Samuel Goldwyn (of MGM fame) is frequently credited with coining the expression “Give the people what they want to see, and they’ll turn out for it,” on the occasion of Louis B. Mayer’s funeral. It’s almost certainly not true – the remark was recorded as having been said by comedian George Jessel in a newspaper article published at least 15 years earlier; what Goldwyn was actually quoted as saying on the occasion was that so many people had turned out for Mayer’s “because they wanted to be sure that Mayer was really dead.” As a piece of American mythology, however, the statement has always remained a favorite, and has led to generations of comedians, actors, writers and storytellers maintaining that in order to succeed, you really need to know your audience. By extension, we probably shouldn’t be all that surprised by the fact that a Radio Shack in Montana is having remarkable success with a give-away promotion involving guns…
If you’ve ever wondered whether satellite television providers like Dish Network subsidize local retailers and providers’ promotions, it would appear that you’re correct. In the story I picked up from the Billings Gazette website , it turns out that the Radio Shack in Hamilton (off of Interstate 93) is offering new Dish Network subscribers a free gun if they purchase or lease certain equipment and sign up for specific service plans. Anyone who can’t qualify to purchase a firearm (or does not want a gun) is given a Pizza Hut gift card of comparable value instead, which seems to be taking care of the anti-gun people for the moment – which, it must be acknowledged, isn’t as big a problem in Montana as it would be in some other states. Rather more interesting for us, however, is that while the Dish Network people were initially put off by the idea, the folks in the Hamilton area have responded with great enthusiasm, outselling the store owner’s wildest projections…
It’s a rather humorous way of coming around to the question of corporate management on a truly wide scale. The gun promotion in our linked story worked well enough in Montana, where a large segment of the population already have guns, and regard them simply as tools – which they are; a gun is an extreme efficient way of converting chemical potential energy into kinetic energy, which can be useful for a number of agricultural and wildlife-management applications. It’s not hard to imagine the same promotion working well in Fort Worth, Texas, where Radio Shack’s corporate headquarters is located, since Texans also have a long and romantic heritage of gun ownership (or at least embrace the mythology about gun ownership). But we can be fairly certain that this promotion would not work in any of the U.S. states with dense populations and strict gun control laws, and since Radio Shack is also active in South America, Europe, and parts of Asia and Africa, there’s no point in discussing a wide replication of this promotion, no matter how well it does in Montana…
Can Radio Shack come up with a similar promotion for other parts of the world? Offering gift cards alone probably won’t do it; this promotion succeeds the way it does because the idea is unusual enough (and jarring enough) to cut through the clutter of thousands of other advertising offers (and possibly dozens of loss-leaders) that a potential customer sees every day. At the same time, a free gun is obviously something that customers in Montana actually want, or the promotion would merely be notorious, not successful. To create an equivalent campaign in places where firearms are not as desirable, the company would have to come up with something that the local customers want, that no other merchant is likely to be giving away, and that will cut through the “noise” in the consumer atmosphere the way this offer does. It’s doubtful that the Marketing department in Fort Worth can do that for thousands of different communities around the world, each with its own ideas about what is desirable – and what is slightly disturbing. But their local or district managers probably could – if corporate management is willing to invest the money and take the chance of local blow-back when somebody tries the wrong promotion…
I’m not saying this sort of promotional program couldn’t succeed on a wide scale, assuming you had the right marketing experts, the right managers, and the budget to make it work. I’m just saying that to pull it off, you’d have to know your audience…
Monday, March 28, 2011
Sunday, March 27, 2011
The Ethics of Organized Labor
The fracas going on in Wisconsin this year reminded me of some discussions I had a while back about organized labor in general and the need for protection for workers in general. In the present-day case, the governor of Wisconsin is claiming that the unionized government workers need to contribute more to their retirement plans, and that the only way to ensure lasting change on these issues is to restrict the unions’ use of collective bargaining in the case of government positions. Regrettably, both of these positions are complete nonsense. The union employees are already contributing 100% of the input to their retirement funds – just like any other employees who deposit some amount of their income into a retirement plan. That income does come from public sources (the people in question are public employees; that’s where all of their salary comes from), but the idea that the union is somehow draining extra money from the state budget is fatuous. Similarly, collective bargaining agreements will always be the heart of any organized labor contract, since that is the only way individual workers can gain influence in their dealings with any large organization. You might as well just say that the union workers are bad because they cost more than we want to pay them…
Unfortunately, what is getting lost in all of this political bellowing is the essential conflict between employers and workers. In the early years of the Industrial Revolution, working hours and working conditions that would never be tolerated in today’s world were not only common, they were legal and supported by most political leaders. The research that proves that working your employees to exhaustion for low pay and no benefits under unsafe conditions is actually bad for business came much later – and generally after modern labor laws were already on the books. But as I’ve noted in several other blogs, most people don’t really understand how economics works – and don’t really care, as long as their personal demands are met. As a result, there are a lot of employers (private and public) who would still ignore both labor law and a century of empirical research and require 15-hour working days without overtime or benefits, and union officials who would rather seen an entire industry die out (or move off-shore), putting all of their members out of work and destroying entire communities, than accept any reduction in employment numbers, let alone pay cuts…
This condition is even worse in the public sector, where most people have no idea what government employees do in the first place, and don’t value that labor even when they do understand it. There is a persistent popular image of bureaucratic drones getting paid huge salaries to do nothing; police officers spending all day eating donuts and sleeping on the job; postal workers getting full pay for performing less than 10 hours of actual work each week; and utterly incompetent teachers who can’t be trusted to teach a class (or, in some cases, even be near minors without supervision) who still can never be fired. There is also a popular image of senior managers who receive salaries that are thousands of times higher than those of any employee, do nothing to earn a penny of it, and will cheerfully demand that their employees work thousands of hours of unpaid overtime just so their employers can collect higher bonuses on work they already don’t do. The problem is that both of these beliefs are, occasionally, quite correct…
Historically, the truth is that workers who are treated well by their employers do not form unions, and if forced to do so by circumstances will still work in collaboration with their management and ownership groups for mutual benefit. And it’s also true that top management teams are hired by the stockholders (through their agents on the board of directors) to run the company for the long-term benefit of ALL parties involved – not because stockholders are saints, but because they recognize that antagonizing local residents, environmental groups, government regulators, vendors, suppliers, customers, potential investors or your employees is bad for business. If both of these things are not being done, then you’re doing it wrong – and your organization is ultimately doomed….
So what should be done in this particular case? Should the governor abandon the reforms he is trying to implement and allow the state to slowly go broke, eventually descending into Federal receivership? Or should the union membership give up the primary benefits of organized labor and accept working conditions that could eventually descend into nineteenth-century standards so that the governor can gain political power and stay in office and the taxpayers can continue receiving all the services they want without paying any more in taxes? Or can all parties involved become aware of the disaster that is looming and try to work together while they still can?
It’s worth thinking about…
Unfortunately, what is getting lost in all of this political bellowing is the essential conflict between employers and workers. In the early years of the Industrial Revolution, working hours and working conditions that would never be tolerated in today’s world were not only common, they were legal and supported by most political leaders. The research that proves that working your employees to exhaustion for low pay and no benefits under unsafe conditions is actually bad for business came much later – and generally after modern labor laws were already on the books. But as I’ve noted in several other blogs, most people don’t really understand how economics works – and don’t really care, as long as their personal demands are met. As a result, there are a lot of employers (private and public) who would still ignore both labor law and a century of empirical research and require 15-hour working days without overtime or benefits, and union officials who would rather seen an entire industry die out (or move off-shore), putting all of their members out of work and destroying entire communities, than accept any reduction in employment numbers, let alone pay cuts…
This condition is even worse in the public sector, where most people have no idea what government employees do in the first place, and don’t value that labor even when they do understand it. There is a persistent popular image of bureaucratic drones getting paid huge salaries to do nothing; police officers spending all day eating donuts and sleeping on the job; postal workers getting full pay for performing less than 10 hours of actual work each week; and utterly incompetent teachers who can’t be trusted to teach a class (or, in some cases, even be near minors without supervision) who still can never be fired. There is also a popular image of senior managers who receive salaries that are thousands of times higher than those of any employee, do nothing to earn a penny of it, and will cheerfully demand that their employees work thousands of hours of unpaid overtime just so their employers can collect higher bonuses on work they already don’t do. The problem is that both of these beliefs are, occasionally, quite correct…
Historically, the truth is that workers who are treated well by their employers do not form unions, and if forced to do so by circumstances will still work in collaboration with their management and ownership groups for mutual benefit. And it’s also true that top management teams are hired by the stockholders (through their agents on the board of directors) to run the company for the long-term benefit of ALL parties involved – not because stockholders are saints, but because they recognize that antagonizing local residents, environmental groups, government regulators, vendors, suppliers, customers, potential investors or your employees is bad for business. If both of these things are not being done, then you’re doing it wrong – and your organization is ultimately doomed….
So what should be done in this particular case? Should the governor abandon the reforms he is trying to implement and allow the state to slowly go broke, eventually descending into Federal receivership? Or should the union membership give up the primary benefits of organized labor and accept working conditions that could eventually descend into nineteenth-century standards so that the governor can gain political power and stay in office and the taxpayers can continue receiving all the services they want without paying any more in taxes? Or can all parties involved become aware of the disaster that is looming and try to work together while they still can?
It’s worth thinking about…
Thursday, March 24, 2011
Vote Early, Vote Often
Every year around this time, The Consumerist website holds a mock competition, based on the college basketball tournaments, which are allegedly to determine the identity of the “Worst Company in America.” I’m not sure how they came up with the idea, although I suspect that since what they deal with is consumer complaints they probably just got to thinking about which company was the absolute worst one day and one thing led to another. But regardless of its origin, the contest is a series of pairings where anyone who wants to can vote for one company over another; the one getting the most votes advances (or should that be “descends”?) to the next level, until only the worst contender remains. You could see it as sort of a grass-roots opposite of the real consumers’ choice awards that come out every year, except that most companies do not take it all that seriously. After all, it’s an Internet slam-fest, intended to draw exaggeration for humorous effect, not a scientific study. It appears, however, that the contest’s defending champion doesn’t see it that way…
According to a note that popped up on the site this evening, Comcast has been urging all of its personnel to go onto the Consumerist site and vote for the other company in their bracket - that is, to make sure that the other firm gets the honors for worst company instead of Comcast. Needless to say, perhaps, this initiative was leaked to the Consumerist people within hours (possibly within minutes) of being sent out, and the website is now gleefully displaying communication, complete with authentic Comcast logos and graphics. Consequently, Comcast is now leading the voting by somewhere over four to one, and appears to be a shoe-in to take the title again this year. What, exactly, the company expected to gain through these actions remains a mystery, to me as well as to the people at The Consumerist…
Now, whether Comcast is actually the worst company in their industry, let alone all of the sectors of American commerce, remains open for debate. I’ve spent some time in that industry, and unless things have changed dramatically there are other companies just as widely reviled as Comcast, some of which actually deserve it. The thing is, every company in the cable business has legions of disgruntled fans, any of whom would probably swear under oath that their particular cable provider is the worst of its kind. What makes the company’s appearance in this year’s contest truly spectacular is that they’ve addressed the situation, not by apologizing to their legions of detractors or by reaching out to The Consumerist people and pledging to do better in the next year, but by rallying their personnel in an effort to smear the “competition” and make themselves look better. Well, that and the fact that they did so using media platforms that even a small child could have told them would be intercepted by the people at The Consumerist and held up to mockery and ridicule by millions of scruffy bloggers just like me…
I suppose it’s possible that the whole thing is a self-referential joke by Comcast at their own expense that I’m just too stodgy to appreciate; it’s probably also possible that this get-out-the-vote effort is a hoax, put onto the Internet specifically for the purpose of making Comcast look like idiots. But I’ve seen enough ill-considered management maneuvers over the years that I can easily believe that this one is real, and that all that is happening is that someone at Comcast doesn’t quite grasp the whole “Internet community” concept yet. Whereas even a few years ago no one would have noticed these sorts of shenanigans, today an attempt to influence an Internet fan vote will be interpreted as cheating (and as an insult to their intelligence) by most of the denizens of the Web, all of whom will cheerfully join in on the Comcast-bashing and try to make the company look even worse…
I’m not sure if Comcast can improve their service enough to be excluded from next year’s list, or if they’re doomed to be “honored” as the Worst Company in America for years to come. But I do know that if they really want off of that list, they’re going to have to try harder than this…
According to a note that popped up on the site this evening, Comcast has been urging all of its personnel to go onto the Consumerist site and vote for the other company in their bracket - that is, to make sure that the other firm gets the honors for worst company instead of Comcast. Needless to say, perhaps, this initiative was leaked to the Consumerist people within hours (possibly within minutes) of being sent out, and the website is now gleefully displaying communication, complete with authentic Comcast logos and graphics. Consequently, Comcast is now leading the voting by somewhere over four to one, and appears to be a shoe-in to take the title again this year. What, exactly, the company expected to gain through these actions remains a mystery, to me as well as to the people at The Consumerist…
