Here’s another hypothetical for you: Suppose your employers announced that because of some really asinine choices made by their senior management team, some of which were so bad that they actually did bankrupt the company, you and your coworkers were going to be required to take a 50% cut in pay. That’s right; not a 10% reduction or even a 25% cut, but half of your current salary is going away. When you protest that this isn’t fair, and you can’t afford to live on such a salary, your managers tell you that the new, lower wage is about the industry standard these days (since your entire industry is in the tank); when you say you won’t accept the pay cut, they tell you that if everyone in the workforce does not accept it they’re going to close the factory and lay off everyone. Now, my question is, would you still refuse? Would your answer be different if you knew you could transfer to another facility owned by the same company and retain your current salary in the event of a plant closure?
Before you answer that, consider that your plant is one of the largest employers in the city you live in; even if all of the people who work there are able to transfer to other locations in other states there will be a domino effect as all of the businesses that provide you and your coworkers with food, shelter, clothing, transportation, entertainment and various services will lose thousands of customers, the city itself will lose tax revenue (from the plant being gone and from all of the former workers leaving, and from all of the collateral damage mentioned above) and have to restrict or eliminate even basic services, other manufacturing companies may flee the expanding urban blight, and your entire community could spiral into the sort of decay that causes everyone to move to less doomed places like Detroit. Are you still going to walk away?
Given where you’re reading this story, you already know that there’s a real case going on where this is actually happening; you can find the original story here if you want to. A union supporter would tell you that the union people had no choice but to reject the offer; making that sort of concession would have dramatically lowered the power and leverage of the union and placed all of its members in danger of further abuse by management. A management supporter, on the other hand, would point out that the union effectively demanded that the new owners continue paying their people double the industry standard for those jobs, that the rejection of this offer has a real chance of turning the workers’ community into a ghost town, and that any of them who can’t transfer will end up having to take the standard wages offered in the industry anyway – thus, effectively leaving them with the same situation they would have been in if they’d just accepted…
The people I feel sorry for in all of this aren’t the owners (as noted elsewhere in this space, the American auto industry dug its own pit and jumped into it willingly), nor even the union employees (the UAW leadership has been guilty of a few hair-brained moves of its own), but rather the people in the community who have been supplying goods and services to the company and to the people who worked there, many of whom are about to see their own businesses bankrupted and their own lives destroyed in the fallout. I’m not saying that I’d accept a 50% pay cut, or that I’d just go along with paying people double the industry standard for their positions; I’m just saying that there ought to be a better way. And I might add that unless we start looking for other possibilities, the decay of the American manufacturing sector is only going to get worse…
Thursday, September 30, 2010
Monday, September 27, 2010
Boring Enough for You?
We recently had occasion to travel into Detroit, and as we progressed along Route M10 into the city, I couldn’t help noticing the streets named “Ten Mile Road” and “Nine Mile Road” and so on. Somewhere in the heart of downtown there was probably a street named “Baseline” road, until it was named something more interesting, and each of these other Mile roads were one-mile increments coming away from the “baseline” where the surveyors started their map. Since the city was originally founded over 300 years ago (by a French explorer whose last name was Cadillac, of all things) it’s a fair bet that the original survey information is no longer all that relevant, and the only real reminders of it are these rather blandly-named streets. On the other hand, there’s a story online today that suggests that this may be just as well…
According to an article from The Press Association UK by way of Google News, McIntosh County in rural Georgia is considering changing the names of some of its streets to less interesting things in the hopes of deterring thieves. It may seem trivial to us, but street signs cost money (somewhere between $10 and $100 in most municipalities, plus the cost of installing the replacements), and the County estimates it is losing about 550 copies of the street signs for Green Acres Street, Boone’s Farm Lane and Mary Jane Lane each year. By the time you get into $50,000 or more each year, it’s not just a nuisance crime anymore, and none of the usual countermeasures seems to be helping. But if the county re-names these thoroughfares with names that don’t suggest a popular TV comedy, a low cost brand of wine, and an old-fashioned slang term for marijuana, respectively, it seems possible that people will stop stealing the signs. There’s no guarantee that the people on those streets won’t rise up in protest, however…
Now, I’m not suggesting that the people who originally named these streets did anything wrong; the odds are good that both the names pre-date both the television show and the wine, and it’s possible that they ever predate the drug slang. Nor am I suggesting that cities and towns should cave into to criminal influences by re-naming things. I am suggesting that this may be the best approach in terms of creating the best results for the lowest possible cost. The county authorities could attempt to prevent the crimes through the use of high fines, strict punishments, and aggressive law enforcement, but all of these things would ultimately cost more money, and the existing laws and enforcement have not been able to prevent the thefts. Changing the street names to First Street, Second Street and Third Street (or something equally run-of-the-mill) could eliminate the whole problem (including the $50,000 + dollars of replacement expenses each year); the county could even raise some extra money by auctioning off all of the remaining street signs, or offering copies for sale (the way the City of Paris does with some of its world-famous street signs)…
I call all of this to your attention, not because I believe there are any local civil leaders reading this blog (although you never really know), nor because I believe any sign thieves might be turning in, but rather to suggest that there’s a valuable lesson here about management and the art of the possible. The McIntosh County Supervisors clearly have the choice between spending several million dollars to prevent the loss of 50,000, or changing the names of three streets, eliminating the thefts and making a potential revenue stream available (the souvenir signs). The next time you’ve got an expensive problem on your desk, you might want to take a moment and consider alternative solutions. Are you spending a million dollars to save 50,000? Is there an easy way to prevent the losses and make money, too? Maybe you should think about it…
