Only in the Movies

I’m not going to be posting much over the month of August, since my cohort is in the middle of our run-up to Comprehensive Exams, and most of us are working fifteen to twenty hours a day reviewing the past two years of class assignments and readings. It’s one of those times when you really wish you had the “Time-Turner” gadget from the third Harry Potter story, so you could keep turning back time and pick up as many additional study hours as you wanted. The problem, of course, is that most of us will never have as much time as we want, even given an effectively infinite supply of it – and, so far as we know, mucking about in closed temporal loops is so impossible that it makes flying broomsticks, magical transfigurations and owls that are actually smarter than bread mold all look positively realistic. You can’t run your life – or your business – like something out of a Hollywood blockbuster…

Take, for example, the fictional “Omni Consumer Products” company from the “Robocop” movie franchise. In the films, it’s supposedly a giant mega-corporation that wants to buy up the near-future version of Detroit, level the place, and build a utopian hyper-city on the site. To do this, however, they have to eliminate the crime rate first, and in order to do so they decide to invest in cyborg technology when their huge, armed and armored robots (the infamous ED 209 “Enforcement Droid”) prove unworkable. As a recent article on the Cracked.com humor site points out, this is a terrible idea, not just because of the inevitable unethical human experimentation or because of the equally predictable collateral damage that results, but also because it’s a completely inefficient way to accomplish such a task…

Now, let’s be clear about this: experimenting on people is wrong, even if said people are too dim to realize that their employment contract gives the company the right to do just that; I would go so far as to call it blatantly evil, in fact. But even if we leave the movie’s eponymous hero out of it altogether, the company’s efforts to build giant robots brimming with military-grade weapons to enforce municipal laws would already be stupid from a business or economics standpoint long before we ever get to the ethics of the situation. For what a single billion-dollar robot that doesn’t work would cost you could field a police force of 20,000 uniformed officers for a year – or, if you prefer, roughly five (5) times the number of police officers currently employed by the Detroit Police Department in real life. For what even a small fleet of Enforcement Droids would cost you could flood the city with uniformed policemen, not only eradicating crime (without resorting to machines that occasionally spray their surroundings with bullets before falling down flights of stairs) but also providing a huge number of new jobs and giving a lot of deserving people a chance at a better life…

“Why does he tell us this?” I hear some of you asking. After all, it’s not like anyone reading this blog (assuming anyone reads this blog) is actually the head of an evil mega-corporation that is going to start building robotic enforcers, let alone stealing people’s brains for cyborg utilization. I bring this up partly because, as the folks who wrote the linked humor piece correctly note, this isn’t even the most egregious movie example of corporate stupidity in the last twenty years, let alone the most evil. In fact, if you watch enough movies you could get the idea that all senior managers are not merely evil and without a conscience, but credulous idiots as well. Which brings me to my main point: in a world where people were willing to risk a multi-trillion-dollar eco-disaster rather than spend $500,000 on safety equipment, it’s hard to say that impression is entirely wrong…

People don’t fight wars the way it happens in the movies; people don’t build buildings, heal the sick, care for their families, or teach their students the way you see it up on the silver screen. Maybe, in addition to the other standards we maintain for new businesses, we should be asking if anything the management team is doing is pure Hollywood movie logic – and, if it is, preventing them from ever starting operations…

Guess Again

It’s one of those stories that just screams “corporate waste and greed” or possibly “managerial incompetence” – at least, the headline does. Wal-Mart is spending somewhere on the order of $2 million fighting a $7,000 fine slapped onto them by OSHA as the result of a seasonal worker being trampled to death on “Black Friday” last year. Any rational person reading the story will probably wonder why the company doesn’t just save itself the $1,993,000 and pay the fine; certainly it makes no sense to spend 286 times more to fight a penalty than to just accept it. One could almost imagine a stockholder’s revolt, like the one Disney had when they gave Michael Ovitz $76 million in a termination package after less than one (unproductive) year with the company, breaking out over this. It’s when you read down past the headline and find out what the fine is actually about that things become rather murky…

