Diaries: The Film School Digression

So why am I sitting in the elevator lobby of our Department’s floor with my friend and counterpart from the OB/Micro side our discipline and a borrowed video camera on a tripod, waiting for a pack of diminutive young Asian women to stop giggling and press the “door open” button? Well, it’s kind of a long story…

As previously noted, a few weeks ago we found out that, by recent but hallowed tradition, the first year doctoral students are required to provide the entertainment at the Department’s Holiday party every year. This has apparently had mixed results over the years; some of the groups have been small enough to get by with just two individual performances, while others have been collective. Some of the attempts have been deathly boring, while others were so ill-advised that there are some resentments over them that still linger, even to this day. The potential for disaster is huge, and the best we can hope for is to pass inoffensively into obscurity…

Which will not be easy for a group that includes only two native speakers, plus three Chinese, a Korean and an Albanian. The addition of the two transfer students (considered to be first-years for the purposes of this exercise – that’s the Chairman’s official decision) gives us 5 diminutive women and two very large white guys, none of whom can sing, dance, or play any known instruments. We settled early on some type of dramatic production, since all of us can at least memorize and recite lines; almost immediately we decided to videotape the whole exercise, since that would lower the pressure on everybody, and increase our chance of pulling this off. But that still left the question of what to do…

I ran the idea past my wife and the kids, and they came up with the idea of a dramatic reading, with the members of the cohort acting out parts of the story. I’m not sure who suggested “A Visit from St. Nicholas” as the dramatic reading, but the cohort all liked the idea, and we quickly brainstormed up different things for all of us to be doing on-screen while the poem is being read. With only two males – and only two native speakers – available, it came down to my counterpart and I to take on the roles of Narrator (e.g. the one reading the actual poem in real-time) and Santa himself…

It was a toss-up, but while we’re equally matched as public speakers, I’m slightly better at interpretive reading, while my friend is by far and away the better actor. Therefore we agreed that I’d be the one reading aloud at the party, and he’d get to be Santa on the screen. He also agreed to edit the video, but with modern software (and a stone-axe-simple storyboard to work from) our other Large White Guy (LWG?) insists this won’t be difficult. It leaves me as the only one who has to perform in public, and unfortunately gives the impression that I’m somehow in charge of this mutual insanity, which could hardly be further from the truth. But such are the fortunes of war; we’ve all got to make this work or suffer the consequences. Assuming we can manage to film the thing, of course…

Our interpretation of the poem involves Santa coming to our building and walking through our Department offices, granting wishes, leaving candy canes, and so on. We’ve worked out and filmed sight gags for every member of the cast, and now we just have to show how our hero gets onto and off of the floor. So we’ve got a scene where people off-camera are waving pictures of various animals on the end of long sticks, representing Santa’s reindeer, and we’re getting a shot of this happening onboard the elevator, which is our interpretation of Santa’s team waiting for the big man to return to the sleigh. It’s going to look great on the video, trust me! Just as soon as one of our cast members remembers to push the button and open the door…

Worst Scam Part II

When we got to the end of the video presentation about the “Millennium Centers” I was looking for the exits (or the fire stairs, or the escape hatch, or possibly the “eject” button, anything to get out of their office) when the leader of the presentation announced that the next step was personal interviews, and started matching off applicants with members of the staff. There wasn’t any tactful way to beg off, and I did need a job at the time, so I went along with my interviewer to see what came next. In for a penny, in for a pound, right? Besides, there was a certain morbid fascination (like watching a train wreck) about what the interviews would be like…

To my lasting astonishment, it was a real interview. We talked about my last few jobs, and some of the things I had accomplished on each of them. I’d finished my MBA by then, and the Interviewer wanted to know what I’d studied in school, and what I was planning to do with that education in the future. Everything went really well; I’m a reasonably personable individual to begin with, and by then I’d had a lot of practice in giving interviews. It wasn’t until we got to the description of the job being offered that things started to go downhill. You see, the primary job they were looking for was a sales position, selling advertising space in the Millennium Centers Directory; sort of a private telephone book which would give priority to businesses located in the Center, but could be used by anyone else in the area who was willing to pay for the ad space. Needless to say, perhaps, the sales positions were pure commission jobs, without a draw or expense money…

