I May Not Know Much About Art…

After our last post I was mourning the superseding of our beloved Orbital Banana – in a healthy, “The King is dead, long live the King!” kind of way – when I came across a story about an “art” project that is, in its own way, even more outrageous. It’s not publicly funded in the usual sense, so it doesn’t really compare to the Orbital Banana, but in a very real sense it was crowdsourced – that sense being that the “artist” in question is using images and likenesses belonging to dozens of other people without bothering to pay for any of them…

If you missed it the first time around you can find the Washington Post story about it here. What I think is the really outrageous part of the whole story isn’t so much the theoretical copyright violations – although the author tells us that previous attempts to stop similar projects through the courts have failed – as it is the fact that people are apparently buying enlarged photos of Instagram pictures harvested on line. And even that pales compared to the fact that somebody is apparently willing to pay $90,000 USD apiece for photographs of images available online with just enough alteration to be considered “transformative” rather than stolen…

The legal defense in this case is apparently that if you take a picture and alter it in some way (presumably in some way that makes it artistic, if it wasn’t already) that is constitutes a new work and is therefore not a copyright violation of the original. That might be difficult to argue in this case, since the only changes the “artist” has made is to remove the original captions and then add some apparently random comments of his own. But if the people whose pictures he’s using want him to desist they will need to take legal action of their own, and that’s not going to be easy considering that the artist has just made $90,000 a pop selling large photographic prints of other people’s photos (you could hire a lot of legal talent with only a few of those sales), and also considering that Instagram itself will not help them…

When asked about this project, and its legality, Instagram basically announced that they will help you if someone is displaying pictures stolen from your account on the Instagram site itself, but other than that you’re on your own. It’s difficult to blame the company for that, either, since they are neither a law-enforcement agency nor a court; short of creating a large legal department of their own and then providing legal services to their users there isn’t much the company could do about events that happen outside of its domain, even if it wanted to. But it does mean that anyone whose pictures were stolen who decides to take action is going to have to go it alone against a guy who routinely makes millions of dollars selling “transformed” images for which he does not pay…

Now, I don’t need really to tell you that anything you let loose on the Internet is probably going to be stolen, or at least used without permission, at some point in the future – or that there is no outer limit to how long things might remain kicking around somewhere in cyberspace. For years it has been a truism that you shouldn’t post anything online that you wouldn’t want printed on the front page of every newspaper in the world that is still printing, and I’ve brought you any number of stories about people who suffered various misfortunes because they forgot that. There was even a new case this week, when a Spirit Airlines flight attendant posted a picture of herself standing inside the engine pod of an airplane, resulting in yet another career-threating online incident. But this time none of the people being used did anything wrong beyond not having a very esoteric understanding of how copyright laws work…

I’m not sure where all of this is going to end, either. But as someone who creates content and offers to share it with anyone who comes by to take a look, without even monetizing the site with display ads, I’ll admit that I don’t like where this trend is going – or what it could potentially do to the online community…

The Private Sector Catches Up

Some years ago I wrote in this space about what I felt was the ultimate in Public Sector funding nonsense: an art project, funded by the Canada Council for the Arts (the Canadian equivalent of our National Endowment for the Arts), in which a performance artist received a $55,000 grant for explaining his plans to build a giant inflatable yellow banana and place it in orbit of the Earth, but not actually doing anything. According to the story, upon receiving the grant the artist realized that it would actually take at least ten times more funding to actually complete the project, and elected not to proceed until he was able to raise the additional funds. But, due to the nature of the grant program, he was not required to pay back any of the money; hence my contention that he had received five figures worth of money to do absolutely nothing…

At the time I acknowledge that there have always been private sector fiascos that were just as bad, but in terms of sheer flamboyant lunacy, it’s hard to beat paying someone to create an orbital banana that never happens. This, however, was before the era of crowdfunding, and specifically sites like Kickstarter that allow people to solicit all manner of art projects, public performances and product developments that they have no intention of actually doing. Including, apparently, a company that raised over $1 million USD for the creating of a watch that they will never actually make…

You can pick up the original story off of the New York Observer website, but if you’d rather not wade through it what they’re talking about is a company called Central Standard Time, which issued a Kickstarter project requesting $200,000 in January of 2013. It was to be the thinnest wristwatch ever built, and even though it wasn’t a smartwatch product, the Internet when crazy over the idea, eventually raising over $1 million USD for the project. At the time, the company claimed that they had already designed, prototyped and tested the product, and were ready to begin production, needing just the upfront money to start everything in motion. But as things turned out, the product wasn’t ready, there was no production contract in the works, and the watches turned out to cost about three times what the company originally projected…