Now, whether Comcast is actually the worst company in their industry, let alone all of the sectors of American commerce, remains open for debate. I’ve spent some time in that industry, and unless things have changed dramatically there are other companies just as widely reviled as Comcast, some of which actually deserve it. The thing is, every company in the cable business has legions of disgruntled fans, any of whom would probably swear under oath that their particular cable provider is the worst of its kind. What makes the company’s appearance in this year’s contest truly spectacular is that they’ve addressed the situation, not by apologizing to their legions of detractors or by reaching out to The Consumerist people and pledging to do better in the next year, but by rallying their personnel in an effort to smear the “competition” and make themselves look better. Well, that and the fact that they did so using media platforms that even a small child could have told them would be intercepted by the people at The Consumerist and held up to mockery and ridicule by millions of scruffy bloggers just like me…
I suppose it’s possible that the whole thing is a self-referential joke by Comcast at their own expense that I’m just too stodgy to appreciate; it’s probably also possible that this get-out-the-vote effort is a hoax, put onto the Internet specifically for the purpose of making Comcast look like idiots. But I’ve seen enough ill-considered management maneuvers over the years that I can easily believe that this one is real, and that all that is happening is that someone at Comcast doesn’t quite grasp the whole “Internet community” concept yet. Whereas even a few years ago no one would have noticed these sorts of shenanigans, today an attempt to influence an Internet fan vote will be interpreted as cheating (and as an insult to their intelligence) by most of the denizens of the Web, all of whom will cheerfully join in on the Comcast-bashing and try to make the company look even worse…
I’m not sure if Comcast can improve their service enough to be excluded from next year’s list, or if they’re doomed to be “honored” as the Worst Company in America for years to come. But I do know that if they really want off of that list, they’re going to have to try harder than this…
Wednesday, March 23, 2011
That’s Just Silly
A few posts back I mentioned that sometimes I’ll read a news story and wonder if someone is getting an early start on April Fool’s Day – and if it’s the author of the piece or the person they interviewed for the story. Unfortunately, all too often there are multiple witnesses to the facts of the story, plus documentary evidence, Internet sites, and court transcripts that all indicate the story is real and not a hoax; just absurd by its very nature. Such was the case with the most recent story about the recording industry trying to recover funds from a file-sharing site, in this case LimeWire. Even granted that the court action was brought by thirteen record companies acting in concert under their industry advocates – and even granted that LimeWire was responsible for thousands of users making millions of downloads, $75 trillion US seems a bit excessive…
You can read the Law.com coverage about the case if you want to, but the background of the story is that the recording industry was demanding the highest possible damages for every possible download of every possible file on the site – which works out to $75 trillion according to their math, or more than five times the US national debt. Or, if you like, it’s somewhere between $240,000 and $250,000 for every man, woman and child in the United States (depending on just how many undocumented residents we’ve actually got). It’s clearly a ridiculous amount of money to demand from a legal standpoint, not just because there is no reason to believe that everyone who ever went to LimeWire downloaded every file that was ever available at LimeWire, or even because that much money may not even exist, but because that’s not the way lawsuits actually work outside of the funny pages…
Keeping in mind that you should not get your legal advice from bloggers without law degrees, anyone who has spent even one class period in a civil law class knows that you can’t just make up some amount of money that may not really exist and demand that anyone who you don’t like pay it. Damages in a civil case come in two types: compensatory and punitive; compensatory are supposed to make good whatever damage the other party has done to you, and punitive are supposed to punish the other party so they don’t do it again. This is why you will often hear the plaintiff (the party that brings the suit) going on and on about how horrible the action was, how much they have suffered as a result, and how important it is to be sure that the defendant (the party they are accusing of wrongdoing) never does this again. However, in this case, the damages requested are completely absurd for both purposes…
There is simply no way that a bunch of file-sharing music fans on the Internet would ever have purchased $75 trillion through regular channels if LimeWire wasn’t available. In fact, if you know the kind of people who share files online, you already know that most of them wouldn’t have spent ANY money to purchase the majority of those files. The linked article mentions that the judge is going to limit the damages to one fine per file, which seems a bit more realistic (you figure that at least one user downloaded every file in the LimeWire catalog at least once), but I’d have to say that even that is probably more than the recording industry would have made on those properties if they were trying to sell the same downloads. As to the punitive use of damages, it’s highly doubtful that LimeWire has $75 trillion; since file-sharing sites BY DEFINITION don’t charge anything, the site probably only makes whatever they can get from banner advertising – which isn’t much. In fact, it’s unlikely that LimeWire’s total assets are even $75 thousand, let alone adding nine more zeroes onto the end…
What this action has done is make the recording industry look bad – yet again. The damages they are demanding are clearly enough to destroy LimeWire millions of times over, which should be enough even to prevent the company from declaring bankruptcy and then re-forming as a conventional firm the way Napster did – even assuming that they have the corporate protections in place to do that in the first place. Now, no one is saying that you shouldn’t sue to recover money people have taken from you by using your copyrighted material without permission, but attempting to take everything they will ever have and then destroying their company into the bargain just looks mean. It would be an ill-considered action even for an industry that doesn’t already have massive public relations issues; for the recording industry, it’s only a matter of time before they eradicate whatever fragment of relevance they have left and are pitched out onto the ash-heap of history…
All of which makes me say that this case was kind of a silly idea…
You can read the Law.com coverage about the case if you want to, but the background of the story is that the recording industry was demanding the highest possible damages for every possible download of every possible file on the site – which works out to $75 trillion according to their math, or more than five times the US national debt. Or, if you like, it’s somewhere between $240,000 and $250,000 for every man, woman and child in the United States (depending on just how many undocumented residents we’ve actually got). It’s clearly a ridiculous amount of money to demand from a legal standpoint, not just because there is no reason to believe that everyone who ever went to LimeWire downloaded every file that was ever available at LimeWire, or even because that much money may not even exist, but because that’s not the way lawsuits actually work outside of the funny pages…
Keeping in mind that you should not get your legal advice from bloggers without law degrees, anyone who has spent even one class period in a civil law class knows that you can’t just make up some amount of money that may not really exist and demand that anyone who you don’t like pay it. Damages in a civil case come in two types: compensatory and punitive; compensatory are supposed to make good whatever damage the other party has done to you, and punitive are supposed to punish the other party so they don’t do it again. This is why you will often hear the plaintiff (the party that brings the suit) going on and on about how horrible the action was, how much they have suffered as a result, and how important it is to be sure that the defendant (the party they are accusing of wrongdoing) never does this again. However, in this case, the damages requested are completely absurd for both purposes…
There is simply no way that a bunch of file-sharing music fans on the Internet would ever have purchased $75 trillion through regular channels if LimeWire wasn’t available. In fact, if you know the kind of people who share files online, you already know that most of them wouldn’t have spent ANY money to purchase the majority of those files. The linked article mentions that the judge is going to limit the damages to one fine per file, which seems a bit more realistic (you figure that at least one user downloaded every file in the LimeWire catalog at least once), but I’d have to say that even that is probably more than the recording industry would have made on those properties if they were trying to sell the same downloads. As to the punitive use of damages, it’s highly doubtful that LimeWire has $75 trillion; since file-sharing sites BY DEFINITION don’t charge anything, the site probably only makes whatever they can get from banner advertising – which isn’t much. In fact, it’s unlikely that LimeWire’s total assets are even $75 thousand, let alone adding nine more zeroes onto the end…
What this action has done is make the recording industry look bad – yet again. The damages they are demanding are clearly enough to destroy LimeWire millions of times over, which should be enough even to prevent the company from declaring bankruptcy and then re-forming as a conventional firm the way Napster did – even assuming that they have the corporate protections in place to do that in the first place. Now, no one is saying that you shouldn’t sue to recover money people have taken from you by using your copyrighted material without permission, but attempting to take everything they will ever have and then destroying their company into the bargain just looks mean. It would be an ill-considered action even for an industry that doesn’t already have massive public relations issues; for the recording industry, it’s only a matter of time before they eradicate whatever fragment of relevance they have left and are pitched out onto the ash-heap of history…
All of which makes me say that this case was kind of a silly idea…
Tuesday, March 22, 2011
Such a Little Snowball
Just for the record, I’ve tried the trick where you roll the snowball down the slope, and it starts picking up more and more snow, eventually turning into a snowball the size of your house, which then also scoops up your enemies and carries them away from you in an amusingly cartoonish fashion that inexplicably fails to hurt anyone or anything despite involving the out-of-control movement of several metric tons of snow. That is, I’ve tried to do it, and after many dozens of attempts over the course of forty or so miss-spent years, I’m forced to conclude that while this works brilliantly as a metaphor for things getting out of control, it doesn’t work that way in the real world. I would like to point out, however, that allowing private companies to palm off security costs onto a Federal agency paid for by tax funds also doesn’t work in the real world…
A press release issued last week by the U.S. Travel Association details the findings of a blue-ribbon panel comprised of former DHS officials (including former Chairman Tom Ridge), congressmen and industry experts on the effect that the increases in baggage fees and similar games have had on air travel, and the industry in general. This isn’t necessarily the most impartial organization on the face of the planet; the USTA is an organization of boosters for the travel industry, and it is primarily made up of and supported by people who make money off of tourists and travelers of all types. But at the same time, this panel isn’t anybody’s choice for leftists and anti-business hippies; most of the roster is big-business Republicans and actual government officials – and they don’t have anything nice to say about the way the crackpot TSA screenings are affecting their industry…
Consider, for example, the depressing effect the TSA screenings have had on non-essential travel. We’ve all heard stories about people deciding not to fly – or to avoid travel at all – because they can’t abide the thought of being groped and probed on their way to the gate. The USTA panel’s findings suggest that the average traveler has cancelled two to three trips per year, resulting in a loss in business of $85 billion in business and 900,000 jobs. Now, granted that this does not consider jobs gained in the automobile, bus and train building companies, petroleum companies, or businesses that provide roadside assistance; nor does it acknowledge the fact that TSA behaving like buffoons appears to be the key turn-off, not anything the airlines have done. It is still a mind-boggling idea, and all the more so since all of the international experts who have been asked to comment on the TSA enhanced screenings have claimed that these business-destroying routines are also completely useless in terms of preventing actual terror attacks on airplanes…
It remains to be seen if the remedies the USTA panel is suggesting will do any good; certainly, removing the first-bag baggage fee might encourage people to carry on less baggage, shortening the search times and speeding up the checkpoints. It’s also possible that a “trusted flyer” express lane program, at least a completely voluntary one, might speed up these lines without turning our entire nation into the Orwellian nightmare its opponents like to describe. But the reason I’m calling it to your attention in a business blog – and comparing it to a cartoon snowball in the first place – is that this isn’t just a security threat imposed by foreign enemies or a profit-boosting stunt installed by the airlines to help make a fast buck. The truth is, the failure of our airline security systems on September 11, 2001 can be directly blamed to the airline industry fighting tooth and nail against anything resembling proper security laws for over fifty years, and then imposing the new baggage fees to try and recover some of the cost when the consequences of their lobbying actions finally blew up in their faces…
And whether your chosen metaphor involves snowballs, birds coming home to roost, or anthropomorphic bunnies and puppies playing basketball, nothing is going to change until we start demanding accountability from our governments (as citizens), from our business leaders (as stockholders), and from the companies themselves (as customers), and hold the people responsible for these crimes against intelligence and occasionally sanity responsible when things go horribly wrong, in the sky or in our economy…
A press release issued last week by the U.S. Travel Association details the findings of a blue-ribbon panel comprised of former DHS officials (including former Chairman Tom Ridge), congressmen and industry experts on the effect that the increases in baggage fees and similar games have had on air travel, and the industry in general. This isn’t necessarily the most impartial organization on the face of the planet; the USTA is an organization of boosters for the travel industry, and it is primarily made up of and supported by people who make money off of tourists and travelers of all types. But at the same time, this panel isn’t anybody’s choice for leftists and anti-business hippies; most of the roster is big-business Republicans and actual government officials – and they don’t have anything nice to say about the way the crackpot TSA screenings are affecting their industry…
Consider, for example, the depressing effect the TSA screenings have had on non-essential travel. We’ve all heard stories about people deciding not to fly – or to avoid travel at all – because they can’t abide the thought of being groped and probed on their way to the gate. The USTA panel’s findings suggest that the average traveler has cancelled two to three trips per year, resulting in a loss in business of $85 billion in business and 900,000 jobs. Now, granted that this does not consider jobs gained in the automobile, bus and train building companies, petroleum companies, or businesses that provide roadside assistance; nor does it acknowledge the fact that TSA behaving like buffoons appears to be the key turn-off, not anything the airlines have done. It is still a mind-boggling idea, and all the more so since all of the international experts who have been asked to comment on the TSA enhanced screenings have claimed that these business-destroying routines are also completely useless in terms of preventing actual terror attacks on airplanes…
It remains to be seen if the remedies the USTA panel is suggesting will do any good; certainly, removing the first-bag baggage fee might encourage people to carry on less baggage, shortening the search times and speeding up the checkpoints. It’s also possible that a “trusted flyer” express lane program, at least a completely voluntary one, might speed up these lines without turning our entire nation into the Orwellian nightmare its opponents like to describe. But the reason I’m calling it to your attention in a business blog – and comparing it to a cartoon snowball in the first place – is that this isn’t just a security threat imposed by foreign enemies or a profit-boosting stunt installed by the airlines to help make a fast buck. The truth is, the failure of our airline security systems on September 11, 2001 can be directly blamed to the airline industry fighting tooth and nail against anything resembling proper security laws for over fifty years, and then imposing the new baggage fees to try and recover some of the cost when the consequences of their lobbying actions finally blew up in their faces…
And whether your chosen metaphor involves snowballs, birds coming home to roost, or anthropomorphic bunnies and puppies playing basketball, nothing is going to change until we start demanding accountability from our governments (as citizens), from our business leaders (as stockholders), and from the companies themselves (as customers), and hold the people responsible for these crimes against intelligence and occasionally sanity responsible when things go horribly wrong, in the sky or in our economy…
Monday, March 21, 2011
Why Do We Need These People?