When we got to the close, and the Interviewer asked me what I thought of the sales job “opportunity,” I told him that, frankly, I was over working commission-only jobs. I did a lot of that kind of work when I was younger (this is true, by the way), and after going to all of that trouble to get a Management degree, I really wanted to be a manager. I’d expected that would be the end of the interview, but the Interviewer wasn’t phased in the slightest. He immediately shifted into the description of the General Manager, Operations Manager and Director of Marketing positions that would be the management team for each center, and asked if any of those jobs appealed to me. I said that the Operations Manager job looked right up my alley, particularly if it would eventually lead to promotion to General Manager and a Center of my own to run. To which the Interviewer responded, “Okay, the buy-in for that position requires an investment of $100,000.”

Keep in mind that a buy-in fee is hardly unheard-of; a number of business types do require people to buy into them in exchange for senior positions. Law firms, for example, will generally require some offered a partner’s position to buy into the firm, since they will thereafter become one of the owners of the operation, and gain a share of the firm’s assets (whatever those happen to be). The difference in this case was, the buy-in wasn’t for a partnership share (there was no ownership of any kind involved) – and the job itself paid just $40,000 per year. Not very much, even at the time, and just 40% of what they were asking me to give them up front. Or, in other words, they wanted me to pay them $100,000 for the privilege of being able to work for them at $40,000 per year, with no guarantee that they wouldn’t just fire me after the first week and keep my $100,000…

Now, you might reasonably ask who in the world would be dumb enough to fall for a scam like this. Well, I’m not (I told them I’d have to think about the offer and fled the building before I could fall over laughing), but apparently between 80 and 140 other people were, because a year or so later I saw an article about the Orange County District Attorney’s Office filing charges against the people behind the Millennium Centers, claiming that they had bilked an undisclosed number of people out of somewhere between $8 million and $12 million in return for “management positions” in Centers they’d never had any intention of building, and then fled the country…

Granted, it’s a drop in the bucket compared with outrages like the Madoff case, or some of the other scandals associated with the current economic crisis in this country. And yet, for sheer effrontery; for the bald-faced lies they were telling and the absurdity of the con they were running, I still think this is the worst scam I’ve ever seen in person. That so many people fell for it when there were elements of the scam that a child could have seen through continues to astonish me to this day – and makes the recent events in the financial, insurance and banking sectors seem all too predictable. Because if idiots like this could defraud people out of millions of dollars with a story and a set-up (it’s called a “store” by con artists) this preposterous, what couldn’t a sharp character like Madoff have done? It’s too bad for him that he didn’t take a tip from the people behind the Millennium Centers and just take the money and run while he still could…

Worst. Scam. Ever.

A few weeks back I told you all about my run-ins with crooked multi-level marketing schemes, or MLMs as they are often called. I also mentioned the worst of these, the “Travel Agent” scam, in my post You Can’t Be Serious. In my opinion, the “Travel Agent” scam would have been bad enough without the multi-level aspect, and in fact even the guys who were trying to con us into giving them our money in order to become fake travel agents were barely pushing the angle of bringing in other people. Possibly this was because real travel agents don’t work in a pyramid structure (think Amway) and they were pushing our Suspension of Disbelief as it was; I recall noticing that the cut we would get by actually sending in travel bookings was so small that the pitchman we met was focusing on the “special secret industry discounts” aspect and trying to convince us that we’d save more on our own travel than the scam would cost us. But, as I indicated in that post, the “Travel Agent” scam wasn’t actually the worst I ever encountered…

That story begins with another blind ad in the paper, and another voyage – this time to a business park near Orange County’s John Wayne Airport – to try out for an alleged job. To those of you who are muttering that I seem to have done this a lot, keep in mind that between 1989 and 2001 I lost eight (8) different jobs in merger situations, had to look for work nine (9) different times, and only have a few of these stories to tell. This particular case begins much the same way the “Travel Agent” scam did, with a group “interview” with a dozen or so of us in a board room with as many representatives of the company. After the “Travel Agent” fiasco, I would probably have just walked right out on this one, but I’d driven for an hour to get there and (more to the point) arrived late. Sincere there was no way to escape without causing a huge scene, I stayed for the pitch. I’m glad now that I did, because this one was something else…