Originally, the company had promised to ship its first production run in about three months; this lengthened to six months, then to twelve, and then they stopped announcing dates altogether. Finally, over two years after they were supposed to have product in stores (and rewards to the participants of the Kickstarter) the company announced that they were out of funds and would not be able to continue with the production. Normally this would mean that they had to return the money to their backers, but since the company has never actually declared an end to the project – as of this writing they are still “investigating alternatives” – legal action against them isn’t yet possible. Even if you wanted to sue them, there would still be some question of whether the company has anything you could use to recover your funds…

Now, we should probably note that the majority of crowd-funding sources are entirely legitimate, and a surprising number of them have ended up creating wildly successful products and services. Writing on the Forbes site, Goncalo de Vasconcelos notes that crowdfunded companies start out with a large base of potentially fanatical customers (the people who liked the product or concept enough to bankroll the project in the first place) who will often promote the product or service to everyone they know. Whether or not this makes such projects superior to the ones generated by professional venture capital firms is debatable (de Vasconcelos makes his own argument in the article), but it’s hard to deny that the concept can be extremely powerful when it works. Unfortunately, it can be difficult to tell the difference between a can’t-miss project and an embarrassing boondoggle even for the professionals, let alone for a crowd of Internet supporters – and that doesn’t even consider the possibility of outright malfeasance…

For the record, I have no reason to believe that anyone associated with the Central Standard Time company or its Kickstarter project are anything other than well-meaning, naïve and possibly credulous entrepreneurs. I think we can safely assume, however, that there are crowdfunding projects out there in cyberspace that are being run for nefarious purposes – and if there weren’t any before, there almost certainly are now. From where I’m sitting it looks like the private sector has caught up with our beloved Orbital Banana and is currently breaking away…

Watching Them Watching Us

I stumbled across an article this week – it’s Maureen Dowd’s op-ed piece in the New York Times – talking about how people using the Uber service are rated by the drivers at the same time and in the same ways they rate their drivers. There have already been issues with Uber drivers, who are all independent contractors not employed by the company, not conforming to the same standards of service or safety; there have also been cases of complaints about user ratings that are delivered by mean, spiteful, or simply insane customers that bear no relationship whatsoever to what actually occurred. This kind of thing is to be expected in any customer service position, of course, and it’s one of the primary reasons it is so difficult to maintain staff levels in those positions. But this is the first case I have ever seen where customer service personnel are being allowed to rate their customers – with a similar disregard for accuracy or fairness…

In the article, Ms. Dowd notes that while some of these reviews are based on interactions with the customer – such as people who keep the driver waiting or are rude during the ride – some of them are as simple and petty as people who are not fun, friendly or appealing to drive around, and even worse, there does not appear to be any control in place over these potentially damaging ratings. The author goes on to note that some users recommend paying additional cash tips (ones which will not be reported to the company or the IRS unless the driver wants them to be) and promising to give the driver a 5-out-of-5 rating in return for receiving one as a customer. However, there’s no way to tell how prevalent such methods are, or what effect (if any) they actually have on your desirability as a customer…

Now, we should probably acknowledge that any public-contact job is going to be made more difficult by the tiny percentage of customers who will inevitably end up being horrible people. In the case of Uber drivers, we’ve already had stories about drivers refusing to pick up people with service animals, people who did not appear to be sufficiently clean, or people who smelled bad, and having people throw up during the ride has become so common that the company has had to institute a standard fee for cleaning it up. There haven’t been any confirmed cases of customers using an Uber ride as a washroom or a brothel yet, but it’s not clear whether those things haven’t happened or if those cases just haven’t reached the media. Even the company itself would have no way of knowing about any such incident unless the driver elected to report it…

Given these working conditions, and the fact that Uber drivers have to be able to see a user’s profile before they can offer to pick up that user in the first place, I think we can assume that an ad hoc system of rating customers – and passing notes about which ones to avoid – would probably have come into being by now even if the company hadn’t chosen to provide one. In theory, such a system should help to enforce basic rules of behavior and courtesy for Uber passengers, just as the rating system for drivers should enforce rules about service, safety and upkeep on the vehicles; bad customers will not get offered a ride, and bad drivers will not get taken up on any offers to provide one. What isn’t clear is how often this system will lead to additional abuse – and what the company can be expected to do about the situation…

