Difference of Opinion

I regret the amount of political commentary that keeps landing on this page in recent weeks. I try to stay out of those issues because, as previously noted, I don’t usually feel I have anything to add to most political discourse. I’ve been jumping in lately in places where I feel that politics is intruding into management and/or strategy, which do lie within my area of expertise. In too many cases lately, the problems we have been seeing are coming from politicians who like to pretend that they know more about business than I do about politics – and one in particular who likes to claim that he knows more about business than anybody despite having had to declare bankruptcy on at least five different occasions. This sort of thing becomes particularly dangerous when the political leaders involved turn out to be bad at math…

Consider, if you will, the situation with Foxconn in Wisconsin. The company has promised to build a factory in Racine County, if they were given about $3 billion US in various subsidies. Foxconn initially claimed that the factory would bring 13,000 jobs to Wisconsin, although they have been scaling back that claim while raising the amount of money they want from the state and Federal governments even before the deal was signed. The most recent estimates on the project go as high as $4 billion in subsidies and as low as 3,000 jobs, depending on whom you ask. Even worse, though, is the fact that relatively low unemployment in Wisconsin means that the company will almost certainly need to relocate workers from other parts of the country or the world – and there’s no word on how much money they’re going to demand for that purpose…

Now, one could reasonably argue that increasing the population of Wisconsin by the number of employees Foxconn is going to need will increase the tax base and generally improve the economy of the state, since all of those people will need house to live in, groceries to eat, and so on. The problem is that with over $4 billion in subsidies and under 3,000 workers it would take decades for the project to break even. Independent studies cited by CNN and other sources are projecting that no one other than Foxconn itself is going to see any net benefit from this project until around 2043. All of which assumes that the factory is still in operation in twenty-five years and that the company hasn’t shifted production somewhere else…

Opponents of the deal like to point out that for the kind of money under discussion we could just pay the 3,000 people the salaries they are supposed to be getting every year for the next twenty-five years and not bother building the factory at all. Think about how much infrastructure we could rebuild with 75,000 person-years of work (that’s 156,000,000 person-hours, if you’re keeping track at home). Or, if fixing crumbling roads and bridges isn’t you issue, think about how many teachers, nurses, daycare workers, police officers, firefighters, paramedics, social workers, park rangers, and lifeguards we could employ for that kind of money…

The people who are currently running this country, and in particular the state of Wisconsin, are effectively saying that rather than spend $4 billion of public funds employing people to do things we need done, build things we need built, and take care of our own citizens, that it makes more sense to spend that money in order to enable a Chinese company to send even more money home to their own oligarchs. As reluctant as I am to comment on public-sector projects, this really is a matter of business strategy - and I have a difference of opinion about whether this is really a good idea...

Down Four Lanes of Highway

I think we were all expecting to see some of the companies impacted by the developing trade war start moving production outside of the US. Whether or not the new tariffs on steel and aluminum will actually help the U.S. companies that produce those materials remains in dispute, but the retaliation coming from the EU, Canada and China does not – and those counter-punches are going to hurt. For example, Harley-Davidson is facing an estimated increase of $2,200 per unit it exports to Europe – which is an increase from 6% to 31% if that helps. Company and industry sources both claim that Harley-Davidson was already considering moving more production off shore, but this gave the idea greater appeal. It’s a predictable response to a difficult situation. Unless you’re the President of the United States, apparently…

Both the BBC and CNBC are reporting on the move, and both of them are citing a tweet from our President saying that he is surprised and disappointed that Harley-Davidson is “surrendering” instead of waiting for the supposed benefits of this trade war to help make up the difference. How, exactly, a trade policy that protects US steel and aluminum manufacturers from foreign competition will help a company that makes motorcycles is a little tenuous. Granted, American metals companies could lower their own prices if they had less “unfair” foreign competition, but in general, companies lower their prices as a result of greater competition, not less of it. And even if our domestic producers were somehow inclined to lower their costs, there is no reason to believe that they will – or that it would be enough to offset the tariffs being placed on motorcycles by the EU and other to follow…

A much bigger question, at least from where I’m sitting, is why anybody would find either of these developments surprising in the first place. Random, arbitrary, and inexplicably high tariffs are going to provoke retaliation, just like any other hostile action. Make them high enough, arbitrary enough, and combine them with enough ignorant and belligerent rhetoric, and people are likely to see such measures as economic warfare – because that’s exactly what it is. And while I will concede that there are some conditions under which tariffs (and other sanctions) are justifiable, or even sensible – a trade war is still a better idea than an actual war, in almost every possible case – suddenly declaring a trade war on countries that have been your stable trading partners for decades makes about as much sense as attacking them without warning any other way…

I realize that this post is drifting away from business and towards politics, which I would prefer the blog not do, but by the same token this is very much a matter of strategy, and in this case, applying the wrong ones. As a matter of international business or economics this move makes no strategic sense for anybody except a handful of American metals companies, and we should note that if there is an economic crisis because of this trade war their business will not prosper either. The only category under which this qualifies as an actual strategy is in the case of appealing to a reactionary political base, or rewarding owners of newly-protected companies who happen to be current or potential campaign contributors. Which is really the point…

To put it simply, I don’t comment (much) on politics because having business interests attempt to direct national policy is a colossally bad idea – and that is what is happening here. I do not have any evidence that would prove that members of our current administration are allowing their own business interests, or those of their political supporters, to direct our national policy towards a potentially disastrous trade that can’t possibly do anyone on either side any good, and may ultimately be bad even for the handful of companies supposedly being protected under such a policy. I just can’t fathom any other explanation…

This won’t end well. It never does…

Make What Great Again?

Despite my avoidance of political topics on this blog, I am perfectly willing to admit that I am personally pro-business, and against excessive regulation. The problem is, as a Centrist my idea of what constitutes “excessive” does not suit people on either end of our increasingly polarized political spectrum. I don’t agree with the far right, who appear to believe that business leaders are a collection of saints and angels who would never do anything to the detriment of the public good just because it would enrich them personally, and I can’t abide the far left, who appear to believe that all we have to do is meditate, eat organic kale, and keep our carbon footprint as close to neutral as possible, and everything we need will just appear before our wondering eyes...

