Déjà vu All Over Again

Some of our older readers probably remember a time in the 1980s when entrepreneur Malcolm Bricklin decided to introduce one of the smallest and least impressive production vehicles ever designed to the American automobile market. Called the Yugo because it was being manufactured on license in what was then Yugoslavia, the car was actually a license-build version of a Fiat design that Fiat had abandoned years earlier for both aesthetic and reliability problems, called the Zastava Koral. It sold for what was, even then, a ridiculous price – about $3,999.99 US, or the equivalent of about one-quarter of what a low-end Chevy or Toyota might have gone for during the same period. And the joke was that you’d probably need to buy four of them, too, because at any given time there’d probably be only one of them in running condition, while the others were in the shop waiting for replacement parts to be shipped from Yugoslavia…

In business it’s a classic example of what’s usually called the “low price leadership” strategy (providing the equivalent product at the lowest possible price); it’s also an excellent example of one of the primary problems with that strategy: lack of parity in product quality. If I offer you a product for half the price my competition charges, you’re far more likely to purchase my product – unless my product has only one-quarter of the value, in which case you’re probably not. In the grand scheme of things, a Yugo that runs one day in five and will only survive for 25,000 miles or so is not worth a third of a Chevrolet that will run every day for five years and last for 120,000 miles; it’s not even worth as much as a used Honda Civic that will be good for another 100,000 miles at the same price. Unless your product is at least reasonable comparable to the competition, the lower price will not ensure an advantage. Which wouldn’t really be news, except that another company is trying the same stunt – and is likely to encounter the same problems…

A story from the Associated Press by way of the Houston Chronicle website tells the ongoing saga of the Tata Motors “Nano” – reputed to be the world’s cheapest production car. These tiny vehicles have been introduced into the consumer market in India, where they compete primarily with motorcycles and scooters, offering a much safer and more comfortable ride, particularly if you intend to carry two or more people at once. There has been talk of importing them into the United States for a while now; it’s expected that their $3,000 price tag (cheaper than a Yugo even 25 years later!) would make them a strong competitor for Smart cars, Segways, Prius and other small/ultra-efficient vehicles. Unfortunately, the news story is about an increasing number of cases where the Nano spontaneously bursts into flames. There is even some concern that it might explode…

Now, we’ve established that I’m not really a good judge of consumer behavior. I was on the focus group for a new Ford design that turned out to be the Ford Focus, and I thought the thing was hideously ugly and no one would ever buy it. Several million Focuses later, I have been forced to concede that the mere fact that the Focus IS hideously ugly does not seem to have kept people from buying them in droves. So it’s possible that people will purchase the Nano in large numbers, as well; that the mere fact that it may burst into flames and explode without warning may not be enough to keep people away from a basic commuter car that costs half of what a Segway does…

Just the same, though, I think I’ll pass on investing in stock in the company…

Something New

The other day, my students and I were talking about barriers to entry, and an example that came up (this being Michigan, where automobile factories used to be common) was new car companies. It’s been at least a generation since anyone opened a new automobile company in North America; the only new car companies any of my students could think of were Saturn and Hummer, both of which are General Motors nameplates. If we go back a few more years you can get into things like American Motors and DeLorean, but for the most part it has been decades since anyone made a serious attempt to start a new car company, precisely because the barriers to entry are so high – you need an inconveniently huge amount of capital, not to mention land (for the factory), trained workers, government permits, insurance, and so on. At least, that’s the way things were looking up until this week…

From our “There’s something you don’t see every day!” files comes the story of Carbon Motors, a new company based in Indiana that is marketing what it describes as the first police car ever designed specifically for that purpose. Carbon’s “E7” design includes features such as bullet-resistant door and body panels, a back seat that can be hosed out to clean it, driver-specific intelligent keys to keep people from stealing them, integrated lights, sirens and instruments, a 75 mph crash capability, a forward-looking infrared (FLIR) system and a backup camera, not to mention 0 to 60 acceleration in 6.5 seconds and a top speed of something over 150 mph and built-in ram and PITT maneuver modifications. The company insists that the price will be comparable to taking a passenger car and modifying it to have all of the same features, and that the fuel economy should be in the 28 to 30 mpg range. That last claim would be harder to believe if BMW hadn’t signed on to produce the engines, by the way…

According to this story on Bloomberg.com, BMW has won the contract to build a super-low-emission diesel engine for the E7, which will include the exhaust and transmission systems. The deal calls for 240,000 units over an unspecified number of years, and represents a huge windfall for the German car maker (it’s worth something on the order of $1.35 billion to BMW), as well as an excellent way of introducing their new, super-efficient diesel systems to the North American market. If the E7 is actually adopted by a significant number of police forces, the company should be able to start selling its own production vehicles with the same power plant within a year or two. It’s a huge win-win situation, for Carbon Motors (which stands to receive a $310 million Federal clean-energy loan) as well as for BMW. And if the cars are as effective, efficient, and clean as advertised, for the jurisdictions that purchase the cars, as well…

Of course, the real question is whether the E7 will sell, and that remains to be seen. If Carbon Motors can’t gain wide acceptance of the product among law enforcement they won’t be able to produce the cars on a large enough scale to complete their contract with BMW or pay off their Federal loan, and they’d just end up being the DeLorean motors of the 21st Century. On the other hand, if they can sell the product, they’d be the first new car company to appear in the United States in half a century or so, and there’d almost certainly be a demand for a civilian version of their product – from private security companies, security-conscious private citizens, movie stars who play lots of law-enforcement officer characters (don’t laugh; that’s where the civilian Hummer came from!) and anyone else who thinks the design is cool or interesting. In which case, they might just end up being the exception that proves the rule in next year’s strategy class…

Too Hard?

As previously noted, there are times when it’s almost too easy to write these posts; where the story pretty much writes itself, and all I need to do is provide a link and the requisite snarky comments about people who either agree or disagree with the point the original author made (depending on whether I agree with it or not). But I would be remiss if I didn’t also point out that there are some days – and some stories – when the reverse is true; when a story or set of stories is so obvious that it’s really hard not to just provide the link and write “Duh?” next to it repeatedly. Such was the case this morning when a whole set of news organs – many of them run by otherwise brilliant people – started posting stories about how health stocks were rising on the news that the Healthcare Reform bill had be passed by Congress…

Now, I’m not blaming the stock reporters; it’s their job to monitor the markets and tell us when a specific class of stocks rises or falls – or when a specific company does – unexpectedly. Without those services, we’d all have to spend the day watching the various tickers, which I regret to say is a bit less interesting than watching paint dry, at least for most of us. What moves me to write “Duh?” repeatedly is the surprised exclamations that this is happening, which appear to be popping up like June asparagus all over the Web today. As if there is anything surprising about 30,000,000 customers suddenly entering a market driving up the fortunes of the companies that will supply those customers – even if the companies themselves have been dubious about the whole thing…

People who love to revile the insurance industry will be dancing in the streets today, of course – and they probably should be. In many ways the Healthcare Reform act is a classic case of an industry refusing to regulate itself correctly until the government is forced to step in and do it for them, and I don’t argue that a lot of people will be getting their just desserts as a result. But by the same token, I don’t for one moment believe that the industry won’t find a way to make money on all of these new customers (even if they can’t reject them for pre-existing conditions or cancel them for getting sick anymore), and even a few hundred dollars per person per year adds up once you start talking about 30 million of them…

The primary thrust of the reform act isn’t to make healthcare services available for free, or even to include them in the services you get for paying your taxes; the idea is to make them available to everybody. It will take some innovative thinking to turn this condition into an opportunity – as opposed to just insuring healthy people and kicking out anybody who might actually NEED health insurance – but the majority of the people who will benefit from this new law are the ones who were already willing to pay for health insurance, and just couldn’t get it until now. Most of them will end up paying more to their insurers than they end up costing in services, and if the insurance companies change their focus to cover more preventative care and proactive measures (and they’ll almost have to, with this many more customers) there’s an excellent chance that they will make a significant profit on all of this new business…

So of course their stock is going to rise. And if they play their cards correctly, there’s every reason to believe that their profits will also go through the roof, even on lower individual margins per sale. And if that happens, I’d expect to see all of the major healthcare providers withdrawing their support from the opposition to this measure, and from all of the politicians who have been campaigning against it – which should make for some interesting posts for all of my counterparts who blog about politics instead of business. My only point here is, of course this is a good day for everyone publicly-traded company in the healthcare business…

Why wouldn’t it be?