According to an article from The Press Association UK by way of Google News, McIntosh County in rural Georgia is considering changing the names of some of its streets to less interesting things in the hopes of deterring thieves. It may seem trivial to us, but street signs cost money (somewhere between $10 and $100 in most municipalities, plus the cost of installing the replacements), and the County estimates it is losing about 550 copies of the street signs for Green Acres Street, Boone’s Farm Lane and Mary Jane Lane each year. By the time you get into $50,000 or more each year, it’s not just a nuisance crime anymore, and none of the usual countermeasures seems to be helping. But if the county re-names these thoroughfares with names that don’t suggest a popular TV comedy, a low cost brand of wine, and an old-fashioned slang term for marijuana, respectively, it seems possible that people will stop stealing the signs. There’s no guarantee that the people on those streets won’t rise up in protest, however…
Now, I’m not suggesting that the people who originally named these streets did anything wrong; the odds are good that both the names pre-date both the television show and the wine, and it’s possible that they ever predate the drug slang. Nor am I suggesting that cities and towns should cave into to criminal influences by re-naming things. I am suggesting that this may be the best approach in terms of creating the best results for the lowest possible cost. The county authorities could attempt to prevent the crimes through the use of high fines, strict punishments, and aggressive law enforcement, but all of these things would ultimately cost more money, and the existing laws and enforcement have not been able to prevent the thefts. Changing the street names to First Street, Second Street and Third Street (or something equally run-of-the-mill) could eliminate the whole problem (including the $50,000 + dollars of replacement expenses each year); the county could even raise some extra money by auctioning off all of the remaining street signs, or offering copies for sale (the way the City of Paris does with some of its world-famous street signs)…
I call all of this to your attention, not because I believe there are any local civil leaders reading this blog (although you never really know), nor because I believe any sign thieves might be turning in, but rather to suggest that there’s a valuable lesson here about management and the art of the possible. The McIntosh County Supervisors clearly have the choice between spending several million dollars to prevent the loss of 50,000, or changing the names of three streets, eliminating the thefts and making a potential revenue stream available (the souvenir signs). The next time you’ve got an expensive problem on your desk, you might want to take a moment and consider alternative solutions. Are you spending a million dollars to save 50,000? Is there an easy way to prevent the losses and make money, too? Maybe you should think about it…
Sunday, September 26, 2010
The Ethics of Censorship
Everyone knows that censorship is wrong, or at least everyone raised in a country with a free press certainly thinks so. Americans in particular tend to be rather militant about this; we fought an armed revolution against a mother country just so that no one could tell us what we could say, write, or pray to, and there’s no way we’re going to stand for that now. By the same token, everyone knows that there are some types of speech that are not (and probably shouldn’t be) guaranteed under the Constitution; you really don’t want people going around inciting others to violence, or shouting “Fire!” in a crowded place, and so on. The inherent problem is where to draw that line, and more to the point, who gets to draw it?
The case about Facebook invitations (and the potential abuse of them) that came up earlier this week is an excellent example. On the one hand, there is no way a private company should be monitoring what can or can’t be put up on the Internet, and the idea that such monitoring would absolve parents of their responsibility to supervise (and when necessary discipline) their children is absurd. But at the same time, for the company to take no responsibility for the misuse of its services, say to post public notice of a wild party giving an enemy’s address and promising free food and alcohol, for example, is fatuous. Nor will any disclaimer or contract language help them; such an attack could easily be aimed at an individual who has no relationship with the company and has never visited their site – and defending such a claim in court would not be a joyous experience…
Which leads me to the obvious question in ethics: How much responsibility does Facebook (or any other social networking operation) have for the misuse and abuse of its services to damage other people? Can they be required to safeguard the interests of people who are not their customers, effectively serving as adjunct law enforcement personnel? Can they be required to determine what is or is not protected speech, thus taking responsibility for interpreting and enacting Constitutional law? Or, to phrase it a little differently, if a company offers a service and one private individual uses that service to damage another private individual, does the company have any ethical responsibility to prevent such misuse of their services, or to make whole the damaged party?
For most of history there has been no such assumption of responsibility; the companies that make cars generally can’t be held liable for their products being used in drive-by shootings, or to escape the scene of a crime, for example. On the other hand, product liability has grown much more complicated in recent years, with the tobacco companies being held responsible for the outcome of using their products, and various firearm manufacturers being sued for facilitating violent crimes – and it’s hard to imagine that an actual innocent person whose home (and potentially, life) have been destroyed through misuse of a social networking service wouldn’t have some right to seek compensation. One could argue that the service provider has a responsibility to verify the identity of its customers, and to furnish the identity of anyone who uses the service to commit a crime to the relevant authorities, but that’s still just the legal, rather than ethical, aspect of the question…
At what point are companies like Facebook just service providers, innocent and blameless for the way their services are used to damage others (in the same sense that the telephone company isn’t generally held responsible for crimes planned or carried out using voice communications), and at what point are their services actually creating new categories of offense? And what responsibility (if any) does the company have to make sure that its services aren’t being used improperly?
It’s worth thinking about…
The case about Facebook invitations (and the potential abuse of them) that came up earlier this week is an excellent example. On the one hand, there is no way a private company should be monitoring what can or can’t be put up on the Internet, and the idea that such monitoring would absolve parents of their responsibility to supervise (and when necessary discipline) their children is absurd. But at the same time, for the company to take no responsibility for the misuse of its services, say to post public notice of a wild party giving an enemy’s address and promising free food and alcohol, for example, is fatuous. Nor will any disclaimer or contract language help them; such an attack could easily be aimed at an individual who has no relationship with the company and has never visited their site – and defending such a claim in court would not be a joyous experience…
Which leads me to the obvious question in ethics: How much responsibility does Facebook (or any other social networking operation) have for the misuse and abuse of its services to damage other people? Can they be required to safeguard the interests of people who are not their customers, effectively serving as adjunct law enforcement personnel? Can they be required to determine what is or is not protected speech, thus taking responsibility for interpreting and enacting Constitutional law? Or, to phrase it a little differently, if a company offers a service and one private individual uses that service to damage another private individual, does the company have any ethical responsibility to prevent such misuse of their services, or to make whole the damaged party?