As recounted on the NBC New York site , the fine in question is intended to punish the retail giant for unsafe working conditions that led to its employee’s wrongful death. The headlines imply that Wal-Mart is trying to get out of having to pay anything over this episode, but the full story establishes that the company has already paid out $400,000 for a victims’ compensation fund and donated $1.5 million to the community, as well as developing and implementing new crowd management plans for next year. The real issue here is that OSHA is attempting to classify “crowd trampling” as an occupational hazard for the first time in history – and that has implications that reach far beyond $7,000 in fines or even $2 million in legal fees…

What a lot of people in this country fail to realize is that OSHA is not a legislative body; no one within the organization will ever stand for election and most of its personnel are simply career civil servants – employees of the Federal government, or technically, you (assuming you are a U.S. citizen). They serve at the pleasure of the President, and while it is possible for their regulations to be struck down by the Federal courts as illegal or unconstitutional, this rarely happens. The facts of the matter are that a group of people who were not elected to office, by you or anyone else, are creating laws out of thin air that could negatively impact a company which has already gone above and beyond anything specified in the existing laws to handle the situation…

To take this situation to its logical conclusion, suppose some minor bureaucrat from your local government decided that exposure to water should be considered a hazardous working condition, because someone in your state had drowned once. This individual states that water is now a work hazard, and because you have a drinking fountain in your place of business, you are in violation of the law and must pay a fine. Would you whip out your checkbook and pay the fine, knowing that tomorrow the same petty official could declare pencils, photocopiers or breathing to be workplace hazards and enact another fine? Or would you draw your line in the sand and say “no?” Is this actually an effort to avoid senseless loss of life in the workplace, or a heavy-handed power grab by unelected Executive Branch personnel ?

Of course, it’s possible that Wal-Mart would never have run afoul of the new anti-trampling laws; that their new management plans would have been accepted by the courts as a reasonable response to an unavoidable workplace hazard, and no ambulance-chasing lawyer or power-grubbing bureaucrat would ever have attempted to shake them down for further funds, settlements, or sanctions…

But all things considered, I don’t think we can reasonably blame them for contesting this OSHA ruling…

Payback

I saw a story online this week that brought back a memory of an even funnier (and nastier) story, and I thought it was time I shared it with you. The original story comes to us from the local television station in Edmund, Oklahoma; it seems that a local pharmacist got tired of a serial burglar stealing painkillers and filled up a bunch of hydrocodone bottles with M & Ms. Sure enough, the thief broke in grabbed the bottles without looking, and ran off with them. The local police still have no suspects, which suggests an inside job (or possibly a police officer doing the stealing), but I was immediately struck by the fact that the pharmacist could easily have left something worse than chocolate candy in the purloined bottles…

While I was working in the drug store, my senior pharmacist told me a story about one day a few years earlier when a man walked up to the Pharmacy counter, pointed a gun at the doc, and demanded drugs. The pharmacist, a quick-thinking man, reached under the counter and handed the man a large bottle of pills, saying “Here, take these; they will really f**k you up!” The gunman opened the bottle, dumped all of the pills into his mouth, swallowed them, and ran out of the store without another word…

By this point I was staring at the doc in disbelief. “What kind of pills were they?” I asked.