The company was calling itself “Millennium Centers,” and its basic concept was that they were going to build business development centers all over the United States, each of which would offer every conceivable service that a new start-up business could possibly want. If you needed a realtor to rent you an office, an ad agency to design your marketing campaign, a copy center to make your copies, a notary to witness your documents, an attorney to write your contracts, an insurance agent to sell you liability or group health insurance, or any one of a hundred other professionals, they’d all be located in the Millennium Center. Existing businesses could get all of the services they needed in a single stop, and people who wanted to start a new business could come to the center with nothing more than a business concept and some cash (lots and lots of cash!) and get everything taken care of for them…

While it would be tedious to enumerate all of the issues that would come up if you tried to house all of those services under one roof (and generate enough work to keep all of them solvent), for my money the really outlandish aspect of the Millennium Centers business model was that they weren’t just going to rent space in existing industrial parks or office buildings (many of which were standing vacant at the time); they were going to build their own, free-standing Millennium Center buildings, which would be glass-and-steel pyramids (think of pictures you might have seen of the Luxor Hotel in Las Vegas), complete with pyramid-shaped fountains out front and pyramid-shaped topiaries planted all around the building and pyramid-shaped street lights out by the sidewalks, and so on. It looked like something that Walt Disney might have come up with for an Egyptian-themed attraction at a theme park assuming that he’d been up really late the night before suffering from food poisoning. I was trying very hard not to laugh by the time we got to the end of their video presentation, and trying to think of a tactful way of escaping from the office (getting something I’d left in the car might have worked). But little did I know that the most astonishing part of the afternoon was yet to come…

(To Be Continued)

Asleep at the Switch

Ever since the Bernard Madoff story first broke, we’ve been hearing people asking if the Securities and Exchange Commission (SEC) was asleep at the switch while all of his shenanigans were going on. The SEC is part of the Executive Branch of the Federal government, and thus suffers from having a great many political hacks and useless drones on its payroll at any given time, but generally the agency has managed to keep the very worse violations of our financial system from happening. Or, at least, it had until recently, when the current financial crisis began sweeping the nation and some guy named Bernie managed to steal the equivalent of $500 from every man, woman and child in America…

Now it turns out that our fears about the agency having been asleep at the switch may not come to close to just how messed up the situation really was. A story being reported by Reuters Online reveals that as long ago as 2004, an SEC attorney DID twig to potential improper operations in the Madoff organization, and did report her suspicions to her superiors in the agency. Unfortunately, at that time the SEC was engrossed in searching for fraud in the Mutual Fund industry, and the attorney in question was ordered to suspend her investigation of the Madoff Group and get busy with those priority inquiries. Personally, I should think it was quite bad enough that those Mutual Fund investigations completely failed detect the growing problems in the Financial and Insurance industries, despite the fact that a lot of mutual funds were heavily invested in those sectors. But now it turns out that one of the supervisors who told the attorney to abandon her investigation was married to Madoff’s niece…

It’s the kind of story that often gets featured on “Stranger than Fiction” blogs and web sites. If you pitched this idea in Hollywood you’d probably get shot down for being too trite, or at least too predictable. And, in fairness, it remains to be seen if this Madoff family collateral actually had anything to do with the investigation being dropped, or indeed if he did anything wrong. But even in the current age of fantastical blunders and improbable family connections, it’s hard to believe that this was an innocent event…

So what is the business lesson in all of this? How can we possibly learn from such an impossibly far-fetched sequence of events? Let me suggest that if this story turns out to be true as reported, and a bit of family influence kept the Madoff outrages from being detected for another four or five years, then this is a wake-up call to every one of us who might have viewed the original report with skepticism. Outlandish as it sounds, the truth is that people receive improper advantages due to family connections every day in America, and it’s entirely possible that even the most outrageous betrayals of the public trust might boil down to something as simple as the offender’s niece’s husband deciding to deflect an embarrassing investigation away from dear old Uncle Bernie…

And if we assume that just because something is outrageous, outlandish, asinine, and utterly shameful, it can’t possibly be true, then the people who were really asleep at the switch were us…

Nothing New?