The Ethics of Non-Profit Salaries

We’ve been hearing a lot in recent years about CEO compensation packages, and how many top firms are now paying their senior managers more than the GDP of some developing countries – or enough to feed half of Asia, depending on your point of view. As I mentioned in an earlier post, this isn’t necessarily a bad thing, and all of the neo-Marxists out there can just settle down about it; companies are created to make money, and if you can show that a given employee’s efforts increased your net profits by 700% then there’s certainly nothing wrong with given them a piece of the action. But what happens when that scenario will never and can never happen – because the company is a non-profit organization, required by law to break even every year? Do those same rules apply?

Some people would tell you that every member of a non-profit organization should work for free – less necessities like health insurance and such, of course – but in reality, all this would give you is an agency staff made up entirely of people who do not need to work for a living. Which is to say, volunteers, amateurs and dilettantes, for the most part. Given time, there’s no question that some of the volunteers will become quite adept at managing a non-profit organization, but anyone who believes (as a distressing number of people seem to) that running any large organization is easy is displaying the “anything I don’t understand must be easy” fallacy, as well as their own ignorance, and should be vigorously ignored. Certainly, running an organization with a $100 million budget, 4,000 plus service locations, and tens of thousands of employees is a job you’d want a professional for; the question here is what should you pay them?

An article that ran this week on the ABC News website quotes the Charity Navigator organization as saying that the average compensation for CEOs of charities that size is about $462,000, which is almost laughably tiny when compared with CEO salaries for for-profit companies the same size. But the article is about the scandal resulting from the Boy’s and Girl’s Clubs of America CEO getting a total compensation package of nearly $1 million last year while accepting Federal support money. In fact, the compensation and perks being granted to the senior management of this organization has so outraged a group of Republican Senators that they’re threatening to hold up all legislation that would give money to the agency. Which seems reasonable, at first; $4.3 million on travel, $1.6 million on conferences and meetings, and $544,000 on lobbying fees is certainly over $8 million that won’t be going to help any children. The real question, which is being ignored in the political grandstanding, is whether the agency is being run well, and if so, whether the same results could be obtained if you spent a smaller amount on salaries…

Which brings us, I think, to the heart of the ethics question that is integral to this issue: if a non-profit agency is being run properly, in terms of providing high-quality service to its constituents, should its decision to pay a higher than industry standard salary to its CEO be questioned? Should Congress be able to make that decision (or at least strongly influence that decision) in return for grant funding of less than $18 per child served per year? The idea that the Federal Government itself could provide the same services for less would be laughable if it wasn’t so sad, and so is the idea of Senators, who get paid their own considerable salaries for life even after they leave office, being sanctimonious about anyone else’s pay. If the agency is providing high-quality services for a better price than the granting agency could by itself, should ANY grant maker be able to exert that kind of external control? On the other hand, since non-profit organizations do not have stockholders (and have only limited government regulation), if grant makers and other donors do not exert some kind of control on these agencies’ spending, then who will? For that matter, how do we even know if the non-profit agencies our tax money is being granted to are well-run in the first place?

It’s worth thinking about…

The Grad School Diaries: A Face in the Crowd

O’Hare International Airport wasn’t as big or as grand as I remembered it, but it has been a few years, and I’ve undoubtedly gotten more jaded since the last time I was here. I had just arrived in town for the 2009 Academy of Management Conference, having flown from Detroit (a 29-minute flight) instead of driving five hours from East Lansing. It’s an unusual choice (most of our department either drove or took the train), but we only have the one car, and I can’t leave my wife without transportation for a week. And after our last adventure with passenger rail (what my long-suffering spouse calls “TrainCo”) in 2004, I’m reluctant to use the train for business trips…

Fighting my way through the crowds to Baggage Claim, recovering my bag, and booking a ride to my hotel on a shuttle van were all fairly routine, but felt lonely, somehow. I’m attending a conference of 10,000 people, but other than the folks from my own department, I know only three or four people in this entire field by sight – and it’s doubtful that any of them would recognize me after all of these years…

I had just reached that cheery conclusion when a man a few years older than me came out of the terminal building and climbed into the shuttle van. He seemed vaguely familiar to me, but I couldn’t place the face. “Are you here for the AOM conference?” the man asked.

I told him that I was. “Great!” he exclaimed. “What school are you from?”

I told him that I was from MSU. “I’m from Loyola Marymount in Los Angeles,” he said, naming the school where I had gotten my MBA 15 years earlier. He held out his hand. “My name’s David,” he told me.

I shook his hand, and the dime finally dropped. “You’re David Mathison, aren’t you?” I asked, emphasizing the surname just slightly.

Professor Mathison looked startled at being identified, but he acknowledged that I was correct. I grinned at him.

“You don’t remember me, Professor,” I said. “But I was one of your MBA students back in 1994!”

Readers of my blog (assuming there are any) will already be familiar with the Professor, from one of my early posts on ethics, but for those joining us late, Dr. Mathison was my instructor for the Organizational Behavior/Human Resources elective I took in the MBA program – the same subject I was teaching that summer, albeit at the undergraduate level. Since the last time I’d seen Dr. Mathison, not only had I taken up his profession, I was teaching his subject…

I told the Professor this, and we spent the ride into town catching up on the past 15 years. It has been an eventful time for me; my world has changed beyond recognition as I have gone from 29 to 44; from MBA student to corporate manager to consultant to administrator to grad student again; as I’ve found the love of my life and lost my mother, both grandmothers, my favorite uncle, and my undergraduate mentor. It hadn’t really come home to me until now, telling the story and seeing the words on the page, just how much HAS happened in only a decade and a half; how much loss and how much sorrow; hardship and grief; triumph and joy. It’s the story of a life, and who would have guessed that I’d ever have one, let alone that I already had?