I wasn’t planning a follow-up to the post about the charity group spending less than 3% of its intake on its purported mission, since there really isn’t much more to say about them. But then a massive earthquake hit Japan, causing hundreds of thousands of injuries, thousands (or more) of deaths, and almost unimaginable destruction – and less than 48 hours later there were already spam and phishing attacks being reported that had “Japanese earthquake” or “Tsunami” in the headers. It’s things like these that make me want to round up Internet scammers and have them all recycled as compost (which could then be used to grow food crops and feed the people left hungry by the disaster), but as bad as those are, the fake charities set up to try to scam money out of people trying to help the survivors are even worse…
You can pick up one of the stories on the Computer Weekly website if you’d like, and I’ll try and put up the WSJ link later today, but apparently the US Federal Trade Commission (FTC) is already warning about online charity scams sending emails begging for “donations” and posting appeals on various social networking sites and Internet communities around the world. The FTC is urging people to check out a charity group’s credentials, read their operating reports and tax returns, and look them up on reference sites like Charity Navigator before giving any significant amount of money. Personally, I can’t decide which is worse: the fact that most people won’t check on those credentials, the fact that all of those donations won’t reach the victims who really need help because some scammers is going to be spending it on hookers and blow, or the fact that such people will feel no remorse whatsoever and will continue to prey on the foolish, the unsophisticated, and the overly emotional in exactly the same way as soon as the next natural disaster comes along…
The fact is, complaining about this sort of Internet scam and then not doing anything to prevent it from succeeding is a lot like complaining about auto theft and then leaving your car unlocked with the keys in the ignition every night. While it’s certainly true that Internet crime can never be eradicated, and even eliminating false charities online is impossible, there’s still a difference between being a crime victim and being a sucker. Giving money to some charity group that didn’t exist on Sunday and has no credentials whatsoever isn’t any different from attempting to buy products for 95% off on some website that no one ever heard of – or trying to buy a $25,000 Rolex for $20 from some guy you met in an alley somewhere. If something seems too good to be true, it probably is – and with all of the information available in a minute’s search online, the only people who are going to be taken by such scams are the ones who couldn’t be bothered to look. Or were too credulous, naïve or stupid to realize that they might need to do so…
Until everyone starts doing business responsibly online – or at least as responsibly as you would be while shopping for dinner in the real world – I will continue to bring you stories like this one. But I don’t expect to be stopping any time soon…
You can pick up one of the stories on the Computer Weekly website if you’d like, and I’ll try and put up the WSJ link later today, but apparently the US Federal Trade Commission (FTC) is already warning about online charity scams sending emails begging for “donations” and posting appeals on various social networking sites and Internet communities around the world. The FTC is urging people to check out a charity group’s credentials, read their operating reports and tax returns, and look them up on reference sites like Charity Navigator before giving any significant amount of money. Personally, I can’t decide which is worse: the fact that most people won’t check on those credentials, the fact that all of those donations won’t reach the victims who really need help because some scammers is going to be spending it on hookers and blow, or the fact that such people will feel no remorse whatsoever and will continue to prey on the foolish, the unsophisticated, and the overly emotional in exactly the same way as soon as the next natural disaster comes along…
The fact is, complaining about this sort of Internet scam and then not doing anything to prevent it from succeeding is a lot like complaining about auto theft and then leaving your car unlocked with the keys in the ignition every night. While it’s certainly true that Internet crime can never be eradicated, and even eliminating false charities online is impossible, there’s still a difference between being a crime victim and being a sucker. Giving money to some charity group that didn’t exist on Sunday and has no credentials whatsoever isn’t any different from attempting to buy products for 95% off on some website that no one ever heard of – or trying to buy a $25,000 Rolex for $20 from some guy you met in an alley somewhere. If something seems too good to be true, it probably is – and with all of the information available in a minute’s search online, the only people who are going to be taken by such scams are the ones who couldn’t be bothered to look. Or were too credulous, naïve or stupid to realize that they might need to do so…
Until everyone starts doing business responsibly online – or at least as responsibly as you would be while shopping for dinner in the real world – I will continue to bring you stories like this one. But I don’t expect to be stopping any time soon…
Sunday, March 20, 2011
The Ethics of Liquidation Sales
After my rather snarky post about companies closing stores and selling off the remaining inventory from those locations at allegedly favorable prices, several people asked me about the legality of such actions, mostly in the legislative sense of “should this be allowed?” For the most part, liquidation sales don’t violate any laws, and even selling things “as-is” or the equivalent isn’t actually a crime. The concept of “Let the buyer beware!” is quite literally millennia old, and the idea that you get what you pay for (and anything that seems too good to be true probably is) isn’t much younger. But while the question of whether such sales cross the line into deceptive business practices (which frequently IS a criminal offense) is better left to the courts and legislative bodies, the ethics of the situation is a management issue, and that brings it into this forum. So let’s take a closer look…
To begin with, hauling a bunch of inventory back to your warehouse, inspecting it for damage, sorting it into delivery packages and shipping it back out to your other locations is expensive; if your company is closing all of its locations such operations won’t even be possible. Similarly, hauling your fixtures and whatnot off to a salvage yard probably isn’t cost effective, either. In general, it’s going to make a lot more sense financially to just sell everything off right where it is. Moreover, if you offer reasonable discounts on everything it may be possible to sell enough merchandise to help pay off the company’s creditors, which in turn will have the advantage of helping you stay in business (if you’re going to) or short-change fewer creditors at the termination of the company(if you’re not). Transferring additional merchandise into these locations to take advantage of the high volume of customer traffic may seem a little dodgy, but in principle at least, there’s nothing overtly wrong with it…
Setting the prices for such sales is a bit murkier. Furniture and fixtures that have already been depreciated may not have any book value, which means that anything you can realize by selling them drops straight to whatever is left of your bottom line. Merchandise that you can return to your vendors for credit needs to sell for more than the charge-back amount you could get, but merchandise you can’t return is cost you will just have to eat if you can’t sell it. Marking everything up by 100% (or in some cases 800%) before you apply your customer-attracting “liquidation prices” may seem fraudulent, but as noted in my original post, the Internet has made it almost impossible to hide price information from the public, and for the most part there aren’t any laws against charging too much for merchandise (assuming the public can just get what they need somewhere else). As long as the product you’re selling is accurately described – and you don’t try to convince anyone that your price is, in fact, lower than the going rate when it isn’t – there’s nothing overtly wrong with this either. One could argue that billing such sales as a discount is misleading, but if making money off of the stupid, credulous, naïve or greedy is ever criminalized, it seems likely that our economy will collapse…
The real question here seems to be whether our responsibility to our stockholders (and by extension our creditors and our vendors) exceeds our responsibility to our customers. Or, to put it another way, should we defraud our creditors and bankrupt our owners so that customers (including people who have never done business with us before) can get a better deal on random purchases? Or should we take advantage of people who are too dim to operate a smart phone (or learn about the odds of getting something for nothing) in order to further the greater good of our company, our community, and eventually our economy? And, in either case, would it do any good to support legislation intended to protect the foolish and credulous from their more venal impulses, considering that we know that such people will just find another way to squander their money?
It’s worth thinking about…
To begin with, hauling a bunch of inventory back to your warehouse, inspecting it for damage, sorting it into delivery packages and shipping it back out to your other locations is expensive; if your company is closing all of its locations such operations won’t even be possible. Similarly, hauling your fixtures and whatnot off to a salvage yard probably isn’t cost effective, either. In general, it’s going to make a lot more sense financially to just sell everything off right where it is. Moreover, if you offer reasonable discounts on everything it may be possible to sell enough merchandise to help pay off the company’s creditors, which in turn will have the advantage of helping you stay in business (if you’re going to) or short-change fewer creditors at the termination of the company(if you’re not). Transferring additional merchandise into these locations to take advantage of the high volume of customer traffic may seem a little dodgy, but in principle at least, there’s nothing overtly wrong with it…
Setting the prices for such sales is a bit murkier. Furniture and fixtures that have already been depreciated may not have any book value, which means that anything you can realize by selling them drops straight to whatever is left of your bottom line. Merchandise that you can return to your vendors for credit needs to sell for more than the charge-back amount you could get, but merchandise you can’t return is cost you will just have to eat if you can’t sell it. Marking everything up by 100% (or in some cases 800%) before you apply your customer-attracting “liquidation prices” may seem fraudulent, but as noted in my original post, the Internet has made it almost impossible to hide price information from the public, and for the most part there aren’t any laws against charging too much for merchandise (assuming the public can just get what they need somewhere else). As long as the product you’re selling is accurately described – and you don’t try to convince anyone that your price is, in fact, lower than the going rate when it isn’t – there’s nothing overtly wrong with this either. One could argue that billing such sales as a discount is misleading, but if making money off of the stupid, credulous, naïve or greedy is ever criminalized, it seems likely that our economy will collapse…
The real question here seems to be whether our responsibility to our stockholders (and by extension our creditors and our vendors) exceeds our responsibility to our customers. Or, to put it another way, should we defraud our creditors and bankrupt our owners so that customers (including people who have never done business with us before) can get a better deal on random purchases? Or should we take advantage of people who are too dim to operate a smart phone (or learn about the odds of getting something for nothing) in order to further the greater good of our company, our community, and eventually our economy? And, in either case, would it do any good to support legislation intended to protect the foolish and credulous from their more venal impulses, considering that we know that such people will just find another way to squander their money?
It’s worth thinking about…
Thursday, March 17, 2011
Is That An Experiment Or Are You Just Glad To See Me?
From time to time I’ll encounter a story in the regular media that makes me wonder if the reported behind the article is trolling me, or is being trolled himself. For those unfamiliar with the term, trolls are fun-loving denizens of the Internet who enjoy getting an extreme reaction out of people who should know better. Going onto a discussion board or the discussion section of a website and making comments that you know will move the regular readers into a bowel-clenching outrage is called trolling those individuals, and it has become so common in some parts of the Web that it’s generally best to assume that any wild tale, tall story or outrageous claim is being made expressly for the purpose of making you make a fool out of yourself by reacting to it – especially if the comments run exactly opposite of the belief systems associated with the site you’re on. In this particular case, however, I can’t imagine who would make up a story about a drug company raising the price of a medication by 7,500% - or who would find the resulting outrage amusing, for that matter…
According to a story that appeared on the Los Angeles Times website on March 9th, the K-V Pharmaceutical Co. of St. Louis has just gotten FDA approval to sell a drug called Makena, which dramatically reduces the probability of premature birth. Up until now this treatment hasn’t be commercially available; you had to get a compounding pharmacy to make it for you out of the raw materials, which cost about $20 per (weekly) dose. Of course, without standardized production under FDA-certified facilities there was always a certain amount of variance in the exact formulation (and effectiveness) of the product, and there is no real debate that the officially approved version will be safer and more reliable. That said, however, the increase in price from around $20 to $1,500 per week (or $700 to $54,000 if you prefer) still seems a little steep…
Even worse, in my opinion, is that a lot of health insurance plans won’t cover Makena, which means that the drug will have gone from a manageable expense to something that only the very wealthy and very fortunate can get. But the part that makes this story sound like a prank is that K-V Pharmaceutical is exerting legal pressure on the compounding pharmacies that used to make the stuff from scratch, threatening to sue them for patent infringement if they don’t stop making the drug. Given that the company stands to make a small fortune off of a product that they didn’t have to invent (only synthesize in the lab), couldn’t they just let the people who are poor enough (or desperate enough) to use a home-brewed equivalent of the name-brand drug go about their business and turn a blind eye?
Well, if you’ve been paying attention to our discussions of copyright and patent infringement, you already know that they can’t. If K-V doesn’t defend the patent against all comers, there’s nothing to keep another giant corporation from pirating the formula and charging even more for it. And, in fairness, the company did have to go through all of the usual clinical trials, get all of the required permits and approvals from the FDA, and invest all of the money necessary to get this product through the testing process and onto the shelf. Comparing the official version of the drug, properly certified and made using approved processes to the home-made version is like comparing packaged analgesics to willow-bark tea (which DOES have analgesic properties, but isn’t the most reliable remedy in the world). There’s no real question that the K-V product will be safer to use and more effective, or that the company has complied with every legal and regulatory requirement. It’s just that imposing this pricing structure in a year when the future of health-care management is one of the biggest news stories – and one of the most contentious political issues – is so tone-deaf it makes me wonder if someone is trolling us – or conducting some kind of social-science experiment…
Either way, I really wish they’d stop…
According to a story that appeared on the Los Angeles Times website on March 9th, the K-V Pharmaceutical Co. of St. Louis has just gotten FDA approval to sell a drug called Makena, which dramatically reduces the probability of premature birth. Up until now this treatment hasn’t be commercially available; you had to get a compounding pharmacy to make it for you out of the raw materials, which cost about $20 per (weekly) dose. Of course, without standardized production under FDA-certified facilities there was always a certain amount of variance in the exact formulation (and effectiveness) of the product, and there is no real debate that the officially approved version will be safer and more reliable. That said, however, the increase in price from around $20 to $1,500 per week (or $700 to $54,000 if you prefer) still seems a little steep…
Even worse, in my opinion, is that a lot of health insurance plans won’t cover Makena, which means that the drug will have gone from a manageable expense to something that only the very wealthy and very fortunate can get. But the part that makes this story sound like a prank is that K-V Pharmaceutical is exerting legal pressure on the compounding pharmacies that used to make the stuff from scratch, threatening to sue them for patent infringement if they don’t stop making the drug. Given that the company stands to make a small fortune off of a product that they didn’t have to invent (only synthesize in the lab), couldn’t they just let the people who are poor enough (or desperate enough) to use a home-brewed equivalent of the name-brand drug go about their business and turn a blind eye?