The unfortunate truth is that regulations exist because without such measures people will cut corners and take chances that make no bloody sense, even if those behaviors have no real chance of increasing their personal wealth. So as much as we would all like to avoid government interference in business operations that chokes off trade and curtails personal freedom, whether that involves increased tax incentives for small business start-ups or legalization of certain controversial agricultural products, I think we can all agree that FAA regulations that prevent passenger aircraft from catching fire and exploding in mid-air are probably worth keeping…

Unfortunately, as a story from the Associated Press last week makes clear, not everyone in our current Administration understands this principle. It seems that under certain conditions lithium-ion batteries can self-ignite, which is generally not a good thing on an airliner carrying hundreds (or thousands) of gallons of highly flammable, potentially explosive fuel. Over the past few years three cargo aircraft have experienced such fires (and have been destroyed in flight), and the UN agency that deals with international flight safety has been trying to get all of the nations that have airlines to adopt safety regulations about transporting these batteries by air. One might think that this sort of common-sense measure would appeal to both the people who own airplanes and the people who fly on them, and so far it has, but that doesn’t consider the people who make lithium-ion batteries…

Sure enough, the battery industry has been lobbying to prevent exactly this sort of regulation, and the current business-friendly government in Washington has placed a freeze on this and all other new safety regulations pending additional study of their effect on business. Apparently, they are arguing that people in remote areas, such as the Alaskan back country, would be unable to get the batteries they need if this regulation was applied to all flights. They also seem to be blaming the Chinese, whom they claim manufacture sub-standard batteries and avoid the existing safety regulations, even though neither of these claims have any relationship with reality…

Now, the truth is, I have no idea how often the need for lithium-ion rechargeable batteries becomes so acute (and so immediate) that it isn’t possible to ship them using surface transportation, let alone cargo aircraft, and requires that large loads of batteries arrive by the first and fastest mode of transportation. I am dubious about how often, or even whether, such a spike in demand is more important than the safety of hundreds of innocent passengers, not to mention the potential loss of airliners that can easily cost hundreds of millions of dollars in their own right. It’s also not clear to me how the battery lobby has been able to push its agenda past that of the airline lobby and the consumer protection lobby…

I can’t tell you if the current Administration in Washington will actually be able to make America great again; I’m no expert on politics or economics, and I think the country is pretty great as it is. What I can tell you with complete certainty is that I’m not going to be purchasing tickets on any airline that is still accepting loads of rechargeable batteries as air freight on passenger flights, and that if I had any stock in any airlines that did this I would be raising every possible kind of stockholder protest right now. And if I was in charge of running an airline, any airline, I’d make absolutely certain that we stopped carrying such cargoes, no matter how much the battery companies were willing to pay. Before things get any worse…

Financial Aid Starts Early

You may have heard the jokes – they go all of the way back to the Murphy Brown television series in the early 1990s – about how competitive preschools are, and how choosing the wrong one could start a fall of dominoes that will prevent your child from getting into the right grade school, middle school, high school, college and graduate school. Exactly how many people actually believe in such a sequence is unclear, but there are still news stories every few years about preschool programs that cost as much in tuition as most public universities, and the massive competition that occurs each year to get into the best. An offshoot of these jokes involves parents taking out student loans on behalf of children who are not yet able to dress themselves, or in the case of less wealthy families, seeking financial aid in order to achieve the same results. Unfortunately, this may be less of a joke than you’d think…

According to a story that ran last week in the New York Times, the problem with preschool is that it isn’t affordable for a very large range of families, especially in the case of single parents who also need after-school daycare. The example given is in Chicago, where even the public school system’s Preschool program runs in excess of $13,000 per year – over a thousand dollars per child per month – and private programs range upwards from there. There are low-income programs like Head Start, for families that qualify, but most people living above the poverty line can’t get their children into those programs, which only leaves student loans, personal loans, and the aforementioned financial aid programs. Programs which, it turns out, also leave large numbers of parents and their children out in the cold…

Now, we should probably acknowledge that the Daycare issue isn’t a new concept. For at least the last twenty years, and possibly more like fifty, many working-class families have had to decide between working a second (or third) job in order to pay for daycare, or just having one parent quit their jobs and stay home with the children. Indeed, if your monthly take-home pay is $1,000, and cost for childcare is going to be $1,120 per month, you probably couldn’t afford to go back to work if you wanted to. A single parent does not have that option in the first place, of course, and once we start considering child support and spousal support issues the whole matter of who actually qualifies for financial aid becomes even more complicated. The real question is what to do about it…

Greater funding for financial aid programs would seem to be one obvious approach, except for the fact that all of the existing financial aid systems are overtaxed, not just the ones available to preschool students – and the fact that funding for public education is already in crisis. As appealing as the idea of pumping additional money into local school districts in an attempt to increase the number of places available in public preschool facilities might be, it does not appear that throwing additional resources into traditional methods is going to help. The question that comes to my mind is whether there might be a private-sector approach that would help…

We have already seen examples of companies offering subsidized preschool programs as a benefit for their employees – offering the services at cost makes them effectively resource-neutral on the balance sheet, while at the same time helping to retain valued employees and raising morale. There can even be an operational efficiency improvement, in that employees who have children in daycare in the same building in which they work do not have to leave the premises and travel across town in order to look in on their children. Public support for such programs could be very cost-effective, since every child placed in private or corporate daycare would be one less individual competing for finite resources in public schools or from financial aid programs. But there might be an even more direct approach to the problem…

As of the last time I checked, there was no specific program available to fund new daycare businesses – but there is no reason that the Federal government couldn’t establish one, either through the Small Business Administration (SBA) directly or through the entrepreneurship programs that all of the Federal agencies are required to support. By doing so, they would be able to relieve pressure on both the financial aid system and the public daycare system, not to mention creating jobs for all of the caregivers who would then be employed by the private-sector daycare centers. You would need additional social services personnel to regulate such businesses, and some additional infrastructure to administrate the SBA programs, but you would also be creating profit-making businesses and gainfully-employed citizens, all of who would (in theory) also contribute to the tax base and put additional funds into the local economy…

I’m not saying any of this would be easy. On the contrary, any such program would require a great deal of resources to start and to run, as well as considerable intestinal fortitude on the part of the public officials that launched it. But at least we could get rid of some of these competitive preschool jokes…

The Trouble with Humans

From time to time I will run across a story about a business that has instituted a basic safety measure – like passwords to keep non-customers off a business’ free Wi-Fi system, for example – that is being excoriated for doing so by people who insist that such a measure is unnecessary, insulting, discriminatory, or all of the above. As a consumer and potential customer I can understand these points – no one wants to be inconvenienced or even blamed for the bad conduct of other people. As a management consultant and a manager with experience in the retail and food service sections, however, I can tell you that there is no behavior so uncivilized, antisocial or disgusting that somebody somewhere won’t feel compelled to do it at their first opportunity. As evidence, let me offer the case of public libraries across the United States who have offered 3-D printing services to their patrons only to find themselves having to forbid the printing of guns, drug paraphernalia, or sex toys…

If you missed it the first time you can access the ChicagoTribune story about this here, but the basic concept is fairly simple. Over the past few years 3-D printers – devices capable of creating three-dimensional objects by cutting sectional views (or “slices”) from digital templates out of some suitable medium and then fusing or laminating them together – have gone from massive, expensive industrial equipment to machines small enough and cheap enough for home use. They’re still a bit too expensive for a lot of people to buy just for the fun of making random objects, but they’re well within the reach of a well-funded public library, and some such institutions have started buying them and letting patrons use them for a modest fee. In theory, this is a wonderful idea – it allows families to teach their children about the possibilities of 3-D rendering on the computer, and then print out an actual object using the printer. Unfortunately, this ignores the basic nature of human beings, and our ability to ruin just about anything…