David Mathison had guessed. I won’t tell you the Professor’s story, since it’s not mine to tell. But as tough as my life has been over the past 15 years, he’s had it worse. In fact, it’s no exaggeration to say that he had been through trial and tragedy that would drive me around the bend, just since the last time I’d seen him. And yet, he remained the same good man and the same calm and patient teacher I remembered from that earlier time. It struck me then that some people were born to be teachers, whether they follow that profession or not. They have the gift to show us that the world is larger than we believed, that there are always more things to see and learn and experience, that we have not arrived, but have only begun, the voyage that is life…

I don’t know if I will ever get to be that good at my professions, any of them. Granted, I have made it this far, but I’ve been lucky. I’ve had good teachers…

Too Important

There’s an old saying in America that you should never discuss religion or politics in public, because of the very high probability of offending someone who might be listening. People don’t usually consider it these days, but this country was originally settled by people seeking either religious or political freedom, or occasionally both; the right of all Americans to maintain their own faith regarding religion and governance is still considered the cornerstone of our entire society. Unfortunately, a side effect of that freedom is that all of our citizens also have the right to believe that theirs is the only true faith, and that everyone else is wrong; another side effect is the right to say so, loudly, and to take umbrage at anyone who disagrees with them. Which is bad enough when it comes to religious intolerance; some of the things that get political in this country are enough to make you think the entire place is a madhouse…

Case in point, consider the tragic story of a young man from South Caroline named Jerome Mitchell, who had his insurance company cancel his policy shortly after he was diagnosed with HIV in 2002. The company claimed that a clerical error in Mitchell’s file proved that he had the condition before he purchased their policy and had failed to disclose it on his application; this constitutes fraud and frees the company from the expensive obligation to provide the treatments needed to save Mitchell’s life. Presented with certified records, signed statements, and even its own internal memos that documented the error, the company simply ignored their (former) customer, their own underwriter, healthcare providers and eventually Mitchell’s attorney, refusing to budge on the matter until finally sued – a lawsuit which has since been upheld at the Appellate Court and State Supreme Court levels, and which the company continues to fight…

You can read the Reuters story here if you want to, but if you found the original story repulsive, the twist ending will really upset you: an investigation that resulted from the Mitchell case found that his insurer, Assurant Health (formerly Fortis) had been systematically investigating every new HIV claim and trying to find grounds for declaring fraud and cancelling the policy. Similar cases are now springing up all over the country, as various regulatory agencies start looking into these “rescinded” account cancellations, thousands of which are apparently blatantly illegal. What makes this political (and, at least to me, fantastical) is when you read the comments section on such stories, and find all of the people who are claiming that this is an argument AGAINST healthcare reform…

In case anyone missed it, this is a case of blatant and deliberate fraud on the part of Assurant; using information they knew to be false in order to violate a contractual obligation. Not satisfied with that, however, they also withheld treatment that an innocent man needed in order to survive, refused to produce any account of their procedures or the process of how this decision was made, destroyed evidence, and appealed the legal loss for at least six additional years (the process continues). Why the people who made these decisions have not be charged with fraud, obstruction of justice, and conspiracy to commit a felony is beyond me; if I was the relevant prosecutor I already would have, and I’d throw in criminal negligence and murder (under the depraved indifference statute) if the customer in question had died as the result of their actions. None of which addresses the real point here, which is that this has nothing to do with politics…

In any industry, companies which charge exorbitant rates, pay their senior management team outrageous salaries, invest money like idiots, and refuse to provide the services for which they are charging are committing fraud, and should be attacked in both civil and criminal actions, as well as by targeted legislation, until they stop. I don’t care what party you belong to or who you think should be running the country, fraud is still fraud, and unethical business practice is still unethical business practice, and both of them are wrong no matter what your personal beliefs happen to be...

Unless there’s a religion and/or political party somewhere that is in favor of fraud, obstruction of justice, depraved indifference and conspiracy, of course. In which case things are even worse than I’d thought…

Flying Food

We’ve talked about airlines charging for onboard food in this space before – most of the surviving US carriers are already doing so, in the hopes of lowering costs, if not actually making more money. The problem with such programs, traditionally, is that while it is certainly possible to save money by eliminating services, it isn’t always possible to make money by charging for the same services. A good case in point is the current legal action being taken by the union that represents flight attendants, which is claiming that since the airlines started charging a checked baggage fee, more and more of their membership is being injured by overloaded and oversized carry-on bags being carried by people trying to avoid the fees. It’s possible that the airlines will come out ahead on this move - $35 to $100 a head is a good incremental increase on a service that doesn’t actually cost you anything (since you were already paying the baggage handlers) – but once you factor in the cost of the lost business from angry customers and the worker’s compensation lawsuits from flight attendants getting hit with oversized bags that pop out of overhead bins during flights, it seems unlikely this will remain a major revenue stream for long…

Now Continental Airlines is jumping on the food-for-sale bandwagon, with the company claiming they will make $35 million each year from food sales. It’s a nice idea – the company could certainly use the additional revenue – but I think we are justified in questioning the numbers involved. If the numbers in the linked AP story are correct, the airline has about 900 flights a day, and a number of those (international flights, domestic flights over six hours, etc.) will still, of necessity, feature free food. If we eliminate those and ignore all flights of three hours or less (e.g. non-meal flights), that should still leave somewhere on the order of 180,000 to 200,000 flights each year in which food will be for sale. Which means that Continental will need to make around $200 worth of profit per flight in order to hit that $35 million target – and that may be optimistic…

Now, it’s always possible that Continental will work out some program of high-margin, high-appeal food items that will persuade the majority of their passengers to shell out extra money for food. Keep in mind, however, that even if they can get another $10 per person for food (and they won’t) that it’s only the profit that enters into this calculation. On an airliner with 150 people in Coach (First Class food is still free – it has to be!) $10 per person is $1500; if your margin is 10%, that’s well short of the $200 figure the airline is expecting. Increase the purchase amount or the margin and your sales percentage can be lower, but raising prices will lower the number of sales, just as in any other retail business – and so will lowering the amount you spend on food in order to raise the margin…

One of the best approaches to this I’ve seen so far was the one used by US Airways, which has food for purchase on board, but also has snack items and convenience-store favorites like Cup-of-Noodles for about what you’d pay in a convenience store. The sales amounts are undoubtedly lower per customer, but these stabilized food products don’t require any labor in terms of preparation and will stay fresh for days or months without having to be replaced after every flight. Still, once people become accustomed to food-for-purchase programs, they’ll probably start bringing their own food in their carry-on baggage – which will exacerbate the carry-on problem, undermine the food-sales program, and generally make life on an airliner even worse than it is now (imagine sitting next to a passenger who is enjoying a nice limburger cheese and sardine sandwich, for example). I’m no expert on air travel, but if your corporate goals include making more money, annoying fewer customers, losing fewer employees (and fewer workers’ compensation suits) and generally not looking like a corporate buffoon, I’m not sure food-for-sale programs are really your best bet…

The Ethics of Fast Food

I read with great interest the story about Weight Watchers signing a deal to endorse certain McDonald’s products in New Zealand and Australia starting this month. Both companies are extremely enthusiastic about the idea, and there are hints that if the relationship proves successful they might expand it to other countries, including a McDonald’s near you, sometime in the near future. It’s certainly a unique move in the burger wars – up until now, most of the competition has centered around quality, price, and which movie tie-in products you find more appealing; health consciousness is a new one. And, not unexpectedly, the whole deal is turning into a major controversy down under…

You can access the original press story in the Sydney Morning Herald if you want to, but the basic idea is that Weight Watchers is allowing McDonald’s to use their logo on three value meals that are being marketed as healthier and better for dieters than the traditional burgers and fries. Many consumers seem to like the idea, but nutritionists and obesity experts are condemning the move, saying that it’s just a stealth way to suck people into McDonald’s and sell them the same old fat-laden products. All of which raises at least two interesting problems from a purely ethical standpoint…

On the one hand, Weight Watchers is not a government agency or a non-profit group; they were established to make money, and it can not be disputed that they have a fiduciary responsibility to their ownership to make as much of it as possible without violating any laws or ordinances. This licensing deal with McDonald’s (which is all this agreement actually is; the products are not changing, nor is Weight Watchers providing any input on what McDonald’s will sell or how they will fabricate anything) will make a lot of money for the people who own Weight Watchers for no capital outlay whatsoever; the only thing they are giving in return is the use of their name and reputation. From a purely accounting/finance standpoint, they’d actually be remiss if they didn’t take this deal…

