Thursday, September 18, 2014

When At Fault... Countersue!

Schoolyard bullies can often get their way simply with the threat of violence. If you've been punched once, you may just surrender your lunch money the second time without fist ever having to connect with nose.

Apparently, this lesson has been learned in the corporate boardroom as well.

Susan Antilla, in a DealBook article in today's New York Times, reports the case of an unhappy investor who is being countersued by the brokers whom he is suing.

The investing group had sent Reef Securities of Richardson, TX, a total of $90,000 to be placed in the energy industry. An initial payment was received, and then distributions slowly dropped to nothing. The investors sued. And then Reef countersued.
"They said we’d be liable for their legal expenses," which could have been $400,000 or more, Mr. Vaerewyck [one of the investors] said. "That’s a pretty significant piece of change for a group of retired individuals."

This is apparently the new way to deal with an unhappy customer.
Like Mr. Vaerewyck and the other Reef customers, investors who lose money in private placements face a new obstacle when they take their cases to arbitration before the Financial Industry Regulatory Authority, or Finra, as they are required to do in any dispute. The brokers they have sued are suing them back, accusing them of reneging on indemnification agreements.

Thankfully, this response is "not widespread". But the most depressing quote in Ms. Antilla's article came from a lawyer representing the unhappy Reef investors: "Every brokerage firm out there would do it if they thought they could get away with it."

Really? Sigh. 

In private placements, "investors must sign documents that say they indemnify the issuer and its agents for any losses, lawyer fees and case costs in the event the investor makes a misrepresentation. Investors also agree in writing that they are sophisticated and understand the risks of the investment." Which is why they make such appealing targets for countersuits. But isn't the indemnification for the issuer, not the broker? Don't you, as an investor, rely on the broker to steer you towards a good deal?

Finra, of course, insists that intimidating unhappy customers "would violate Finra conduct rules". Ya think? The Finra representative goes on to say that in such circumstances they would certainly "investigate". I feel much better now, don't you?


Monday, September 15, 2014

Wouldn't You Like to Know What Ed-Tech Companies Know About Your Kids?

We all know that companies collect an amazing amount of information about us from our online wanderings, although it's possible that many of us aren't aware of just how much is being gathered.

And there's no question that the power of this Big Data is only beginning to be exploited.

Since it's early days yet, there are some laughable errors that occur, that serve as useful reminders that you are being tracked. For example, I recently booked a mini-vacation through one of the online price-comparison sites, and now I'm seeing ads everywhere for vacations spots. A little late, don't you think? After all, I've already booked a non-refundable trip: A better offer is not going to get me to change plans, so why even bother?

But others are harder to laugh off, and that's especially true when it comes to children.

Today's New York Times has a thought-provoking piece by Natasha Singer about how much information schools are collecting about your kids.We already know that kids, while stunningly sophisticated about how to use the latest technology, aren't necessarily as sophisticated about understanding how long that digital footprint may last, and how it may come back to haunt them later. But at least that's stuff they post themselves.

What about the stuff that's collected that they don't know about? As Singer reports:
At a New York state elementary school, teachers can use a behavior-monitoring app to compile information on which children have positive attitudes and which act out. In Georgia, some high school cafeterias are using a biometric identification system to let students pay for lunch by scanning the palms of their hands at the checkout line. And across the country, school sports teams are using social media sites for athletes to exchange contact information and game locations.

Take a moment to think how such information, in someone else's hands, might be used.

While some 30 states have recently passed regulations limiting student data collection, or requiring greater transparency about such data collection and use, there are still a lot of holes that need to be filled. 

There is a federal law that "limits the disclosures of student education records by schools that receive public funding. But critics have long complained that the 40-year-old law, written for the file-cabinet era when student records were kept on paper, has not kept pace with digital data-mining." (More info on that law, here)

Many schools don't regulate "the kinds of information their education technology vendors collected from students or how the companies used those details."

Singer reports that California has now passed (although Gov. Jerry Brown has not yet signed) a wide-ranging bill, that
prohibits companies from selling, disclosing or using for marketing purposes students’ online searches, text messages, photos, voice recordings, biometric data, location information, food purchases, political or religious information, digital documents or any kind of student identification code. The idea is to prevent companies from using information about students for any activity not intended by schools.

Most adults don't read the "privacy policies" published by the websites they visit, and children are even less likely to do so, or to have the foresight to understand how the information trail they leave behind might be used. Let's put a little protective shield around them. 


Wednesday, August 27, 2014

When is Discrimination Apparently Not Discrimination?

It seems that if you discriminate on the basis of economics, that's OK.

Today's New York Times has an interesting Mireya Navarro article about "poor doors" -- how you access your low-income apartment that's tucked into a luxury high-rise. Heaven forfend that you should pass through the same lobby as your betters.