Many of my readers (assuming I have readers) will remember the flap that appeared last year when the plans for an all-plastic handgun that could be fabricated by most home-use 3-D printers were released onto the Internet. Much of this died down when it became clear that such a gun would be far more dangerous to the person trying to fire it than it would to the target, but the plans are still out there, and it isn’t hard to imagine a variety of illegal purposes to which such an artifact could be put. Even more problematic, perhaps, are objects that can be used for non-violent but still inappropriate purposes, all of which are also available in many places online. Even if we accept that the development and dissemination of such files qualifies as protected speech under the First Amendment (there seems to be some debate on this topic) it’s still not the sort of thing one wants to have to explain to small children while working on a family craft project at the public library…

Now, it could definitely be argued that people using the public library’s 3-D printer to make inappropriate objects isn’t really any different from the other inappropriate ways people use the library’s computers, but that doesn’t address the underlying issue. I personally believe in free access to information for all users, including those too poor to afford their own computer or Internet connection; I also believe that censorship in general is wrong. But at the same time I have issues with not being able to use the library because a collection of homeless people is using it as an emergency shelter, and I don’t believe that families should be unable to use the library (or its special new printers) because other members of the community insist on looking up – and in this case, printing – images that are inappropriate in a public setting…

A common catch-phrase around my household is “Another beautiful idea – ruined by people.” I could probably write an entire blog just about these situations, and I certainly have no concrete suggestions for how to solve this one. I’m just pointing out that sometimes safety regulations are there for a reason – and that no matter how innocent something appears to be in the abstract, we as managers have to be prepared to deal with trouble when the idea is implemented in the real world…

I’d Buy That for a Penny, Too!

It was one of those headlines that catches your eye from the corner of the page: “Carrier Sells for a Penny!” Obviously, this is one of those outrageous cases of governmental waste in action! We must leap to arms, write to our Congresspersons, demand action, and speak loudly in public – or at least put our caps lock key on and leave it there! Unfortunately, once you actually call up the story and read it most of the fanfare drains away relatively quickly; the carrier in question is the former U.S.S. Forrestal (CV-59), commissioned in 1955 and decommissioned thirty-eight years later in 1993. For the past twenty years she’s been more of a political and ecological football than anything you could call a ship, and it’s actually past time somebody did something with her hulk.

From a historical standpoint, Forrestal was a significant development; the largest carrier constructed by that point in history and the first ship to include innovations such as an angled flight deck, a steam-powered launch catapult, or an optical landing control system during her construction. Like the later and somewhat larger nuclear-powered super carriers, Forrestal served both as a symbol of American military power and as an instrument of force projection all over the world. With the end of the Cold War and the gradual drawdown in Navy requirements, however, the need for the older carriers began to decline following the first Gulf War, and several of these ships were decommissioned and offered for use as monuments or museums, much like the U.S.S. Midway (museum ship in San Diego, California) or the U.S.S. Intrepid (museum ship in New York City). In the event, however, Forrestal became a more difficult issue…

It should come as no surprise to anyone that it is an expensive proposition to maintain an 81,000-ton ship in readiness to sail and fight; what continues to surprise many people is that it is also expensive to maintain one as a floating museum. Of course, anything made of metal that is floating in salt water is going to have to deal with corrosion, and a museum (of any kind) also has to deal with maintaining displays and exhibits and with keeping the interiors clean and safe enough so that the tourists won’t accidentally hurt themselves. This isn’t necessarily easy to do inside the hull of a warship, which (in fairness) was never designed for small children, idiots, or members of Congress. And even assuming you can raise the money to acquire and convert the hull, tow it to its final resting place, and maintain both the hull and its contents, there’s still the issue of where to put the museum…

In the end, Forrestal was on the donation list for over a decade while various groups tried to raise the money to buy her, but ultimately those efforts fell short. There are, after all, only so many carrier enthusiasts, and only so many ports that can both house and afford a museum ship of that size. There was a second effort in the early 2000s to use the ship as an artificial reef; a number of former American warships have been utilized in this fashion, but these efforts fell through as well. All that was left at that point was to sell the ship for reclamation, to be broken apart and scrapped. Oddly enough, this also proved difficult…

Despite the desire to view an aircraft carrier – or any other large vessel – as just an ocean-going collection of metal, such a ship is actually better described as a floating waste dump, containing forty years worth of petroleum waste, battery acid, asbestos, heavy metals, lead-based paints and other toxic chemicals. Cleaning one up enough to use it as an artificial reef is a massive undertaking, and highly expensive; breaking one up for parts is even harder, and requires more OSHA and EPA clearances than the average person would believe. It is still possible to make money on such a salvage operation, given enough time and the right facilities, but it isn’t easy and it’s almost always something that our government would be better advised to outsource than try to do in-house. So if you were thinking about trying to by one of the other decommissioned pre-nuclear super carriers for a penny, I’d have to advise against it. It’s more fun to blog about anyway…

The Ethics of Jackpots

We’ve spoken about the business aspects of gambling – and the attendant ethical questions – in this space before, and I don’t believe there has been much change since our last ethics post on the subject. Like most business ventures that have the potential to do harm to the customer when used as intended, there will always be controversy over whether our ethical responsibility as businesspeople to keep our customers free from harm or risk whenever possible overrides our ethical responsible as citizens of a free republic to respect the rights of consenting adults to do things they enjoy that are not necessarily good for them. But with the huge media storm kicked up by last week’s record-setting lottery jackpot, it seems worthwhile to take a look at some of the less common concerns associated with gambling on this scale – some of which are quite different from the issues you would encounter even in quite large private gambling operations…

To begin with, the news stories tell us that the people who bought tickets for Friday’s drawing spent in excess of $1.4 billion in their attempts to win a prize that will work out to a bit less than one-quarter of that amount. One could argue that the remaining 75% will go towards state education budgets and the profits of the stores that sold the tickets, thus improving both the economy and the state budgets for the next year. But for the most part, the states do not add the amount they receive from lottery games to their existing education budgets; they deduct the amount of the lottery income from the existing budgets and transfer those funds to other expenses. There is still a benefit to the retailers, but in many cases the share given to them by the state barely covers the cost of selling the tickets in the first place; several store owners have told me that the lottery sales are mainly useful as loss-leaders, bringing in customers who will then purchase something else. And even if both of those benefits were genuine, there still remains the issue of a nation of debtors spending $1.4 billion they don’t have on gambling…

Then there’s the issue of how winning affects the winners. Stories of people winning a small fortune in a lottery game, spending all of the money in a matter of weeks, destroying their credit and winding up much worse off than they were to begin with are common in America, and there’s some indication that winners are also targets of fraud schemes, frivolous lawsuits, and freeloading friends and relatives. Given that most of the people in this country lack the training to manage their money before they win a lottery prize, it is probably unreasonable to expect the sudden influx of millions of dollars to improve matters – and given the venal nature of humans in general, it’s probably also not realistic to expect people not to attempt to fleece anyone who has suddenly received millions of dollars and has no idea what to do with them…

Of course, all of these objections also apply to small-scale gambling operations, but most people don’t have access to other forms of gambling on every street corner (in every market, bar and convenience store) the way they do with state lottery games. It’s also very unlikely that dozens (or hundreds) of old friends, long-lost relatives and people who really WANT to be your friend will attack someone who has just won a few thousand dollars at a casino or racetrack the way they will someone who has just won $400 million in the state lottery. And regardless of the relative risks, the right of consenting adults to do as they wish with their own money remains the same in each case…

So if these massive lottery games have so little benefit, and have the potential to cause so much harm, do we as business people have an ethical responsibility to oppose or eliminate such gaming programs? Or does our obligation to allow people to live their own lives and make their own choices outweigh our responsibility to protect our customers and our fellow citizens in general?