On the other hand, the nutritionists are definitely correct when they argue that McDonald’s is only doing this to bring in people who wouldn’t normally do business with them – and hopefully, their families as well. The scenario of a parent going to McDonald’s and getting to feel good about eating a Weight Watchers-approved meal while the kids eat the regular burgers and fries is highly likely; so is the chance that some of the people trying to eat “healthy” foods will break down and purchase some of their favorites instead. Even more to the point, Weight Watchers has spent decades (and billions of dollars) cultivating the image of being about helping people to lose weight. Despite their actual business model (making lots of money on diet services), even people who should know better will tend to accept that if the company approves of a product, it will actually help you to lose weight. For Weight Watchers to pretend otherwise is absurd – and highly disingenuous…

So the question is this: does Weight Watchers have a responsibility to the members of the public who have bought into their public image (e.g. they’re dedicated to helping people lose weight), or is that responsibility overridden by their fiduciary responsibility to their stockholders? Does McDonald’s have a responsibility to its customers to actually help them live healthier lives, or does their responsibility to their own stockholders (to make as much money as possible selling inexpensive foods) override whatever they owe their customers? Do you, as a consumer, have the right to be able to trust in the artificially-generated corporate images of the companies with whom you do business, or do you have a duty to be responsible for your own health (in this case, dietary health) and make decisions about what your buy or eat based on the facts, not licensed symbols and logos? And if not, where do you draw the line between creative advertising stunts and outright fraud?

It’s worth thinking about…

The Grad School Diaries: On the Road, Again

I walked up to the counter and set down my selections – paper towels, baby wipes, a bottle of window cleaner, and so on. “Do you have any Lysol?” I asked the counterman.

He shook his head and I shrugged; it would have come in handy jus then, both as disinfectant, and also as air freshener, but we could make do without it. I paid the man and wandered back out, past the displays of candy bars, pyramids of soft drinks and beer, and the pallets of bottled water. Convenience stores seem to follow similar layouts wherever you go, I reflected, which really isn’t surprising when you consider that the same three or four national companies supply food and basic non-food merchandise to almost all of them. I spent a while analyzing the basic services and categories four or five jobs ago, when my (then) current employer was considering expanding into the industry…

I passed through the double doors and past the gas pumps to the small parking area, where our daughter and son-in-law to be were frantically trying to clean out their cat carrier with the remains of our housecleaning supplies. “Having any luck?” I asked innocently, earning five dirty looks – my wife, the kids, and the two cats, whose travel accommodations had unexpectedly turned into a septic tank when our larger cat fouled herself (and the carrier) on the way out of Atlanta…

We had just started our return trip to East Lansing, with the cargo area and rooftop carrier on the Torrent full of assorted stuff, and both cats and the dog in carriers in our son-in-law’s car. It’s a long drive – about 800 miles, through five states, which works out to about 13 hours of driving time, not counting meals, refueling stops and comfort breaks. We had wanted to get on the road early and get through as much of the drive as possible before sunset, but it isn’t possible to get four humans and three animals and all of their impedimenta loaded out and on the highway that quickly, even when you aren’t also dealing with the habits of four non-morning-people. Still, we’d managed to exit the Atlanta freeway system and were making reasonable time toward the Tennessee border when we got the text message about the cat accident and pulled off at the next exit to find a service station…

Between the four of us, we’ve probably spent a hundred person-hours planning this trip; when you include the time of all of the other parents, step-parents, grandparents, work associates, faculty advisors, travel agents, hotel clerks and personal friends, it’s probably twice that. We’ve got almost any substance a driver or passenger could possibly want to eat or drink for this voyage, as well as maps, books on tape, medicine and first aid supplies, hand sanitizer, newspapers, satellite radio, GPS navigation systems, web-enabled smart phones, laptop computers and movies on DVD – and the whole thing has been derailed by twelve pounds of nervous cat. You could use it as a metaphor for most human activity, if you wanted to…

The next twelve hours will include a massive traffic jam and resulting detour somewhere in Tennessee, a fast-food lunch somewhere in Kentucky, dinner at a Cracker Barrel somewhere near the Indiana/Michigan border, and too many comfort breaks to count, along with music on the XM radio, good conversation, the occasional news story, and a few bottles of wide-awake to make sure we keep on the road. It’s going to be a hard day’s travel, and long before we see the Lansing Metroplex in our headlights we’re all going to wish it was over. And perhaps someday in an unknown future we will find ourselves setting out again, for another new city and another new challenge and another new life…

For the moment, however, we’re all standing around a gas station parking lot, somewhere in Georgia, waiting for the cleaning solvent fumes to clear…

New Technology, Old Problems

One of the oldest promotional concepts – probably the oldest concept that can be classified as “advertising,” in fact – is the idea of putting up a sign with a picture of your product somewhere where people who might want to buy that product can see it. Of course, over the years we’ve seen the technology evolve from hand-painted signs to giant billboards, to moving/animated billboards, and eventually to giant flat-screen monitors broadcasting actual audio-visual commercial programs to us while we drive. I felt that this arms race had reached its logical conclusion in the appearance of mobile billboards – signs that actually drive up in front of you to make sure you can see them – until examples of these vehicles incorporating dioramas of living-room décor (IKEA), flat-screen monitors (the one I saw was for some energy drink, but theoretically you could put any ad you wanted on these), and large clear boxes containing a stripper pole and half-naked women (various strip clubs) began appearing on the roads. But as extreme as these examples might be, I think the development I read about this week is even worse…

According to a story appearing on the Sun UK website, a Japanese firm has invented a new form of billboard that uses sensors to determine who is looking at it, and then displays content relevant to that individual’s interests. For the moment, the recognition software is somewhat limited (e.g. if the sensors detect that you’re male, it pulls up a car ad, whereas if they detect that you’re female you get a cosmetics ad), but these systems are already being refined for applications like security/facial recognition systems, and it should eventually be possible for the computer to assess your age, ethnicity, height, weight, socioeconomic status, or even whether you’ve eaten, drunk or slept recently. The potential for targeting advertising is amazing; unfortunately, so are all of the problems one encounters with more traditional forms of promotional signage…

Consider, for example, that when a huge flat-screen billboard was put up facing an intersection in Los Angeles, the number of traffic accidents there rose exponentially – because people were looking at the fascinating images instead of the road. Now imagine how much worse that would be if the billboard recognized the driver and pulled up an image that was specifically intended to attract his or her attention. The possible images would be constrained by who wanted to advertise on that site (as well as by local indecency/pornography laws), but that wouldn’t prevent some very distracting images from flashing at bad moments. Then there’s the issue of all of the energy such installations would use (and the pollution that generating the electricity would entail), the light pollution they will produce when operating at night (you wouldn’t want to have a window facing one), and the fact that they block your view of virtually anything else. And then there are the potential social and legal issues…

Imagine if you had small children who kept seeing ads for horror movies, funeral homes, women’s underwear, or strip clubs, just because people with an interest in those subjects kept walking past an interactive billboard while you were around. Or, if you prefer, imagine how the religious fundamentalists in your neighborhood would react if one of these installations started promoting some denomination they didn’t care for, or even worse, one of those “atheist billboard” messages we keep hearing about. For that matter, suppose somebody put up one of these where the light from the screen kept coming in your windows. Would you sue? Can you honestly imagine that nobody else would? What if multiple parties sued and counter-sued, demanding that something be taken down or that their images (whatever those might be) get equal time? For that matter, how could you possibly keep some advertisers from paying extra to make sure that THEIR ad was more likely to come up than the others stored in the installation’s memory?

