Lounge in a Box

Once in a while I will come upon a story in the online news sites that sounds good at first look, but which demonstrates a more hopeful world view or greater faith in humanity than I have left at this point. Despite what my critics might imply, I don’t believe that all people are terrible, or that if it is possible for members of the general public to steal and/or destroy something for their own fun and profit that everyone will do so. The problem is that in many cases it only takes one bad actor to ruin everything for everyone else. I’ve often summed up businesses that failed because of the work of a limited number of bad actors with the expression “Another beautiful idea – ruined by people.” This was my first reaction to the CNN story about small, private rooms that can be rented by the hour being installed in airports…

The company behind this, which calls itself Jabbrrbox, claims that these cubicle-sized rooms can be used to provide a quiet space in which to place phone calls, get some work done, or speak with others in privacy, much like a very small, private airport lounge. The company also claims that these are more cost-effective than executive clubs offered by airlines, although at $10 for 15 minutes and $30 for a whole hour this is only the case if you are planning to use the Jabbrrbox unit for fewer than 15 hours per year (American Airlines’ “Admiral’s Club” is $450 per person per year, for example) or fewer than 2 hours in a visit (a one-day pass for the Admiral’s Club is $59). It also lacks the concierge service, refreshments, business services and other amenities one would find in a conventional executive club. It does, however, offer greater privacy – which I can’t help thinking is going to be the biggest problem…

At the moment, the Jabbrrbox units have a clear door panel, but the company is talking about equipping future units with a privacy screen, and even if they don’t, anybody could block the panel with a handful of printer paper and a spool of scotch tape. I’m not suggesting that people are going to start using the cubicles for drugs, sex, or contraband, just because they can. I’m saying that people will already use any relatively secure or temporarily private space for all of those purposes, and I can’t see anything that would keep people from doing the same with the Jabbrrbox compartments. Again, I don’t expect everyone to turn one of these cubicles into a drug den or a brothel, but it wouldn’t take more than one such bad actor to put an entire bank of them out of service…

That seems unfortunate, since this is a potentially useful service, and they’ve already got to deal with more common criminal activities like vandalism, credit card fraud, and a significant chance of squatters, including customers who will refuse to leave when their time is up and drunks passing out on the floor. I’ve written extensively in this space about how difficult it can be for an entrepreneurial start-up business to survive, let alone flourish, but in this case the company is going to have a lot more to deal with than the capitalization, cash flow, and customer development/marketing issues that will destroy more conventional businesses…

Now, I would be the first to admit that I don’t have any hard data on how much crime still goes on in American airports, any more than I know what percentage of air travelers are destructive nihilists or ugly drunks. I also have no idea what measures (if any) Jabbrrbox has in place to deal with the objections I’ve pointed out in this post. It’s entirely possible that I’m just being too conservative, pessimistic, or traditional in my assessment of this company’s long-term prospects for success; it’s also quite possible that the company has already got all of this figured out and are just waiting for clearance to start installing these private lounge units in airports all over the world. I’m just saying that whoever came up with this idea has a higher opinion of the general public, or even of air travelers, than I do…

That’s Nuts!

These are some days when I spend hours combing through news aggregation sites and actual news channels, looking for interesting and/or funny stories within a business context to write about in this space. Sometimes there will be something I want to share from my oddball life experiences, lessons I’ve learned or taught in business school, or ethical musings that are as close as an old cynic like me ever gets (or should ever get) to discussing philosophy. Sometimes there are days of quiet desperation, when neither the online news sources or my over-active imagination yield anything, and I wind up just writing insulting jokes about people I don’t like and calling it a day. And then there are days when the first headline I run across says “Fake dog testicles made this man a millionaire…”

I wrote a post about this product – known commercially as “Neuticles” – early on in the blog, but if you missed it, the idea is that some pet owners want to have their dog neutered, but don’t want the animal to look or feel any different afterwards. As is often the case with off-beat entrepreneurial projects, the company was started by a man who wanted to purchase such a product but was unable to do so because no such implants existed. Reasoning that if he wanted the product, others might also, he joined forces with a veterinarian and a group of investors and started a company which has now sold over 500,000 pairs of Neuticles at an average of $310 per pair – which works out to $155 million USD in gross sales…