It’s worth thinking about…

The Ethics of Subsidies

This past week we read in the news about the Kentucky Legislature voting to give a $43 million tax subsidy to a business venture which is building a Noah’s Ark-themed Creationist theme park (the so-called “Ark Park”). This would have been a political hot potato anyway, given the immediate outcry from liberal advocates under a First Amendment violation of state-sponsored religion, but was made much worse in this case by the Legislature also voting to cut $50 million from the state’s Education budget. This is being seen as supporting religion over education, and Creationism over every other possible kind of education (religious or otherwise), and is drawing fire (and ridicule) from everyone inside the state or otherwise who isn’t a Creationist…

I don’t intend to comment on the specific case because I don’t believe there is any basis for discussion; you either believe in Creationist theory (in which case any other use of funds would be madness) or you don’t (in which case this use of funds is asinine). But the larger question here, at least in a business context, is whether the state has any business providing tax incentives or other financial assistance to entrepreneurs who are attempting to build large tourist attractions. Since this could happen in any community in America, including yours, I thought it might be interesting to take a closer look at the positions involved…

On the one hand, any popular tourist attraction will draw visitors into the place where it is located, which has the potential to boost the local economy through hotel rooms, restaurant meals, souvenir stands, and other services used by tourists, and is generally considered a good thing. Unlike an athletic venue, where most of the revenue passes directly to the owners without benefit to the surrounding area (except during championship weeks), a theme park or similar facility will usually produce enough tax revenue to repay the state’s investment and enough collateral revenue to make it worthwhile to the rest of the community. In the case of the “Ark Park,” whether one believes in its religious message (or the political position of its supporters), it seems likely that the influx of tourists from other parts of the region will repay the costs involved – and Creationist dollars spend just like anyone else’s…

On the other hand, whatever the benefits to the business community, the people who live near the Park will have to deal with disadvantages such as traffic, pollution, crowds, crime, and possible shortages of food, water and other resources. At the same time, the cutting of $50 million from the state Education budget will almost certainly lower the level of education available in the state, leading to citizens who are less well educated, professionals who are less capable, businesspeople with inferior training, and so on. The long-term effects on the state’s residents could easily be catastrophic; they will at the very least put the state of Kentucky at a disadvantage versus any location where the education budget hasn’t been cut. And there is a very real possibility that the degradation of business education in the state will eliminate other entrepreneurial businesses that could ultimately have done more good than an amusement park…

All of which leaves us with a question. Does the state have an ethical responsibility to promote the creation of new businesses in order to create jobs and boost the local economy? Does that responsibility remain if doing so would have a detrimental effect on public and community services? Or does the state have a responsibility to maintain (or improve) educational levels at the cost of not supporting new businesses? What if the cost of maintaining the educational establishment prevents the development of new business, which ultimately destroys the state economy and results in even less public funds for education? For that matter, what if the diversion of funds for business development results in an education system so depleted that it can’t produce workers capable of operating the new companies/facilities, and all of the jobs end up going to people from out of state? With finite funds available, and no certainty of which expenses will lead to which outcomes, can we really say that one use of funds is unethical versus another, and how do we find the balance point between the conflicting interests?
It’s worth thinking about…

Bulldozers for the Win!

A few days back there was a story online about Bank of America bulldozing a bunch of houses in Cleveland. With thousands (and possibly millions; nobody really knows for sure) of homeless people in the United States, and millions (possibly tens of millions; nobody really knows for sure) of people one paycheck or less from being foreclosed out of their homes, this seemed almost perverse. People were making appropriate (and mostly appropriate) comments at the bottom, ranting and raving about how cruel and heartless this action was, and how its another thing we should all hate B of A for doing – thus completely missing both the facts of the case and the point of the exercise…

First off, the story also indicated that the bank had donated over a hundred houses to the City of Cleveland for low-income housing; they’ve also donated over 150 buildings in Detroit and are now planning to repeat this program in nine other cities. That won’t end the housing crisis in America, but it’s a good start – and they certainly don’t have to do any such thing. If you read the story carefully, you’d also notice that once B of A gets done bulldozing the selected properties, they’re also going to donate the land underneath them to the City for use as green space (parks and whatnot), although Cleveland could easily sell the land to developers (to raise money) or use it to build public buildings of various kinds (including more low-income housing). But that’s not really the point either…

The actual point of these operations is that the houses being destroyed are ones that the bank owns but can’t give away, let alone sell, usually because they would cost more to repair to a point where you could actually live in one than they would be worth if you did. However, these properties cost B of A money every day they’re carried on the books, and they have the potential to cost the bank a lot if someone were to break into one and injure themselves (to take only the most obvious annoying possibility). Bulldozing the structures eliminates the liability issues, and donating the property should remove the carrying costs; if they do it right the resulting tax credits might even cover the company’s expenses in foreclosing on the mortgages in the first place. But this still isn’t the point…

The laws of supply and demand state that it isn’t possible to charge as much for something that is in vast supply as you can for something rare. If people can obtain a house just by asking for it, they are unlikely to pay money for one, which means the housing market will just get worse. Lowering the supply of anything has the effect of raising the price by an amount proportional to both the reduction and how much people want the item in question, which in this case means raising the price people will pay for a house. Granted that this will also result in people wanting to take our home loans, which will benefit Bank of America, it will also benefit anyone in the country who owns real estate or builds, repairs, buys or sells houses – and anyone who does business with those companies and people…

I’m not saying that Bank of America is comprised entirely of angels looking out for the good of the country; I’m not even saying that you shouldn’t hate Bank of America if you want to. I’m just saying that if you’re going to do so, you might want to select something they’ve done that is actually bad…

The Ethics of Playoffs

By this point it seems clear that everyone in America - and probably most of the rest of the civilized world, or at least those parts that are tired of hearing us whine about it - is in favor of a playoff system in college football. Naturally, there are those who do not watch college sports or sports in general (a friend out in Los Angeles claims to have difficulty remembering which sport uses the oblong ball with the pointy ends on it), but even the majority of those people would probably agree that a system which allows the two teams which are actually the best to meet head-to-head to determine the national championship is more in keeping with our stated national preference for truth, justice and fair play. Unfortunately, there is a very simple and incredibly powerful force that is preventing such a system from being implemented, and will probably continue to do so for the foreseeable future; I refer, of course, to money. As long as it remains more profitable to maintain out current plethora of bowl games and opaque system of selecting the two teams for the "championship" game, nothing is likely to change. The question we need to consider is whether or not this is actually a bad thing...