Heavy sarcasm here, in case you had any doubts.

It's not quite as simple, or simply distasteful, as it sounds.
Developers say the configuration of one building with an attached affordable segment works better when the market-rate units are for sale, as in the case of condos. If that is the choice, the developer is required to provide two separate entrances under the current rules of the program. [The affordable units are only available as rentals.]

Moreover, as Gina Bellafante wrote in a July Times article about the issue,
It isn’t simply that rich people find poorer people yucky, though in some cases that will certainly be true, but that owners typically prefer living among other owners, out of the belief that this arrangement best protects the value of their asset. Renting has the taint of transience, diminished stability and so on.

But it still runs counter to what many of us love about cities -- the opportunities for all kinds of different people to cross paths under all kinds of circumstances. 

And just think what the reaction would be if it were a "people of color door" and a "white door".


Tuesday, August 19, 2014

Write Well and Keep Our Advertisers Happy


Imagine, for a moment, that you are the chief executive of a major magazine publishing company. These are tough days in the print publications world -- more and more readers are getting their news and entertainment online, where it's updated faster and provided more cheaply (often, for free). So if you have any hopes of staying profitable (or returning to profitability), you have to find ways to boost revenue or cut costs.

An obvious starting point for boosting revenue is making your advertisers happier.

An obvious starting point for cost-cutting these days is trimming staff.

But publishing relies on, among other things, writers. How many people will pay money for a magazine that's all ads? I don't always throw out the catalogues that clog my mailbox, but I certainly wouldn't pay money for them. (Yes, I'm familiar with Lucky, which straddles the line between magazine and catalogue.)

So you have decided that you need to cut your writing staff. But who to cut? How will you determine which writers to keep and which to jettison? What criteria will you use to judge them? Quality of writing, for sure (especially since you've already gotten rid of most of the copy editors who could improve anyone's material). Their productivity, no doubt. What else?

In this day of social media, their ability to produce Twitter-teasing snippets and YouTube-ready video is probably important too.

But what about this: Advertiser-friendliness?

That's the direction in which Time Inc. has moved, and Henry Luce is doing wheelies in his grave. Time Inc., with its stable of famous publications (TIME itself, plus Sports Illustrated, People, Entertainment Weekly, Fortune, etc.), was spun off from Time Warner in June (Wall Street Journal article from March 2014 on the spin-off, by Keach Hagey and Martin Peers, here). Layoffs have already occurred, and more are expected.

Gawker Media reported yesterday (here; by Hamilton Nolan; a similar story, by Ravi Somaiya appears in today's New York Times, here) that Sports Illustrated writers were being evaluated on the following criteria:
  1. Quality of writing
  2. Impact of stories / Newsworthiness
  3. Productivity / Tenacity
  4. Audience / Traffic
  5. Video
  6. Social [media]
  7. Produces content that [is] beneficial to advertiser relationships

So much for the "Great Wall" between editorial and publishing.  

The information was provided to Gawker by the Newspaper Guild, which represents some Time Inc. employees; the guild was provided with the information by Time Inc. itself. A union representative told Gawker:
Time Inc. actually laid off Sports Illustrated writers based on the criteria listed on that chart. Writers who may have high assessments for their writing ability, which is their job, were in fact terminated based on the fact the company believed their stories did not 'produce content that is beneficial to advertiser relationships.

An arbitration demand has been filed, "disputing the use of that and other criteria in the layoff decision-making process."
 

You may be thinking, "So what?" But how much editorial writing (by which I mean both news articles and opinion pieces) will you trust if you know that the writers are being judged by their advertising-friendliness? Is that highly positive piece on a new technology in "Big Business Magazine" for real? Should you invest? Or it it written that way because the new technology comes from a company that's advertising heavily in "Big Business"?

Back at the dawn of time, I was a newspaper reporter. And though many readers are cynical about journalists' "objectivity" (and post-modernists argue, with considerable justification, that objectivity is an illusion), I can tell you that we took it very seriously. We did our damnedest to tell the story as we saw it, and be damned to whether the person we were writing about was a close personal friend of the publisher or not.

Welcome to 21st-century journalism.

A Sports Illustrated spokesperson is quoted in both Gawker and the Times complaining that the report is "misleading and takes one category out of context", and that "SI's editorial content is uncompromised and speaks for itself."

It may be speaking, but what exactly is it saying?

Wednesday, August 13, 2014

Who Lives? Who Dies? You Decide.

Medical history is rife with the stories of unethical research (e.g., Tuskegee syphilis experiments; Centers for  Disease Control comments here), and African history is rife with stories of the horrific exploitation of native populations by colonizing countries (Wikipedia article on Africa colonization, here).

Put the two together, and you have the potential for a highly toxic brew.