You can pick up the CNN story here if you want to; alternately, you might want to look into purchasing Gregg Miller’s own book on the subject if you can find a copy – the volume, called “Going… Going… Nuts!” sadly appears to be out of print at the moment. Despite its rather unusual product and the problems inherent with making and marketing cosmetic implants for dogs (and other animals), the company itself is really the classic American entrepreneurship story of finding an empty niche and filling it. Founder Gregg Miller’s life story is a bit more eccentric, as one might expect from the inventor of cosmetic testicular implants for dogs, but in both cases I felt there was a story worth repeating here…

When I first read about Neuticles and wrote my original post on the subject I was treating it with a vaguely satirical air; the sort of (hopefully) gentle mockery that one might suggest befits anyone who would spend money on cosmetic surgery and implants for an animal that can and does eat its own droppings. That was wrong of me, and if Mr. Miller is reading this post I most sincerely apologize for any disrespect or implied criticism. The greater truth behind this story is that however bizarre I might have found his invention to be, Mr. Miller was clearly quite correct in his assessment of its commercial potential, and I should not have been critical of it without any marketing data whatsoever…

The belief that just because I find a product to be outlandish that everyone else will also have that reaction is the management error I have often presented in these posts as the “I am the World” fallacy, and I’m not sure I have ever seen a more extreme example of it. I am, after all, a management instructor and business consultant of some experience, and the product in question is bizarre enough that even CNN is treating this as a weird or amusing piece of news. Apparently it bears repeating that one should never reason ahead of one’s data, and also that while it’s true that 90% of all entrepreneurial start-ups will ultimately fail, that does mean that one out of every ten will succeed…

Even if its business concept STILL seems too outlandish for words…

Here We Go Again

I’ve written about a lot of bad crowdfunding projects in this space, to the point where I’m mostly ignoring all but the most egregious ones now. Most of these ventures appear to be the result of people who have no idea what they’re doing trying something that “must be simple.” After all, they reason, if some clown who just wanted to see how many people around the world would give him money for a batch of potato salad can get in excess of $55,000 USD, then surely people will want to kick in a few dollars to fund a breakthrough in technology and get some neat thank-you gifts. If you look through the “Not Funded” page on Kickstarter, or any of the competing sites, you will find a wealth of stories ranging from the heart-breaking to the things that make you wonder “Who thought that ANYONE would donate money for that?” But it’s starting to look as though the real problem is projects that were funded, but shouldn’t have been…

Consider, if you will, the case of Ossic, a start-up company that was promising to make headphones superior to anything currently on the market. If I’m reading the Business Insider story correctly, the idea was that the company would measure the customer’s head and ears in order to produce a customized fit, resulting in headphones that both sound better and are more comfortable to wear. The pitch was apparently convincing enough that investors contributed more than $3 million USD through their Kickstarter page, and another 22,000 people paid to pre-order the product before the company had produced anything other than an ad campaign. Everything seemed to be going well until the company announced that they had spent all of the money and would be shutting down operations without actually making any headphones…

Anyone who has been reading this blog (assuming that anyone has been reading this blog) probably saw this one coming. I’ve already brought you stories about failed Kickstarter projects to create watches, board games, movies, audio recordings, and plush toys, not to mention Go Fund Me projects (the charitable equivalent of crowdfunding) that also came to grief. What makes the Ossic project so remarkable, from where I’m sitting, is that even assuming that most of the pre-orders were for the company’s cheapest product, we’re still talking about somewhere above $4.5 million USD, which doesn’t include the $3.2 million they got crowdsourcing or the “millions of dollars” they claimed to have raised from conventional sources…

Even assuming that the company was exaggerating about their conventional funding, not to mention their claims that all of their employees had been working without pay for six months to try and fulfill their commitments to the investors, one still has to wonder how they managed to squander something in excess of $8 million without producing more than about 250 demonstrator units (to attempt to generate additional sales/investments). Did they underestimate the production costs, the time it would take to establish a revenue stream, or the overhead it would take to get fully operational? Did their business plan include paying very high salaries to their senior management team, their engineers, or their marketing personnel? Did they even have a business plan?