Long-time readers of this space may recall that in May of 2008 I wrote a post about espresso stands in Washington state that were attracting increased business (and media attention) by employing young women in bikinis for most of their customer contact positions. I called the post “A New Approach” and suggested that while I didn’t believe this theme would work in all retail or service operations, we could not dismiss it outright given that a number of companies geared toward a demographic that would appreciate this type of uniform (e.g. males) already employ young women and require them to wear revealing costume. Last week, during the run-up to Independence Day, at least one company out there in America took me at my word…

A story being reported in the Tacoma (Washington) News-Tribune tells the curious story of Nearly Naked Fireworks, and the young female employees who staffed its retail operation in Puyallup, Washington this year. Said employees were indeed wearing bikinis, and did appear to be attracting a lot of attention – to the point where 17 citizens of Puyallup complained to the local authorities. The news story goes on to quote the owner of this operation as saying that he got the inspiration from the coffee stands that feature bikini baristas, and that you can see women dressed in similar costumes (and even more revealing ones) in almost any park during the summer months in Washington State. Meanwhile, it would appear that the stand is also selling an impressive amount of fireworks…

Now, I don’t mean to advocate this approach as an all-purpose way of cutting through the noise inherent in marketing a product. There are only a very limited number of businesses where this sort of thing is even going to be effective, let alone successful. Unless your key demographic is men (and possibly a very specific group of women) employing scantily-clad young women exclusively as customer service personnel is unlikely to do you any good, and if your customers are primarily women, men accompanied by women, or the sort of blue-nosed prudes who apparently reside in Puyallup in some quantity, this tactic could easily backfire on you. Not to mention the obvious potential for discrimination lawsuits if your business only hires young, visually appealing women and then requires them to remain physically attractive at all times (or risk being fired), as in the case of the Hooters waitress I wrote about this past January…

In this particular case, it’s difficult to imagine what harm the fireworks stand is doing to the community. As long as the company obeys local ordinances on indecent exposure (and the news story indicates that local law enforcement is keeping a very close eye on that exact issue) they aren’t actually breaking any laws, and if any young people do happen to ask why the lady selling fireworks is wearing a bikini, parents should be able to reply “Because it’s very warm out today and she’s trying to stay cool” with a clear conscience. None of the women working in the fireworks stand are likely do so anything suggestive in full view of the public, and they’re actually less likely than anyone else to actually light off any fireworks, given that they’re surrounded by tons of explosives and not wearing anything that could protect them from showers of sparks. So, under the circumstances, asking people to think of the children OR complaining about the dangers of fireworks both seem a bit off…

Of course, some of the townspeople are probably worried that the escalation from bikini coffee stands to bikini fireworks stands is just the beginning. In a few years, perhaps (they think), the quiet streets of Puyallup could be besieged with bikini hamburger stands, bikini hardware stores, bikini dry cleaners, bikini bridal salons, bikini supermarkets, bikini furniture stores, bikini movie theaters, bikini pet shops and bikini dental clinics. In which case, yes, we could imagine that the town of Puyallup might have to cope with severe growing pains, as single men from all over the Pacific Northwest move to Puyallup, or as they might start calling it, Nirvana, Washington…

There still won’t be any new marketing ideas under the sun. But the local economy should flourish, as long as they have enough comely young women who don’t mind going to work in bikinis every day…

Get the Pitchforks

We’ve been hearing a lot lately about the basic, elementary mistakes that the senior management of the American automakers have made over the past few decades, culminating in the near-destruction of what was once the most powerful industry in the world. Most of this is not really news – we’ve been reading news stories about “planned obsolescence” and the inability of the Big Three to grasp that what their customers actually wanted were smaller, more fuel-efficient cars that lasted longer since the 1970s. However, unless you or a loved one has actually been employed by an automobile dealership during this period, you’ve probably missed some of the worst management practice of all. Even today, the news is focusing on the dealerships being eliminated by the American automakers, and not on how these (usually) loyal franchise holders have been given the shaft all along…

Consider, for example, the issue we’re having with our Pontiac Torrent this week. Over last weekend, we discovered that the hatchback was failing to unlock, either from the remote keychain transmitter or from the “unlock” button inside the car. It’s not a safety issue, since the hatchback isn’t intended as a passenger door, but it IS a nuisance, in that there is no other way to open the hatch. The people who designed the Torrent evidently thought it would look better without keyholes (except for the emergency one on the driver’s door), and expected that the owner would just use the remote to unlock the hatch and the passenger doors. Which is great until the electromechanical actuator that unlocks the hatch fails and there is no other way to get the hatch open. Which results in angry Torrent owners descending on the Service Department of their local dealership demanding immediate (warrantee) service…