Of course, most of these problems already exist; I’m not saying that billboards that you watch are any better than billboards that watch you. I’m just pointing out that this industry already has a number of issues – and that it would be naïve to assume that new technology won’t make any or all of them worse…

Missing the Point – Again

I’ve reported on a lot of failures of customer service standards in this space, partly because I’ve spent so much time in customer service jobs myself, but mostly because I still fancy myself an Institutional Failure scholar, and there is no better way to fail in a service economy (even if your company is not, itself, a service business) than by providing substandard customer service. Unfortunately, this fact doesn’t seem to be as obvious in Corporate America as it is to us; many companies outsource their customer service functions to countries where the customer service representatives they are now employing may never have even seen the products or used the services they are taking calls about, and even those that don’t outsource the function have a tendency to employ the cheapest, most disposable personnel they can for this function…

The problem with such a policy, as previously noted in this space, is that the front-line customer service representative (hereinafter CSR) is the first, and sometimes only, point of contact customers have with your company. If your CSRs are rude, surly, unhelpful, or just plain stupid, you run the risk of angering or alienating the customer to the point where they will no longer do business with your company – yet, the CSR is usually the lowest-paid, least-trained, least-experienced, and least appreciated-person in the company. This is bad enough when all we’re talking about is help desk and product feature explanation duties, but when the CSR in question is, in effect, making company policy on the spot by granting or denying customer billing requests, you have the potential for that minimum-wage (or just barely higher than minimum-wage) employee to make your entire company a nation-wide laughing stock…

Case in point is this article from the St. Petersburg Times website, about a Verizon CSR who apparently refused to disconnect (and stop billing for) a dead customer’s account even after receiving a certified copy of his death certificate. Apparently, this un-named CSR was demanding the (deceased) customer’s personal identification number (PIN), and when told that he hadn’t given it to anyone, told the customer’s daughter that there was nothing the CSR could do for her, before laughing and hanging up the phone. Think about that for a moment: upon being told that the PIN could not be provided, this idiot CSR just laughed and hung up, refusing to help. Did she think the customer’s family was lying for some nefarious purpose? Or did she just expect them to continue paying his (no longer needed) telephone bill for all of eternity?

Even worse is the fact that, according to the news story, the family was trying to close out the customer’s bills and settle his estate, but would not be able to sell his house while the account was still open. It’s a screw-up so bad that even Verizon (which isn’t known for especially good customer service) couldn’t believe it; they’ve since apologized for the CSR and promised to refund the bill for the period during which the customer was already deceased, as well as closing the account. The consumer affairs reporter who filed the story is suggesting that it’s a good example of why you should make sure that your next of kin (or whoever might have to clean up after you’re gone) should have all of your PIN numbers, and even suggests some ways to accomplish this. But I regret to say that I think they’re both missing the point, here…

That point being that unless your company invests more time, effort, training, and (if at all possible) money in your customer service personnel, especially those engaged in billing functions, you will almost certainly have to deal with a similar case, sooner or later. If the screw-up is bad enough, as in yesterday’s Amex/Best Buy story, there is a non-zero chance that not only will you have extensive public relations issues to cope with, but you might also find a jury full of people who do not appreciate idiotic customer service policies has just given one of your mistreated customers tens of millions of dollars you do not have in punitive damages. In the long run, it would probably be cheaper to just invest a few more resources into your customer service department in the first place…

And you wouldn’t have to deal with thousands of scruffy bloggers mocking you all over the Internet…

Give Them Hell

I’ve written in this space before about how much I dislike gift cards – not because I feel there’s anything wrong with these Internet-age descendants of the humble gift certificate, but rather because there’s a real chance that the company you’ve bought them from will lose your records, change card formats without telling you (or sending you a replacement card), or go out of business altogether before you (or the recipient) can cash them in. To that list of possible electronic mishaps, we now have to add the possibility that the company trying to redeem the gift card will suffer a procedural miscue, accuse you of credit card fraud, and have you (or the recipient) arrested and jailed…

A story off of the New York One website tells the curious tale of a customer who went to Best Buy to cash in three American Express gift cards, only to have the clerk on duty handle them incorrectly, decide that it must be a case of credit card fraud, and summon the police. Getting the family members who had purchased the gift cards on the phone to verify the charges and vouch for the recipient didn’t help; the police took her off to jail anyway, and it was several hours later (after the people at American Express finally confirmed that there was no fraud involved and the recipient had done nothing wrong) that she was finally let go. At which point, things actually got worse – at least, from a business standpoint…

On returning to the store, the recipient was not given her money back (including the $180 she paid out of pocket), nor was she given the DVD player she had been trying to purchase; Best Buy told her she’d have to take it up with American Express. American Express, in turn, told her that the money had already been charged by Best Buy, and she’d have to take it up with them. At this point, the recipient did the only reasonable things she could do: she reported the story to the consumer advocate reporter at New York One, and hired an attorney to go after Best Buy. Personally, I hope she asks for an outrageous punitive award – and I hope the court gives it to her…

Best Buy’s explanation is that an employee somehow gave incorrect information to American Express, and that this caused the chain of events that eventually spiraled out of control. I don’t know if that’s even possible, but it’s been 15 years since I last ran a credit card-reader, and perhaps it is now. If it is, however, then the company has a legal responsibility to make sure that anyone who operates such a device knows how to do so correctly – and if they fail to do so, they are responsible for the consequences. In this particular case, the consequences include either false arrest or unlawful detainment (depends on how you’d want to prosecute it), as well as legal liability for defamation of character, public humiliation, deliberate infliction of emotional trauma, and (when they refused to return the customer’s own money, independent of the gift card validation issues) fraud and/or grand theft…

If such a credit card-reader malfunction is not possible, then we can add perjury and conspiracy to commit a felony to the above charges, and all of the people who were responsible for this foul-up should be looking at jail time in addition to putting the company at risk for huge punitive damages. Even worse, though, are the literally millions of people who either have heard or will hear about this episode – not because of this blog, of course, but of the hundreds of other places this story will be posted around the Internet. It’s going to convince a potentially large number of customers to avoid Best Buy, American Express, electronic gift cards, or all of the above, possibly for some time to come. No one is saying that credit card fraud isn’t a serious crime, or that private companies shouldn’t do everything they can to combat it. But as with any other crime, the more people who are falsely accused of credit card fraud, the harder it’s going to be to stop real crimes and catch real criminals later. In which case, the people who are paying for this screw-up are you and me; the public…

And I still hope the gift-card recipient in this story gives the company hell…

Electronic Courage

Over the course of a lifetime, most people will be in one or more dating relationships that they have to call off before finding the love of their life and settling down (assuming that they want to settle down in the first place). In situations where you’ve only dated the person a few times, you can usually break things off without a great amount of drama, just by saying that this isn’t working for you, but in the case of highly dramatic (or clinging) personalities, you may have had to take more drastic measures. If you’re a guy, this might entail just not calling anymore, having your new significant other (assuming you have one) “accidentally” answer a call from your (hopefully now) ex, or in extreme cases by changing your phone number and/or skipping town. If you’re female, this might entail being unaccountably “busy” every night until your (hopefully now) ex stops calling, having your father, brother, best friend or new significant other (assuming you have one) tell your ex to stop calling, or in extreme cases by changing your phone number and/or skipping town. As cowardly as these actions might be, they will at least keep you from having to have the breakup conversation in person…