Imagine someone whose Uber passenger rating gets to be so bad that no one will stop to pick them up, forcing them to use a (generally much more expensive) conventional taxi. Now suppose that a driver does stop to pick them up, but will only agree to provide transportation if given a large cash-only tip – effectively raising the price of the ride. How long would it take before all of the drivers started demanding such tips in return for a 5-out-of-five rider review? Can the riders fight back by threatening to leave a poor driver review in retaliation? Or, more to the point, perhaps, how long is it going to be before all of the ratings are either quid pro quo arrangements or retaliation against the other party, all of which are completely useless to anyone (driver or passenger) trying to use the system?

This issue has always been a problem for sites that offer customer reviews of anything, from Amazon to online service providers, but unless the company has some revolutionary new approach that we haven’t seen yet, the problem has just taken on all new dimensions…

Some Call It Justice

You may have heard the term “schadenfreude” before – it comes up in popular culture every so often, as in the case of the Avenue Q song by that title – but if you’re not familiar with it, the definition is “pleasure at the misfortune of others.” In this increasingly cynical world we’re seeing more and more cases of it, probably best demonstrated by things like the homeowners who had been wrongfully foreclosed on by Bank of America (they didn’t have a mortgage with B of A or anyone else) getting a court order to seize all of the company property from their local branch. Call it karma, cosmic retribution, or evildoers finally getting their comeuppance, these reports have become seen as feel-good happy-ending stories to lighten up our news. And in the case of the debt collection agency that just got nailed for $83 million in punitive damages it’s hard not to agree…

You can find the original story on the New York Daily News site if you want to, but what it comes down to is an outfit called Portfolio Recovery went after a woman in Kansas City for a debt that they knew was not her own – it was owed by somebody with a similar name. The jury in the case ruled that the company knew perfectly well what it was doing, but figured to make an easy buck off the victim, and decided to slap the firm with these amazing damages for violating the Fair Debt and Collection Practices Act. Apparently, the fact that the company knew it was in the wrong and continued to pursue the fraudulent claim for over a year annoyed members of the jury…

Interestingly, the company’s statement about the case (also available on the Daily News site if you want it) calls the amount outrageous and says that Portfolio Recovery is going to appeal the award based on its size – but does not protest that the company did nothing wrong, as you would probably expect. Apparently, the court case established not only that they actually did the things of which they were accused, but also that they knew the collection attempts were fraudulent and continued with them anyway – which would seem to be an even more spectacular failure than the original ill-advised collections effort…

Now, no one is really saying that a year of the plaintiff’s time was actually worth $83 million, or even that the emotional distress caused by the proceedings is worth whatever portion of the award she gets to keep after paying her legal fees. The jury’s point is clearly that unless the company is slapped down good and hard, with an award of damages that is just too massive to ignore, they will probably do the same things again next time. And I’m sure that everyone involved expects the company to appeal the award and try to spend years or decades tying the whole thing up in court, until the plaintiff either gives up or dies. In this case, however, that’s probably a really bad idea…

From a strategic standpoint, what the company needs to do is settle the case as quickly as possible, and with as little fanfare as possible. It’s not unheard of to have settlement agreements that include all parties involved not speaking about the case ever again, and Portfolio Recovery can probably get such an agreement into the deal if they make a large enough offer. Once they settle the case the whole story will drop out of the news cycle, and the company can quickly audit its books to eliminate any similar cases (ones it knows are bogus) and make good-faith efforts to resolve any similar cases before the next lawsuit comes up…

Because every day this story stays in the headlines it will come to the attention of more people, and eventually one of them is going to decide that he or she can win an identical lawsuit, even if they were not wronged by the company. And if that happens, schadenfreude is going to be the least of their problems…

Predators on Parade

Over the years I have written in this space a number of times on the subject of predatory lending, and the occasional feedback I’ve gotten about it usually ranges from confused to skeptical. People in general are reluctant to believe that a financial company would simply ignore state and Federal banking laws in order to offer loans with unscrupulous terms to the desperate; people in the Internet age find it hard to believe that anyone would accept a loan at four or eight (or 20) times credit card interest when they could almost certainly obtain something better online. Unfortunately, neither of these beliefs is necessarily true – as an article on the Detroit Free Press website last week makes all too clear…