So what would you do, in the face of the current outbreak of Ebola hemorrhagic fever in West Africa? There is an experimental drug, available in tiny quantities. It is just finishing up animal testings, and is due to start in soon on clinical trials. It shows promise, but its actual effectiveness is unknown. Should it be distributed to current Ebola sufferers? And if so, to whom should it be given?

Do you give to front-line African medical workers, as the ones who have put themselves at the greatest risk, but who may already be too sick to benefit, or whose medical care may not be "up to" Western standards? Or do you give to Western aid workers, who have been airlifted home, and can be treated in high-isolation sterile wards?

If you give it to the Africans, and they die, is this just another example of using non-whites as guinea pigs for First-World medicine?

If you give it to the Westerners, and they survive, is this just another example of valuing Westerners' lives more highly?

The question is now more-or-less moot, as there are virtually no supplies of the experimental drug, ZMapp, left (click here for CDC's explanation of Ebola, and here for CDC's Q-and-A on ZMapp). At most, there are a few hundred doses remaining; to date. more than 1,800 cases have been reported and more than 1,000 people have died.

The questions are discussed at length in two Andrew Pollack articles for The New York Times (August 8 piece, here; August 12 piece, here). Pollack's most recent article reported that
On Tuesday, the World Health Organization endorsed the use of untested drugs to combat the outbreak, which has already killed more than 1,000 people and continues to spread. But ZMapp and other potential treatments are in such short supply that another politically charged question remains: Who should get them?

Marie-Paule Kieny, assistant director general of the World Health Organization, said at a news conference in Geneva on Tuesday that several drugs and vaccines had shown some promise in animal testing and might conceivably be used.

But none are “available in unlimited supplies right now,” Dr. Kieny said. “I don’t think that there could be any fair distribution of something which is available in such a small quantity.”
So -- who would you choose?

And let's make the discussion a little tougher. The Times' Donald G. MacNeil Jr. reported today (full article, here) that
The Ebola outbreak in West Africa is so out of control that governments there have revived a disease-fighting tactic not used in nearly a century: the “cordon sanitaire,” in which a line is drawn around the infected area and no one is allowed out.
Troops in Sierra Leone and Liberia are closing off roads in infected areas, not allowing people in or out. So... do you just let the people inside that "cordon" fend for themselves, and die or not? Do you provide the limited medication you have to the ones living in the area with the highest levels of disease? MacNeil reports:
“It might work,” said Dr. Martin S. Cetron, the disease center’s chief quarantine expert. “But it has a lot of potential to go poorly if it’s not done with an ethical approach. Just letting the disease burn out and considering that the price of controlling it — we don’t live in that era anymore. And as soon as cases are under control, one should dial back the restrictions.”

Experts said that any cordon must let food, water and medical care reach those inside, and that the trust of inhabitants must be won through communication with their leaders.
 How ethically will panicked people behave? And how much trust in Western medicine and aid do you think exists in West Africa today? 



Monday, August 11, 2014

If You're Planning on Bringing Out the Big Guns...


...Please make sure they're aimed correctly.

Over the weekend, I read the full-page ad that "Authors United" ran in the New York Times opposing Amazon's actions against publishing house Hachette. The ad, signed by hundreds of authors (most not published by Hachette), argued succinctly that "None of us, neither readers nor authors, benefit when books are taken hostage."

Amazon has de-listed many Hachette-published books over the price of e-books, and is now reportedly in a dispute with Disney, preventing Amazon customers from pre-ordering unreleased material (books or movies whose publishing / release date has been announced, but has not yet occurred).

Amazon had earlier posted its own "Readers United" manifesto, accusing Hachette of over-pricing ("Many e-books are being released at $14.99 and even $19.99. That is unjustifiably high for an e-book. With an e-book, there's no printing, no over-printing, no need to forecast, no returns, no lost sales due to out of stock, no warehousing costs, no transportation costs, and there is no secondary market — e-books cannot be resold as used books. E-books can and should be less expensive."). It has also accused Hachette of collusion with other publishers in setting those prices, and quoting George Orwell.

Now, those of us who love books and words love Orwell. This is, after all, the man who skewered the mis-use of language with the "Newspeak" of 1984, and the three great slogans of "the Party":
  • War is Peace
  • Freedom is Slavery
  • Ignorance is Strength

According to Amazon, its e-book platform would have been seen as a threat to traditional publishing by Orwell, just as the introduction of inexpensive paperback books was:
The famous author George Orwell came out publicly and said about the new paperback format, if "publishers had any sense, they would combine against them and suppress them." Yes, George Orwell was suggesting collusion. 

The Internet exploded in response, because the actual quote is:
The Penguin Books are splendid value for sixpence, so splendid that if the other publishers had any sense they would combine against them and suppress them.

A slightly different spin, wouldn't you say?