First off, all of the arguments about bowl games, television revenues and profits made by the sports programs of NCAA schools improving the quality of education at those schools are completely specious - the money generated by the athletic programs is almost universally retained by the athletic department for its own use. The rest of this point is a bit murkier, however. Participation in any nationally televised event usually comes with the opportunity for the school to broadcast its promotional video during the event, and will always create mentions of the school's name in publications and newscasts where it would not normally appear. It seems clear that this will increase the school's exposure and prestige; the degree to which this improves matters for the institution remains in dispute. Still, a national playoff system would concentrate media and public attention on the seven games involved (assuming a field of eight seeds; a field of 16 would involve 15 games, and so on) and draw it away from the 28 other bowl games being televised each year. This would be even better for the eight teams selected, but would undoubtedly harm the other 56 to some degree...

Second, there's the business picture to consider. Bowl games, as is often alleged, generally do benefit the television networks and venue owners more than anyone else, but as a business blogger I feel it is my duty to point out that these are public-owned companies (in the case of the networks) and public municipalities (in the case of many of the actual stadia) all of which benefit the economy and the public in general by earning money, employing people and paying taxes. The residual benefit realized by the communities in which bowl games take place (especially hotel and restaurant receipts from visiting fans) may be smaller, but is certainly not a bad thing, especially because these businesses also contribute to the economy as a whole. And even if the secondary benefits realized by related businesses (transportation companies, tour companies, apparel and souvenir manufacturers, publishers and the like) are small, they're certainly better than nothing, which is what we're likely to see from a bowl that is eliminated as no longer relevant or simply driven into complete obscurity...

Finally, there's the effect such a system would have on the game itself. As frustrating as it is to have the same record as another team in your conference (and actually beat that team head-to-head during the regular season!) and still end up below them in the standings and bowl precedence for the post-season, as is the case with Michigan State this year, it would be even worse if no one ended up watching your bowl appearance because it wasn't one of the 7 National Playoff games, and worse still if your team was denied a post-season game after finishing their best season in a generation just because there wasn't enough of a television audience to bother staging the game...

In the long run, I can't (as a fan) say that the current bowl system is really a good thing. But by the same token (as a business teacher) I can't really say it's entirely without its up side, either. As long as there is money to be made, there will probable always be dozens of obscure but colorful football games played in the last weeks of December, and the first weeks of the new year...

GO GREEN! GO WHITE!

Customer Appreciation: How Far Would You Go?

Most consumers have run across customer appreciation stunts at least a few times over the years; those rather odd promotional activities that fall somewhere between advertising and value-added, in a (usually vain) attempt to create customer loyalty in people who would otherwise have no particular attachment to the business. Some of these are little more than expensive fiascos, while others can work surprisingly well; the question is how many resources are you willing to devote to an activity which, even if successful, will mainly generate intangibles (e.g. goodwill and customer loyalty)? Can your business afford to take all of your clients to Las Vegas for the weekend, or would a weenie roast in your parking lot make more sense? Should you offer your customers an item that cost you 25 cents to make and 30 cents to mail for “free” if they just pay you $4.95 shipping and handling (as credit card companies are wont to do), or play it straight and send out free calendars and fridge magnets with your contact information on them?

Before you answer that question, you might want to consider the customer appreciation stunt that the owner of a small greeting-card shop in New York is putting on this Holiday season. According to a news story in the New York Daily News if you spend $50 or more on cards (or any other purchase) the owner, a former exotic dancer, will perform the pole dance of your choice. The performances are described as “R-rated” and will probably draw some fire from some blue-nosed public crusader eventually, but for the moment the stunt seems to be working: the store is bringing in unusual amounts of both foot traffic and purchases, and the owner intends to go on performing for anyone who wants her to…

Now, if we consider this promotion from a strictly business standpoint, it would appear to be very clever. Since the owner has to be present in the shop during the hours of operation anyway, and since the dance performances do not prevent her from conducting any other aspect of her business, they value she is adding to the purchase of greeting cards (and stripper paraphernalia, if desired) effectively costs the business nothing. If she had to employ a dancer to conduct this promotion we would have to subtract the cost of employing such an individual from whatever incremental increase in business the dances bring in, but since the owner is doing these performances herself during regular working hours, any increase should drop straight to the bottom line…

Of course, no business can exist in a vacuum. Some people will question the morality (or propriety) of combining stationery and exotic dancing into one business, or at least question whether the point of this business is actually greeting cards or pole-dancing. However, if the owner obeys all local ordinances and does not in any way harm anyone it’s hard to imagine how this supplementary service would be any different from a coffee house offering open-mike poetry night or a bar offering live music in order to draw more customers, add value to their business transactions, and improve the bottom line. The real question would be, how far would you be willing to go to promote your own business by creating new and unprecedented value for your customers? I’m not saying your competition is about to introduce pole-dancing or any other non-traditional customer appreciation program to their repertoire, but apparently you never know…

The Ethics of ADA

A while back I recall seeing a story on television about a burger joint in Sacramento, California, that was just big enough for a kitchen area and a counter with 12 stools – and usually had a line out the door and down the block, of people just waiting to get some of their exceptional food. Nothing fancy – obviously – but the local people swore by the specialty of the house: a cheeseburger with so much shredded cheese that the cheese ran off the patty while it was cooking and formed a shelf (or “skirt”) around the sandwich. Despite being an almost literal hole in the wall, the “Squeeze Inn” was beloved of people in Sacramento, and customers came from miles around to wait in the huge line for their crispy fried cheese. So what could possibly force such an operation out of business?