For most of history there has been no such assumption of responsibility; the companies that make cars generally can’t be held liable for their products being used in drive-by shootings, or to escape the scene of a crime, for example. On the other hand, product liability has grown much more complicated in recent years, with the tobacco companies being held responsible for the outcome of using their products, and various firearm manufacturers being sued for facilitating violent crimes – and it’s hard to imagine that an actual innocent person whose home (and potentially, life) have been destroyed through misuse of a social networking service wouldn’t have some right to seek compensation. One could argue that the service provider has a responsibility to verify the identity of its customers, and to furnish the identity of anyone who uses the service to commit a crime to the relevant authorities, but that’s still just the legal, rather than ethical, aspect of the question…
At what point are companies like Facebook just service providers, innocent and blameless for the way their services are used to damage others (in the same sense that the telephone company isn’t generally held responsible for crimes planned or carried out using voice communications), and at what point are their services actually creating new categories of offense? And what responsibility (if any) does the company have to make sure that its services aren’t being used improperly?
It’s worth thinking about…
Thursday, September 23, 2010
A New World Error
Most of the time when somebody uses the phrase “Wake up, sheeple!” (that is, sheep + people = sheeple) they’re being a douchebag – which is to say, they’re asserting how cool, unique, and not sheep-like they are compared to everyone else. It’s rather like the stereotypical “hipster” who only listens to obscure music, just so they can say “It’s a really obscure band – you’ve probably never heard of it.” But there are times when a news story will come along and you find yourself wondering just how naïve – how foolish and unworldly – someone would have to be to allow such events to happen in the first place. You don’t give a loaded gun to a small child; you don’t turn your back on a mad dog, and you don’t post invitations to an upcoming party where everyone on the Internet can see them…
Unfortunately, we keep seeing cases where somebody does just that – usually because they’re a teenager and don’t understand that the whole world WILL take you up on such an invitation, or because they don’t understand how the privacy settings on Facebook work, or most often both. The most recent case comes to us from Harpenden, England by way of the MSNBC Website , but there have been similar cases elsewhere in the UK and Spain in the last couple of years. In this week’s case the teen’s parent was able to cancel the party and shut down the Facebook page well in advance, and local law enforcement is gearing up to deal with any mobs of drunken revelers (and vandals and thieves) like the ones from February’s incident in Spain . The real question is how could this happen in the first place…
The news account states that the teen in our story did not check the box on her Facebook invitation designating the party as a private affair, and that this lead to it being classified as a public event and made available to anyone who wanted to see it – which, by extension, meant that the whole world was invited. On learning of the mistake, her mother cancelled the party, suspended the account, and revoked the teen’s Internet access, but also said that Facebook itself should have realized that a teenager’s birthday party should not be made available to the public and blocked the public listing. The company, in turn, says that it can’t monitor every invitation sent out by every one of its customers, and that doing so would be a violation of free speech (and freedom of assembly, if you think about it) anyway. They suggest that parents keep a closer eye on what their children are posting online…
On the one hand, it’s hard not to side with the company on this – nobody really wants Facebook censoring what their users post, and there’s no question that parents shouldn’t expect a social networking site to mind their children for them. On the other hand, it’s a rather naïve and silly policy for the company to take, given the potential for abuse this situation exposes. A common harassment tactic (it goes back to the social unrest in the 1960s) is to surreptitiously post signs indicating that your adversary is having a garage sale at dawn on Sunday, and then watch the resulting chaos; imagine how much more damaging it would be to create a dummy Facebook account and indicate that a wild party will be held at your enemy’s address on Saturday, and invite the whole world to come – especially if they are actually having a party that night…
When we were children, or even young adults, the worst that could happen with a wild teenage party was that a few of the wrong kids might get wind of it and show up to make trouble; today, if you push the wrong button, every troublemaker in the world could get your name, address, telephone number, and the date and time of your party. The truth is that there has never been anything as mindlessly powerful or casually dangerous as the Internet in all of human history, and allowing your children to play with it without supervision is far more insane than leaving loaded weapons lying around. The world has changed around us once again, and it does not care what you or I or anyone else thinks about it. Anyone who does not pay attention to the dangers of this Brave New World might as well be stuffing raw meat down their pants and then going for a walk in wolf country…
Unfortunately, we keep seeing cases where somebody does just that – usually because they’re a teenager and don’t understand that the whole world WILL take you up on such an invitation, or because they don’t understand how the privacy settings on Facebook work, or most often both. The most recent case comes to us from Harpenden, England by way of the MSNBC Website , but there have been similar cases elsewhere in the UK and Spain in the last couple of years. In this week’s case the teen’s parent was able to cancel the party and shut down the Facebook page well in advance, and local law enforcement is gearing up to deal with any mobs of drunken revelers (and vandals and thieves) like the ones from February’s incident in Spain . The real question is how could this happen in the first place…
The news account states that the teen in our story did not check the box on her Facebook invitation designating the party as a private affair, and that this lead to it being classified as a public event and made available to anyone who wanted to see it – which, by extension, meant that the whole world was invited. On learning of the mistake, her mother cancelled the party, suspended the account, and revoked the teen’s Internet access, but also said that Facebook itself should have realized that a teenager’s birthday party should not be made available to the public and blocked the public listing. The company, in turn, says that it can’t monitor every invitation sent out by every one of its customers, and that doing so would be a violation of free speech (and freedom of assembly, if you think about it) anyway. They suggest that parents keep a closer eye on what their children are posting online…
On the one hand, it’s hard not to side with the company on this – nobody really wants Facebook censoring what their users post, and there’s no question that parents shouldn’t expect a social networking site to mind their children for them. On the other hand, it’s a rather naïve and silly policy for the company to take, given the potential for abuse this situation exposes. A common harassment tactic (it goes back to the social unrest in the 1960s) is to surreptitiously post signs indicating that your adversary is having a garage sale at dawn on Sunday, and then watch the resulting chaos; imagine how much more damaging it would be to create a dummy Facebook account and indicate that a wild party will be held at your enemy’s address on Saturday, and invite the whole world to come – especially if they are actually having a party that night…