This actually happened to us once before, in Los Angeles, before we came to Michigan. Only in that case, all of the actuators failed – the only way to get ANY of the doors open was to manually unlock the driver’s side door and then unlock the doors by hand – which gets old really quickly, especially when you’ve shelled out the money for power door locks. We went to the dealer we bought the car from, and after a few days of trial and error (during which they had to cover the cost of our rental car) they were able to solve the problem. What makes this an abuse of the franchise holder is that the dealership didn’t design the Torrent; they didn’t select these faulty actuators and they certainly didn’t fail to work the bugs out of the car’s systems before clearing them for distribution. But they are the ones having to clean up the resulting customer service nightmare…

Of course, this is only the tip of the iceberg; the companies have also ignored the dealers’ input on what cars would sell and what designs were ugly/faulty/impossible to unload (who thought the Pontiac Aztec was a good idea? Or the Chevy Vega?), produced cars that were literal rip-offs (the Cadillac Cimarron?) or death-traps (the Ford Pinto and Explorer), and used contracts to punish or destroy any dealer who complained. A favorite trick was sending an uppity dealership a consignment of nothing but pink cars and requiring them to try to sell them (generally at a horrendous loss) as part of their contractual obligation. The final indignity – cancellation and/or non-renewal of those contracts isn’t even a little surprising to anyone who has been paying attention over the past 30 years or so…

I’m not suggesting that the dealerships are as pure as the driven snow, of course; plenty of them have been nailed over the years for everything from passing used cars off as new ones to gouging customers (and their insurance companies) for repairs. But what I think is getting overlooked in all of this is that a dealership is a franchise, and franchise holders are, in fact, customers; one could even argue that they are the automakers’ primary customers. And given the way these organizations have been and continue to be treated by their franchisors, I’m often amazed that they’ve never gathered together en mass and marched on Detroit with pitchforks and torches…

The Ethics of Stupidity

Anyone who follows this web log already knows that I do a lot of posts about stupid people, stupid business concepts, stupid decisions, and other things that can be tagged as “stupid.” In fact, it’s the single most common tag found on my posts, and it probably would be even if I didn’t specifically study the ways in which things fail; most of these episodes just make for entertaining storytelling. However, from time to time I’ll write about something and readers will ask me why that particular bone-head play was “allowed” to happen. Why didn’t they – the anonymous “they” who seem to be in charge of everything – stop these poor idiots from injuring themselves, destroying their businesses, putting innocent lives at risk, or whatever it is? The straight answer is that there is no “they” – no level of government of which I’m aware includes an Office of Stupidity, and if making foolish business or consumer decisions was outlawed our economy would collapse. But this begs the question of just what obligation do we, as business people, have to the truly stupid…

Consider, for example, this case from the Pittsburgh Post-Gazette about two people who managed to wound themselves while trying out a gun they had just purchased. As the story notes, the weapon was legally obtained and no one was charged with an illegal discharge, so they were not breaking any laws by firing it, either. The couple in the story did, however, manage to shoot themselves (or each other; the account isn’t that clear) with their own gun, proving that they are either too stupid to correctly operate a firearm or too stupid to understand that guns can be dangerous if you fiddle with them and take the appropriate gun safety class. I once saw a similar episode happen at a gun range: a young man, attempting to impress his girlfriend, insisted on renting a .50 caliber Desert Eagle (a very large handgun) and then attempting to fire it one-handed…

Folks, the Desert Eagle in .50 cal is too big for me to use comfortably, and this kid was a foot shorter and probably 100 pounds lighter than I am. Sure enough, the massive recoil was too much for the kid to handle, and the gun flew back and smacked him in the forehead, cutting a huge gash and sending blood gushing down his face. Note that he didn’t do anything wrong, let alone illegal, in wanting to rent and fire this weapon. But he still managed to injure himself and scare the living daylights out of the young lady who was with him and a number of other people on the range that day. The desk clerk at the range tried to talk the young man out of trying to fire this weapon, but ultimately had the choice of either allowing his customer to proceed or refusing to do business with that customer, and made the same choice most businesspeople would have made…

So my question is, if one of your customers is planning to do something that you know has a very high probability of injuring them or someone near to them, but which is completely legal in your community, do you have any ethical responsibility to stop them? Assume for the moment that you have no LEGAL requirements to do so, and that no other consequences will befall you if you do intervene. Do you have any purely ethical responsibility to keep someone who is too stupid, ignorant and/or stubborn to know any better from hurting him or herself? How about if there are innocent people who might suffer from collateral damage; do you have any responsibility to them? On the other hand, if the activity in question is considered a civil right, guaranteed to every citizen of our country under the U.S. Constitution (like the right to keep and bear arms, for example), do you have the right to prevent them from exercising their rights under the law of the land?