Well, if you said “bureaucracy” or more to the point, “bureaucracy run amok,” come claim your prize. But what makes this story so remarkable is that the bureaucracy that shut the place down, and the regulations that the business had indeed violated six ways from Sunday, wasn’t anything to do with health codes, vermin infestations, business licenses, liquor licenses, noise, parking, storage or use of illegal chemicals, price fixing, price gouging, exterior signage, interior signage, false advertising, or even tax evasion. No, apparently what did in the Squeeze Inn was the ADA – the Americans with Disabilities act. And the worst part is, as far as I can tell, it wasn’t even incorrectly applied…

As I pick up the story off the Sacramento Bee website, the tiny burger stand was not in compliance with the Federal law that requires all places of public accommodation to be accessible to all Americans, even those who can’t walk without mechanical assistance. With its tiny floor space, narrow door and inconvenient parking arrangements, the Squeeze Inn was out of compliance with the basic ADA requirements, and wound up being sued by a local resident who was unable to maneuver inside the place for lunch. While the case was eventually settled, the owners decided to move their operation to a larger (and more compliant) location before someone else decided to jump on the same gravy train and sue them for even more money. Fortunately, they were able to find a new location nearby, and able to afford the move, but the situation still raises a basic question of ethics…

The ADA exists because if it didn’t, all manner of businesses would simply tell disabled Americans that the fact they were being denied equal access was their tough luck, and they could take their business to some equally unfriendly competitor. If we assume that all people, regardless of their physical limitations, should be allowed equal access to all of the same freedoms and services, then we must have laws that guarantee compliance with this principle. At the same time, there are going to be some businesses that can’t afford to bring their operations into full ADA compliance, and those companies will be driven out of business by lawsuits and bureaucrats, which harms the customers who were patronizing that business and damages the local economy and does NOTHING WHATSOEVER to help the disabled people who are, in principle, being aided by this law. Even with the best will in the world, it’s hard to see what good it does disabled people to destroy a business that they can’t use – but it’s hard to see what other threat would keep all business owners from claiming this hardship…

So what’s the answer? Should all businesses be forced to comply with ADA regulation? Should special exceptions be granted when a business can establish that compliance is not possible and there are alternative services that the disabled people in the community could use? Should people who sue businesses under ADA regulations solely for the purpose of extorting money be charged with extortion and sent to ADA-compliant Federal prisons? Should business owners who claim the hardship exemption when there isn’t one (or when they could easily comply but just don’t want to) be charged with racketeering and civil rights violations and sent to much less enlightened Federal prisons? And should such decisions be made by unelected bureaucratic officials, or should these decisions be left up to the people (and their elected representatives)? Or would that constitute the very “tyranny of the majority” that the ADA was set up to prevent in the first place?

It’s worth thinking about…

Take the Train?

It’s a truism in America that public transportation is cheaper than driving one’s own car – and, in fact, many people are convinced that public transportation is ridden exclusively by those people who can not afford to drive. Of course, riding a bus or train is usually slower than driving, but most people will assure you that the amount you save on parking, gasoline, car repairs and insurance more than makes up for the time you are spending. Environmentalists praise public transportation, claiming that the lower emissions of one bus compared to 40 cars (or one train compared to 300 cars) is more than enough motivation for riding it. Some people will go so far as to praise the lower stress involved in riding over driving, or cite the ability to read, study, nap, or whatever during this time. But what happens when the country is in the grips of the worst recession in a generation, and the price of riding public transit isn’t cost effective?

A story reported this week in the Mercury News tells the sad tale of the Bay Area Rapid Transit system, better known in Northern California as BART. Often hailed as California’s greatest public works project ever, BARD connects most of the communities in and around the San Francisco Bay Area in a network of trains and subways convenient to both main airports and most of the business districts. But despite the pro-environmental and anti-big-business nature of the Bay Area, the BART system is currently losing on the order of $130 to $140 million each year – which has led to price hikes in an attempt to stem the losses, which has lowered ridership even further. People were reluctant to use BART when it was priced competitively – citing commutes that were as much as 8 times longer, in terms of minutes in transit, than driving a car – but with price hikes making driving cheaper, the system is doing even worse…

Some of the problem is political – the contract the city signed with the bus and train operator’s union is so disadvantageous for the city it’s surprising there haven’t been riots – and some of it is simple bureaucracy – none of the people who could change the situation has any personal or financial motivation for doing so – but most of it is just poor management. The city needs to encourage ridership any way it can, and placing various nuisance fees (what is an SFO round-trip surcharge, anyway? And in what world is it a good idea to more than double it when your ridership is already dropping?) on riders who are already dubious about your service is no way to run a railroad. Or, in this case, a public transit system…

In the long run, the City and State will continue to support the BART system, but with California’s budget already at the breaking point, the last thing they need is to put more strain of the highway system, run up costs for road repairs and bridge maintenance (above the levels those things are already at), and shovel more money into an inefficient public works project. Unless somebody in the City by the Bay wakes up and smells the smog, things are about to get worse for our friends in Northern California…

Pay As You Throw

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

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

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

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

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

And the Creek Don’t Rise

There was an interesting question that came up over the weekend regarding who should take responsibility for an expensive (but not particularly dangerous) natural disaster. I’m not sure if it’s really a question of ethics, apart from the obvious issue of taking responsibility for one’s actions, but in this case it’s not clear if any one person (or agency) was responsible, or if this really is one of those occasional “acts of god” so beloved of the insurance writers. Here are the facts as reported by the local media:

On Saturday the 20th, heavy rains in western and central Michigan caused the Grand River to rise, and eventually overflow its banks near the city of Ionia. As a result, a field by the side of the river, which was being used as a temporary parking lot at a music festival hosted by a local radio station, was flooded, and something on the order of 1,000 cars were partly or fully immersed in the water. The best guess is that it will be until Wednesday (e.g. today) before the ground dries out enough to remove the cars, at which point the question of which ones are reparable and which ones have been totaled by the water damage will come into play. Keep in mind that immersion in water will generally cause more damage to a car’s interior and power train systems than the book value of the vehicle, which means that anything that was submerged to the cabin level is probably a write-off…

The obvious question is whether the flooding could have been prevented. There is a dam that crosses the river just above the festival site, but it’s what’s called a “run of river” dam, meaning that it has no flood-control properties and no flood basin or flood channels to contain or re-direct the waters. In fact, the dam’s owners are only licensed to use it as a hydroelectric station; the Federal Energy Regulatory Commission (FERC) would not have permitted them to try to use the dam to intervene, even if it had the capacity to do any good, which it didn’t. Flooding along the Grand River is actually an annual event when the local snowpack melts; the reason there aren’t any permanent structures on that site is that those fields are covered with water and mud every year when the river hits flood stage. It’s just that those floods normally happen in the spring…

As such, the question of who is to blame becomes a little murky. The power company that owns the dam couldn’t have intervened if they’d wanted to, but what about the festival organizers? Should they have been aware of the flood risk? Should the radio station which sponsored the event take responsibility? What about the government agencies that issued permits to hold a festival on that site and use that field as a temporary parking lot (state, county or city)? Or should the people who parked their cars next to a river on a summer day when there were violent storm cells in the area and the National Weather Service had already issued a flash flood warning for the area call their own insurance companies and hope for the best?