He explained that they were a kind of super-laxative – something they give patients the night before abdominal surgery, to clean them out. There was no way to overdose on them, the doc told me; if you took too much the extras would just flush out of your system along with everything else. But even on a regular dose, they worked very quickly; he usually told his customers not to take these pills unless already at home or near an available toilet…

When the police were summoned, they found the gunman two blocks from the store, holding on tight to a telephone pole and trying desperately not to foul himself – a fight which he lost when one of the police officers tapped him on the shoulder. There was some delay while they found a tarp for him to sit on, so as to avoid getting the inside of their vehicle dirty. Fortunately, the pharmacist who told me the story was more than happy to loan them one from out of his trunk…

Now, given the recent trend of people suing companies when they manage to hurt themselves doing things no sane person would ever do (see yesterday’s post), it’s probably best if the pharmacist in Edmund doesn’t use this tactic; staking out the pharmacy and catching the thief in the act would leave him open to less legal liability, and installing a hidden camera would probably be safer. Still, I can’t help thinking that whoever the serial thief is, he’s pushing his luck – for all we know, the injured pharmacist might be reading this very post right now…

Personal Responsibility?

I noted with great interest this week the story in the New York Post about a woman who is suing Starbuck’s because they served her a cup of hot tea, which she then dropped on her infant son. The woman’s attorney is claiming that the company was negligent because it should have been served in a cup with an insulated sleeve and stuck in one of those brown cardboard trays that make it impossible to get the cup out of without splashing your beverage across the ceiling of whatever room you are in. It does raise an interesting question about product safety laws; unfortunately, it also raises a few questions about consumer intelligence and personal responsibility…

It’s the second case this year where the plaintiff is claiming to have been injured because a cup of tea was too hot; you can read about an earlier case in New York off of the Reuters website if you’d like to. Now, if all of this sounds familiar, it’s probably because of the well-travelled legend about Stella Liebeck the woman supposedly awarded millions of dollars (some versions of the story put the final award at $18 million or more) after she was scalded by a cup of McDonald’s coffee. But the facts of that case don’t really match the urban legend – Stella attempted to settle with McDonald’s for the cost of her medical treatment ($20,000 – not very much even in 1994 dollars), the jury eventually ruled her 20% to blame for the accident, there had been over 700 similar cases in the previous 10 years (that’s right; over 70 times a year!) and the courts were frankly sick of McDonald’s claiming that they weren’t doing anything wrong. Most importantly, perhaps, the product liability cited in the case was the cup (which could easily pop open and douse the user), not the temperature of the liquid itself…

In the Starbuck’s cases, there’s no question of the containers being faulty; both plaintiffs only came to grief after dropping their cups, not having them pop open. There’s also no real question about the temperature of the beverage; tea is customarily made from boiling water (in order to get the leaves to steep properly) and anyone who drinks tea should already know that. The real question in both of these cases is whether the Starbuck’s people should have known to put insulators on the cups before the customer could pick up the beverage and burn him- or herself, or if the customer should have known better than to pick up a paper cup full of scalding hot liquid in the first place. And, in the more recent lawsuit, whether any reasonably sane person would be holding a cup of scalding liquid over a five-month-old infant in the first place…

Now, personally, I’ve had to get an insulator before picking up a cup of hot liquid; I’ve even had to reach over a counter to get one. And I’ve never been dim enough to hold boiling-hot beverages over a baby (what if you slip, or trip?). More to the point, perhaps, I can usually figure out that a cup of hot beverage is going to be, you know, HOT before I touch it – even if the cup doesn’t have “Warning: The beverage you are about to enjoy is quite hot!” written on it the way all Starbuck’s cups do. In the long run, the juries in both cases are going to have to decide where the company’s responsibility to produce a product that no customer can possibly hurt anyone with ends, and where the customer’s personal responsibility begins. All I can say is it’s probably a good thing that I’m not on either of those panels…

Are You Kidding Me?