Another interesting question would be where they found 22,000 people who have never heard the often-quoted statistic that 90% of all entrepreneurial start-ups fail. One might reasonably assume that with the stories of failed crowdfunding projects now bouncing all over the Internet, people would be more cautious about spending money on a product that might or might not actually exist, but that does not appear to have been the case here. Even granted that the product descriptions were highly appealing (“Like virtual reality for audio!”), I have trouble picturing paying $200+ for a product that does not currently exist from a company I’ve never heard of before. Admittedly, I refused to pre-order the Apple Watch, either, and that seems to have turned out all right, but I still have to wonder…

I don’t imagine that anyone out there spent their rent money pre-ordering headphones, and it’s even harder to believe that anyone would contribute money they couldn’t afford to a crowdfunding project. What concerns me is that if projects like this one keep getting this level of negative attention, there is a real possibility that people will stop supporting new companies, either through crowdfunding and pre-orders, or possibly through more conventional channels. If that happens it seems highly likely that the rate at which new entrepreneurial ventures fail will exceed 90% - and there’s no telling how many deserving products or companies will never get their chance…

Lonely Hearts Clubs

I was a bit surprised to read a Gizmodo article earlier this week about the appearance of a specialized dating cite launched for supporters of our current President, and the launch of a competing cite (for people who oppose the current President) to compete with it. It’s not so much that people might want to seek out potential dating partners who share their political and social positions, or even that the political climate in the United States has gotten to be so toxic that anything with the President’s name on it will generate an immediate opposition and/or parody. It’s more the fact that there are apparently people out there in cyberspace who are creating specialized niche dating sites and expecting to make money in the process…

You can pick up the original Gizmodo article here if you don’t believe me, and I would completely understand if you didn’t. It turns out that there are dozens, or perhaps thousands, of sites specifically oriented to promote connections between people of all descriptions, including Trump voters, anti-Trump voters, conservatives, liberals, centrists, tall people, short people, runners, swimmers, bikers, people who support gun ownership, people who support gun control, people with allergies, people with bad haircuts, people who give haircuts but aren’t very good at it, and a bewildering array of business owners, managers, supervisors, hourly workers and academics – all of which apparently utilize the same database…

Researching the article, the author apparently discovered dozens of stolen profile pictures, and a few outright stolen identities, some of which appear on every niche dating site they had time to audit. A little digging turned up a company that will sell you all of the back-end code and data you would need to start your own dating site, including a massive (and apparently completely compromised) database of members. All you have to do is customize the front page to suit the demographic you are attempting to attract, promote your new site across the Internet, and split the $25 membership fees you will be collecting from each new member 50/50 with the company that is providing you with the code…

This isn’t a new idea, of course. The folks at Gizmodo compare it to WordPress, but to me it recalled the instant web pages on Geo Cities twenty years ago. There’s a supposedly “nominal” start-up fee (they won’t tell you how much it is unless you sign up for it first), plus optional charges to help you design your part of the state, develop a concept, put together a logo, and so on. You then get to keep between 42% and 50% of every subscription and renewal you sell. What I found the most amazing, though, was the answer on their FAQ about referrals. If you refer a “quality partner” to the provider, you will then get 10% of their commissions for life. Whether or not you get 10% of their 10% of the people they recruit is unclear, although it is certainly implied that you do. If that’s true, we’ve definitely heard this story before…

Why exactly no one (not even the Gizmodo reporter who blew the lid off this story) seems to have recognized this as an online adaptation of the classic multi-level marketing (MLM) scheme is beyond me. Of course, why anyone in 2018 would still want to pay money to be involved in anything as sketchy as an MLM is also beyond me, but that’s really not the point. Even if the idea of making money off a dating site in a world that already has the Tinder, OkCupid , and Match sites, plus dozens of social media channels that don’t cost anything to use doesn’t make you want to call shenanigans on the whole concept, you’d still expect anyone who encounters it to ask if anyone has ever made money on this or any other MLM scheme…

I’m not going to post a link to the actual dating site provider because I don’t want to encourage this sort of crap; I’m not going to mention them by name, either, because I don’t really enjoy being sued by people who make their living by taking money from the greedy, the gullible, and the occasional credulous idiot. I will just suggest that if you have your heart set on diving into some get-rich-quick scheme there are better ways to go about that…

What Comes Around…

Some years ago I brought you the story of the My Coke Rewards program, and the similar promotion called “Pepsi Stuff” that the Coca-Cola Company first mocked and then copied. Both of these were essentially the classic “box-tops” concept that has been in use since at least the 1920s. Send current marketing, contact, and demographic information along with proof-of-purchase (generally the tops of a specific number of packages) and occasionally a small sum of money, and the company will send you any one of a number of cheap “prizes.” Some of these are simply advertising pieces in their own right (hats or t-shirts with the company name and logo on them), while others are furnished by other companies as part of a shared advertising deal. How effective these schemes really are remains somewhat debatable…