When we were children, or even young adults, the worst that could happen with a wild teenage party was that a few of the wrong kids might get wind of it and show up to make trouble; today, if you push the wrong button, every troublemaker in the world could get your name, address, telephone number, and the date and time of your party. The truth is that there has never been anything as mindlessly powerful or casually dangerous as the Internet in all of human history, and allowing your children to play with it without supervision is far more insane than leaving loaded weapons lying around. The world has changed around us once again, and it does not care what you or I or anyone else thinks about it. Anyone who does not pay attention to the dangers of this Brave New World might as well be stuffing raw meat down their pants and then going for a walk in wolf country…
Wednesday, September 22, 2010
Impression Management
A story that hit my desk today struck me as being an excellent example not only of how much more complicated business operations have become in the Internet Age, but also of how difficult it’s getting to categorize the information you get in off of the news channels. There are times when what looks at first to be a breakdown in (civility and common sense) worth of the Racing to the Bottom blog turns out to be a complicated case of “he-said, she-said” or even a question of ethics without any clear answer at all. Which way you view this case depends on a number of factors, only one of which is whom you decide to believe…
You can find the original story on USA Today Travel Online if you want to, but the basic story is that a couple was staying in a hotel in England when the manager burst into their room, accused them of posting negative reviews of his establishment on the Trip Advisor website, and ordered them to leave before he called the police. The story neglects to mention if the manager’s allegations were true, and there is no listing for the hotel in question currently up on Trip Advisor anyway (it might have been taken down due to the traffic attendant upon the news story), but that’s not really the point anyway; the question is how to interpret the facts presented…
Some of the news stories (and commenters) suggested that bad-mouthing a hotel in which you are currently staying is unwise, and we could perhaps agree with that. On the other hand, barging into a customer’s room and evicting them because you suspect they have posted uncomplimentary reviews about your business is completely asinine, and so is calling the police to remove people who aren’t actually doing anything wrong from your establishment. We could also point out that is these customers weren’t actually writing negative reviews before, they certainly will be now, and hundreds of thousands of people all over the world who never intended to do business with you before certainly won’t do so now, which makes these tactics even more absurd…
On the other hand, there have already been reported cases of people trying to use the threat of negative online reviews to extort money or free services from a variety of businesses, and in particular ones from the hospitality industry who are the most vulnerable to such rackets. We have no idea what words may have been exchanged between the customers and the management, what demands or counter-claims may have been made, or even what the manager would say about any of this, since his side of the story has been left out of the media accounts. It would appear that regardless of the circumstances he should have been able to come up with a better approach to the situation than this, but that’s not a call we should be making; he was there and we were not…
In the long run it probably won’t matter what really happened; the wired world has the attention span of a fruit fly, and within hours (if not minutes) there should be something more outrageous popping up on the news aggregation cites for people to outrage about. Unless the manager in our story makes a practice of this sort of thing it probably won’t come up again – and if it does, I would imagine he has a much better idea of what the consequences of such actions would be now. The real lesson here is for anyone who is, has, or ever will be the manager of any business that involves contact with the public, and that lesson is about image management…
You can’t control what your customers are going to say about you online, or anywhere else, anymore than you can decide whether or not scam artists will attempt to extort money from you using online reviews, or anything else. All you can do is provide the best possible service at competitive prices, remain calm and professional at all times, encourage people who DID enjoy doing business with you to write positive reviews if they can, and avoid causing the sort of public spectacle that results in news stories and statements from law enforcement agencies. If your business is a sound one, the truth will get out eventually. And if it isn’t… Well, perhaps you should spend more time reading comments your customers have written and see what you can do to improve…
You can find the original story on USA Today Travel Online if you want to, but the basic story is that a couple was staying in a hotel in England when the manager burst into their room, accused them of posting negative reviews of his establishment on the Trip Advisor website, and ordered them to leave before he called the police. The story neglects to mention if the manager’s allegations were true, and there is no listing for the hotel in question currently up on Trip Advisor anyway (it might have been taken down due to the traffic attendant upon the news story), but that’s not really the point anyway; the question is how to interpret the facts presented…
Some of the news stories (and commenters) suggested that bad-mouthing a hotel in which you are currently staying is unwise, and we could perhaps agree with that. On the other hand, barging into a customer’s room and evicting them because you suspect they have posted uncomplimentary reviews about your business is completely asinine, and so is calling the police to remove people who aren’t actually doing anything wrong from your establishment. We could also point out that is these customers weren’t actually writing negative reviews before, they certainly will be now, and hundreds of thousands of people all over the world who never intended to do business with you before certainly won’t do so now, which makes these tactics even more absurd…
On the other hand, there have already been reported cases of people trying to use the threat of negative online reviews to extort money or free services from a variety of businesses, and in particular ones from the hospitality industry who are the most vulnerable to such rackets. We have no idea what words may have been exchanged between the customers and the management, what demands or counter-claims may have been made, or even what the manager would say about any of this, since his side of the story has been left out of the media accounts. It would appear that regardless of the circumstances he should have been able to come up with a better approach to the situation than this, but that’s not a call we should be making; he was there and we were not…
In the long run it probably won’t matter what really happened; the wired world has the attention span of a fruit fly, and within hours (if not minutes) there should be something more outrageous popping up on the news aggregation cites for people to outrage about. Unless the manager in our story makes a practice of this sort of thing it probably won’t come up again – and if it does, I would imagine he has a much better idea of what the consequences of such actions would be now. The real lesson here is for anyone who is, has, or ever will be the manager of any business that involves contact with the public, and that lesson is about image management…
You can’t control what your customers are going to say about you online, or anywhere else, anymore than you can decide whether or not scam artists will attempt to extort money from you using online reviews, or anything else. All you can do is provide the best possible service at competitive prices, remain calm and professional at all times, encourage people who DID enjoy doing business with you to write positive reviews if they can, and avoid causing the sort of public spectacle that results in news stories and statements from law enforcement agencies. If your business is a sound one, the truth will get out eventually. And if it isn’t… Well, perhaps you should spend more time reading comments your customers have written and see what you can do to improve…