When you spend your spare time on news aggregation sites looking for business-related items to blog about, the way I do, wretched excess very quickly fails to amaze you any longer. The idea that there are $40 bottles of water for sale, or $6 trays of instant ice cubes (“Just pop it into your freezer!”), or even $10,000 cell phones becomes an accepted fact, and you find yourself becoming jaded in a very specific way. I grew up in Southern California, within driving distance of Hollywood, and may therefore have been a bit more susceptible than most to losing my sense of wonder (or outrage) at people overpaying for common items simply to prove that they could; western Los Angeles county is full of businesses that operate on the principle of providing exactly those sorts of goods and services to people. That said, I still think that paying $69,000 for a mattress set is absurd…

A story posted in the Life & Style section of the Wall Street Journal website profiles two of the companies that make these “super-premium” bedding sets, including the most expensive American-made product (the E.S. Kluft & Co. Sublime mattress set, at $44,000) and the somewhat pricier European equivalent (The Vividus set from Hastens Sangar AB, of Sweden). These hand-made products include a number of highly expensive materials, such as cashmere, mohair and silk, to form the layers of the mattress, and hand-tied steel coils to support the higher layers. Yet, despite the jaw-dropping price, these sets still retain the typical service life of an ordinary inner-spring mattress: between 7 and 10 years. To put this in perspective, that’s the equivalent of spending $822 a month, or $190 a week, just for your bed, before you even consider a bedroom to put it into…

Or, if you prefer, it’s the equivalent of purchasing 18 top-of-the-line Tempurpedic mattress sets, each of which has a twenty-year warranty (with a service life estimated at 30 years). Alternately, you could describe this product as costing effectively 55 times as much as the best memory-foam equivalent – which wouldn’t really be a jaw-dropping excess, except that the super-premium products also don’t have the same resistance to stains, liquids or dust mites you get from the less expensive product. There’s also no reason to believe that spending 55 times as much will actually assist you in sleeping any better; at least, there’s been no scientific evidence to support that position. All of which leads me to question if there aren’t better uses for one’s money…

Now, I’m not going to tell anyone how to spend their money; that’s your right by virtue of your having earned it in the first place. And speaking as somebody who has had to endure sleep studies, decades of insomnia, and clever machines that blow air up your nose while you’re asleep to keep you from snoring (and, in extreme cases, dying), I can honestly say that there are very few things that are better or more important than a good night’s sleep. It’s just that at current prices you could purchase a house in the Lansing area for monthly payments lower than what these mattress sets would cost you, and in 30 years you’d own the place and the land underneath it, free and clear. I can’t help thinking that if I had that kind of money the real estate investment would appeal to me a lot more. But that’s just me…

Too Good to be True

I’ve written a number of posts in this space about various employment scams – the one about The Millennium Centers scam is still one of my favorites – but I continue to be amazed by these particular confidence games. It’s amazing to me that anyone is still doing these, in a world where anyone who wants to can verify that these offers are a scam and that the people behind them are usually wanted in multiple states on felony charges with just a few minutes of Internet research, I would have expected that most con artists would have found a safer way of making money by now. But, of course, the really amazing part of these crimes is that in our modern world, anyone is still falling for these scams…

There was another story, this time in the US Today Economy site online, about several recent employment scams, and how crimes of this type are on the rise in the current economic downturn. Some of these are the traditional training and envelope-stuffing scams, where you pay $600 for materials that you then make crafts out of and sell back to the company at a profit, or $6,000 for “training” and client lists that turn out to be worthless, but others are adding a new wrinkle by combining credit card fraud with the traditional employment scams. The online article tells about one operation where the marks agreed to pay $1.95 for a “subscription” but failed to notice the illegibly small fine print where it said that if you don’t cancel your subscription within 24 hours, you will be charged an additional $49.95…

Now, I’m not saying that all mail-order and online business opportunities are scams. Actually, there are a number of opportunities online that have proven quite lucrative; it’s just that all of them require work on the part of the participants – and none of them require any significant money up front. The sad fact is that for many people the Internet is still a black box – unknowable and unfathomable technological magic. Millions of people – many of them otherwise sane! – actually believe that if you say it on the Internet it has to be true, that Wikipedia is an unimpeachable font of True Knowledge, and that if someone sends you an email claiming to be a Nigerian prince and offering you $40 million for a few moment’s work, it must be for real. Thus, they fall victim to frauds they would never give a moment’s thought to if they encountered them in any other format…