For people who can’t even handle these time-honored classics, there’s a new service available online that eliminates the need for any involvement in the breakup process, and has the added value of possibly making someone’s pain available for public mockery. According to this article on Canada’s Globe and Mail website, this service (called IDUMP4U.com) will provide a telephone call notification of your termination of the relationship, and then post the audio file of the call on You Tube. Interviewed for the story, the entrepreneur behind this service claims to be providing a useful public service, and making a difference in people’s lives. In the strictest sense, this might be true: he is helping people who are too cowardly to handle their own break-ups escape from unhappy relationships, as well as giving his clients’ exes the chance to get on with their lives and possibly find actual happiness. But in a very real sense, all he is doing is enabling people to be lazy cowards and escape the consequences of their actions…

I haven’t framed this post as an ethics question because, personally, I don’t see that the service described does anything that asking any other third party to help you end a relationship does – and I can’t see how this is any worse than dumping someone by email or text message (which constitutes a legal divorce in certain Islamic countries). If I got a call from an such a service back when I was single, I would probably have concluded that someone who is chicken enough to hire a total stranger to tell me she’s breaking up with me is not someone I really want to be dating in the first place. It’s the logical extension of the saying about “If you loan someone $20 and never see them again (e.g. so they don’t have to pay you back), it was money well spent.” I’m really much more concerned about the potential such a service has for abuse…

Suppose a jealous ex-boyfriend hired such a service to tell you your current significant other is breaking up with you, in order to get you back. Or a spiteful ex-girlfriend started doing this with every new person you go out with, just so you can never be sure if you’ve got a relationship or not. You might be able to get a restraining order, but you’d never really be sure, would you? How about using such a service to make an enemy think someone is stalking them, by having people they’ve never even met “dump” them over the telephone (and on You Tube)? I don’t doubt that the entrepreneur in our story will do his best to weed out fraudulent and abusive uses of his service, but this has the potential to go south on him very quickly, resulting in actual lawsuits, loss of credibility, and lots of real-world hard feelings…

Seems like a difficult way to make a living, is all I’m saying. But for the moment, there’s someone selling electronic courage online for those who don’t have any of their own…

The Ethics of Online Reviews

I noted with great interest a story off the Wall Street Journal website about a lawsuit that’s being filed against Yelp.com for extortion. If you’re not familiar with the company, it’s basically a big online comments page, just like the ones on Amazon and other e-retailers, only not attached to any particular company or vendor. If you like a particular restaurant, dry cleaners or bookstore, you can go on the site and leave a review – and if somebody did you wrong in a customer service situation, you can go on the site and blast them for it. It seems like a great idea, doesn’t it? You can get real, raw feedback from the customers who have already made use of the product or service you’re thinking of putting money into, and get revenge on all of those rude and incompetent idiots who not only got your blood up but ruined your favorite shirt, too. Until we remember the basic problem with comments on the Internet…

If you read online comments (not that I am for one moment suggesting that anyone ought to do that) you will have probably already encountered those fun-loving beings known as “trolls” who insist on leaving posts that either insist that some completely impossible events have happened to the author, insult all of the other authors, or attempt to convince you to visit another site where you can find highly specialized pornography and/or make huge amounts of money for doing absolutely nothing. For the most part these electronic scribbling are harmless; the Internet equivalent of graffiti, but they do point up the credibility of anonymous comments left on websites: effectively nothing. It limits the utility of most online review functions (the ones on Craigslist are a good example) to the extent that you need to take them with a considerable grain of salt. But that’s not really the problem with Yelp, and it’s not what occasioned the lawsuit…

According to the news story (and several similar accounts), unless you give the company money, either for advertising or “membership” services of some other kind, you will never see any positive reviews of your business – and will find negative allegations that are completely false. The people who own Yelp are claiming the whole thing is hogwash, of course, but now they’re having the identical problem: people are coming out of the woodwork to claim that they’ve been scammed by the company, and there is no way to verify if any of THOSE claims are for real, either…

On the one hand, not only do people in this country have a Constitutional right to free expression, but there’s no effective way to regulate content on the Internet anyway. On the other hand, even in the United States you do not have the right to libel or slander other people (or their companies), and if you are a business entity you can (and probably will) be sued if you try to extort money out of people, disparage them for no reason, or just provide them with a good target and an easy way to squeeze money out of you in exchange for dropping a lawsuit. It’s an impossible business to be in, and I personally don’t believe it has a future; eventually only comments like the ones on Amazon (which you have to have a login and account information on file to post) are likely to survive. But in the interim, all of us who set foot onto the Web have a question in ethics to consider…

Do you have any responsibility to post positive comments about a business you have positive feelings for? Do you have any responsibility to post negative comments about a business with which you’ve had negative outcomes (to protect other consumers)? And if you know that a company which provides a forum for such comments may not be trustworthy, do you have any responsibility to avoid posting there? Or even warning other consumers away from their site, if you believe they are acting unfairly? For that matter, if you ARE such a company, how can you be expected to weed out trolls (who are attempting to destroy a business purely for the fun of it by using your service) from legitimate informants? Can you, ethically, post such comments if you can’t say for sure that they are legitimate? If you do so anyway, are you ethically responsible for the results of those comments?

It’s worth thinking about…

The Grad School Diaries: Return to Atlanta

Not counting layovers in the airport, this is my third trip to Atlanta, and oddly enough, all of them have been car trips – oddly, that is, when you realize that I’ve never lived within 800 miles of the place. But my wife and I were here in 2004, taking our daughter to college, and then again in 2008 when we came down for New Years’. And now we’re back, to help our daughter and her husband to be move again. Specifically, to help them move in with us, in East Lansing, Michigan – 800 miles from here…

I think we’re all a little worried about the transition; it’s just that none of us are willing to admit it. Even if you get along really well with your parents, it’s hard to avoid having mixed feelings about giving up your independence and going to live with them again. Even if you get along really well with the people who are going to be your in-laws (in another 14 months), it’s not easy to go and live under their roof. Even if you’re the best parent in the world (and my wife just might be) it’s hard to adjust to having the kids living with you again after five years as an empty-nester…

And, of course, even if you’ve loved your stepdaughter like your own child pretty much from day one (which is when we first met), being a middle-aged doctoral student with your own health, memory, stress and anxiety issues (and a schedule that frequently explodes for no apparent reason) means that anything you attempt takes on whole additional dimensions of complexity. It’s the only sane choice; it’s the only reasonable choice; it’s the only practical choice. But even for people who love each other as much as all of us do, it’s not an easy choice – we’re all going to have to work at this…

So it’s probably fitting that the whole thing is starting off with a mad scramble to get the residual belongings (the ones that didn’t get onto the moving van) packed up, everything we’re not taking thrown out, all of the services disconnected, and the cars loaded out. We’ve got to be out of the apartment in two days, on the road in three, and home to East Lansing before Monday, because I’ve got a class to teach. And that doesn’t even consider the going-away party…

It’s hardly the first time I’ve joined a party of the younger generation as somebody’s parent; I had that same experience with some of these same people seven months ago, the last time we were in Georgia. I think I finally understand the riff I’m getting here, this time: I’m 20 or so years older than the average person in this group, but not only am I cool enough to be worth hanging around with, I’m cool enough to actually go out and join the party without needing to be in charge of it. Don’t get me wrong; it would be a wonderful thing to be able to just whip out my billfold and tell everyone that the food and drink are on me. The generous side of my soul would love to do just that, in fact. But that would mean taking over this party; not only making it my event, but also changing my role into the “Great White Parent,” at a remove from all of the others…

It’s a line I will have to be careful not to cross over the next few years, and it’s a fine one. But this party is not about me; life in general is frequently not about me. And sometimes even the best of intentions can change things in ways you don’t want – and never intended. Some years ago I told the woman who would become my wife, “I am not a very good man – but you could make me one.” She said I gave her too much credit, but I disagreed then, and I do now; I am still not sure where this journey is taking me, or what I will be like at the end of it – but I know I will be a better person for taking the trip. And an infinitely better man for having taken it with her…

Of course, tomorrow I WILL be in charge of getting four people, three pets, two cars, and one metric assload of stuff 800 miles before we sleep. But for now, I think I’ll just lean back at one corner of the table and enjoy the party. Because there really is no way of knowing if I’ll ever make a fourth visit to Atlanta…

And the last easy day was yesterday…

What Are the Odds?