It’s worth thinking about…

The Grad School Diaries: The River of Time

I zipped up my jacket and pulled my knit cap down over my ears as I walked out the east entrance of the Business Complex and set off down the path. It’s fall in East Lansing, and the cold wind has gone from crisp to bitterly cold, but I’ve got to get to class, and there’s no other feasible way of getting where I’m going. I pull on my Thinsulate ™ gloves and feel grateful for both my gore-tex boots and my cold-climate heritage…

I’m taking an undergraduate statistics class this semester, because unless I can master this subject at the elementary level I’ll never be able to cope with it at a graduate level. And since at least half of my doctoral classes are, effectively, classes that use statistics at a graduate level, this class is going to be important to me for the rest of the journey, even if it is an undergraduate class filled with kids of half my age or less. I really don’t think of it as slumming; it’s more remedial than anything else, and if I’m really lucky then maybe the undergraduates won’t be offended by having me in their class…

The walk from the Business Complex to Wells Hall (home of the Math and Statistics departments) is less than a mile’s distance along the banks of the Red Cedar River, but it’s a world of difference; from seminar classes in state-of-the-art classrooms and interactions with fellow scholars who have also chosen academia as a career (lifers, if you will) as we discuss the cutting edge of research in the field, to a well-worn building and an ordinary math-based staple course you could take almost anywhere. It’s also a voyage back in time, to days when I walked along a similar path near the water’s edge and wondered if there really was a life beyond that one, and if I could really put aside the errors of my callow youth and be accepted there. To change, to grow, to become more than I was…

Today, as I walked past the Farm Lane Bridge on one side and the International Center on the other, there was a loud honking noise from overhead, and a dozen Canada geese swooped down and alighted on the water. It was completely unexpected, and I found myself laughing with delight. I’ve always loved the geese; I find them endlessly amusing, although I suppose there’s really nothing inherently funny about a wild goose (other than the name). It’s just a large, black-and-white water bird, but I have always loved them for their waddling gait, their outrageous honking vocalizations, their endearing social habits, and their custom of mating for life. In an instant, I was transported back to the days in Santa Barbara, watching the ducks, pelicans and dozens of migratory birds on the lagoon next to our dorm. The years have gone by, time has come full circle, and I find myself here once again, in a place I know strangely well, for all that I’m still a newcomer here…

I’ve suffered less from mid-life crisis than many people I’ve known – unless this whole adventure is just one big crisis, of course. Sometimes I think it’s because I don’t think of myself as middle-aged, despite my 44 years and corresponding grey hair and wrinkles. But mostly, I think, it’s because my “inner child” never really went away; 40 years later, I’m still the child who loved feeding the ducks in Venice; 25 years later, I’m still the young man who loved watching the wild birds (and feeding the ducks) at UCSB’s wildlife preserve. I jest about not having an inner child, so much as I do an “outer grown-up.” But perhaps, like all of the best jokes, there’s a grain of truth in this one…

People sometimes speak of time as being fluid, like a river, with currents and eddies, that takes us from the headwaters of our birth to the great Ocean that awaits us all. Billy Joel used exactly that metaphor in the song “River of Dreams,” and Harlan Ellison used it in a more direct sense in “City on the Edge of Forever.” I’m still trying to learn what I don’t know, and that’s more true on days like today when I’m trying to keep up with the 19-year-olds in Wells Hall than most of the times of my life and most of the places I have been in my travels. But just the same, it occurs to me that sometimes the River of Time may not be just an abstract concept that we use to give a more poetic feeling to our fear of the unknown. Sometimes you can find it running past the east entrance of the building in which you spend most of your days…

A Celebration – Continued

Yesterday we began celebrating some of the truly stupid business moves of 2009, as brought to you by Fortune Magazine and CNN. It seems a shame to kick all of these people while they’re down, but on the other hand there are some actions so asinine, and so completely to the contrary of the public good, that they bear repeating. And I don’t know where you’d find a better example of that than South Carolina’s Governor, Mark Sanford …