Tuesday, September 21, 2010
Look to the Skies
A story popped up this week about one of the occasional attempts to bring satellite phones to the mass market, and I thought it might be interesting to review the life, death and rebirth of the Iridium system. If you’ve heard this story before you may want to stay with us anyway, because there appear to be a few new wrinkles coming – and the story is still a good one, if one likes cautionary tales about good technology and unproven business models…
The Iridium system was launched during the late 1990s and went online November 1, 1998. It was less hype than a constellation of satellites in geostationary orbits that could send and receive microwave telephone systems, much like a set of cell towers orbiting the Earth at 23,800 miles up. The handsets needed to use this network were heavier and more expensive than the mobile phones of the time, but Iridium offered the unique advantage of being able to make and receive telephone calls to or from literally anywhere on the planet. Unfortunately, the company hadn’t worked out the issues with its sales, customer service or support units; it was also charging significantly more each month for a service that would allow you to call your mom from the North Pole, but would not allow you to make a call from one floor of your office building to another. Despite its obvious potential, Iridium failed in a truly spectacular fashion just 9 months after its founding, with a group of private investors buying up the company’s assets (estimated at $6 billion US in equipment alone) for roughly $25 million US…
At one point it was reported that the Iridium constellation would have to be de-orbited for safety reasons, but the new owners were able to keep it up and operational; today the company has about 300,000 subscribers and was profitable as recently as 2008 (the last year for which I have figures available). It’s available to anyone willing to pay the price, but the general public is largely unaware of it; most of the users are marine shipping firms, aviation companies, oil and other survey/exploration outfits, field scientists, and the U.S. Department of Defense. Still, there’s nothing stopping you from getting an Iridium phone and service contract and being reachable anywhere under the open sky, assuming that you would want to. But now AT&T is introducing a new wrinkle that has the potential to change everything – or leave another big smoking crater…
According to an article on the CNET News service this week, AT&T is introducing a dual-mode phone, called the “TerreStar Genus” which operates as a conventional cell phone when there’s a carrier for it to connect with, but switches to satellite reception when there are no cell towers available. The handset is still expensive, at $800 or so, and the satellite feature is an extra $25 per month plus 65 cents per minute of voice calls or $5 per megabyte of data – above and beyond the usual AT&T cell phone service contracts, which I can tell you aren’t all that cheap to begin with. But with the appearance of cell phones costing $10,000 plus just for the handset, and iPhone and iPad units that are nearly that expensive to begin with, it’s hard to imagine that AT&T won’t get any users; the real question is whether they will be able to sell enough units to make up the costs involved in offering such a service in the first place…
The simple fact is, not that many people really need to be able to make telephone calls from the middle of a national park, the top of an ice floe, or the deck of a ship in the middle of the ocean. Satellite telephone service is a niche industry at the best of times (as Iridium found out in 1998), and the relatively small number of customers who occupy that niche are already being served by the existing provider. Unless AT&T can identify a new market segment for the phone and the service, or just convince enough technophiles that this is the must-have gadget of 2010, they are not likely to see any significant number of sales…
But, on the other hand, if they can expand the market enough to lower the price on both the hardware and the service contracts, they could finally introduce satellite communications to a mass market. For the first time, you might be able to call anyone on Earth from anywhere at all times…
The real question then becomes, is this a good thing, or a bad thing?
The Iridium system was launched during the late 1990s and went online November 1, 1998. It was less hype than a constellation of satellites in geostationary orbits that could send and receive microwave telephone systems, much like a set of cell towers orbiting the Earth at 23,800 miles up. The handsets needed to use this network were heavier and more expensive than the mobile phones of the time, but Iridium offered the unique advantage of being able to make and receive telephone calls to or from literally anywhere on the planet. Unfortunately, the company hadn’t worked out the issues with its sales, customer service or support units; it was also charging significantly more each month for a service that would allow you to call your mom from the North Pole, but would not allow you to make a call from one floor of your office building to another. Despite its obvious potential, Iridium failed in a truly spectacular fashion just 9 months after its founding, with a group of private investors buying up the company’s assets (estimated at $6 billion US in equipment alone) for roughly $25 million US…
At one point it was reported that the Iridium constellation would have to be de-orbited for safety reasons, but the new owners were able to keep it up and operational; today the company has about 300,000 subscribers and was profitable as recently as 2008 (the last year for which I have figures available). It’s available to anyone willing to pay the price, but the general public is largely unaware of it; most of the users are marine shipping firms, aviation companies, oil and other survey/exploration outfits, field scientists, and the U.S. Department of Defense. Still, there’s nothing stopping you from getting an Iridium phone and service contract and being reachable anywhere under the open sky, assuming that you would want to. But now AT&T is introducing a new wrinkle that has the potential to change everything – or leave another big smoking crater…
According to an article on the CNET News service this week, AT&T is introducing a dual-mode phone, called the “TerreStar Genus” which operates as a conventional cell phone when there’s a carrier for it to connect with, but switches to satellite reception when there are no cell towers available. The handset is still expensive, at $800 or so, and the satellite feature is an extra $25 per month plus 65 cents per minute of voice calls or $5 per megabyte of data – above and beyond the usual AT&T cell phone service contracts, which I can tell you aren’t all that cheap to begin with. But with the appearance of cell phones costing $10,000 plus just for the handset, and iPhone and iPad units that are nearly that expensive to begin with, it’s hard to imagine that AT&T won’t get any users; the real question is whether they will be able to sell enough units to make up the costs involved in offering such a service in the first place…
The simple fact is, not that many people really need to be able to make telephone calls from the middle of a national park, the top of an ice floe, or the deck of a ship in the middle of the ocean. Satellite telephone service is a niche industry at the best of times (as Iridium found out in 1998), and the relatively small number of customers who occupy that niche are already being served by the existing provider. Unless AT&T can identify a new market segment for the phone and the service, or just convince enough technophiles that this is the must-have gadget of 2010, they are not likely to see any significant number of sales…
But, on the other hand, if they can expand the market enough to lower the price on both the hardware and the service contracts, they could finally introduce satellite communications to a mass market. For the first time, you might be able to call anyone on Earth from anywhere at all times…
The real question then becomes, is this a good thing, or a bad thing?