We’ve all seen the billboards, television ads, banners and whatnot, claiming that if you send it your old or unwanted gold trinkets, there’s a hefty payday waiting for you. Some of the television commercials are particularly high-pressure, with happy spokespeople talking about all of the wonderful things they managed to do with their huge gold windfall. What makes it all sound credible to the viewer is the near-record prices that gold has been selling for lately. After all, if gold is selling for over $1,000 an ounce, and you have several ounces of jewelry sitting around, that means you should be able to get several thousand dollars for it, right? What are the odds that something being advertised on TV by the late Ed McMahon could possibly be less than legitimate?

Well, according to an article that posted this week on The Boston Globe website, some of the “cash-for-gold” companies aren’t offering all that much per gram. In fact, 11% to 29% is the average range, but the Globe actually tried buying some gold earrings, just to see what they could get for them. The earrings sold for $62 (on sale) and had about $14.65 worth of gold in them (the rest of the price being “workmanship” and markup). The mail-in dealer they sent a pair to send back a check for $3.25...

Now, this is not to suggest that there is actual fraud going on here. The fact is, the mark-up of anywhere from 400% to 4,000% for “workmanship” and overhead is actually very common in jewelry; there’s also a matter of definitions, in that gold prices are given per ounce of 24-karat gold (the purest form), while a lot of gold jewelry is 14-karat or 10-karat, which are stronger and more durable. Even so, most of the prices quoted in the Globe story are listing gold prices at somewhere around $9.75 a gram, or a little over 27% of market price. And that doesn’t count the (apparently very common) cases where your “guaranteed” gold-return envelope mysteriously “vanished” in the mail, and the cash-for-gold company never got it in the first place…

What keeps this from being a scam is that none of the companies that engage in these practices make any claims about how much, exactly, you can make selling them your gold – or even what they pay per gram of gold in the first place. They also aren’t clear about how much they are charging you for shipping and handling, or for converting belongings of yours that look vaguely golden into gold ingots; metals extraction and recovery procedures aren’t actually that cheap, and neither are pre-paid insured shipping envelopes. It might seem like 77% is a large cut for the company to be taking, but $10 for shipping and handling and $1.40 for metals extraction aren’t actually large amounts of money in absolute terms. The real problem here isn’t so much deceptive advertising practices as it is people who can’t seem to grasp the idea of “something for nothing” being impossible, at least in a business context…

The simple fact is that companies do not exist to do wonderful things for the consumer; they exist to make money by providing value for their customers. McDonald’s does not exist to provide you with convenient and inexpensive nutrition; they exist to make money by buying basic ingredients (meat, potatoes) and adding value (processing, cooking) which you then pay extra for. Otherwise, you could just buy your own meat and potatoes and spent the time grinding, chopping, baking and frying until you got what you wanted. In the case of the gold-buying companies, you could take your $14.65 worth of gold, spend the money having it appraised, smelted, and made into ingots or wafers, and then sell it – spending all of the time, transportation, security, and overhead costs that would incur – and you’d probably be pressed to make more than the $6 the gold buyers in the linked story offered. Add in the shipping costs and insurance costs (along with the occasional pay-out to people who claim to have shipped you gold-like substances but really haven’t), and you’d probably have a hard time doing better than the 22% the “cash-for-gold” company in the story was offering…

None of this excuses the fact that these organizations are preying on people with a poor grasp of reality, of course. But if all companies were prohibited from making money on the greedy, the short-sighted, and the hopelessly credulous, the economy would collapse…

And you still couldn’t make thousands of dollars selling $14.65 worth of gold…

It’s Contagious?

I’ve spent a lot of time in the last year picking on various airlines for what I continue to feel are misguided strategies surrounding revenue, and I probably shouldn’t have. The fact is, consumer behavior is complicated, and even the scholars who spend their entire careers studying it can’t always account for why people choose to spend money on things that cost more, do less, and confer no particular social or status advantages on the purchaser. Certainly, Sir Richard Branson knows a lot more about running service-industry companies than I do (one of us is a self-made billionaire; one of us is a doctoral student making less money than an exterminator’s helper; you do the math), and if he feels that charging $80 for an aisle seat on Virgin Atlantic flights is good for business (even when people in the linked story are describing a whole section full of empty aisle seats), then I probably shouldn’t tell him otherwise. But you still have to wonder who at Blockbuster thought bringing back late fees was a good idea…

According to the story in the Chicago Business News website, Blockbuster has returned to charging extra for movies kept beyond the first five days. The company had suspended this policy in order to be more competitive with Netflix, which does not have late fees, but apparently they feel they can make enough on the extra revenue from the late fees to make up for the customers they will annoy enough to lose to Netflix. Even more mind-blowing, at least to me, was the note in the story about an “auto-sell” feature: if you keep a Blockbuster movie more than ten days, you are automatically considered to have bought it – which could be really embarrassing, I suppose, if you accidentally forget to return the wrong movie in time…

Now, I suppose the auto-sell feature makes sense; otherwise, you could easily end up charging people $100 for a used DVD that you’d sell them for $10, a deal which makes your customers unhappy and makes you an easy target for class-action lawsuits in any state that doesn’t have California’s iron-clad contract laws. I still have to wonder about the idea of late fees, though. The company insists that the new charges aren’t a late fee, but rather an extension of the rental charge, like the one you would incur if you kept a rental car for an extra day. I have trouble believing that their customers are going to see it that way, however; down on the pointy end of consumer purchasing behavior this looks just like an old-fashioned “I-was-too-lazy-to-return-the-movie” charge, and it’s likely to play right into the competition’s metaphorical hands…

So the questions that remain are, will Blockbuster actually be able to make more money on this new fee structure (as opposed to losing market share by annoying the all-important lazy and stupid customer demographics), and did they get this idea by watching the airlines charging for baggage checking fees, pillow and blanket fees, seat-selection fees, and (my on-going favorite) fees to pay your fees in advance? If your reaction to any of these issues was “Wait; Blockbuster is still in business?” you’ve probably just answered my questions – and raised a few more that the stockholders should be asking whoever the CEO of Blockbuster happens to be at the moment…

Wretched Excess?