By now you probably already know Sanford from his South American holiday and the associated massive hypocrisy, but had that story not broken he’d probably still have gone down in infamy as one of a few Republican governors who attempted to refuse the Obama Administration’s stimulus money. In fact, Sanford intended to demonstrate his commitment to his conservative fiscal beliefs by refusing $700 million in Federal aid, thus depriving the state with the second-highest unemployment in the country of any of the public works projects you could fund with that money, as well as the jobs that would be associated with them. Several other Republican governors, notably Sarah Palin of Alaska, also attempted to reject the Federal assistance, but in Sanford’s case the South Caroline Supreme Court ruled against the Governor and ordered him to accept the money. The combination was a political black eye that would likely have finished Sanford’s career if the whole infidelity matter hadn’t wiped it out of the public eye…

I’ve already noted that attempting to use the Hoover Administration’s approach to an economic crisis (running around the Oval Office making little shrieking noises) is part of what did in the Republicans in last year’s Presidential elections, and we can only hope that any other governors (Republican OR Democrat) who try it meet a similar fate. Even if such a move was economically correct (which is clearly dubious, at best) this is a public relations blunder so completely inept that if it wasn’t for Willie Walsh, CEO of British Airways, I wouldn’t even have anything to compare it to. For the record, Mr. Walsh is the executive who asked all of his personnel to work for 40 days this year without pay in order to save the company from bankruptcy, saying that he would himself not take a salary for July (and presumably 9 other days this year). The gesture fell flat, however, since Mr. Walsh received a 6% pay raise for this year and will still make in excess of $1 million even if he does take 40 unpaid days (and made $1.2 million last year); the general feeling among the airline employees is that he can afford it…

But I think the top honors have to go to the folks at AIG, who insisted on granting $165 million in annual bonuses to the people who had tanked their company and forced the Federal Government to bail them out for over $150 billion – on the grounds of needing to retain those people. As I noted in an earlier post, even if all of those people really were critical to running the company (and pulling it out of the mess it was in), and despite the fact that all of the bonuses together didn’t amount to even 0.2% of the Federal bailout money, this was a PR disaster that made AIG eclipse Halliburton as the most hated organization in America; a feat I would have said was impossible just a year earlier. Moreover, since financial services are a relationship-based business, I fail to see how AIG will ever recover from annoying all of its customers to this extent…

I’d call these posts high comedy, and suggest that we all needed a good laugh, except for two rather troubling facts. First, most of the people responsible for these idiot plays are still in place, and likely to continue planning strategy for these same organizations. And second, it’s only July. The year’s not over yet…

A Celebration

Every year around this time, Fortune Magazine comes out with a review of the stupidest business moves of the year to date – what they refer to as a mid-year report. Some of their choices are a bit snarky; some of them will make you want to point out that the issues they are mocking really are not as cut-and-dried as they’re making things sound, and some are trivia you probably didn’t care about anyway, but I’d have to say that the majority of them are funny. And this year’s crop includes some good ones…

You can access the article in slideshow format here if you want to, or at least until the CNN site takes it down. I’m just going to touch on a few of the highlights, because there are some things that I don’t honestly think could ever be mocked enough. Like the Segway/General Motors collaboration project, for example. Called a PUMA, the resulting vehicle looks a lot like a wider Segway scooter, only with seats for two people and a windshield/canopy arrangement. Early reviewers immediately started calling it the “electric rickshaw” and mocking it for its limited range (35 miles on a charge), while calmer observers questioned if this was really a good place for GM to be expending resources while on the very brink of bankruptcy. It’s worth noting that there may not be anything wrong with the concept – in fact, the new product may work very well – but the timing was still off…

Then there’s John Thain, the former CEO of Merrill Lynch. During the buyout arrangements with Bank of America, it came to light that Thain had just completed a $1.2 million redecoration of his office in New York. Not really the best thing the CEO of a publically held company to be doing at the best of times (the stockholders have a natural tendency to want to see that money put into dividends or earnings, not perks for the President), but completely asinine for the head of a company facing bankruptcy and liquidation. Given that even a simpleton should have known that the details would eventually leak out, it’s even harder to explain why Mr. Thain thought that spending $87,000 on an area rug or $35,000 for a specialty toilet for his office was a good idea…