According to the story by Susan Tompor, Michigan’s Attorney General has just announced a settlement following legal action against two out-of-state lenders who had been offering short-term loans at rates ranging from 89% to 169% interest, or between 12 and 24 times the State limit for unlicensed lenders of 7%. The story notes that under such a loan a consumer who borrowed $1,000 for a two year period would end up paying over four times what they borrowed. Even worse, however, was a much shorter (six-month) loan program with an effective APR of over 350% - effectively, paying $1.75 for each dollar you borrowed in addition to repaying the full amount…

It’s not always clear why people agree to loan terms like these. In some cases it really is desperation – the need to pay off some expense that can’t be financed any other way, and for which default (or foreclosure) isn’t an option. In other cases it’s a matter of speculation – the belief that the customer can take the money, buy something, sell it quickly for more money, and pay back the original loan before the interest has a chance to add up. You will see this kind of thing happen any time there’s an investment bubble in play – we saw it in 2005-2008 in the Real Estate Bubble, around the turn of the Century with the Dot-Com Crash, even during the Beany Baby craze in the late 1990s. But the sad truth is that many of these loans result from the fact that most people don’t really understand how finance actually works…

Now, we should probably acknowledge that loans of this type do represent a large risk for the lender. Generally unsecured by anything, and frequently take out by people who lack either the assets or the income that would make it worth taking them to court, a disproportionately large number of these loans will end up in default, and the company will never recover any of the money. Consequently, the interest rate on these loans has to be high enough to make up for the increased risk, or no one would ever offer them in the first place. Unfortunately, that’s also where and why the whole topic moves into the grey area…

If the state imposes a hard limit on the interest that can be charged for unsecured loans (in Michigan that limit is currently 7%) then there is also a hard limit on how risky the individual loans can be. If the lender can only make 7% on its money, and more than 7% of its funds are never repaid at all, it will quickly go out of business. Such a policy will prevent people from being charged 169% interest on a loan, but it will also keep someone with an 8% chance of defaulting from getting a loan. Predatory lending appears in the first place because there are people with a (real or perceived) desperate need for funds who can’t qualify for an ordinary loan – and as long as that need exists, there will always be unscrupulous companies who will be willing to risk state and Federal sanctions to make a fast buck…

Unless we can manage to educate the public about how finance works, or at least about how consumer loans do, this situation is probably going to continue. Alternately, I suppose, we could try teaching people about saving money, living on a budget, and not blowing money on get-rich-quick schemes or inappropriate purchases. In either case, however, I would not recommend holding your breath…

The Ethics of Admissions

An interesting case came up earlier this week when over 60 Asian-American groups filed a Federal discrimination complaint against Harvard University, claiming that students of Asian ancestry were required to meet higher admission standards that applicants of other racial backgrounds. According to the complaint, the coalition has evidence that all else being equal Asian-American students needed to score 140 points higher than whites, 270 points higher than Hispanics, and 450 points higher than African-American applicants on the SAT in order to have the same chance of admission to private universities, including Harvard. This is a troubling claim, especially if the evidence pans out, but the situation becomes even murkier when we consider that Harvard’s current admissions policies have resulted in a student body that is over 21% Asian-American, despite the fact that people of Asian ancestry make up less than 6% of the population of the United States…

I don’t intend to discuss the relative merits of Affirmative Action in this space – mostly because that’s really a political issue and not a business topic, but also because I don’t believe that I have anything particularly profound to say on the subject. The case can certainly be made that some consideration is due to any number of minority groups for the discriminatory practices that they have experienced and in many cases continue to experience – but one can also quite reasonably argue that any policy that does harm to any person who has never themselves done anything wrong is not just, and solving injustice by creating additional injustice makes no bloody sense. And the whole situation becomes more complex as the number of groups seeking to gain a competitive advantage for themselves rises…

In this specific case, it does not seem reasonable to require one specific group of applicants to have much higher performance in order to receive the same consideration, especially if you consider the popular image of Asian students as quiet, studious, incredibly hard-working and single-minded to be a damaging stereotype (as some advocates clearly do). But, at the same time, it is difficult to explain why being represented in the student body at nearly 400% of your relative representation in the general population is discriminatory. Certainly, there are other minority groups that do not enjoy anything like this level of disproportional admissions, and one could easily imagine any or all of them filing complaints about the preference that is apparently being given to their Asian-American counterparts…

The University has responded to the allegations by stating that their admissions process is based on a holistic reading of all of the applicant’s scores, grades, activities, abilities, writing skills, academic skills, and so on, including whether or not it believes that a given applicant would be a good fit for their program. This is actually very common among elite schools, and may be the only reasonable way to choose between the literally hundreds of applicants for every position in the incoming class. Unfortunately, this doesn’t address the specific complaint the coalition is making; it also doesn’t answer the conflict at the heart of the matter. Is it more important to have a diverse student body (or work force, for that matter), or to provide a completely level playing field for the students who are competing for admission to that school?