Well, if you’ve been paying attention to our discussions of copyright and patent infringement, you already know that they can’t. If K-V doesn’t defend the patent against all comers, there’s nothing to keep another giant corporation from pirating the formula and charging even more for it. And, in fairness, the company did have to go through all of the usual clinical trials, get all of the required permits and approvals from the FDA, and invest all of the money necessary to get this product through the testing process and onto the shelf. Comparing the official version of the drug, properly certified and made using approved processes to the home-made version is like comparing packaged analgesics to willow-bark tea (which DOES have analgesic properties, but isn’t the most reliable remedy in the world). There’s no real question that the K-V product will be safer to use and more effective, or that the company has complied with every legal and regulatory requirement. It’s just that imposing this pricing structure in a year when the future of health-care management is one of the biggest news stories – and one of the most contentious political issues – is so tone-deaf it makes me wonder if someone is trolling us – or conducting some kind of social-science experiment…
Either way, I really wish they’d stop…
Wednesday, March 16, 2011
Still Not Your Parent’s Middle School Experience
If the case of the middle school students’ slandering their teachers wasn’t enough, a separate case that turned up on the following day told the story of a teacher who was forced to resign after one of her students found out about her past as a porn star and the parents and administrators of the school collectively had a cow. You can find that story off of the local television station’s site if you like, but what happened was that a teacher in St. Louis appeared in a pornographic film about 20 years ago, and one of her students found the pictures online. The linked story does not explain whether the student in question was actively looking for dirt on the teacher and hit the mother lode, or why a minor was able to access pornographic materials in the first place, or even why the child’s parents aren’t answering some very pointed questions from Child Protective Services in reference to that last question. It does, however, record that the teacher’s contract will not be renewed for next year…
What makes this case so upsetting is that no one is claiming that the teacher has done anything improper, let alone illegal, during the course of her duties. The school district ran a full background check on her before hiring her and found nothing of interest, since there are no laws against appearing in pornographic films or against getting your credentials as a teacher and applying for a teaching job two decades later. Given the desperate shortage of teachers in this country it seems tragic that our society has become puritanical enough to let one youthful indiscretion from decades ago override years of dedicated service in the classroom. Even worse, this is the second time this same individual has been driven out of a teaching job by that one bad decision…
Now consider the implications for your business. Can you be absolutely certain that no member of your company has EVER said or done anything that could potentially offend any possible customer you will ever have? Especially when you consider that things as mild as a divorce, a mistaken arrest for a crime for which they were never charged, or a single risqué picture might meet that standard if your customers or constituents are sufficiently prudish? In theory, you could require all job applicants to disclose everything they have ever done for money, but even that is bordering on invasion of privacy, and requesting some personal details (such as age, religion, gender orientation or marital status) will almost certainly get you sued. In fact, if the teacher in our story was not a contract employee, she could almost certainly sue the school for wrongful termination, whereas the standing of the parents to sue the school for employing somebody who used to do some “icky” for a living is a matter for the courts to decide. Neither outcome is likely to be good for business, however…
Eventually common practice should prevail, and there will be new legal standards that establish who you can sue and for how much in the event that someone associated with an organization once did something of which you don’t approve. There will probably be new legal standards for how long you can hold something against somebody, too. In the meanwhile, however, everyone in a management role needs to be aware that the number of employees of any profession or experience level who really are as pure as the driven snow is limited, and that if you hire anything else you can face legal and financial consequences of your actions, no matter what you decide. Under the circumstances, all we can do is try to make the choice that will do the most good for the most people with the least possible fallout, and hope for the best…
Of course, this WILL require that managers use intelligence, as guided by experience, and pay attention to what is going on in the world and in their organization itself. But that’s a post for another day…
What makes this case so upsetting is that no one is claiming that the teacher has done anything improper, let alone illegal, during the course of her duties. The school district ran a full background check on her before hiring her and found nothing of interest, since there are no laws against appearing in pornographic films or against getting your credentials as a teacher and applying for a teaching job two decades later. Given the desperate shortage of teachers in this country it seems tragic that our society has become puritanical enough to let one youthful indiscretion from decades ago override years of dedicated service in the classroom. Even worse, this is the second time this same individual has been driven out of a teaching job by that one bad decision…
Now consider the implications for your business. Can you be absolutely certain that no member of your company has EVER said or done anything that could potentially offend any possible customer you will ever have? Especially when you consider that things as mild as a divorce, a mistaken arrest for a crime for which they were never charged, or a single risqué picture might meet that standard if your customers or constituents are sufficiently prudish? In theory, you could require all job applicants to disclose everything they have ever done for money, but even that is bordering on invasion of privacy, and requesting some personal details (such as age, religion, gender orientation or marital status) will almost certainly get you sued. In fact, if the teacher in our story was not a contract employee, she could almost certainly sue the school for wrongful termination, whereas the standing of the parents to sue the school for employing somebody who used to do some “icky” for a living is a matter for the courts to decide. Neither outcome is likely to be good for business, however…
Eventually common practice should prevail, and there will be new legal standards that establish who you can sue and for how much in the event that someone associated with an organization once did something of which you don’t approve. There will probably be new legal standards for how long you can hold something against somebody, too. In the meanwhile, however, everyone in a management role needs to be aware that the number of employees of any profession or experience level who really are as pure as the driven snow is limited, and that if you hire anything else you can face legal and financial consequences of your actions, no matter what you decide. Under the circumstances, all we can do is try to make the choice that will do the most good for the most people with the least possible fallout, and hope for the best…
Of course, this WILL require that managers use intelligence, as guided by experience, and pay attention to what is going on in the world and in their organization itself. But that’s a post for another day…
Tuesday, March 15, 2011
Not Your Parent’s Middle School Experience
There were two articles that popped up last week that fit very nicely into our “Brave New Interconnected World” theme – the idea that a world in which the Internet exists isn’t just like out mid-20th Century world with new commercial, entertainment and information retrieval opportunities, but is actually an entirely new place. I could probably write a whole series of blog posts about each of these – and I will probably revisit the ethics of the situation on some future Sunday – but for the moment, let’s consider the implications of these two events in a business context. The students who appear in these stories will be joining the workforce sometime in the next decade anyway, but even if they veer off into Academia or the arts, these same problems will be coming to your industry even sooner than that – assuming they haven’t already…
First, consider the case of two middle-school students from Georgia who were suspended and one more who has already been expelled for making Facebook postings accusing some of their teachers of being pedophiles. You can pick up the original file from the local Fox affiliate if you want to, but the essence of the case is that the students are claiming to have been exercising their First Amendment Rights to complain about their teachers, while the schools are maintaining that false accusation of a felony isn’t a protected form of speech, it’s a felony in itself. Supporting the school’s position is the official Code of Conduct (signed by every one of these students and their parents) which states that spreading malicious comments such as these is forbidden and anyone doing it can be expelled without further discussion. Even if we are willing to accept that no crime has been committed here (and I wouldn’t bet MY freedom on that), the students involved are either too careless to bother reading things before they sign them or too stupid to realize that they are in violation of those rules…
Then we have the parents in the case, who are threatening to sue the school, the school board, and anyone else in range over the alleged violation of their children’s civil rights. This no only ignores the agreements they signed with the school, but also the definition of Freedom of Speech as guaranteed under the Constitution in the first place. These suits are unlikely to succeed, but the families will probably pursue them anyway, because if they can get the school or the district to admit any responsibility or wrongdoing it will help them defend themselves when the teachers sue them for slander, libel, defamation of character, pain and suffering, infliction of emotional trauma, and anything else they can think of – cases which very well could succeed. Free expression could be seen as defense against repressive school regulations, but it isn’t a defense against making statements that you know to be false that harm another person…
From a business standpoint the implications of this case are even more chilling. Granted that very few businesses have employees who are 12 years old, but people of all ages like to complain about authority figures online, and there is no reason to believe that your employees might not make use of some ill-chosen phrase in their own social networking – and if they are commenting on your customers or even on other employees you might end up getting named in the resulting legal action. Employment contracts might help shield the company from the court cases splashing onto them, if your state allows them and if the judge in your case decides to accept them, but there’s still no way you can possibly monitor everything your employees say or do on their own time…
(To be continued…)
First, consider the case of two middle-school students from Georgia who were suspended and one more who has already been expelled for making Facebook postings accusing some of their teachers of being pedophiles. You can pick up the original file from the local Fox affiliate if you want to, but the essence of the case is that the students are claiming to have been exercising their First Amendment Rights to complain about their teachers, while the schools are maintaining that false accusation of a felony isn’t a protected form of speech, it’s a felony in itself. Supporting the school’s position is the official Code of Conduct (signed by every one of these students and their parents) which states that spreading malicious comments such as these is forbidden and anyone doing it can be expelled without further discussion. Even if we are willing to accept that no crime has been committed here (and I wouldn’t bet MY freedom on that), the students involved are either too careless to bother reading things before they sign them or too stupid to realize that they are in violation of those rules…
Then we have the parents in the case, who are threatening to sue the school, the school board, and anyone else in range over the alleged violation of their children’s civil rights. This no only ignores the agreements they signed with the school, but also the definition of Freedom of Speech as guaranteed under the Constitution in the first place. These suits are unlikely to succeed, but the families will probably pursue them anyway, because if they can get the school or the district to admit any responsibility or wrongdoing it will help them defend themselves when the teachers sue them for slander, libel, defamation of character, pain and suffering, infliction of emotional trauma, and anything else they can think of – cases which very well could succeed. Free expression could be seen as defense against repressive school regulations, but it isn’t a defense against making statements that you know to be false that harm another person…
From a business standpoint the implications of this case are even more chilling. Granted that very few businesses have employees who are 12 years old, but people of all ages like to complain about authority figures online, and there is no reason to believe that your employees might not make use of some ill-chosen phrase in their own social networking – and if they are commenting on your customers or even on other employees you might end up getting named in the resulting legal action. Employment contracts might help shield the company from the court cases splashing onto them, if your state allows them and if the judge in your case decides to accept them, but there’s still no way you can possibly monitor everything your employees say or do on their own time…
(To be continued…)
Monday, March 14, 2011
Not Having It Your Way
I was reading an article in the New York Times web site over the weekend which was talking about an increasing number of food service establishments in New York that have given up on customer service and are now producing the food they want to make, rather than what the people buying it want to eat. The Times describes these establishments as “hard-line” or “puritan” in character, explaining that the people who run them have decided that specific options are not appropriate – ketchup does not go with their menu, so they don’t have any, regardless of how many customers ask for it, to take one example. Several of the owners are quoted as saying that one size does not fit all, the customer is not always right, and people who don’t want to eat the specialized offerings they have for sale would probably be better off finding another provider anyway. After all, they point out, it’s New York City; there’s going to be another option within a block or two anyway…
I was immediately taken back to a similar experience I had in Santa Monica, California, when the consulting firm I used to work for was based there. There was a nearby bar and grill operation whose menu specified “No changes, no substitutions, no kidding,” and they weren’t, in fact. The only burger on their menu came with caramelized onions, gruyere cheese, arugula and gorgonzola, and you couldn’t get it with any of these items taken off or anything different added. I don’t mind if a restaurant wants to have a “no substitutions” policy – having to custom-make food slows down the service and can complicate the supply issues in direct proportion to what your customers want you to substitute – but not allowing a customer to leave things off seemed a bit odd to me. After all, I’m effectively asking you to spend less money on ingredients and less time making the thing; it doesn’t seem like an unreasonable request. But the owner (who was also the chef who had created this monstrosity) had other ideas…
Now, I will be the first to agree that the customer ISN’T always right; and that people who want you to do things to the detriment of your business for their personal amusement aren’t really customers in the accept sense anyway. And to some extent I have to agree with the owners quoted in this article: if you don’t want their special take on whatever it is you’re ordering, why are you paying the extra price for it in the first place? But in my specific case, I was there on business, ordered one of the only things on the menu that looked vaguely palatable, and was so irritated at not being able to get what I wanted that I not only refused to ever go near the place again but also made a point of telling everyone I could about the “no changes” policy. I also went around the corner and got a bottle of ketchup, which I proceeded to use on my own food (and wound up sharing with half of the people in the place, who also thought the policy was for the birds). You wouldn’t think New Yorkers would put up with this sort of thing, any more than high-maintenance Californians would be willing to accept not getting their way – and yet, the place in Santa Monica is still there, and the practice seems to be spreading in New York…
I’m not sure there’s an actual business lesson here; given the astronomically high failure rate for new restaurants of all kinds, it seems odd to me that any of them would voluntarily choose to turn away any customers with money. At the same time, the idea of being good enough at what you do that you can play by your own rules is hardly a new concept; nor is the idea that such a level of confidence would be attractive. It should be interesting to see if this business model takes off and spreads to other parts of the world, if it remains a New York specialty, or if the erosion of public and economic pressure eventually does it in…
I was immediately taken back to a similar experience I had in Santa Monica, California, when the consulting firm I used to work for was based there. There was a nearby bar and grill operation whose menu specified “No changes, no substitutions, no kidding,” and they weren’t, in fact. The only burger on their menu came with caramelized onions, gruyere cheese, arugula and gorgonzola, and you couldn’t get it with any of these items taken off or anything different added. I don’t mind if a restaurant wants to have a “no substitutions” policy – having to custom-make food slows down the service and can complicate the supply issues in direct proportion to what your customers want you to substitute – but not allowing a customer to leave things off seemed a bit odd to me. After all, I’m effectively asking you to spend less money on ingredients and less time making the thing; it doesn’t seem like an unreasonable request. But the owner (who was also the chef who had created this monstrosity) had other ideas…
Now, I will be the first to agree that the customer ISN’T always right; and that people who want you to do things to the detriment of your business for their personal amusement aren’t really customers in the accept sense anyway. And to some extent I have to agree with the owners quoted in this article: if you don’t want their special take on whatever it is you’re ordering, why are you paying the extra price for it in the first place? But in my specific case, I was there on business, ordered one of the only things on the menu that looked vaguely palatable, and was so irritated at not being able to get what I wanted that I not only refused to ever go near the place again but also made a point of telling everyone I could about the “no changes” policy. I also went around the corner and got a bottle of ketchup, which I proceeded to use on my own food (and wound up sharing with half of the people in the place, who also thought the policy was for the birds). You wouldn’t think New Yorkers would put up with this sort of thing, any more than high-maintenance Californians would be willing to accept not getting their way – and yet, the place in Santa Monica is still there, and the practice seems to be spreading in New York…
I’m not sure there’s an actual business lesson here; given the astronomically high failure rate for new restaurants of all kinds, it seems odd to me that any of them would voluntarily choose to turn away any customers with money. At the same time, the idea of being good enough at what you do that you can play by your own rules is hardly a new concept; nor is the idea that such a level of confidence would be attractive. It should be interesting to see if this business model takes off and spreads to other parts of the world, if it remains a New York specialty, or if the erosion of public and economic pressure eventually does it in…
Sunday, March 13, 2011
The Ethics of Usury
There was an article online this past week about a series of credit card offers going out around the United States with interest rates well above the levels normally associated with predatory lending, which has had some observers calling for the passage (or enforcement, where applicable) of usury laws. The idea of interest rates that exceed the level permitted by law is certainly not new; most of the world’s major religions have weighed in on the practice over the centuries and most civilized countries have to address the matter sooner or later. But despite the recently passed credit card reform laws, none of these rates are actually illegal – it turns out that charging someone 59.99% annual interest isn’t actually a crime, as long as you tell them about it upfront. The real question is whether we can support such services from an ethical standpoint – or if they should be condemned on those grounds as well…
To begin with, we should probably acknowledge that by some interpretations all forms of interest are prohibited by various religious texts, including those of most Western religions. This is the origin of the idea of usury as a sin, and of laws intended to prevent people from committing it. But if you can’t charge interest for making someone a loan then you can’t make any money by doing so, and therefore there is no real motivation for doing so. If you do extend loans to people you will probably have to add something to compensate for those individuals who abscond with your money or just lose all of it – a 5% increase if 5% of your customers never pay you back, or whatever. You might even offer better rates to those people who you feel are more likely to repay the loans, and steeper ones to people you consider a bad risk. Once you have done so, however, you are stepping onto a very slippery slope, because it is always possible that the person you believe has a 99% chance of paying you back won't, while the person you charged extra because you felt their odds were only one chance in ten will – in which case your practices were misguided if not actually discriminatory…
In the case of these 59.99% (and in a few cases 79.99%) credit cards, most of the people who are offered such rates were told about them upfront and accepted the cards because they could not get a credit card any other way, and modern life can be difficult sometimes if you don’t have one (try to rent a car, book a hotel, or buy an airline ticket without one). One could legitimately argue that the banks extending such programs are offering a service to people who would otherwise not be able to have a card; one could also argue that these institutions deserve something for the massive added risk they are taking – and, indeed, these credit card programs have an appalling default rate compared to conventional arrangements. And one could certainly argue that as long as such rates are openly offered and impartially administrated (and that no actual laws are broken) that a government has no business telling its citizens on what terms they may promise to repay a loan. But none of that changes the fact that these institutions are making money off of the underserved, the impoverished, and the desperate – and that all too often such programs are not sold or administrated fairly in the first place…
So my question is, should our government outlaw such credit programs, knowing that the customers using them will not be able to get loans any other way? Or should they allow such programs to continue, knowing that at least some of those institutions offering these card programs will exploit the ignorance, lack of sophistication, and in some cases outright greed of their customers? It would be a wonderful world in which no one ever needed credit, and no one ever had to charge for extending credit, but in this world, what should we do about these accounts?
It’s worth thinking about…
To begin with, we should probably acknowledge that by some interpretations all forms of interest are prohibited by various religious texts, including those of most Western religions. This is the origin of the idea of usury as a sin, and of laws intended to prevent people from committing it. But if you can’t charge interest for making someone a loan then you can’t make any money by doing so, and therefore there is no real motivation for doing so. If you do extend loans to people you will probably have to add something to compensate for those individuals who abscond with your money or just lose all of it – a 5% increase if 5% of your customers never pay you back, or whatever. You might even offer better rates to those people who you feel are more likely to repay the loans, and steeper ones to people you consider a bad risk. Once you have done so, however, you are stepping onto a very slippery slope, because it is always possible that the person you believe has a 99% chance of paying you back won't, while the person you charged extra because you felt their odds were only one chance in ten will – in which case your practices were misguided if not actually discriminatory…
In the case of these 59.99% (and in a few cases 79.99%) credit cards, most of the people who are offered such rates were told about them upfront and accepted the cards because they could not get a credit card any other way, and modern life can be difficult sometimes if you don’t have one (try to rent a car, book a hotel, or buy an airline ticket without one). One could legitimately argue that the banks extending such programs are offering a service to people who would otherwise not be able to have a card; one could also argue that these institutions deserve something for the massive added risk they are taking – and, indeed, these credit card programs have an appalling default rate compared to conventional arrangements. And one could certainly argue that as long as such rates are openly offered and impartially administrated (and that no actual laws are broken) that a government has no business telling its citizens on what terms they may promise to repay a loan. But none of that changes the fact that these institutions are making money off of the underserved, the impoverished, and the desperate – and that all too often such programs are not sold or administrated fairly in the first place…
So my question is, should our government outlaw such credit programs, knowing that the customers using them will not be able to get loans any other way? Or should they allow such programs to continue, knowing that at least some of those institutions offering these card programs will exploit the ignorance, lack of sophistication, and in some cases outright greed of their customers? It would be a wonderful world in which no one ever needed credit, and no one ever had to charge for extending credit, but in this world, what should we do about these accounts?