Friday, September 17, 2010
Scam or Not?
For some time now we’ve been seeing ads on various cable channels promoting a membership retail operation calling itself “DirectBuy” which claims to be able to save its members huge amounts of money on furniture, home décor items, and home improvement materials. If you’ve seen these ads, you’ve probably wondered where the catch was; as previously noted in this space, companies do not exist for the purpose of simply giving you things (or money); they exist to make money for themselves. It’s not hard to imagine how a company that can actually sell you things for a fraction of retail cost could be wildly successful – provided that they are still selling those products for more than it costs them to obtain and sell the merchandise – but short of scams, bailout money from Congress, or outright theft, nobody out there is actually offering you something for nothing…
Of course, there are a lot of businesses, both retail and wholesale, that have done quite well for themselves using precisely this approach. As noted earlier this year, low-cost is simply one of the three generic business strategies, and common examples like Costco and Sam’s Club operate exactly this way. Moreover, there is a huge markup in some of these product categories (notably furniture, kitchen cabinets, and flooring materials) that warehouse stores like Home Depot are already exploiting to maintain their profit margins. It seems possible, therefore, that this offer might be legitimate. But as this post on the Consumer Reports website points out, in this particular case, there seems to be a bit of a grey area…
On the one hand, the DirectBuy people do charge a rather hefty membership fee; it’s generally between $4,000 and $5,000 USD for a three-year membership, and then $190 a year for each additional year. Even worse, it’s a high-pressure, one-time offer; sign on the dotted line right there and then, or you’ll never be allowed to come back. Thus, you can’t compare their prices to anything else in your market; you have to make the decision blind. There have even been reported cases of DirectBuy locations refusing to allow married people from taking the tour or listening to the pitch unless they bring their spouse – as is the case with timeshares and other high-pressure sales businesses, you generally need to get both spouses to sign or it’s too easy for them to get out of the contract…
On the other hand, a lot of the online comments indicate that if you purchase things that are normally characterized by extremely high mark-ups, it is possible to save significant amounts of money on the DirectBuy program. If you’re remodeling your house, or replacing all of your furniture (as would be the case after a fire or flood), or your business involves doing such things for your clients, this could work out very well for you. For the average consumer, however, it’s debatable if such a service would ever pay off. If you could realize a 10% discount on everything, you’d need to spend $50,000 to break even on the membership cost, and even at a 25% discount you’d have to plan on buying $20,000 worth of merchandise before this contract would be worth the effort. And that’s not counting the 6% handling fee, shipping fees, or local sales tax that will be added to your purchase…
In the strictest sense, we can’t really call this a scam – because it is possible to receive value in return for the money you’re spending, or even come out ahead on the deal. In much the same sense that selling someone a pneumatic nail gun for $1,000 when all they really needed was a hammer costing $25, this is simply a business model that plays upon people’s natural desire to get something for nothing in order to realize large amounts of profits from the gullible. The only truly unethical part of the operation is that the average consumer will never make back the cost of their membership fees – and the lengths the company is going to hide this fact in their advertising and sales operations…
I’ve noted before that there’s no law against making money off of the gullible and credulous – and that if there was, the economy would probably collapse. But you’re still not going to catch me doing business with any firm whose entire strategy is “Let the buyer beware!” any time soon…
Of course, there are a lot of businesses, both retail and wholesale, that have done quite well for themselves using precisely this approach. As noted earlier this year, low-cost is simply one of the three generic business strategies, and common examples like Costco and Sam’s Club operate exactly this way. Moreover, there is a huge markup in some of these product categories (notably furniture, kitchen cabinets, and flooring materials) that warehouse stores like Home Depot are already exploiting to maintain their profit margins. It seems possible, therefore, that this offer might be legitimate. But as this post on the Consumer Reports website points out, in this particular case, there seems to be a bit of a grey area…
On the one hand, the DirectBuy people do charge a rather hefty membership fee; it’s generally between $4,000 and $5,000 USD for a three-year membership, and then $190 a year for each additional year. Even worse, it’s a high-pressure, one-time offer; sign on the dotted line right there and then, or you’ll never be allowed to come back. Thus, you can’t compare their prices to anything else in your market; you have to make the decision blind. There have even been reported cases of DirectBuy locations refusing to allow married people from taking the tour or listening to the pitch unless they bring their spouse – as is the case with timeshares and other high-pressure sales businesses, you generally need to get both spouses to sign or it’s too easy for them to get out of the contract…
On the other hand, a lot of the online comments indicate that if you purchase things that are normally characterized by extremely high mark-ups, it is possible to save significant amounts of money on the DirectBuy program. If you’re remodeling your house, or replacing all of your furniture (as would be the case after a fire or flood), or your business involves doing such things for your clients, this could work out very well for you. For the average consumer, however, it’s debatable if such a service would ever pay off. If you could realize a 10% discount on everything, you’d need to spend $50,000 to break even on the membership cost, and even at a 25% discount you’d have to plan on buying $20,000 worth of merchandise before this contract would be worth the effort. And that’s not counting the 6% handling fee, shipping fees, or local sales tax that will be added to your purchase…
In the strictest sense, we can’t really call this a scam – because it is possible to receive value in return for the money you’re spending, or even come out ahead on the deal. In much the same sense that selling someone a pneumatic nail gun for $1,000 when all they really needed was a hammer costing $25, this is simply a business model that plays upon people’s natural desire to get something for nothing in order to realize large amounts of profits from the gullible. The only truly unethical part of the operation is that the average consumer will never make back the cost of their membership fees – and the lengths the company is going to hide this fact in their advertising and sales operations…