Almost as difficult a question is how much each person should be paid to replace their car, assuming that someone is going to. Just giving each owner the Blue Book value of their car won’t enable them to replace it; most cars don’t retain a book value of more than a fraction of the purchase price, and in many cases the book value will be less than what the owner still owes on the purchase. But purchasing new cars for everyone involved isn’t practical either; the Federal Trade Commission reports that the average new car in America costs $28,400 – that would be $28.4 million to replace all 1,000 cars, and while that would be good for the local economy (assuming the replacements were all manufactured and sold locally) I’m not sure who around here has $28.4 million just lying around…

So who’s to blame for this fiasco? The festival promoters, the festival sponsors, the local government that issued the permits, the local government that DIDN’T put a flood-control basin on the Grand River, the state/Federal government that didn’t shut down the festival because of dangerous weather conditions, or the people who didn’t think twice about parking next to a river during a flash flood warning? Even more to the point, who should pay to clean up the results? Keep in mind that if any of the government agencies or private (tax-paying) companies involved end up footing the bill, the person who is going to ultimately pay for this fiasco is the taxpayer – e.g., you…

It’s worth thinking about…

The Ethics of Paternalism

Going over my notes last week, I ran across an interesting question regarding the ethical responsibility a company has to its employees. It seems there was a case (which eventually reached the U.S. Supreme Court) in which a company that manufactured batteries of various kinds had systematically avoided hiring women for certain positions that involved a significant chance of exposure to lead. The company’s thinking was that since lead exposure can lead to birth defects, they would simply keep anyone who was (or could conceivably become) pregnant away from their manufacturing stations that used lead. We should note that the positions in question were not highly-paid or especially desirable, nor would experience in any of them result in promotion or any other form of career advancement. One could in fact argue that the only special treatment associated with these jobs was who would be hired to fill them…

As you might imagine, when this situation was finally made public a huge firestorm of protest broke out. The company’s defense – that they were acting in the best interests of their employees, to keep anyone from having to choose between their job and their future children – did not placate any of the parties responsible. Several of the company’s opponents roundly condemned this position, in fact, pointing out that men can also suffer significant health consequences from lead exposure, and that assuming that a female applicant wanted children (or was even capable of having them) constituted both gender discrimination and massive condescension on the part of the company. Although the company’s motives may have been well-intentioned, the paternalism it displayed was intolerable – and also illegal…

Now, you might think that I’m dredging this case up from the mists of time; that all of this happened before women were commonly accepted in the workforce, maybe even before they received the right to vote. If so, I regret to inform you that these events are less than 20 years old as of this writing; the Supreme Court decision was handed down while I was in business school in the early 1990s. But while it’s doubtful that anyone would attempt to institute this specific policy today, echoes of the situation described live on; people are still more likely to assign hazardous duty to men than women; single people are more likely to sent into harm’s way than those who would leave a widowed spouse and bereft children; women are still barred from most combat position in our military, and so on. Which to me begs the question: to what extent, if any, should an employer place the welfare of its people ahead of their legal right to die (or be genetically damaged) in unpleasant ways while on the job?

Obviously, there are OSHA regulations and similar laws that attempt to keep everyone safe on the job. And even more obviously, this is a very slippery slope indeed; the line between keeping women off a specific job category because they might get hurt and keeping them off any specific job because you’re a bigot and you don’t believe they can do that job as well as a man could is so fine I can’t imagine how to measure it. In theory, all work assignments should be made regardless of the applicant’s personal characteristics, on merit alone – but does that mean that an employer has no special responsibility for any of its employees? That if one of their people wants to do something with potentially harmful long-term effects, the company should just ignore the possible repercussions and let them go on ahead? Does our responsibility as managers to treat all of our people as even-handedly as possible supersede our very human desire to protect our people from harm?

It’s worth thinking about…

New Theme Park

There’s a wonderful moment in the recent “Iron Man” film, where the hero’s personal assistant walks in on him as he’s having trouble getting out of the armor that serves as the centerpiece of the movie (and the comic series). Most of the earlier iterations of the Iron Man myth have avoided dealing with this, but a suit of armor (even sealed, flying power armor with its own life-support systems and weapons and such) isn’t just a single piece of machinery; it wouldn’t just clamshell open and let you walk in. Real armor, throughout history, has been a collection of components fitted to different parts of the body for different functions, and it’s unrealistic to suggest that the Iron Man armor would be something you just pull on like a cotton jumpsuit. But in the scene our hero is hanging in mid-air, as a bunch of robotic arms attempt to disengage him from the different bits of ironmongery, and his assistant gasps at the sight…

Which leads to one of the film’s best moments, when our hero looks at her, and replies: “Oh, come on! This isn’t even the worst thing you’ve caught me doing!”

This was precisely my reaction when I learned that a genuine UFO cult is planning on building an alien-based theme park and “Happiness Academy” in Las Vegas. As reported by the local CBS affiliate, the well-known nut cult that calls themselves the Raelians is planning on constructing a new facility, including a museum, lecture facility, full-scale replica of a UFO and whatever else a “Happiness Academy” would entail in Las Vegas, starting sometime within the next year…

Anywhere else in the world, this announcement would no doubt be greeted with all manner of public protest. There would be denouncements from local religious groups, calling the Raelians “a dangerous cult” that was obviously created by the devil to distract their members from whatever their particular dogma happens to be. There would be complaints from local business groups about the masses of weirdos that will be attracted to such a facility scaring off paying customers. There would probably be protests and counter-protests about separation of Church and State, the need for various levels of government to intervene in (or stay out of) the situation. Local politicians would scent which way the wind was blowing, and try to gain advantage by taking whatever position about the new theme park seemed politically expedient…

In Las Vegas, the reaction seems to have been more along the lines of people asking if the city really needs another UFO cult and its theme park; if the ones they already have can handle the traffic; or if this one will just make it harder for the existing facilities to pay their bills. I mean, sure, everyone’s happy to see new businesses opening up these days, what with the economic crisis and all, and Las Vegas could certainly benefit from some new construction jobs and real estate getting sold, but you have to think of the long-term effects of a new installation…

I kid, of course, but given how hard the city has worked to cultivate that image of “anything goes” it’s difficult to imagine how having the Raelians build a tourist attraction somewhere in the area will do anyone any harm, and if they actually have money to spend (or, more to the point, if they can actually attract any tourists with money to spend) the whole thing could be really good for the community, at least from a business standpoint. Assuming that the whole thing doesn’t turn out to be another heap of smoke and mirrors, like when the Raelians claimed to have successfully cloned one of their key leaders, that is. It’s a sad day when you can’t even trust the leaders of your local UFO cult anymore. Sometimes I fear for the future of our Republic…

Frankenfood

We’re starting to hear more and more loud wailing and gnashing over genetically modified food products, or “Frankenfood” as people on the “against” side of the issue delight in calling it. It’s tempting to dismiss these folks as neo-Luddite fear-mongers who are against these new foods simply because genetically modifying anything is unfamiliar and therefore scary. Unless, of course, you study history or have just been around long enough to remember how other “perfectly safe” miracles of science like DDT, thalidomide, or cyclamates worked out in the long run; in which case, it’s hard to blame people for being at least a little dubious. I still think the purple tomatoes are a nice touch, though…

A story being reported by the BBC Online site describes a new strain of purple tomatoes that have been genetically engineered to contain an anti-oxidant pigment which is believed to have anti-cancer benefits if consumed regularly. No one is really sure how much impact diet has on any form of cancer, let alone whether high levels of anti-oxidants will really help you avoid getting cancer; most of the evidence to date has been more along the lines of “we know these things are good for you in other respects, and they MIGHT help prevent cancer, so why not?” It’s a difficult argument to refute, really; if a single weird-looking fruit is good for your health, and might have anti-cancer benefits, where’s the harm in eating one? It’s not like this is some new scientific development that could turn out to have unexpected side effects later, is it?