If you read, watch or listen to the news these days, you will eventually get to hear a lot of stories about wretched excess, whether it’s $40 bottles of mineral water, $1,600 bottles of scotch, or $1.2 million cars – although I still like the story about the gold-plated sinks and toilets the best. There was a news story this week that may have taken this concept to a new limit, though: cashmere toilet paper…

A story posted on The Consumerist website led me to this press release site, where you can read more about this revolutionary new concept, assuming you still want to. Now, before you go off having some extreme reaction, please note that the press release specifies “extract of cashmere” rather than actual fabric; apparently it’s some sort of chemical extract (similar to aloe vera or jojoba) that is supposed to make the product more comfortable to use. It’s really only “cashmere” by courtesy; there’s just enough cashmere materials included to allow for marketing it under that name. The product is more expensive than bargain-brand equivalents, but not actually that much more expensive than the premium brands in the product category; unless there is something special about its performance, it’s really nothing more than a marketing stunt…

Which does not change the fact, however, that it’s a super-luxury brand of toilet tissue – at best, an absurd concept, and at worst an example of excess, although perhaps not quite as wretched as you might have initially thought. One can only wonder if purchasing such a product would confer status on the consumer (“Look, Helen! The Johnsons are using cashmere toilet paper! How are we ever going to top THAT?”) or provide an advantage in social situations (“I bought the cashmere toilet tissue because I knew YOU were coming over, baby!”). Would it be possible to market super-premium versions of other household products not normally offered in a luxury configuration? Could you offer mink toothbrushes? Solid gold soap dishes? Diamond toilet brushes? Platinum-plated, jewel-encrusted loofas? Should you just give up and start buying luxury-grade knitwear, for towels and washcloths, if not actual toilet tissue?

I kid, of course, but while this sort of product is undoubtedly good for business for whatever sort of store sells cashmere toilet paper (assuming that anyone actually buys such a thing), it does raise some serious issues about the wider civilization in which this commerce is occurring – such as: have we all gone completely out of our tiny little minds? In a world where you could feed a child in a third-world country for a month on what the crystal-encrusted bottle of spring water would cost, how do you rationalize spending that much extra on a product that you’re literally going to flush the moment you’re done with it? Even allowing for its obvious contribution to the supply of low-hanging comedy fruit for Internet humorists, can we as a society really continue doing things like this?

Of course, social commentary about wretched excess has been around for millennia, and there’s no reason to believe that it has ever actually been responsible for bringing down an entire civilization. But, on the other hand, if this is the exception that proves the rule, remember, you heard it hear first, folks...

More Bad News

Hopefully, most of you have been spared from having to deal with the phenomenon of “helicopter parents,” but if you spend any time working in Academia you won’t be able to avoid them for long; I even had some run-ins with them at the Extension at UCLA. The term refers to those individuals who insist on hovering over their offspring at all times, regardless of the situation – hence the name. It drives elementary, middle and high school teachers to distraction and occasionally results in kids with no concept of how to solve their own problems, but it really gets interesting once the children in question turn 18. As a college instructor, I’m legally prohibited from discussing anyone’s grades with anyone; if you’re a legal adult I can’t tell your parents anything, any more than I could a total stranger. But helicopter parents aren’t about to take no for an answer, even with legal backing; there have been cases of them calling their (adult) child’s employer and demanding to know why their offspring wasn’t given a plum assignment or a “deserved” promotion…

All of which is already causing massive problems for an American workforce which wasn’t doing that well against the rest of the world as it was, but the worst may be yet to come. A story from the AP by way of the SF Chronicle warns of a growing trend of colleges calling parents whenever a student under the age of 21 is caught with alcohol, or even just intoxicated. I’m not sure this practice is even legal in some jurisdictions; arrests are generally public information, but not always, and if the student isn’t actually arrested I’m not sure you can release their school disciplinary record. But even assuming this is legal, it’s still one of the most colossally bad ideas I’ve heard since giving Federal funds to “Faith-based” organizations without an audit procedure. It’s the first step onto an extremely slippery slope which NOBODY in their right mind wants to be on…

Now, I know a lot of you are thinking “That’s not so bad. Maybe it will cut down on the amount of underage drinking – and the resulting underage alcohol-related traffic fatalities.” And you may be right; some of the college administrators quoted in the linked story insist that this helps their students to learn better judgment, grow up faster, stop making silly mistakes, and so on. But the potential for abuse of such a system is almost unlimited; if school administrators are allowed to broadcast disciplinary record information there’s no logical reason to keep them from reporting on how much time their students spend studying, what other activities their students are involved in, who their students are keeping company with, and thousands of other details. College administrators will resist doing so, of course; most of them are over-worked now, and being required to function as babysitters and nannies will not sit well – but, as previously noted, that won’t stop the helicopter parents from demanding such services, if they get such an idea into their heads in the first place…

Even worse, though, is the effect this is likely to have on the students themselves. Some of them will probably just stop trying to solve their own problems, since they know that the moment word gets home their mommy and daddy will be on the telephone with the answer anyway. Even worse, however, will be the kids who went away to college to try to get out from under their parents’ thumb in the first place; they’re likely to take more extravagant risks and insane chances than college undergraduates already do, just to get off of the grid and away from the camera. There’s no telling what they’ll actually do once they’re incognito, but I can almost assure you that it’s going to be worse than just underage drinking – and that the same helicopter parents who are already demanding that their offspring be protected from every conceivable risk (including bad grades AND unemployment) will start demanding that the schools protect them from themselves as well…

Which is how this whole cycle started in the first place…

Killer PR Challenge

In case you missed it on your local news, there has been quite a flap for the last few days over what Sea World should do regarding its killer whales and their public image. While the company has made a very good living showcasing these majestic marine predators over the past few decades, there’s no getting away from the fact that an Orca, no matter how intelligent, fun-loving and vaguely anthropomorphic it might be, is also a six-ton (or larger) apex predator that eats smaller mammals in addition to fish. In fact, there have been some reported cases of Orcas harassing dolphins and porpoises for no apparent reason, and they are quite willing to eat adorable little marine mammals like seals, sea lions and sea otters. However, this isn’t usually much of a problem in marine parks – where the Orcas are seen frolicking with humans and eating small fish out of buckets – until one of them kills somebody, the way one did in Florida this week…

You can check out the story from the Associated Press by way of the Washington Post Online if you want to, but the basic upshot is that at the end of the lunchtime show last Wednesday, a large male killer whale named Tilikum attacked and fatally mauled one of his trainers in front of a large and horrified audience, including a fair number of families with small children. This has sent a lot of people into panic states, and the company into spin control, but no one is trying to deny that the event happened or that it would have been horrific to watch. The real question now is how can Sea World deal with the inevitable firestorm of negative comments, both from people who are against the idea of aquaria and marine parks in the first place, and also from people who are against the idea of anything unpleasant ever happening where children can see it. Or, for that matter, those against placing employees into dangerous working conditions where, for example, they might get mauled or killed by giant apex predators…

Now, I don’t want to suggest that the company has done anything wrong in this case. The trainers who work with the killer whales are all adults who have been briefed on the risks, signed all manner of legal forms, and given extensive training on how to work safely around animals that can kill you anytime they feel like it, and all of them chose to take the job. By the same token, anytime you watch a human “trainer” go into an enclosure with a wild animal (and Orcas can’t really be domesticated, after all), be it a circus lion tamer or a marine park employee, there’s a non-zero chance that he or she will be killed and/or eaten by the animal. In the case of a lion tamer’s act, that sense of danger is what makes it exciting, and in the case of a killer whale show, it’s the fact that these animals could squash the human participants like a grape – but don’t! – that makes the exhibit so fascinating and wonderful. Unfortunately, that also means that sometimes the animals will go ahead and behave like animals – in which case, you usually need to hire a new trainer…

So, if it was your company, and your trademarked tourist attraction had just killed someone in front of hundreds of horrified tourists, what would you tell the media? For that matter, what would you do with the Orca? Before you retire tonight, you might consider saying a brief word of thanks to whoever (or whatever) you believe in that you don’t have to figure out this particular PR nightmare. And, perhaps, that your job does not entail a non-zero chance of being eaten – unless it does, of course…