I’ve noted before that there’s no law against making money off of the gullible and credulous – and that if there was, the economy would probably collapse. But you’re still not going to catch me doing business with any firm whose entire strategy is “Let the buyer beware!” any time soon…
Thursday, September 16, 2010
Unwise Choices
One of my favorite truisms about management is the oft-repeated “Never second-guess the person on the ground” – meaning, don’t tell someone who was facing a crisis what they should have done; they were there and you weren’t, and while your choice might have been a better one, none of us will ever know for sure. What people seem to forget about that statement is that it refers to choices made during a crisis; split-second decisions where all the manager had to go on was judgment, or intelligence as guided by experience. If you read the news these days it’s quite easy to find decisions made in the comfort of a boardroom or executive suite days or years before the crisis actually came that show a lack of judgment so complete it’s difficult to even think of sufficiently snarky things to write about them. The recent gas pipeline explosions in San Bruno, California, are a good case in point…
As reported online by CNN here , Pacific Gas & Electric (PG&E) had planned to replace the section of pipeline that caused the explosion back in 2009, and had received $5 million in rate increases to pay for the work, but then diverted it to “higher priority work.” Instead, in 2009 they requested another $5 million in rate increases, and then awarded roughly the same amount of money to six top executives as bonuses. The watchdog agency quoted in the online article also claims that PG&E spent $62 million over their budget in 2009 for “management incentives” and an additional $60 million in re-doing gas leak surveys that had been botched the previous year. Probably the most amazing part of the case is that the pipeline in question had been built in 1948 and never replaced, and the PG&E had identified it as being one of their top 100 most likely to fail according to their own records…
Now, I could go off on a rant about the ethics of not maintaining gas pipelines in densely populated areas, gouging your customers for rate increases in order to furnish a handful of your top executives with million-dollar bonuses, or providing incentives to a management team that apparently can’t even cope with the idea that exploding pipelines that kill both your customers and your public image are bad – but there’s not much point; none of those topics really require elaboration, let alone explanation. Let me instead call to your attention the line at the end of the article, where PG&E has already agreed to set up a $100 million fund to re-build parts of San Bruno affected by the blast. There has been no word yet, but with at least 7 wrongful death suits to follow, the total cost of this fiasco will probably be two or three times that much…
Obviously, the people running PG&E knew there was a risk; just as obviously, they decided that paying large bonuses was worth running that risk. Losing that gamble has already cost them twenty times what they scooped out in bonus money, and could potentially end up being a forty-to-one or sixty-to-one loss. If any Federal, State or local prosecutor can find evidence of actual criminal negligence, there could also be trials for manslaughter or even murder (under the Depraved Indifference statute), and it would be surprising if there aren’t stockholder lawsuits (assuming PG&E has stockholders) to recover ALL of the management incentives and bonuses during the period when these asinine decisions were made. Which leads us to the obvious question: why in the world would you bet the assets, reputation and public image of your company, if not your own reputation and possible future, on something that could come back to bite you sixty-fold if you are wrong? Or, it that isn’t snarky enough, why would you take a chance with this much potential to end badly in a way that almost literally screams “Stupid Management Tricks” for a net of less than a million dollars each?
Of course, it’s possible that the people who received the wayward $5 million are not the same ones who made the choice to allocate those funds in such a manner, but it hardly matters now. The only remaining questions for the company are “What on Earth were you thinking?” And, almost as important, “What other bright ideas have you acted on lately?”
As reported online by CNN here , Pacific Gas & Electric (PG&E) had planned to replace the section of pipeline that caused the explosion back in 2009, and had received $5 million in rate increases to pay for the work, but then diverted it to “higher priority work.” Instead, in 2009 they requested another $5 million in rate increases, and then awarded roughly the same amount of money to six top executives as bonuses. The watchdog agency quoted in the online article also claims that PG&E spent $62 million over their budget in 2009 for “management incentives” and an additional $60 million in re-doing gas leak surveys that had been botched the previous year. Probably the most amazing part of the case is that the pipeline in question had been built in 1948 and never replaced, and the PG&E had identified it as being one of their top 100 most likely to fail according to their own records…
Now, I could go off on a rant about the ethics of not maintaining gas pipelines in densely populated areas, gouging your customers for rate increases in order to furnish a handful of your top executives with million-dollar bonuses, or providing incentives to a management team that apparently can’t even cope with the idea that exploding pipelines that kill both your customers and your public image are bad – but there’s not much point; none of those topics really require elaboration, let alone explanation. Let me instead call to your attention the line at the end of the article, where PG&E has already agreed to set up a $100 million fund to re-build parts of San Bruno affected by the blast. There has been no word yet, but with at least 7 wrongful death suits to follow, the total cost of this fiasco will probably be two or three times that much…
Obviously, the people running PG&E knew there was a risk; just as obviously, they decided that paying large bonuses was worth running that risk. Losing that gamble has already cost them twenty times what they scooped out in bonus money, and could potentially end up being a forty-to-one or sixty-to-one loss. If any Federal, State or local prosecutor can find evidence of actual criminal negligence, there could also be trials for manslaughter or even murder (under the Depraved Indifference statute), and it would be surprising if there aren’t stockholder lawsuits (assuming PG&E has stockholders) to recover ALL of the management incentives and bonuses during the period when these asinine decisions were made. Which leads us to the obvious question: why in the world would you bet the assets, reputation and public image of your company, if not your own reputation and possible future, on something that could come back to bite you sixty-fold if you are wrong? Or, it that isn’t snarky enough, why would you take a chance with this much potential to end badly in a way that almost literally screams “Stupid Management Tricks” for a net of less than a million dollars each?