On the one hand, no one wants to have to tell any specific applicant group that they will need scores 140 points higher (let alone 450 points higher) than another specific group to be considered for admission. But by the same token, no one wants to tell members of any specific applicant group that none of them are going to be admitted because the incoming class is now made up almost entirely of people from one or two other groups. This is the specific injustice that the Affirmative Action programs were intended to fight in the first place, but now we seem to have reached a situation where we can’t correct the injustice being done to one applicant group without inflicting an equivalent (or even worse) injustice on another. How can we possibly reconcile the desire to have a diverse student body with the need to offer every applicant an equal chance at admission? Or, for that matter, how can we correct the current inequity without making things even worse?

It’s worth thinking about…

Will They Ever Learn?

For years now I’ve been writing in this space, and occasionally elsewhere, about the importance of front-line (first level or first tier) customer service, and in particular about how failure in this position can render everything else the company does irrelevant. The sad reality is that even if the entire company has excellent customer service personnel, and provides exceptional service in general, to that one customer who we have completely failed, our entire company’s record is zero. None of this is new information, either; ask anyone associated with a service or consumer business, and they’ll all tell you how important good customer service (and good customer relations in general) is to the survival of the company. Right before they go back to treating the customer service personnel like cannon fodder…

Part of the problem is that turnover in any public-contact position is going to be rapid, because of the corrosive effect that working with public has on most people. Even though the majority of all customers are good people, it doesn’t take that many instances of being lied to, stolen from, screamed at, insulted, or otherwise abused to sour anyone’s opinion of the customers they are supposed to be serving. Over time, even very good employees burn out, shut down, or just stop trying – at which point we need to retrain or replace the worst cases and try to motivate whoever is left. It’s hard to convince anyone to invest money in employees whom they know will not last – in much the same sense that it is difficult to side with shifty, short-lived cannon fodder over paying customers who are actually giving us money. But as Don Henley notes, “apathy is worse…”

Consider, for example, the case of cancer patient Lisa Love, who was attempting to fly home from San Diego to Texas on American Airlines. Between her illness and the effects of the treatment, Love was not feeling well and asked an American gate agent to call a wheelchair for her. Said agent failed to do so, telling the passenger that “Oh, you look fine to me” and returning to her regular duties. This resulted in calls to the company that were not returned, emails and tweets that apparently never got to anyone who was prepared to do anything, and eventually calls to a consumer-advocate reporter and the resulting television news story and Internet account that you can view here if you want to…

Now, it’s not hard to imagine how something like this could happen. Think of any major airport on a busy day, and imagine a busy gate agent, trying to get a couple of hundred hot, cranky, generally uncooperative people onto an airliner without delaying the flight or throwing things any further behind schedule, when an apparently healthy passenger asks her to drop everything and summon a wheelchair and attendant. Maybe the agent is trying to cover the work of three people; maybe she’s had dozens of able-bodied people request wheelchairs so they can avoid having to walk a hundred yards extra; maybe she’s being paid peanuts and knows the odds of a raise this side of retirement are virtually nil; maybe it’s just a really crappy day. But however it came about, the company is now being mocked by dozens of scruffy bloggers all around the world for something they really do know was a bad idea…

If you consider the airline industry as a whole over the last thirty years or so, you will note that there is only one U.S. carrier that has consistently made money over that time period – it’s Southwest Airlines, which is known as much for its “Positively Outrageous Customer Service” (as the company calls it) as they are for their cut-rate airfares and slightly skeevy airplanes. I don’t believe this is a coincidence, any more than the success of Nordstrom is. Nor is it a coincidence that Southwest has generally taken better care of its employees than the industry standard. In almost every industry, if you examine the most successful companies, you will find that all of them have the best customer service and the best human resources practices of any firm in that industry. One could almost believe that there was some direct causal relationship…

None of this will come as any surprise to any student of management – or any experienced air traveler, for that matter. One has to wonder if American Airlines is ever going to take this lesson to heart, however…