In all honesty, the linked news article is really more of a non-story than it is breaking news; people all over the world continue to fall prey to all manner of Internet scams, most of them far less credible than your average employment con. In just the past few months we’ve had another rash of Nigerian bank fraud scams, fake Publisher’s Clearinghouse scams, and phishing schemes where people actually fell for emails supposedly from their own banks requesting confidential information. Still, it probably bears repeating that if something sounds too good to be true, it probably isn’t true, and if a company wants you to pay them $6,000 or $600 or even $6 upfront but will not guarantee that you’ll ever make a dime, you probably won’t…

And if you are victimized by any type of fraud just because you were too lazy to do the legwork and research the “company” involved before you gave them money you couldn’t afford to lose… Well, I wouldn’t expect a whole lot of sympathy from people whose lives have been destroyed in the current economic crisis, either…

Differentiation Fail

When you study management strategy (not that I am for one moment suggesting that anyone ought to study management strategy), you quickly learn that all of the articles suggesting that there are dozens or hundreds of different strategies are mostly crap; just as there are really only three kinds of story (comedy, tragedy and history), so to there are really only three kinds of business strategy: low-cost, differentiation, and specialization. Every so often somebody claims to have come up with a completely new approach – usually for the purpose of trying to convince everyone to pay $30 for their new book – but these three categories hold up surprisingly well. What most people fail to grasp is that any of the types require parity in the other two dimensions to be effective in the first place; otherwise all you’ve created is an elaborate way to waste money…

Low-cost strategy is the easiest to understand; your logic is simply “buy our product because it costs the least!” But if your product is so shoddy as to be completely useless there will be no market – or niche – for it, and if your product is identical to every other product on the market – if it isn’t differentiated in any way – there will be no real reason for customers to select your offerings over the competition. By the same token, if your product is completely new, innovative and distinctive but costs 50 times what the competition’s equivalent does, it’s not likely to sell well unless it can deliver 50 times the value – which is generally hard to do. This isn’t usually a problem, since very few companies deliberately market a product that costs even ten times what the competition is charging, but as far as I can tell from the chatter online, somebody should have explained this to the Dyson people before they launched their new "air multiplier" product…

As the linked Consumer Reports article notes, the new Dyson product does, as advertised, produce a smooth, powerful current of air, ideal for improving the circulation in your room. It’s just that the basic model costs $300 and doesn’t do anything that a $10 box fan can’t do; the claim that conventional fans produce a “choppy” air current does not appear to hold up under testing. Even if it did, most of the comments I’ve seen online so far suggest that there’s no way anybody is going to pay 30 times the price for this thing. Sure, the “Air Multiplier” is a cool-looking gizmo, and the fact that it doesn’t have any exposed fan blades might appeal to anyone who lives with an entity stupid enough to try sticking random body parts into a fan, but it doesn’t seem to be worth the price…

What makes this all the more puzzling, in my opinion, is that the company has generally demonstrated a better grasp of pricing strategy in the past. The basic Dyson vacuum cleaner (which we’ve had for two years now and swear by) is an excellent piece of engineering, and only about 50% more expensive than the equivalent competitor. I had no problem paying $300 for it instead of the $200 competitive equivalent, but there’s no way I would have paid $6,000 for it or any other vacuum cleaner; even a Roomba robotic vacuum cleaner, which actually vacuums the room without a human operator, isn’t more than twice the cost of a conventional vacuum, and some of them are even cheaper than the Dyson…

I have no idea what possessed the Dyson people to set the price on this product as high as they did; all I know is that they aren’t likely to sell a lot of them. The store around the corner from us has had a display of these things up for the last month, and they don’t appear to be moving, while the same store has sold out of box fans at least twice since last summer. Unless Dyson can somehow add value, lower the price, or find a niche market for these devices (people with a morbid and crippling fear of moving fan blades, perhaps?) they will have failed to market this product – because differentiation by itself does not appear to have been enough…