It’s worth thinking about…
Saturday, March 12, 2011
The Grad School Diaries: The Woodchuck Observation
I suppose that my reaction to seeing the woodchuck again – up close this time – might be considered a bit eccentric; it’s just that I had never seen one until we came to Michigan. I’d seen marmots in the Swiss Alps, ground squirrels in the Sierra Nevada, and chipmunks in the Rockies, but the famous American groundhog – famed in song, story and passable Bill Murray movies – was a new thing for me. I can honestly report that they’re visually appealing creatures, rather more like a long-bodied ground squirrel than any kind of hog I’ve ever seen, and once again I felt that sense of wonder at seeing something so familiar and yet totally new to me. It was a rare moment of peace and discovery, as my world expanded again. Although as it turns out, the sighting itself isn’t that unusual for Central Michigan…
I was never that much of a naturalist growing up; my interests lay more in fantastical beasties out of myth and legend, and later on ones with engines, made out of titanium and aluminum. I could tell you the life stories of dozens of aircraft families and hundreds of Advanced Dungeons and Dragons monsters by the time I was in middle school, but biology as such didn’t really interest me. I didn’t even have the dinosaurs phase most little boys go through. My memory of that time is hazy; I recall thinking that creatures that were dead and fossilized eons ago were all very well and good, but there were real, live astronauts landing on the moon when I was five, and supersonic airplanes flying around with the promise of Los Angeles to Paris in two hours soon to come, and that seemed far more exciting. I learned about great horned owls when one started roosting in the tree outside my window, eagles because they could fly, too, marmots when we saw them in Switzerland, and turtles just because they’re the coolest animals ever, but even trips to the zoo would only hold my attention for the time we were there…
It was only later, when I started getting into backpacking, mountaineering, and wilderness survival, that I really started to notice the creatures that share our world – and even then I was more interested in the behavior, descriptions and personalities than I was in how their hormones worked or how many stomachs they had. But when you’re trying to stay alive under adverse conditions with only the basic equipment you can conceal about your person stopping to admire the pretty birds and adorable mammals isn’t really high on your list, either. For many years the only notice I took of the wildlife around us was when I noticed that the sparrows that inundated our house in Redondo Beach were mating on a wire outside – or when something had flown into the window again…
Along with our arrival in Michigan came (almost from day one) a huge host of creatures, some familiar – like the wild geese that lived on the artificial lake next to the hotel we were staying in – and some not – like the goldfinches, which I’d read about but never seen before. We encountered three species of squirrel never seen west of the Rockies (and thus unfamiliar to me), wild rabbits quite different from our Western cottontails, a truly repulsive number of skunks, and the occasional hapless (and stupid) white-tailed deer, but then one day I saw a strange animal walking through our back yard. It wasn’t striped with white, so I knew it wasn’t a badger or a skunk; it was too wide to be a weasel, too small to be a wolverine, and too low to the ground to be a fox or a dog. I bought a field guild to mammals of Michigan, but it wasn’t until the late fall of our second year that I saw the creature again – when it wandered onto our back deck, apparently looking for food…
It has been said that travel is broadening, and that living in a new place will really change your perspective on the world. In most cases, I imagine, that aphorism is oriented toward great cities, cultural landmarks, museums, works of art, and learning opportunities – and, in fairness, I’ve had a few of those things over the years, too. But it must be acknowledged that sometimes the most amazing experiences of our lives, and the ones that help us reconnect to our sense of wonder and amazement, aren’t to be found in any tour book. Sometimes they just happen to amble onto your deck…
I was never that much of a naturalist growing up; my interests lay more in fantastical beasties out of myth and legend, and later on ones with engines, made out of titanium and aluminum. I could tell you the life stories of dozens of aircraft families and hundreds of Advanced Dungeons and Dragons monsters by the time I was in middle school, but biology as such didn’t really interest me. I didn’t even have the dinosaurs phase most little boys go through. My memory of that time is hazy; I recall thinking that creatures that were dead and fossilized eons ago were all very well and good, but there were real, live astronauts landing on the moon when I was five, and supersonic airplanes flying around with the promise of Los Angeles to Paris in two hours soon to come, and that seemed far more exciting. I learned about great horned owls when one started roosting in the tree outside my window, eagles because they could fly, too, marmots when we saw them in Switzerland, and turtles just because they’re the coolest animals ever, but even trips to the zoo would only hold my attention for the time we were there…
It was only later, when I started getting into backpacking, mountaineering, and wilderness survival, that I really started to notice the creatures that share our world – and even then I was more interested in the behavior, descriptions and personalities than I was in how their hormones worked or how many stomachs they had. But when you’re trying to stay alive under adverse conditions with only the basic equipment you can conceal about your person stopping to admire the pretty birds and adorable mammals isn’t really high on your list, either. For many years the only notice I took of the wildlife around us was when I noticed that the sparrows that inundated our house in Redondo Beach were mating on a wire outside – or when something had flown into the window again…
Along with our arrival in Michigan came (almost from day one) a huge host of creatures, some familiar – like the wild geese that lived on the artificial lake next to the hotel we were staying in – and some not – like the goldfinches, which I’d read about but never seen before. We encountered three species of squirrel never seen west of the Rockies (and thus unfamiliar to me), wild rabbits quite different from our Western cottontails, a truly repulsive number of skunks, and the occasional hapless (and stupid) white-tailed deer, but then one day I saw a strange animal walking through our back yard. It wasn’t striped with white, so I knew it wasn’t a badger or a skunk; it was too wide to be a weasel, too small to be a wolverine, and too low to the ground to be a fox or a dog. I bought a field guild to mammals of Michigan, but it wasn’t until the late fall of our second year that I saw the creature again – when it wandered onto our back deck, apparently looking for food…
It has been said that travel is broadening, and that living in a new place will really change your perspective on the world. In most cases, I imagine, that aphorism is oriented toward great cities, cultural landmarks, museums, works of art, and learning opportunities – and, in fairness, I’ve had a few of those things over the years, too. But it must be acknowledged that sometimes the most amazing experiences of our lives, and the ones that help us reconnect to our sense of wonder and amazement, aren’t to be found in any tour book. Sometimes they just happen to amble onto your deck…
Friday, March 11, 2011
Hail to the Bean Counters
I was reading a story about a program starting up to supply the City of Chicago with a batch of 400+ solar-power trash compactors for public areas downtown, when I noticed that there had been some resistance to the program on the principles that these new units cost money, that the city already has a massive budget problem, and that solar-powered trash-compactors are a funny-sounding idea in the first place. All of these objections are stupid, of course; a similar project in Philadelphia is saving the city an estimated $900,000 a year (or enough to pay for the compactor units in less than three years); on a seven-year replacement cycle these things should provide a boost for the budget in four and a half of the seven, and trash compactor units cut down on how often you have to empty the trash cans, saving labor hours and fuel for the garbage truck, while solar-powered compactors don’t need expensive wiring or expensive electricity to work. But, of course, none of that is really the point…
You can find the original story from The Chicago Sun-Times here if you want to, but the key point here was never really about trash collection. We have similar machines in use on campus at MSU, and they’ve worked out rather well despite the harsh Michigan climate; there is also plenty of data from other cities that have used this technology to support the idea that these devices will not only pay for themselves but actually save the city money over the course of their operational lifespan. The issue is politics – and the fact that it is almost always easier to run around shouting (or printing inflammatory articles) about anything that does not suit your agenda than it is to actually think about it, let alone make a coherent case. It’s not easy to tell a cash-strapped city to spend money on anything in order to make money later – but that is generally how it works…
People have a tendency to look at the “break even” point when they consider an investment – how long will it take to make back what we’re going to spend? This isn’t a good measure, however; I’d rather have an investment that didn’t pay off for five years and then made a few million dollars extra than a project that paid for itself in a few weeks and then never made another dime. Return on investment (ROI) is a better measure, because it considers how much you will actually make over the life of the project, not just when you will get back to a zero-sum balance. Most financial analysts will tell you that the net present value (NPV) calculation is the best one to use; this considers the interest rate, the cost of capital, risk factors, how much you will eventually make on the project, and even what you could have made if you’d done something else with the money, and gives you a simple calculation: how much money will you have at the end of the project for each dollar you invest now?
I won’t bore you with the details of how to do an NPV calculation; there are automatic NPV calculators available online if you want to try this (or you will find the function on any HP12 or HP17b Financial calculator). My point in filling your ear with this rant is that all too often you will hear people expressing shock or outrage at fiscal expenses they fell are irresponsible, when the truth is that they’re looking at the wrong measurement of the project. Solar-powered trash compacting trash cans may sound silly on paper, and spending $2.5 million on them may seem reckless, but in the long run they appear to make more sense than the alternative – and the people who are railing against them are simply displaying their ignorance – or their political agenda…
You can find the original story from The Chicago Sun-Times here if you want to, but the key point here was never really about trash collection. We have similar machines in use on campus at MSU, and they’ve worked out rather well despite the harsh Michigan climate; there is also plenty of data from other cities that have used this technology to support the idea that these devices will not only pay for themselves but actually save the city money over the course of their operational lifespan. The issue is politics – and the fact that it is almost always easier to run around shouting (or printing inflammatory articles) about anything that does not suit your agenda than it is to actually think about it, let alone make a coherent case. It’s not easy to tell a cash-strapped city to spend money on anything in order to make money later – but that is generally how it works…
People have a tendency to look at the “break even” point when they consider an investment – how long will it take to make back what we’re going to spend? This isn’t a good measure, however; I’d rather have an investment that didn’t pay off for five years and then made a few million dollars extra than a project that paid for itself in a few weeks and then never made another dime. Return on investment (ROI) is a better measure, because it considers how much you will actually make over the life of the project, not just when you will get back to a zero-sum balance. Most financial analysts will tell you that the net present value (NPV) calculation is the best one to use; this considers the interest rate, the cost of capital, risk factors, how much you will eventually make on the project, and even what you could have made if you’d done something else with the money, and gives you a simple calculation: how much money will you have at the end of the project for each dollar you invest now?