Well, actually it is. There’s apparently also some debate about whether these actually taste like tomatoes, not to mention the fact that they look vaguely disturbing. But what makes this entire controversy so amusing is that up until the 17th Century, tomatoes were believed to be poisonous by many cultures, including Great Britain and its North American colonies. As it turns out, the leaves and stems of the tomato plant ARE poisonous (they contain glycoalkoloids), but the fruit is both safe to eat and actively good for you. There was even one celebrated case in the American colonies where a tomato proponent declared that he would publically eat a sack of the red fruits (to prove they were safe) while the local tomato detractors swore he’d keel over from the acid within the first few seconds. What seems to have gotten glossed over in the amusing historical accounts (and contemporary accounts) of this incident is that if our tomato fancier had tried eating the entire plant during his demonstration, it actually might have killed him…

So is genetically modified food any less safe than food bred to have specific characteristics of color, shape, size or flavor the old-fashioned way (e.g. through hundreds of generations of selective cross-pollination)? This remains to be seen, but I should probably point out that unless all of the food you’ve eaten in the last ten years has been taken from plants and animals you raised yourself, you’ve probably already eaten some of this stuff, and unless you move to a farm and start raising all of your own food through completely organic methods, there is a near-certainty that you will be eating some of these products again in the next ten years. Regardless of how we feel about Frankenfood, it’s already here…

I still think these tomatoes look disgusting, however…

Stupid People

When I started writing this blog, I created the “Stupidity” tag because any regular writings about business are going to include examples of failure, and some of those examples are going to be stupid. In my case, one of the areas I study is actually institutional failure, and while stupidity is only one of a long list of things that cause corporations and other institutions to fail, I continue to regard it as both the most preventable cause of failure and the most fun to write (and read) about. So I found the story about a bank issuing a credit card to a tree to be exactly the sort of grist I look for in setting up a new post…

A story related on the urban legend research site Snopes.com details the events following a California man’s efforts to get companies to stop sending him credit card offers by writing “Never waste a tree” on the form and sending it back in. Sure enough, a few weeks later he received a credit card back in the mail for a Mr. Never Waste Tree. Granted that it would have been a crime for him to have made a bunch of purchases on that card and then refused to pay for them on the grounds that the card is the property of Mr. Tree, this would have been cold comfort to anyone victimized by such a crime – or to any of the stockholders of the issuing company, all of whom would have seen their money shoveled out the window because credit cards are so profitable that quite literally ANYONE can receive one…

Now, I could point out that most of these credit card applications are processed automatically, and it is entirely possible that no live person ever saw this one until after the NBC affiliate station in Los Angeles did a story about it in 2005. I could also point out that given the volume of credit card offers being processed at the time, it’s unlikely that a human machine-minder would have noticed this one application even if someone WAS watching the machine that day, or that the company would have done anything about it anyway. After all, it’s always easier to try to force someone to pay for the goods they have (fraudulently) purchased than it is to get them to buy something in the first place. The problem is what happens when this sort of policy is taken to its logical conclusion…

Millions of Americans are drowning in credit card debt, and the sad fact is that most of them should never have been allowed to have a credit card in the first place. Millions of others are defaulting on mortgages they should never have been given in the first place, car loans they had no realistic prospect of making the payments on, and home equity loans used to make upgrades on houses that have now lost 70% of their purchase price. When a couple of kids fill out a “birthday club” card with a fake name in order to get an extra ice cream cone, it’s a (relatively) harmless sitcom moment; when half of the country does something equally silly what you get is a crushing economic downturn, $700 billion in “bail-out” funds, tens of thousands of jobs lost in the automotive industry alone, and a Federal deficit that we may not live to see the end of…

You’ve all heard me ranting before about how if an industry will not regulate itself, eventually the government will be forced to either step in and do so or let the entire national economy slide into the crapper. I just hadn’t figured it would end up being both…

Parking Magic

Did you ever find yourself facing the unappealing choice of either risking a ticket because you don’t have any change to feed a parking meter, or not being able to park and having to go somewhere else? How about those occasions when you need to be somewhere for a few hours and the only space available has a 30-minute limit, forcing you to keep running out to feed the meter? Well, if a new development going on in Chicago starts catching on in other cities, these problems may soon become a thing of the part – although I won’t make book on a new set of problems failing to appear soon thereafter…

According to a story being reported in the Chicago Tribune this week, the city has been testing an electronic parking system that allows you to purchase parking time electronically from a device mounted on your dashboard. Plans are already underway to expand the system and adopt new technologies that will allow you to purchase your parking minutes directly from your cell phone – and buy more minutes if you should find that your virtual meter is about to run out and you need more time to complete whatever errand you’re on. As usual, this idea has both positive and negative aspects…

On the one hand, feeding coinage into a parking meter is a pain, particularly when the amount you’re being charged for the space is as high as it is in parts of Chicago, Los Angeles, or any other large city. Consider that if parking is $2 per hour (not unusual these days) you will need 8 quarters per hour, or 64 of them (nearly two rolls of quarters) for a day at work. Even at 75 cents per hour I was spending $3 or $3.50 per day to park in Santa Monica the last time I worked there, which meant three rolls of quarters every two weeks – not a very appealing choice, but still preferable to the $175 that the parking lot under our office building would have charged me for a month of non-reserved parking. I’d probably have preferred an electronic system to taking $60 in quarters out of the bank each month…

On the downside, this system not only requires the user to have a higher level of technology available in order to park, it eliminates any practical considerations for not raising the cost of parking in the city. If your parking enforcement personnel no longer have to empty parking meters – or even walk a beat to write parking tickets – but can handle all of the functions of their jobs from a desk somewhere, not only is it much easier to enforce parking laws, it’s much easier to keep increasing the cost per hour. In fact, this would really require no effort at all…

In the long run, of course, it really doesn’t matter what we think of such developments; cities will continue raising parking rates because they need the money – and because they can. Eventually, the simple pole-mounted coin box will become obsolete, simply because it will not be possible for anyone to carry enough small change around with them to buy enough time for even a short errand, let alone a day at work. At that point a system that accepts credit cards, debit cards, and electronic payments by cell phone or over the Internet (for as long as there is any difference between those functions) is probably a good thing. A much more serious issue is that those electronic purchases can be traced – in fact, they have to be traced for billing purposes…

On-street parking will probably always be the low-cost alternative to expensive parking lots, and it may remain more convenient than having to drive off and find space in a lot somewhere. But the idea that one day soon anyone who wants to find out will be able to learn exactly where you park your car everyday has some very disturbing implications…