British novelist Dorothy Sayers, who actually worked in advertising in real life, explained the basic issues in her 1933 novel Murder Must Advertise. Unless the company running the promotion requires its customers to pay a “shipping and handling” fee – which dramatically lowers the effectiveness of the promotion – the company will have to pay for verifying the participating applications, buying and warehousing the “prizes,” and shipping the goods to the customer out of its advertising budget. The problem becomes how many additional sales the company will realize as a result of the promotion, and how much of the resulting profits they are willing to spend. Too many prizes, or too much value per prize unit, and the costs will eat any resulting increase in profits; too few prizes or too little value per prize unit and no one will participate in the promotion. And that doesn’t even consider aspects like fraud, forgery, or potential damage to the company’s brand identity…

In the original “Pepsi Stuff” promotion the company had to contend with all of these problems and then some. Much of what they were offering did indeed consist of cheap promotional materials for which an absurd amount of “proof-of-purchase” was required, and the few attempts at prizes with an intrinsic value ended up causing trouble, as in the case where a “joke” offering of a Harrier jump-jet resulted in a lawsuit from someone who claimed to have been deceived by the offer of a $30 million military jet for the equivalent of about $750,000 cash. The Coca-Cola people appeared to be watching the whole situation with glee, and wasted no time running their own ads mocking the Pepsi promotion, before starting their own version 10 years later…

Over time, the Coke version of the promotion grew unfeasibly expensive and began causing the company other problems, until they gradually converted it into recruiting for customer-generated content on Twitter about a year ago. I was therefore not particularly surprised to see a relaunch of the Pepsi Stuff program at the beginning of 2018. If the previous iterations are anything to go by, we should expect to see the Pepsi version end in another six to eight months, with everything you’d actually want going out of stock by the end of this summer. Meanwhile, the Coke ads mocking the new Pepsi version should launch sometime in the next month or so. It will be interesting to see if Coke bothers to create new ads of mockery, or if it just dusts off the old ones and starts airing them again. It will also be interesting to see if they re-launch their own version of it again around 2028 or so…

Now, I’d be the first to admit that I’m not clear on what either of these companies think they’re going to accomplish by using and re-using a promotion style that was old before most of their present customers were born. It’s true that all of the proofs-of-purchase are electronic these days, based on codes entered online, and it’s also true that modern automated fulfillment systems take most of the labor expenses out of the equation. And if there has been any reduction in the appeal of getting something for nothing, or in the number of people who are naïve enough to believe that you can get something for nothing, news of the decline has yet to make it to Central Michigan. But I can’t help thinking that unless somebody comes up with a new idea for a product promotion this whole cycle will just keep coming around again…

Release the Goats!

Some years ago I brought you the story of a team of goats that were being used to clear some brush from a hillside in Los Angeles – and how labor officials were protesting because the goats replaced a crew of twenty or thirty human employees with a single goatherd. At the time, I noted that the use of goats, as opposed to gasoline-powered agricultural equipment, was not only cheaper and more effective but also reduced air pollution and noise pollution, not to mention the production of naturally-occurring fertilizer. It came as no surprise to anyone, however, that none of the humans involved (except possibly the goatherd) were willing to put the environment ahead of their financial benefit…

Now the same story has come to Michigan, only this time there’s a university and an actual union grievance involved. According to a story in the Battle Creek Enquirer, the American Federation of State, County and Municipal Employees (AFSCME) is claiming that Western Michigan University failed to notify them that it was planning to bring in goats to deal with brush clearing, and that this represents a violation of the union’s agreement with the school. Why, exactly, anybody would want the assignment of clearing a poison ivy-infested woodlot in the middle of a Michigan summer is beyond me; it seems more likely that the union would be protesting against having to do this work, or at the very least, complaining about the working conditions. None of this appears to bother the goats, though…

Now, we should probably acknowledge that, this time at least, there probably is something to the “slippery slope” argument being raised by the union leadership. Even if none of their members want this particular job, the fact that the University has apparently brought in non-union labor to perform a task that would normally fall under the union’s jurisdiction isn’t really something they can afford to let pass unchallenged. As I’ve noted in a number of other posts, every time you fail to defend a contract or an intellectual property it becomes geometrically harder to do so the next time, until you are unable to defend it at all. And while the goats themselves aren’t really laborers in the usual sense, the same can’t be said about the company that is providing them…