I won’t bore you with the details of how to do an NPV calculation; there are automatic NPV calculators available online if you want to try this (or you will find the function on any HP12 or HP17b Financial calculator). My point in filling your ear with this rant is that all too often you will hear people expressing shock or outrage at fiscal expenses they fell are irresponsible, when the truth is that they’re looking at the wrong measurement of the project. Solar-powered trash compacting trash cans may sound silly on paper, and spending $2.5 million on them may seem reckless, but in the long run they appear to make more sense than the alternative – and the people who are railing against them are simply displaying their ignorance – or their political agenda…
Wednesday, March 9, 2011
Planned Obsolescence
I was reading through this week’s collection of consumer ranting and raving over at The Consumerist site when I noticed a posting about a class action suit against Dell Computers, claiming that the company has deliberately designed its computers to fail and require expensive repairs. This is said to include cooling systems that don’t, power supplies that fail much sooner than industry standards, and motherboards that won’t last, along with other interesting design flaws than the plaintiffs claim were inserted into the design on purpose. I was immediately transported back to the early years of the new millennium and the first laptop computer I ever purchased – also a unit from the Dell Inspiron line – which had exactly this set of problems…
It’s probably worth noting that I initially blamed a number of the issues I was having with the computer on Windows Millennium Edition (often pronounced as “Windows meeeeeee” by people who were plagued by it, since it was widely believed that sheep could have created a better operating system). It was only after it became clear that the thing was overheating for no apparent reason AND the motherboard was failing that I got it looked at and discovered that the entire machine was a complete pile of crap. Even worse, I had failed to take out the extended warranty, thinking that (as is most often the case) the computer would either work for the two or three years I would keep it or fail right out of the box, in which case the manufacturer’s original warranty would suffice. I hadn’t counted on the machine being designed to fail on the ninety-first day in service, or at any rate, the day after the warranty expired…
This led me to referring to the product as the “Expiron” for a number of years, or more commonly the “Dell Doorstop” model, because after ninety days or so the only possible use for this machine was to wedge the door open. As bad as it sounds, however, this was not the worse computer I worked with during that period. In the first year of our consulting firm’s operation, the Senior Partner acquired a number of no-name PC clones (desktop machines, not laptops) from a local shop that built them from bulk components. They were extremely generic machines, but they functioned acceptably for a year or so – until one of them quite literally burst into flames one afternoon…
When I showed the (now charred) wreckage to our usual repair people they were astonished. “We always thought that ‘crash and burn’ was just a figure of speech,” the lead repair guy told me. They were able to recover a surprising amount of data off the singed hard drive, and we had backed everything important up anyway, so the event was more of an operating loss than an actual disaster. But we were unable to get any restitution from the store that sold us these incendiary lemons, because by the time our computer caught fire the shop had gone out of business and no one we could reach had a forwarding address for the owners…
I’m not going to do any better on this class action suit, either; they’ve restricted the class to owners of other models, and in any case you have to have had your Dell repaired by the company in order to qualify. If the plaintiffs here are successful, however, I’d anticipate a flood of other Dell customers suing for damages incurred due to the failure of other Inspiron models, as well as pain and suffering caused by lost data, failed classes, missed deadlines, lost business, and anything else we can think up. I don’t know how the company will play this one, but if the allegations are true, it’s going to be a very long winter for Dell – and anyone who owns part of the company…
It’s probably worth noting that I initially blamed a number of the issues I was having with the computer on Windows Millennium Edition (often pronounced as “Windows meeeeeee” by people who were plagued by it, since it was widely believed that sheep could have created a better operating system). It was only after it became clear that the thing was overheating for no apparent reason AND the motherboard was failing that I got it looked at and discovered that the entire machine was a complete pile of crap. Even worse, I had failed to take out the extended warranty, thinking that (as is most often the case) the computer would either work for the two or three years I would keep it or fail right out of the box, in which case the manufacturer’s original warranty would suffice. I hadn’t counted on the machine being designed to fail on the ninety-first day in service, or at any rate, the day after the warranty expired…
This led me to referring to the product as the “Expiron” for a number of years, or more commonly the “Dell Doorstop” model, because after ninety days or so the only possible use for this machine was to wedge the door open. As bad as it sounds, however, this was not the worse computer I worked with during that period. In the first year of our consulting firm’s operation, the Senior Partner acquired a number of no-name PC clones (desktop machines, not laptops) from a local shop that built them from bulk components. They were extremely generic machines, but they functioned acceptably for a year or so – until one of them quite literally burst into flames one afternoon…
When I showed the (now charred) wreckage to our usual repair people they were astonished. “We always thought that ‘crash and burn’ was just a figure of speech,” the lead repair guy told me. They were able to recover a surprising amount of data off the singed hard drive, and we had backed everything important up anyway, so the event was more of an operating loss than an actual disaster. But we were unable to get any restitution from the store that sold us these incendiary lemons, because by the time our computer caught fire the shop had gone out of business and no one we could reach had a forwarding address for the owners…
I’m not going to do any better on this class action suit, either; they’ve restricted the class to owners of other models, and in any case you have to have had your Dell repaired by the company in order to qualify. If the plaintiffs here are successful, however, I’d anticipate a flood of other Dell customers suing for damages incurred due to the failure of other Inspiron models, as well as pain and suffering caused by lost data, failed classes, missed deadlines, lost business, and anything else we can think up. I don’t know how the company will play this one, but if the allegations are true, it’s going to be a very long winter for Dell – and anyone who owns part of the company…
Tuesday, March 8, 2011
Lower Than That
I’ve talked about non-profit overhead in this space before, and if you were around for those entries you probably remember me saying something about how the ends of this spectrum are both problematic, in the sense that it isn’t possible to run an organization of any size with all-volunteer labor out of somebody’s living room, but by the same token any group that gets less than 75% of its intake into actually doing whatever it does is probably spending too much on bloated salaries and gold-plated facilities/equipment. To these remarks we should probably add that any group which is spending 5% or less of the money it receives from supporters on actually fulfilling its mission is probably a scam, and if that mission involves granting wishes for terminally ill children, then the scammers who are ripping people off under such a guise should be publicly shamed before being recycled as dog food – or possibly skeet…
By the same token, it would be easy to single out the group mentioned in the Times-Picayune business section (by way of the Nola.com website ) as a particularly egregious example of this sort of outrage – except that they’re not, really. Granted that the “Wishing Well Foundation USA” does appear to be a scam – they took in $1.3 million in 2008 (the last year for which data is available) and spent only $36,000 of it on official activities, which by my calculations is actually 2.7% of their income. But the same records indicate that over $1 million of that went to telemarketing firms, which are often used by small-time charity groups to generate more donations. Meanwhile, the organization’s president received a salary of $63,600 – which is nearly twice what they spent on actual activities, but is still just 4.9% of their income. Unless the person in question owns a significant interest in those telemarketing firms (and the article does not indicate that he does) it’s certainly not a very efficient scam…
Now, I certainly do not advocate giving this group or the people behind it a pass on the accusation of misconduct; it they aren’t actually siphoning off the donations for their own purposes they are, at the very least, running a criminally incompetent organization and doing much more harm than good. It’s not just that they’re squandering money given to them in good faith, they’re also taking that money away from real charities working in the same field (like the Make-A-Wish Foundation, for example) as well as organizations that are actually working on cures for juvenile diseases. But from the information presented, I can’t tell if there is any genuine malfeasance here, or if the people behind this organization are merely well-meaning buffoons – and neither can the crowd of people leaving scathing comments at the bottom of the linked article. What I can tell you is that whether they’re honest or not, the responsibility for making sure that charitable donations go to reputable organizations lies with the people making the donations…
The truth is that in this 21st Century, donating money to charity isn’t that different from any other business transaction, and just as you would check out a business before you gave them your money, you should also investigate any charity that is asking for your donation. You wouldn’t do business with a company that has a zero-stars rating everywhere on the Internet and a Better Business Bureau rating of “Liars, Thieves and Scoundrels,” and you also shouldn’t have anything to do with a charity that has had a Charity Navigator rating of zero out of five stars for the last six fiscal years running…
Because the truth is that people online aren’t any different from people anywhere else, and saying to yourself that no one could stoop so low as to steal money from ordinary hard-working citizens that was intended to grant wishes for terminally ill children is like saying that the nice man selling $25,000 watches for $20 out of an alley must be above-board. Until we wake up to the realities of our brave new digital world, this sort of thing is going to keep on happening, and we will have no one but ourselves to blame…
By the same token, it would be easy to single out the group mentioned in the Times-Picayune business section (by way of the Nola.com website ) as a particularly egregious example of this sort of outrage – except that they’re not, really. Granted that the “Wishing Well Foundation USA” does appear to be a scam – they took in $1.3 million in 2008 (the last year for which data is available) and spent only $36,000 of it on official activities, which by my calculations is actually 2.7% of their income. But the same records indicate that over $1 million of that went to telemarketing firms, which are often used by small-time charity groups to generate more donations. Meanwhile, the organization’s president received a salary of $63,600 – which is nearly twice what they spent on actual activities, but is still just 4.9% of their income. Unless the person in question owns a significant interest in those telemarketing firms (and the article does not indicate that he does) it’s certainly not a very efficient scam…
Now, I certainly do not advocate giving this group or the people behind it a pass on the accusation of misconduct; it they aren’t actually siphoning off the donations for their own purposes they are, at the very least, running a criminally incompetent organization and doing much more harm than good. It’s not just that they’re squandering money given to them in good faith, they’re also taking that money away from real charities working in the same field (like the Make-A-Wish Foundation, for example) as well as organizations that are actually working on cures for juvenile diseases. But from the information presented, I can’t tell if there is any genuine malfeasance here, or if the people behind this organization are merely well-meaning buffoons – and neither can the crowd of people leaving scathing comments at the bottom of the linked article. What I can tell you is that whether they’re honest or not, the responsibility for making sure that charitable donations go to reputable organizations lies with the people making the donations…
The truth is that in this 21st Century, donating money to charity isn’t that different from any other business transaction, and just as you would check out a business before you gave them your money, you should also investigate any charity that is asking for your donation. You wouldn’t do business with a company that has a zero-stars rating everywhere on the Internet and a Better Business Bureau rating of “Liars, Thieves and Scoundrels,” and you also shouldn’t have anything to do with a charity that has had a Charity Navigator rating of zero out of five stars for the last six fiscal years running…
Because the truth is that people online aren’t any different from people anywhere else, and saying to yourself that no one could stoop so low as to steal money from ordinary hard-working citizens that was intended to grant wishes for terminally ill children is like saying that the nice man selling $25,000 watches for $20 out of an alley must be above-board. Until we wake up to the realities of our brave new digital world, this sort of thing is going to keep on happening, and we will have no one but ourselves to blame…
Monday, March 7, 2011
How Stuff Works: Board of Directors
I’ve been keeping an eye on the expanding compensation scandal at the Blue Cross/Blue Shield of Massachusetts, and it struck me that many of the people commenting on the story have no idea what a Board of Directors is or what it is supposed to do – and the reporters covering the story aren’t helping. Then it occurred to me that the reporters may not know either – most of my students don’t know until I explain it to them, and they’re all graduating seniors in a top business school, not political/public opinion journalists. So I thought we would continue with our occasional series on How Stuff Works, and look at what the Board at Blue Cross was supposed to do – and why they may not have done it…
In theory, any corporation (public or private) is nothing more than a group of people who have pooled their money in order to start a company. You or I don’t have the cash to start a new car company, for example, but if we get a hundred million or so of our friends together and we each put in $100, that’s $10 billion of capitalization, enough to start a new GM, for example. The problem we run into is that none of us has the time to run the company – we all have to have jobs to make the $100, and even if we didn’t, most of the people chipping in the money don’t have the experience or training to run an automobile company in the first place. So we hire a CEO to run the company for us. The problem there is that we can’t really supervise the CEO, despite the fact that he or she actually does work for us; we don’t have the time or the expertise. So what we do is hire a team of people who know about running big manufacturing companies, tell them what we want the company to accomplish, and have them tell the CEO what we want him or her to do. This team of experts is called a Board of Directors…
Right off the bat, you can see how there would be problems with this. First off, the Directors are not going to work for free, so we’re going to have to pay them. Keeping track of all of the factors involved in running a large company takes a lot of time (try it if you don’t believe me), so we’re going to have to pay them to be on the board – and experts at that level will not work for cheap. Then there’s the board independence issue – depending on who we get, the Directors may have more loyalty to the CEO than they do to the stockholders, or they may run their own companies and have reciprocal understandings with our CEO. Even if they don’t have these problems, the Directors will almost certainly have their own public relations issues, and they may have political or personal reasons for voting a specific way on certain issues…
In the case of the Blue Cross board members, the Boston Herald online is raising cane because several of the Directors who voted to give their (failed) outgoing CEO an $11 million severance package are also crusaders against rising healthcare costs – at least, publically. Certainly the Chamber of Commerce President and Union President involved have a vested interest in appearing pro-business and anti-cost. Commenters on the site (and people in Boston generally) appear to be outraged by the idea that these supposed reformers were paid large salaries (&70,000 to $80,000 per year), and made no effort to screw the outgoing CEO out of money his contract promised him. The problem is that while this may be hypocritical, it isn’t even unusual, let alone improper…
Board members may only meet four times each year, but all of them are assumed to spend weeks reading up on the issues before those meetings. The board salaries cited may seem excessive – especially when, as the article notes, they’re higher than the average person’s salary – but they’re probably not out of line for the qualifications of the people holding those posts. As to trying to deny the outgoing CEO his contractual bonus funds, the Board might have been able to win the court case – but they would also have had to risk losing it and costing the corporation three times (or perhaps more) in judgments. The suggestion that the Directors should be willing to do those jobs for free because the organization is a non-profit is equally silly; a non-profit isn’t necessarily a charity, and even if it is, the people who work for it still need to make a living. The kind of people who will serve on a board for no compensation probably aren’t the same people who know how to run a large (and complicated) organization like Blue Cross in the first place, and the kind of people who have that expertise will not work for free…
The bottom line in this case is that the Directors haven’t done anything wrong. If the people who own the company – in this case, probably the people of Massachusetts – don’t approve of the Board’s actions, they can fire the Directors and get new ones. They can also vote any of the Directors who hold public office out, and demand the resignation of anyone who holds a private position. But claiming that there has been wrongdoing in this case just proves that the people doing the complaining don’t understand How Things Work…
In theory, any corporation (public or private) is nothing more than a group of people who have pooled their money in order to start a company. You or I don’t have the cash to start a new car company, for example, but if we get a hundred million or so of our friends together and we each put in $100, that’s $10 billion of capitalization, enough to start a new GM, for example. The problem we run into is that none of us has the time to run the company – we all have to have jobs to make the $100, and even if we didn’t, most of the people chipping in the money don’t have the experience or training to run an automobile company in the first place. So we hire a CEO to run the company for us. The problem there is that we can’t really supervise the CEO, despite the fact that he or she actually does work for us; we don’t have the time or the expertise. So what we do is hire a team of people who know about running big manufacturing companies, tell them what we want the company to accomplish, and have them tell the CEO what we want him or her to do. This team of experts is called a Board of Directors…
Right off the bat, you can see how there would be problems with this. First off, the Directors are not going to work for free, so we’re going to have to pay them. Keeping track of all of the factors involved in running a large company takes a lot of time (try it if you don’t believe me), so we’re going to have to pay them to be on the board – and experts at that level will not work for cheap. Then there’s the board independence issue – depending on who we get, the Directors may have more loyalty to the CEO than they do to the stockholders, or they may run their own companies and have reciprocal understandings with our CEO. Even if they don’t have these problems, the Directors will almost certainly have their own public relations issues, and they may have political or personal reasons for voting a specific way on certain issues…
In the case of the Blue Cross board members, the Boston Herald online is raising cane because several of the Directors who voted to give their (failed) outgoing CEO an $11 million severance package are also crusaders against rising healthcare costs – at least, publically. Certainly the Chamber of Commerce President and Union President involved have a vested interest in appearing pro-business and anti-cost. Commenters on the site (and people in Boston generally) appear to be outraged by the idea that these supposed reformers were paid large salaries (&70,000 to $80,000 per year), and made no effort to screw the outgoing CEO out of money his contract promised him. The problem is that while this may be hypocritical, it isn’t even unusual, let alone improper…
Board members may only meet four times each year, but all of them are assumed to spend weeks reading up on the issues before those meetings. The board salaries cited may seem excessive – especially when, as the article notes, they’re higher than the average person’s salary – but they’re probably not out of line for the qualifications of the people holding those posts. As to trying to deny the outgoing CEO his contractual bonus funds, the Board might have been able to win the court case – but they would also have had to risk losing it and costing the corporation three times (or perhaps more) in judgments. The suggestion that the Directors should be willing to do those jobs for free because the organization is a non-profit is equally silly; a non-profit isn’t necessarily a charity, and even if it is, the people who work for it still need to make a living. The kind of people who will serve on a board for no compensation probably aren’t the same people who know how to run a large (and complicated) organization like Blue Cross in the first place, and the kind of people who have that expertise will not work for free…
The bottom line in this case is that the Directors haven’t done anything wrong. If the people who own the company – in this case, probably the people of Massachusetts – don’t approve of the Board’s actions, they can fire the Directors and get new ones. They can also vote any of the Directors who hold public office out, and demand the resignation of anyone who holds a private position. But claiming that there has been wrongdoing in this case just proves that the people doing the complaining don’t understand How Things Work…
Sunday, March 6, 2011
The Ethics of Phone Books
I noticed an article on S.F. Gate online about an initiative by the City of San Francisco to ban the delivery of hard-copy yellow pages phone books within the City limits. It’s a follow-up to their move to ban plastic shopping bags a few years ago, and appears to be based on the fact that most people these days use electronic yellow pages online instead of the physical version, the fact that unused physical phone books waste a lot of energy, the fact that un-recycled versions take up a lot of landfill space, and the fact that no one on the San Francisco City Council appears to have any ownership interest in a company that prints yellow pages. Naturally, the people who publish yellow pages are protesting this measure on First Amendment grounds, saying that such a ban interferes with their rights to freedom of the press – which brings up a number of interesting ethics questions…
First off, does advertising classify as protected speech? I’ll leave the second-guessing of what the Founding Fathers would have intended to the Strict Constructionist types on the far right, although it’s hard to imagine that anyone living in 1787 could have imagined telephones, let alone telemarketers or spam emails. But whether the Founders intended it or not, the real question for us is whether advertising SHOULD be protected under the Constitution. The right to advertise isn’t guaranteed under the First Amendment, but the right to publish is – and in a very real sense, most print media exists only to sell ads; the content is just a way of getting people to pick up the material and read it. If the city is allowed to ban distribution of yellow pages, there’s no reason the same law couldn’t be used to restrict distribution of newspapers and magazines…
On the other hand, the city does have the right to regulate what gets collected by its garbage trucks, what gets disposed of in its landfills, and what gets processed in its recycling plants. Even if San Francisco can’t prevent the books from being distributed, it can probably make it a crime to throw them away – or make it a requirement for the publisher to collect the old ones. Neither of these actions will endear the City Council to the people of San Francisco, nor will it go over well if the publishers start charging more to advertise in the yellow pages in order to cover the cost of collection and recycling. But while we could argue that people have a right to smaller landfills – and more environmentally friendly living conditions in general – it would be harder to argue that people have a right to physical yellow pages…
Unless we consider that some people do not have Internet connections, can’t afford to have computers, and might still need to find telephone numbers. In which case, the lack of telephone books would inconvenience those people and cut off anyone advertising in the books from a huge (if admittedly not very lucrative) market segment. So I think we have to ask a few questions about this situation: Does the right of the city to exclude tons of waste from the landfill and even more tons of particulate from the air supersede the right of published to publish phone books, or companies to advertise in them? Does the right of people who can’t afford a computer to look things up supersede the right of everyone else to a cleaner city environment? Should the First Amendment guarantee of freedom of speech apply to all advertising? And if not, how do we draw the line between publications that sell advertising space around their content, and publications that squeeze content in between masses of copy?