I also enjoyed the story about the New York Yankee’s $2,500 seat offering. For those of you who don’t know, cheap seats in the average baseball stadium are generally between $6 and $15, with good seats going from $25 to $80, and individual seats in a luxury skybox running from $100 to $300. There are exceptions, of course, but in Los Angeles (for example) seats in the exclusive Dugout Club section (which includes access to the premium food service venue of the same name) are only $500, and the most expensive regular sears are only about $120. Field level seats in the new Yankee Stadium (just the seats; nothing particularly exclusive) were $2,500, with a season ticket price of $200,000. Yes, that’s roughly the equivalent of buying an entire luxury box (in Phoenix, for example, a box has 25 seats at $100 each); and again, yes, if you wanted a pair of seats for the season in that section it would cost you $400,000. Enough to buy a house in much of America, and enough to buy a really nice house in the Lansing area…

Needless to say, perhaps, $200,000 season tickets are even harder to sell than $2,500 single-game tickets in the middle of an economic crisis, and the seats went unsold. Of course, the Yankees eventually got tired of seeing all of the empty seats on television, and cut the price for those seats by 50% - which still makes them more than twice as expensive as the best seats in the house in L.A. So far, that hasn’t helped, but at least it’s better than some of the other reactions to the financial crisis covered by this same article…

(To be continued!)

Pay As You Throw

As waste management becomes an increasingly critical problem in the U.S., we’re seeing more and more communities having to get creative about paying for their trash collection (and dumping) services, since not everybody has a convenient canyon they can fill up or a convenient ocean to dump everything into. One of the more pragmatic (or mercenary; it depends on your point of view) schemes we’ve encountered so far is the “pay as you throw” or PAYT program: the city will only collect garbage if you put it in approved trash bags (usually a special color and/or marked with the city’s logo), which you are required to purchase at the supermarket for a dollar or two. The idea is that this way you are only paying for the amount of garbage collection service you actually use, and the city does not have to take the waste management fees out of their (already scarce) property taxes. Which is okay, as long as you’re not the store that gets stuck with selling the bags…

A story which turned up in the Concord Monitor online site notes that stores which carry the PAYT bags do not receive any payment for doing so; all of the money is sent to the company in South Carolina which manufactures the bags, which in turn shares some of the funds directly with the city using the PAYT program. Meanwhile, the stores have to pay for the costs associated with stocking and selling this “product” for free – and at a loss, in fact, if the customer pays for the bags with a credit card. According to the article linked above, some of the stores in Concord (and some of the other communities using this system, apparently) are refusing to carry the bags. The store managers say that the minor loss in public relations is more than offset by the money they are saving by not carrying this product in the first place…

Here in East Lansing there’s a similar system in operation, but it’s a hybrid that I think works a lot better. All homeowners in the City of East Lansing are issued one (1) large (64-gallon) rolling garbage can and one (1) smaller blue tote bucket (around 15 gallons) for recycling by the city. If you need to throw away additional waste, you can purchase 20-gallon plastic PAYT bags in a package of 5 for $5 at most grocery stores; if you need to throw away extra yard waste (leafs, lawn clippings) you can purchase brown paper bags, also about 20 gallons, also at 5 for $5. Most of the funding for trash collection still comes from your property taxes, but if you need to dispose of some extra waste the city isn’t on the hook for it, and if your neighbor is throwing away lots of extra waste YOU aren’t on the hook for it. And the local markets don’t seem to mind, because the number of bags they have to carry is small enough to represent a trivial expense…

In the Concord example, the obvious solution would be to allow the markets to raise the price of PAYT bags by just a few cents each (say, to $1.09 and $2.09, respectively) to cover stocking and handling expenses, or else cut them in on a similar amount of the money the town is making on the bags. You’re still going to have a problem with people buying generic trash bags and throwing them into dumpsters (or leaving them by the side of the road), but at least you won’t be placing what is effectively an unauthorized, unilateral tax burden on businesses that only make a 1% to 1.25% profit margin in the first place. And I’m really not sure what the town is going to do if some of the people commenting on the linked news story make good on that threat to start making counterfeit PAYT bags and selling them for half of the usual price…

Maybe the East Lansing model is a better idea than I thought…