What is less clear this time is how to resolve the issue. Currently, the goats are ahead of schedule and will probably finish eating all of the offending brush before the grievance can be resolved through channels, and it is difficult to see how putting the goatherds out of work would benefit the union personnel in the first place. Under the circumstances it might just be better to let them finish the job, especially given that WMU is a public university, and the higher cost of using humans on the brush removal detail would be paid for out of our state income taxes. On the other hand, it might be possible for the University to acquire its own herd of goats, at which the official goatherds (if not the goats themselves) would become members of AFSCME…

I think the main takeaway from this story is the way changing times can impact us in unexpected ways. Goats grazing on a hillside are hardly a new technological advance, but the use of environmentally-friendly methods and renewable resources in everyday tasks is. At least, it seems unlikely that the use of goats eliminating union jobs was an issue when WMU and AFSCME first signed their labor agreement. It’s enough to make you wonder what other bronze-age innovations may complicated labor relations, or business in general, as we go forward…

Beastly Decisions

There was story on the General Counsel website this week about a Fourth Circuit Court of Appeals decision on a religious discrimination case that was so stupid that I felt it deserves repeating. The original case was about a mining company employee who was refusing to use the company’s new biometric scanner to clock into and out from the job, claiming that this would be the equivalent of accepting the “Mark of the Beast” from the Book of Revelation. By itself this would probably be a non-story – a person’s religious beliefs are what they are, and as long as they aren’t proselytizing on company time or otherwise disobeying their supervisor’s instructions no one else will (or should) care. The company should still offer some accommodation, especially if they can easily do so (they could) and even more especially if the employee has provided long and valuable service to the company (the employee in question has been on the job for 37 years). None of that is what puts this story into the “stupid” category, however…

What is really absurd about this story, and is also the reason that the employee appears to have won his case on appeal, is that the company had already made accommodation for other employees who were unable to use the biometric system. Granted, the other employees were unable to use the biometric scanner because of injuries to their hands, not because of their belief system, but given that the company already had a numeric keypad for the other employees to use, it’s difficult to understand why they couldn’t have added a third identification code to the keypad and allowed the religious miner to use the same accommodation. Or, more to the point, perhaps, why they felt it was worth spending the money on a Federal court case, not to mention risking negative publicity on the Internet and mockery from thousands of scruffy bloggers, just to avoid adding one more identification code…

Now, we should probably acknowledge that we don’t know why the biometric sensor system was considered a good idea in the first place. If it is somehow harder to falsify attendance using the biometric system than it would be using a traditional time-clock system then it is understandable that the company would want its employees to use the new system, and equally understandable that they would not want every employee who wants to be able to game the system asking for an accommodation for various made-up reasons. But unless these problems are very wide-spread within the company, and the economic impact of all of the timekeeping falsification is extremely high, it’s hard to imagine that the benefit of using the system will be that much more effective than just having supervisory personnel verify attendance…

The big problem with making exceptions to any business policy is that once you have done so it becomes geometrically harder to explain why each additional request for an exception should not also be granted, until the rule becomes unenforceable due to more people being exempt from it than are still governed by it. This is why schools have zero-tolerance policies on weapons and drugs, and why companies are obliged to enforce patents and copyrights even in cases when they know the violations will never have any real impact on their business. It’s also why, in most jurisdictions, judges and magistrates are given discretion regarding sentencing for various offenses. But as with any other slippery-slope argument, there’s a real chance that applying one set of rules without exception in every possible case will result in outcomes even more absurd – and even more potentially damaging to the company – than not having those rules in the first place…

Traditionally, the only practical way to deal with the exceptions problem is to have very clear, and very exclusive, reasons for any accommodation being granted. For most businesses, schools, and government agencies, the Americans with Disabilities Act (ADA) spells out exactly what is and is not acceptable – which can be extremely useful in settling this type of situation. Outside of ADA sanctions the supervisory manager on the spot is going to need to establish company-specific and situation-specific exceptions, but this can be accomplished fairly. In this particular case, most people would be okay with an exception being made for ordained ministers from a sect that believes that biometric scanner profiles are equivalent to the “Mark of the Beast,” provided that they have worked for the company for 37 or more years at the time the accommodation is made…