And, perhaps more important of all, should a single municipal government be able to make that decision unilaterally, without input from the Supreme Court, Congress, the People of the United States, or even the residents of the city they nominally govern?
It’s worth thinking about…
First off, does advertising classify as protected speech? I’ll leave the second-guessing of what the Founding Fathers would have intended to the Strict Constructionist types on the far right, although it’s hard to imagine that anyone living in 1787 could have imagined telephones, let alone telemarketers or spam emails. But whether the Founders intended it or not, the real question for us is whether advertising SHOULD be protected under the Constitution. The right to advertise isn’t guaranteed under the First Amendment, but the right to publish is – and in a very real sense, most print media exists only to sell ads; the content is just a way of getting people to pick up the material and read it. If the city is allowed to ban distribution of yellow pages, there’s no reason the same law couldn’t be used to restrict distribution of newspapers and magazines…
On the other hand, the city does have the right to regulate what gets collected by its garbage trucks, what gets disposed of in its landfills, and what gets processed in its recycling plants. Even if San Francisco can’t prevent the books from being distributed, it can probably make it a crime to throw them away – or make it a requirement for the publisher to collect the old ones. Neither of these actions will endear the City Council to the people of San Francisco, nor will it go over well if the publishers start charging more to advertise in the yellow pages in order to cover the cost of collection and recycling. But while we could argue that people have a right to smaller landfills – and more environmentally friendly living conditions in general – it would be harder to argue that people have a right to physical yellow pages…
Unless we consider that some people do not have Internet connections, can’t afford to have computers, and might still need to find telephone numbers. In which case, the lack of telephone books would inconvenience those people and cut off anyone advertising in the books from a huge (if admittedly not very lucrative) market segment. So I think we have to ask a few questions about this situation: Does the right of the city to exclude tons of waste from the landfill and even more tons of particulate from the air supersede the right of published to publish phone books, or companies to advertise in them? Does the right of people who can’t afford a computer to look things up supersede the right of everyone else to a cleaner city environment? Should the First Amendment guarantee of freedom of speech apply to all advertising? And if not, how do we draw the line between publications that sell advertising space around their content, and publications that squeeze content in between masses of copy?
And, perhaps more important of all, should a single municipal government be able to make that decision unilaterally, without input from the Supreme Court, Congress, the People of the United States, or even the residents of the city they nominally govern?
It’s worth thinking about…
Saturday, March 5, 2011
The Grad School Diaries: Déjà vu All Over Again
If you’ve never had the experience of having sensors stuck to your head with unpleasant white goo while simultaneously wired for pulse, respiration, and a half-dozen other sensors, all I can say is you aren’t missing much. And if you’ve never had to try to sleep while so equipped, my advice would be to just quietly give thanks to whomever you believe looks out for you. So why am I going though this procedure again? Well, it seems that the first time didn’t take…
As noted in my previous rant on this subject, my first sleep study was an unpleasant (one might even say creepy) experience that would have been a depressing and lonely reminder of one’s mortality except that I was too busy being grossed out, irritated, and eventually in pain to really notice. When the results of the first study were termed “inconclusive” by the sleep specialist reviewing the case (whom I still have never met) my primary-care physician decided that enough was enough and pre-approved using a different test center for the retest. Which brings me here, to the Midwest Center for Sleep Disorders on the south side of town; a facility purpose-built for this type of research and not just adapted from an existing hospital ward. The rooms look more like a business hotel room (or a low-end B&B room), the beds are much more comfortable, and the bathrooms don’t look like something out of the “Saw” movie franchise. But on the downside, there’s still the unpleasant white goo to deal with, and this time I’ve got a machine blowing air up my nose as well…
It turns out that there are a whole series of sleep disorders that are caused by your airway being partly or fully blocked while you sleep (how much blockage there is and why it’s there depends on which disorder you’ve got), and while there is a surgical procedure that can correct some of the obstructions, it’s generally cheaper, safer, and far less painful to just set up a positive air pressure down your windpipe to keep your airway open. This requires the use of a small machine called a Continuous Positive Air Pressure device, or CPAP, which, in plain language, works by blowing air up your nose while you sleep…
Maybe it’s the warmer atmosphere; maybe it’s the more comfortable bed; maybe it’s having enough slack in the sensor leads to change position if I need to; and maybe having air blown up one’s nose actually works as advertised, but the results are different almost immediately. Getting used to the modified airflow is tricky at first, but the attending technician’s advice to think of riding in a convertible and breathing from the airflow works for me, and in a few moments I’m asleep. Even more impressive, however, is that I STAY asleep – nearly seven hours before being woken up at the end of the test. It’s the longest continuous period I can remember staying asleep since my neck surgery in 2007…
Waking up, getting the various sensors removed, and washing the goo out of my hair is different, too. This facility doesn’t have a full bathroom in each sleep room; it’s a medical office building and probably wasn’t plumbed for so many fixtures. There’s a couple of dedicated shower rooms up the hall from the room I slept in which would not look out of place in a gym or locker room, and which have the added bonus of being spotlessly clean. Finishing the paperwork and going home is more like checking out of a hotel as a business traveler than leaving the hospital; I’ve got places to go and things to do, but it’s less of a re-birth and more like going home. Which I then do. I’ll get my own CPAP unit in a few days, and try to adjust to sleeping with air blowing up my nose at home, too. Which may take some doing – but at least I won’t have goo stuck to my head while I’m about it…
As noted in my previous rant on this subject, my first sleep study was an unpleasant (one might even say creepy) experience that would have been a depressing and lonely reminder of one’s mortality except that I was too busy being grossed out, irritated, and eventually in pain to really notice. When the results of the first study were termed “inconclusive” by the sleep specialist reviewing the case (whom I still have never met) my primary-care physician decided that enough was enough and pre-approved using a different test center for the retest. Which brings me here, to the Midwest Center for Sleep Disorders on the south side of town; a facility purpose-built for this type of research and not just adapted from an existing hospital ward. The rooms look more like a business hotel room (or a low-end B&B room), the beds are much more comfortable, and the bathrooms don’t look like something out of the “Saw” movie franchise. But on the downside, there’s still the unpleasant white goo to deal with, and this time I’ve got a machine blowing air up my nose as well…
It turns out that there are a whole series of sleep disorders that are caused by your airway being partly or fully blocked while you sleep (how much blockage there is and why it’s there depends on which disorder you’ve got), and while there is a surgical procedure that can correct some of the obstructions, it’s generally cheaper, safer, and far less painful to just set up a positive air pressure down your windpipe to keep your airway open. This requires the use of a small machine called a Continuous Positive Air Pressure device, or CPAP, which, in plain language, works by blowing air up your nose while you sleep…
Maybe it’s the warmer atmosphere; maybe it’s the more comfortable bed; maybe it’s having enough slack in the sensor leads to change position if I need to; and maybe having air blown up one’s nose actually works as advertised, but the results are different almost immediately. Getting used to the modified airflow is tricky at first, but the attending technician’s advice to think of riding in a convertible and breathing from the airflow works for me, and in a few moments I’m asleep. Even more impressive, however, is that I STAY asleep – nearly seven hours before being woken up at the end of the test. It’s the longest continuous period I can remember staying asleep since my neck surgery in 2007…
Waking up, getting the various sensors removed, and washing the goo out of my hair is different, too. This facility doesn’t have a full bathroom in each sleep room; it’s a medical office building and probably wasn’t plumbed for so many fixtures. There’s a couple of dedicated shower rooms up the hall from the room I slept in which would not look out of place in a gym or locker room, and which have the added bonus of being spotlessly clean. Finishing the paperwork and going home is more like checking out of a hotel as a business traveler than leaving the hospital; I’ve got places to go and things to do, but it’s less of a re-birth and more like going home. Which I then do. I’ll get my own CPAP unit in a few days, and try to adjust to sleeping with air blowing up my nose at home, too. Which may take some doing – but at least I won’t have goo stuck to my head while I’m about it…
Friday, March 4, 2011
Stuck with the Check
For some time now I’ve been picking on various airlines for the unvarnished lunacy involved in baggage fees and similar made-up charges – saying how they might as well just bend over and give the discount airlines (like Southwest) that don’t charge this sort of nuisance fee an axe. I’ve also raised the point that baggage fees result in more people taking increasing amounts of carry-on luggage with them, which crowds an already cramped cabin and clogs up security checkpoints, making an already unpleasant flying experience that much worse and convincing even more people to use alternate forms of transportation. I’ve also expressed my doubts about whether the airlines can actually make more profits this way, and if they can, how much of it is coming on the backs of the taxpayers. Now it turns out that the Homeland Security Secretary was considering the same question…
An Associated Press story appearing on the Yahoo News site details Janet Napolitano’s testimony before Congress, where the Secretary claimed that the increase in carry-on baggage due to the new fee structures is costing taxpayers around $260 million each year. It’s not a big piece of the $5 billion or so that the industry is expected to make this year, but I rather resent the idea of 5% of a given industry’s profit margin being taken directly out of my money, especially when that industry has received government bail-out money over the past decade or so. It turns out that the Department of Homeland Security and some of the Congresspeople they report to are not happy about it either; the real question is what to do about it…
Demanding contributions from the airlines – the obvious idea – is essentially pointless, since they will just add whatever the amount is to existing ticket prices and continue on with business as usual. Imposing a $5 airport security fee on all passengers – which DHS has been trying to get approve since 2002, without success – is just more of the same; not even an attempt to charge the airlines for cleaning up the mess they’ve created. As we’ve seen with the automotive and financial industry bailouts, even government loan debts are not enough to get private companies to stop paying outrageous bonuses to worthless personnel OR start charging more reasonable fees, and there’s no reason to expect that things would be any different in the airline industry. In fact, there’s nothing short of nationalizing an industry that will allow our Federal government to control how a company does business – and that hasn’t worked so well in countries that have tried it…
Now, in many respects, the increased demands on TSA screeners and their crackpot equipment actually has been good for our economy. The airport security programs have provided jobs for thousands of Americans who apparently couldn’t qualify for responsible jobs like garbage collector or sewer maintenance technician, and has provided sales for a number of companies that make equipment you apparently couldn’t use on animals without have the ASPCA camp out in front of your office. And, as the linked article makes clear, the airlines themselves are on a pace to have their first profitable year since 2002. But speaking as an American taxpayer, I’m still a little annoyed at being asked to pick up the check for all of these benefits while an industry that appears to have dug its own pit and then willingly jumped into it gets to make a multi-billion-dollar profit…
An Associated Press story appearing on the Yahoo News site details Janet Napolitano’s testimony before Congress, where the Secretary claimed that the increase in carry-on baggage due to the new fee structures is costing taxpayers around $260 million each year. It’s not a big piece of the $5 billion or so that the industry is expected to make this year, but I rather resent the idea of 5% of a given industry’s profit margin being taken directly out of my money, especially when that industry has received government bail-out money over the past decade or so. It turns out that the Department of Homeland Security and some of the Congresspeople they report to are not happy about it either; the real question is what to do about it…
Demanding contributions from the airlines – the obvious idea – is essentially pointless, since they will just add whatever the amount is to existing ticket prices and continue on with business as usual. Imposing a $5 airport security fee on all passengers – which DHS has been trying to get approve since 2002, without success – is just more of the same; not even an attempt to charge the airlines for cleaning up the mess they’ve created. As we’ve seen with the automotive and financial industry bailouts, even government loan debts are not enough to get private companies to stop paying outrageous bonuses to worthless personnel OR start charging more reasonable fees, and there’s no reason to expect that things would be any different in the airline industry. In fact, there’s nothing short of nationalizing an industry that will allow our Federal government to control how a company does business – and that hasn’t worked so well in countries that have tried it…
Now, in many respects, the increased demands on TSA screeners and their crackpot equipment actually has been good for our economy. The airport security programs have provided jobs for thousands of Americans who apparently couldn’t qualify for responsible jobs like garbage collector or sewer maintenance technician, and has provided sales for a number of companies that make equipment you apparently couldn’t use on animals without have the ASPCA camp out in front of your office. And, as the linked article makes clear, the airlines themselves are on a pace to have their first profitable year since 2002. But speaking as an American taxpayer, I’m still a little annoyed at being asked to pick up the check for all of these benefits while an industry that appears to have dug its own pit and then willingly jumped into it gets to make a multi-billion-dollar profit…
Thursday, March 3, 2011
Has Anybody Seen Ronald Lately?