Of course, it’s possible that the people who received the wayward $5 million are not the same ones who made the choice to allocate those funds in such a manner, but it hardly matters now. The only remaining questions for the company are “What on Earth were you thinking?” And, almost as important, “What other bright ideas have you acted on lately?”
Wednesday, September 15, 2010
Again, Stranger Than Fiction
Over the years, we’ve all heard the urban legends about companies giving products unintentional – and hilarious – names, either by poor translations from one language into another, or else by virtue of extremely poor decision-making. Some of these aren’t actually true – the Chevy Nova was marketed in Spanish-speaking countries, but no one there ever thought that the name was a blunder; “no va” does literally mean “won’t go” in Spanish, but everyone knows what a nova is, and no one confused the names. Others are, however – the AMC Gremlin was actually named for a minor problem or malfunction that defies repeated efforts to fix it, and there is no way to dispute the fact that Dodge really did market a car called the “Swinger” and Daihatsu attempted to market one called the “Charade.” Until a new Audi product was released to the press last week, however, I don’t believe we had ever seen a car named after a human waste product before, however…
You can pick up the story from the Green Car Reports site if you want to, but the story appears to be legitimate. Audi has introduced a new concept car which they have named the e-Tron. It’s an obvious take on iPhone and similarly-configured product names that have appeared over the past few years. The difficulty is that in French, etron is a word – a word that means, literally, excrement. Even worse, the e-Tron isn’t just a single model, it’s Audi’s name for the entire line of hybrid and electric-powered vehicles; they are apparently planning to bring out various different e-Tron models in different sizes, styles and capabilities. Which means that most western countries, presumably including France, will soon be inundated with ads for a product whose name means, literally, dung…
Now, I realize that Audi is a German firm, not a French company, and apparently e-Tron doesn’t mean anything untoward in German; it may not mean anything at all. The question still remains as to why no one even considered that the name might have another meaning in a country which literally shares a border with the one in which Audi is based. Granted that Mazda really did attempt to market a vehicle called the La Puta in several Spanish-speaking countries (it’s a rather rude slang term for a prostitute), and Nissan attempted to sell a car called the Moco (it means “booger” in Spanish, which isn’t actually obscene, but is still not a good name for something you want people to take seriously) in many of the same venues, but both of these cases involve slang terms from languages not spoken within 5,000 miles of Japan, not a language spoken in a literally adjacent country – and neither of them translates into something literally unprintable…
It has been said that it’s almost impossible to find a name for a new product that isn’t already either in use somewhere else in the world or obscene in some other language, and this may be the case that proves the assumption once and for all. There’s probably nothing you can do about the fact that your new product name means “foot fungus” in Swahili, or that your new car project designation mean “over-priced death-trap” in one of the three thousand or so dialects spoken in central Asia, but it’s hard to imagine not at least checking out all of the few dozen languages spoken in your primary market – which for Audi does, legitimately, include the European Union and North America…
Unless, of course, this is all a very clever attempt to gain free publicity by causing an International buzz about a product-naming failure and getting thousands of bloggers and other ‘net denizens to spread word for free. In which case, the strategy appears to be working perfectly – but the events we’re observing are still stranger than fiction…
You can pick up the story from the Green Car Reports site if you want to, but the story appears to be legitimate. Audi has introduced a new concept car which they have named the e-Tron. It’s an obvious take on iPhone and similarly-configured product names that have appeared over the past few years. The difficulty is that in French, etron is a word – a word that means, literally, excrement. Even worse, the e-Tron isn’t just a single model, it’s Audi’s name for the entire line of hybrid and electric-powered vehicles; they are apparently planning to bring out various different e-Tron models in different sizes, styles and capabilities. Which means that most western countries, presumably including France, will soon be inundated with ads for a product whose name means, literally, dung…
Now, I realize that Audi is a German firm, not a French company, and apparently e-Tron doesn’t mean anything untoward in German; it may not mean anything at all. The question still remains as to why no one even considered that the name might have another meaning in a country which literally shares a border with the one in which Audi is based. Granted that Mazda really did attempt to market a vehicle called the La Puta in several Spanish-speaking countries (it’s a rather rude slang term for a prostitute), and Nissan attempted to sell a car called the Moco (it means “booger” in Spanish, which isn’t actually obscene, but is still not a good name for something you want people to take seriously) in many of the same venues, but both of these cases involve slang terms from languages not spoken within 5,000 miles of Japan, not a language spoken in a literally adjacent country – and neither of them translates into something literally unprintable…
It has been said that it’s almost impossible to find a name for a new product that isn’t already either in use somewhere else in the world or obscene in some other language, and this may be the case that proves the assumption once and for all. There’s probably nothing you can do about the fact that your new product name means “foot fungus” in Swahili, or that your new car project designation mean “over-priced death-trap” in one of the three thousand or so dialects spoken in central Asia, but it’s hard to imagine not at least checking out all of the few dozen languages spoken in your primary market – which for Audi does, legitimately, include the European Union and North America…
Unless, of course, this is all a very clever attempt to gain free publicity by causing an International buzz about a product-naming failure and getting thousands of bloggers and other ‘net denizens to spread word for free. In which case, the strategy appears to be working perfectly – but the events we’re observing are still stranger than fiction…
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