In fact, as noted by David Streitfeld in today's New York Times, Orwell went on from there (full article, here):
Orwell then went on to undermine Amazon’s argument for cheap e-books. “It is, of course, a great mistake to imagine that cheap books are good for the book trade,” he wrote, saying that the opposite was true.

“The cheaper books become,” he wrote, “the less money is spent on books.”
Instead of buying two expensive books, he said, the consumer will buy three cheap books and then use the rest of the money to go to the movies. “This is an advantage from the reader’s point of view and doesn’t hurt trade as a whole, but for the publisher, the compositor, the author and the bookseller, it is a disaster,” Orwell wrote.
 Hachette has issued its own salve (Sarah Gray article in Salon, here), in which CEO Michael Pietsch responds directly to the Amazon complaints, noting that (among other things),
We know by experience that there is not one appropriate price for all ebooks, and that all ebooks do not belong in the same $9.99 box. Unlike retailers, publishers invest heavily in individual books, often for years, before we see any revenue. We invest in advances against royalties, editing, design, production, marketing, warehousing, shipping, piracy protection, and more. We recoup these costs from sales of all the versions of the book that we publish—hardcover, paperback, large print, audio, and ebook. While ebooks do not have the $2-$3 costs of manufacturing, warehousing, and shipping that print books have, their selling price carries a share of all our investments in the book.
Amazon is under increasing pressure from Wall Street to produce profits, not just revenues. And while there are plenty of happy Amazon customers who will decry the evil profiteer publishers, I side with the publishers and Authors United on this one (this despite being -- full disclosure -- a generally satisfied Amazon Prime subscriber). I don't want prices to go so low that authors can't make a living. Because then they'll stop writing. And that won't be good for publishers like Hachette, for Internet bookstores like Amazon, or for readers like me. 

Wednesday, August 6, 2014

The Only Reason I'm Not Boycotting Market Basket Is...

... There isn't one in my neighborhood.

But as a native Bay Stater, I've been following the extraordinary story of grocery workers rallying for an ousted CEO (A good summary of the current situation, in yesterday's New York Times, is here; article by Katharine Q. Seelye and Michael J. de la Merced; the actions were also covered by WBUR's On Point radio program today, here).

I drove by the Gloucester MA Market Basket store over the weekend and found that while the nearby rotary had several employees holding up "Honk if you love Artie T." signs, the store's parking lot, designed for hundreds of cars, held fewer than ten.

The Market Basket story has elements of a soap opera (or a Russian novel), with feuding cousins threatening the structure of an entire business on which thousands depend. The chain was founded about a century ago by Greek immigrants, and has grown to 71 stores in Maine, New Hampshire, and Massachusetts. Control has passed to grandchildren, two of whom (Arthur _T._ Demoulas and Arthur _S._ Demoulas) have been fighting for control. Arthur T., who had been president, was forced out in June, and Arthur S. took over, bringing in two "co-chief executives", and apparently exploring options for the sale of the chain.

Market Basket workers made their feelings about "Artie T." clear, and were joined by Market Basket customers, who honored the workers' requests to boycott the store. While many line cashiers and stockers are still showing up for work, they have less and less to do, as few customers are buying, and shelves are empty, as Market Basket warehouse employees are refusing to deliver goods to the stores. The chain is said to be losing millions in sales each week.

Joined by store managers and mid-level executives (several of whom were fired after organizing the first protests), the action is unlike any other workplace disruption seen -- the 99%, if you like, protesting for a member of the 1%.

Boston's WBUR (full article, here) interviewed an assistant produce manager who was protesting: Why was he there? His reply was:
I have concerns, but at the same time I will take the risk because this company has provided me with everything I’ve needed for the last 11 years. Artie T. has made the company what it is. He’s genuinely interested in the associates as well as the customers.
 What's going on here? Just a summertime tizzy? I don't think so. As an opinion piece in the Lowell (MA) Sun noted (here), customers are standing with the protesters, it wasn't just about the "fair prices" for which Market Basket was known:
Market Basket was and is a real place. A place where an actual human being rings up your groceries instead of those stupid, soulless, self-scan aisles. A place where the kid from your neighborhood shows you where an item is. A place where the store manager says hi to you by name and blurts out the weekly specials over the intercom: "Attention, Mah-ket Basket shoppahs." 

And the attention that the workplace action is getting is only increasing. The Sun writer added: 
This is about something much bigger than Market Basket employees or customers now. This is about the middle class having a chance. This is about America.

As many of you know, I argue regularly against "shareholder value" as the be-all and end-all of capitalism. I've written about it often (e.g. here, and, most recently, here). Positive results for shareholders aren't just about this quarter's share price. They're about the long-term. And for that you need well-paid and -trained employees, and loyal customers. Which Market Basket had, in spades. It's a shame the board of directors didn't realize the value of what they had.