Back when we were growing up, most of the companies that marketed directly to a youth audience (including my younger self) had advertising mascots, and most of them had jingles as well. I can still remember the original Burger King – a short, completely animated character whose shticks included a hamburger-shaped helicopter and a castle decorated in a pleasant hamburger motif – and the original Jack in the Box mascot, Pioneer Pete (from Pioneer Chicken), the dancing hamburger and taco from Pup ‘N Taco, a number of Taco Bell mascots including the talking dog, the animated Happy Star from Carl’s Jr., the original Colonel Sanders (I have no idea if it was the real Harlan Sanders or not), the original (animated) Bob’s Big Boy, and many others. I can also remember interim versions of many of these, including a live-action Burger King (an actor in costume and makeup) who had his own theme song and an animated Colonel Sanders. But the biggest of them all was always Ronald McDonald, who had his own theme song and supporting cast at least 40 years ago…
Today, however, it seems like Ronald’s theme song should be “Have You Seen Me Lately?” by Counting Crows, since no one has. In an article on their website, Bloomberg speculates that the company is making less use of the character in their advertising in a bid to both go upscale and refocus their brand onto more adult products. Recent McDonald’s menu changes have emphasized salads and relatively healthy food options, and the McCafe line of upscale coffee products has been credited by the company for creating revenue growth over six of the last seven quarters. At the same time, the company has been shifting towards advertising that supports these new target demographics – which is hardly surprising, if you think about it…
Personally, I can’t help speculating that the shift in advertising focus may reflect the cultural impact of previous campaigns and the company’s current market position as much as it does their new demographic targets. In America, it isn’t generally necessary to encourage children to ask for McDonald’s food products; nearly all cases, children already know what McDonald’s is offering and will already beg their parents for it, simply because they have been conditioned to believe that this is the best-tasting (or at least most-enjoyable) food possible. It will probably be necessary to keep marketing to children, at least to maintain that position, but today’s younger customers are the children and grandchildren (and in some cases, great-grandchildren) of McDonald’s customers, and that market position is not likely to change any time soon. But to establish themselves as a purveyor of adult favorites and a destination for adults, the company will need to develop an entirely new public imagine, and a clown-like spokesman probably won’t help with that…
Of course, Ronald isn’t actually going anywhere. The company still uses him in a lot of different iconography, including charitable (and PR) initiatives like the Ronald McDonald House charities. And we can probably count on seeing him turn up from time to time in youth-oriented advertising of various sorts, as the company uses him to retain their brand recognition among children and pre-teens. What we probably won’t see is a “gritty re-boot” of the character, to appeal to teenagers and young adults, since that would interfere with the primary uses already listed – which is unfortunate, I think. Imagine the marketing potential for Ronald as a superhero, fighting crime with his amazing hamburger-oriented powers; or as an adventurer, discovering the Tomb of the Lost Carbohydrate with his mad exploring skills. On the other hand, given what Burger King did with their smart, funny animated King (who would have fit in with most Warner Brothers cartoon characters) in creating the current, excessively creepy “freaky King,” maybe it’s just as well…
So if you’re out there in America somewhere and you pass a guy in a yellow clown costume and a red wig trying to sell hamburgers to people who have become jaded with live-action advertising mascots, be nice to him. He helped make this country what it is today, good and bad – and I think we can all count on seeing him again soon…
Today, however, it seems like Ronald’s theme song should be “Have You Seen Me Lately?” by Counting Crows, since no one has. In an article on their website, Bloomberg speculates that the company is making less use of the character in their advertising in a bid to both go upscale and refocus their brand onto more adult products. Recent McDonald’s menu changes have emphasized salads and relatively healthy food options, and the McCafe line of upscale coffee products has been credited by the company for creating revenue growth over six of the last seven quarters. At the same time, the company has been shifting towards advertising that supports these new target demographics – which is hardly surprising, if you think about it…
Personally, I can’t help speculating that the shift in advertising focus may reflect the cultural impact of previous campaigns and the company’s current market position as much as it does their new demographic targets. In America, it isn’t generally necessary to encourage children to ask for McDonald’s food products; nearly all cases, children already know what McDonald’s is offering and will already beg their parents for it, simply because they have been conditioned to believe that this is the best-tasting (or at least most-enjoyable) food possible. It will probably be necessary to keep marketing to children, at least to maintain that position, but today’s younger customers are the children and grandchildren (and in some cases, great-grandchildren) of McDonald’s customers, and that market position is not likely to change any time soon. But to establish themselves as a purveyor of adult favorites and a destination for adults, the company will need to develop an entirely new public imagine, and a clown-like spokesman probably won’t help with that…
Of course, Ronald isn’t actually going anywhere. The company still uses him in a lot of different iconography, including charitable (and PR) initiatives like the Ronald McDonald House charities. And we can probably count on seeing him turn up from time to time in youth-oriented advertising of various sorts, as the company uses him to retain their brand recognition among children and pre-teens. What we probably won’t see is a “gritty re-boot” of the character, to appeal to teenagers and young adults, since that would interfere with the primary uses already listed – which is unfortunate, I think. Imagine the marketing potential for Ronald as a superhero, fighting crime with his amazing hamburger-oriented powers; or as an adventurer, discovering the Tomb of the Lost Carbohydrate with his mad exploring skills. On the other hand, given what Burger King did with their smart, funny animated King (who would have fit in with most Warner Brothers cartoon characters) in creating the current, excessively creepy “freaky King,” maybe it’s just as well…
So if you’re out there in America somewhere and you pass a guy in a yellow clown costume and a red wig trying to sell hamburgers to people who have become jaded with live-action advertising mascots, be nice to him. He helped make this country what it is today, good and bad – and I think we can all count on seeing him again soon…
Wednesday, March 2, 2011
I’ll Take That Bet
Here’s a hypothetical for you: Suppose your company has the opportunity to hire a CEO on a medium-term contract (5 or 7 years) at a quite reasonable salary – less than you would expect to pay for a manager of his stature, and considerably less than he could get from a number of other offers. The only catch is, he wants a large severance payment in the contract, so that if you want to fire him early, it will cost you an extra $11 million to get rid of him. Would you accept that contract, knowing that in effect you are betting that the savings on his salary (and the money you will make by having him on your senior management team) will make up for the potential loss if you decide to fire him? Would your feelings about this change if his first three years in office were your best ever, with your highest revenue and lowest costs? If you did take this bet, would you still pitch a fit if he collected his $11 million “golden parachute” after his last year with your organization included a $149 million loss?
Well, you might want to talk it over with some of the people from the Massachusetts Blue Cross/Blue Shield organization, since that’s essentially what has just happened to them. You can get the story off of the Boston Herald web site if you’d like, but the basic story is that the CEO of the Massachusetts Blue Cross/Blue Shield stepped down at the end of last year because the Board was fretting about that year’s operating losses. Exacerbating the whole situation is the fact that the outgoing CEO’s predecessor received an even larger severance package in 2005 ($16.7 million, in fact) – and the fact that the organization is a non-profit…
Now, as I’ve previously noted, a non-profit is not the same thing as a charity. Being a non-profit organization does grant an organization several advantages under the law, most notably not having to pay taxes, but since a corporation only pays taxes on profits and a non-profit can’t have any profits, this isn’t as big a deal as you might think. In theory, all this should do is produce a leaner, more efficient corporation, since it can use 100% of its revenue to pay employees, buy equipment, and improve its services. Even more to the point, perhaps, in 2005 the most recent economic boom was in full swing, many people who should have known better were predicting nothing but peace and prosperity for the next thousand years, and the idea of spending $11 million on a CEO’s severance package seemed almost trivial, since a couple of college students could make that much in a weekend by starting a website. The move certainly wasn’t illegal, and it hardly seemed unethical (let alone “unconscionable”); at the time, it represented a savings of over $5 million from the previous CEO’s severance package…
The point I’m driving at is that all business decisions have to base the inherent risks of the situation against the payoff if your choice is successful. If your business environment is highly dynamic, long-term high-risk activities may not be a good idea; if your country or state are in the middle of an economic bubble that even a toddler could tell would not last forever (and might not last for seven years) then gambling on the stability of your senior management may not be your best choice. This is especially true in an industry like health insurance, which (like the securities, real estate, and airline industries before it) had been skating on thin ice while lobbying Congress to maintain its artificial industry conditions for decades before the deluge finally came. In the teeth of an economic crisis, a healthcare revolution, and an increasingly nasty political struggle for the future (if not the soul) of this country, having to publically admit that you bet $11 million on the performance of your new CEO and lost is a hard thing to carry off…
The question is, when you are given the same choice, somewhere in the future, will you take that bet, or play it safe and risk not getting those three banner years instead?
Well, you might want to talk it over with some of the people from the Massachusetts Blue Cross/Blue Shield organization, since that’s essentially what has just happened to them. You can get the story off of the Boston Herald web site if you’d like, but the basic story is that the CEO of the Massachusetts Blue Cross/Blue Shield stepped down at the end of last year because the Board was fretting about that year’s operating losses. Exacerbating the whole situation is the fact that the outgoing CEO’s predecessor received an even larger severance package in 2005 ($16.7 million, in fact) – and the fact that the organization is a non-profit…
Now, as I’ve previously noted, a non-profit is not the same thing as a charity. Being a non-profit organization does grant an organization several advantages under the law, most notably not having to pay taxes, but since a corporation only pays taxes on profits and a non-profit can’t have any profits, this isn’t as big a deal as you might think. In theory, all this should do is produce a leaner, more efficient corporation, since it can use 100% of its revenue to pay employees, buy equipment, and improve its services. Even more to the point, perhaps, in 2005 the most recent economic boom was in full swing, many people who should have known better were predicting nothing but peace and prosperity for the next thousand years, and the idea of spending $11 million on a CEO’s severance package seemed almost trivial, since a couple of college students could make that much in a weekend by starting a website. The move certainly wasn’t illegal, and it hardly seemed unethical (let alone “unconscionable”); at the time, it represented a savings of over $5 million from the previous CEO’s severance package…
The point I’m driving at is that all business decisions have to base the inherent risks of the situation against the payoff if your choice is successful. If your business environment is highly dynamic, long-term high-risk activities may not be a good idea; if your country or state are in the middle of an economic bubble that even a toddler could tell would not last forever (and might not last for seven years) then gambling on the stability of your senior management may not be your best choice. This is especially true in an industry like health insurance, which (like the securities, real estate, and airline industries before it) had been skating on thin ice while lobbying Congress to maintain its artificial industry conditions for decades before the deluge finally came. In the teeth of an economic crisis, a healthcare revolution, and an increasingly nasty political struggle for the future (if not the soul) of this country, having to publically admit that you bet $11 million on the performance of your new CEO and lost is a hard thing to carry off…
The question is, when you are given the same choice, somewhere in the future, will you take that bet, or play it safe and risk not getting those three banner years instead?
Tuesday, March 1, 2011
I’ve Got a Bridge I’d Like to Show You
The gullibility of the general public in the Internet age is a matter of almost constant wonder and amazement to me. In a time when information on virtually any topic you’d care to name is available to anyone with an Internet connection in a brief online search, you would expect that people would be able to see through almost any confidence scheme. However, as the ongoing success of the various Nigerian bank frauds proves, this is not the case. All over the world, adult people – many of them otherwise intelligent! – are falling for scams that make the original “Brooklyn Bridge” con look positively elegant. I still think that stealing an entire university is crossing a line, though…
I got hold of the story off of the always invaluable MSNBC Technology page , but you can also pick it up from the Wall Street Journal story , which actually gives a clearer view of the problem. The basic idea is that some person or persons currently unknown (but almost certainly felonious) copied the entire website from Reed College, a small private school in Oregon, changed the name of the school throughout to the fictitious “University of Redwood”, and included their own contact information – a blind mail drop and forward operation in Torrance, California. Even the faculty and history pages from the Reed College were copied, resulting in some claims that are more outrageous than funny. Even worse, the fake school’s site is on Go Daddy.com, and the company is refusing to do anything about the con, saying that the copyright infringing material had been taken down…
The really upsetting part, at least to me, is that even if Reed College is successful in their legal action to have the fake site taken down – for that matter, even if they recover enough money to drive Go Daddy off the Internet – there is nothing to stop this group of scam artists (or the next group) from setting up shop on another server somewhere outside of US jurisdiction and doing the same thing. In fact, there’s no way to stop dozens of similar groups of criminals from doing the same thing, and if they are a little more careful about where they “harvest” their fake faculty biographies and fake campus photographs, it might be years before anyone even notices a crime is being committed. As the folks from MSNBC correctly note, all the scammers have to do is collect the “application fees”, wait ten to twelve weeks, and then send “rejection” letters to their would-be students…
Now, I’m sure some of you are pointing out that this is a relatively easy scam to defeat. All you really need to do is look up the rankings for these made-up colleges, or do a brief Internet search looking for any mention of them in any legitimate source, for that matter, and you’ll rapidly find out that no such institution has ever existed. Failing that, you might notice that the scam site has no voice telephone numbers (only a fax line), which should raise at least a few warning flags. Some of you are also probably pointing out that anyone who is dim enough to fall for a scam like this is probably too dumb (or too ignorant) to go to college in the first place. And that might be true – but I don’t remember anything about it being legal or ethical to make money by bold-faced lying to the gullible. If selling someone the Brooklyn Bridge is a crime, then this is too…
I’ve been saying for some time now that life in the Internet age means adapting to new rules, just the way telephones, telegraphs, televisions and movable type did. There is no way to get the genie back in the bottle; all we can do is to double- and triple-source all information, never send money to unknown people or institutions (no matter how legitimate they appear to be), and never hazard money you can’t afford to just throw out a window on Internet offers of this type – anymore than you would just give money to a guy who says he has a bridge he’d like to show you…
I got hold of the story off of the always invaluable MSNBC Technology page , but you can also pick it up from the Wall Street Journal story , which actually gives a clearer view of the problem. The basic idea is that some person or persons currently unknown (but almost certainly felonious) copied the entire website from Reed College, a small private school in Oregon, changed the name of the school throughout to the fictitious “University of Redwood”, and included their own contact information – a blind mail drop and forward operation in Torrance, California. Even the faculty and history pages from the Reed College were copied, resulting in some claims that are more outrageous than funny. Even worse, the fake school’s site is on Go Daddy.com, and the company is refusing to do anything about the con, saying that the copyright infringing material had been taken down…
The really upsetting part, at least to me, is that even if Reed College is successful in their legal action to have the fake site taken down – for that matter, even if they recover enough money to drive Go Daddy off the Internet – there is nothing to stop this group of scam artists (or the next group) from setting up shop on another server somewhere outside of US jurisdiction and doing the same thing. In fact, there’s no way to stop dozens of similar groups of criminals from doing the same thing, and if they are a little more careful about where they “harvest” their fake faculty biographies and fake campus photographs, it might be years before anyone even notices a crime is being committed. As the folks from MSNBC correctly note, all the scammers have to do is collect the “application fees”, wait ten to twelve weeks, and then send “rejection” letters to their would-be students…
Now, I’m sure some of you are pointing out that this is a relatively easy scam to defeat. All you really need to do is look up the rankings for these made-up colleges, or do a brief Internet search looking for any mention of them in any legitimate source, for that matter, and you’ll rapidly find out that no such institution has ever existed. Failing that, you might notice that the scam site has no voice telephone numbers (only a fax line), which should raise at least a few warning flags. Some of you are also probably pointing out that anyone who is dim enough to fall for a scam like this is probably too dumb (or too ignorant) to go to college in the first place. And that might be true – but I don’t remember anything about it being legal or ethical to make money by bold-faced lying to the gullible. If selling someone the Brooklyn Bridge is a crime, then this is too…
I’ve been saying for some time now that life in the Internet age means adapting to new rules, just the way telephones, telegraphs, televisions and movable type did. There is no way to get the genie back in the bottle; all we can do is to double- and triple-source all information, never send money to unknown people or institutions (no matter how legitimate they appear to be), and never hazard money you can’t afford to just throw out a window on Internet offers of this type – anymore than you would just give money to a guy who says he has a bridge he’d like to show you…
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