Outrage is Good. Regulation is Better.

Yesterday's Salon carried an excellent, if depressing, piece by Andrew Leonard, titled "There is no ethical smartphone".

Leonard picks up from a blogpost by self-described "phone geek" John Wood (full post, here). Wood, who wants to upgrade his current phone, notes the problems with current smartphone manufacture:

The increasing complexity of the devices has meant a growth in outsourcing manufacturing of components. Major chunks of the phone are being produced now by companies at arms length [sic] of the company whose name’s on the front of the device, and at arms length [sic] of their own codes of conduct on workers’ rights. This is even more the case with brands like Apple, who are outsourcing pretty much the entire process.

Take Taiwan’s Young Fast Optoelectonics for example. They’ve made LCD touchscreens now for many of the major handset brands – including HTC, Samsung and LG. They also have outstanding allegations of forced overtime, unsafe working, child labour and union busting. Or Foxconn, where a wave of suicides amongst workers producing components for the iPhone in giant factory dormitories has highlighted widespread abuses of workers’ rights.....

The materials used in the manufacture of the phones are also causing widespread suffering. The mineral coltan (columbite-tantalite) is pretty much essential to smartphones, due to its properties in holding an electrical charge. However most of the coltan around comes from the Democratic Republic of Congo, where as with blood diamonds, a blood mineral trade fiercely fought over by gangster warlords is extending conflict and causing misery for workers and civilians.

Other materials are directly hazardous to people working to bring us our smartphones. iPhone outsourced supplier WinTek use harsh chemicals in cleaning screens, skimping on protection for the workers involved. Hospitals have reported long term debilitation in many workers they’ve treated.

What to do? Wood (and Leonard) could try living without smartphones (or computers, or flat-screen TVs, or most other electronics). Wood did a lot of research into the policies of various manufacturers, finally deciding on a Samsung Galaxy Note, in part because the company seemed to be "not as evil as they have been" (full post, here).

It didn't take long for commenters to reach Wood about current questionable Samsung practices.

Leonard doesn't make any shopping suggestions, but he does see a reason to be optimistic: "Ironically, billions of people around the world are now in possession of the most powerful tools for facilitating grass-roots organization ever invented: ethically compromised smartphones!"

How's that?

Leonard points out that, thanks to smartphones, people who are assembling the phones (or providing some materials) under horrific conditions, have the power to transmit photographs or text messages about those conditions to the world at large. Getting consumers to think about these issues is certainly a starting point; I've written before (e.g., here and here) about our responsibility as consumers to think about more than just getting the "best" deal, where "best" means nothing more than "lowest price". There are a number of organizations tracking fair labor issues, like the Fair Labor Association (website, here) and Make IT Fair ("IT" stands for "information technology"; website, here).

There's no question that social media can be a powerful force for change (e.g., $3 million raised for Planned Parenthood in three days, and a stupid move by the Susan G. Komen Race for the Cure Foundation thwarted).

But I think that Leonard doesn't go nearly far enough.

Because without strong regulation, there's nothing to keep those companies from backsliding as soon as consumers' attention moves on to something else. And there's a big incentive (profits!) to backslide.

The reason we remember the Triangle Shirtwaist fire victims, 101 years ago in March (blogpost, here), is not just because of the horrors of the event. We remember it because the deaths of nearly 150 mostly young, mostly immigrant, mostly women, victims were largely preventable (there was no audible alarm on the affected floors; doors had been locked to prevent employee thefts and unauthorized cigarette breaks; fire department ladders were not long enough to reach the affected floors; etc.). We remember it because of the public outcry that followed.

And mostly, we remember it because it led to significant toughening of labor laws.

Outrage is fine, and important. But it needs teeth. The only way to ensure that materials are ethically sourced, and that employees are ethically treated, is to regulate those behaviors. Otherwise, no matter how much the industry promises to police itself, somebody's going to fall for the lure of higher profits. And, though it depresses me to say so, we shouldn't expect them not to.

Made in Detroit, Ohio?!?

Yeesh. Sometimes these posts really write themselves.

Thanks to the website, The Atlantic Wire, I got introduced to a Detroit Free Press story that I wouldn't have seen otherwise. Reporter Susan Tompor uncovered a sad little truth:

"Made in Detroit" T-shirts aren't, in fact, made in Detroit.

In her article, she writes about how she can get choked up hearing hometown boy Kid Rock sing that "I heard them say they're shuttin' Detroit down. But I won't leave cuz this is my hometown."

Kid Rock did indeed buy the "Made in Detroit" brand after it slid into bankruptcy in 2005. The brand's website refers to itself as "the singular symbol for a city that's not about to quit." (Inside the T-shirts, you'll find a logo plus this phrase: "Tough times don't last; tough people do.")

But where are the shirts made? Tompor went shopping, and found shirts made in the Dominican Republic, India, Honduras, and ... Ohio. Some shirts had had tags removed.

Is making "Made in Detroit" shirts in India illegal? No (although removing the tags might bring you unwanted FTC attention). But for a shirt that speaks to regional pride to be made elsewhere -- even elsewhere in the US -- isn't the best ethical move. I suspect that the buyers would wear their shirts with even more pride if they knew that it was indeed Made in Detroit.

Tompor quotes the brand's operations manager as saying that "it would cost more for Made in U.S.A. shirts but ... the company is working toward using more U.S.A.-made shirts." She hopes that works out.

And so do I.

How Much Does a 5-Star Review Cost? Not Much.

Word-of-mouth is about the best advertising there is -- I trust geeky friends of mine to give me advice on new toys to purchase (or not), and they trust me with car-guy questions. But just how far beyond your real circle of friends can you trust "word-of-mouth" reviews?

I've spent many years in marketing research, and the most important thing I learned, and for you to remember, is: "Lies, damned lies, and statistics". I used to tell clients -- who would inevitably try to shape the research for their own benefit -- that they should just tell me what results they wanted, and I'd get them.

"Oh, no," they'd protest, "We want to know what our customers really think."

Really? I didn't think so then, and I don't think so now. They generally want to know what will make them look good.

When I pick up my car after a regular oil-change, the service adviser reminds me that I'll be getting an online questionnaire in the next day or two, and that "We strive for 100% outstanding, so I hope that's what you'll be able to give us."

Hint. Hint.

(In fact, I never complete those questionnaires. Because of all my years in research, I know too much about how they're constructed, and how easy it is to game the system. A properly-constructed questionnaire should ask you, right up front, if you're in the marketing, sales, or research of that particular product or service, and if you say, Yes, should disqualify you. If they don't ask those questions, it's not well-designed research. Just saying....)

Now my service adviser has never offered me cash for a positive review, or a free car wash, or anything of the sort, thankfully.

But there are apparently plenty of folks out there buying positive reviews. I've written before about Amazon's army of reviewers, and the gifts some have received for those glowing reviews.

Today's New York Times has an article by David Streitfeld on the problem of buying five-star reviews.

According to the article, some customers who purchased Kindle Fire covers from VIP Deals (for less than $10, plus shipping; "regular price", $59.99) were refunded their purchase price for a five-star review.

While the letter [from VIP Deals making the refund offer] did not specifically demand a five-star review, it broadly hinted. "We strive to earn 100 percent perfect ‘FIVE-STAR’ scores from you!" it said.

As Streitfeld drily writes, at least one customer who was offered the deal had her doubts:

"I was like, 'Is this for real?'" she said. "But they credited my account. You think it’s unethical?"

Um, that would be Yes.

Connections between the person who makes a product or offers a service and the person who promotes that product or service must (by law, not just ethics) be disclosed. Streitfeld writes that the Federal Trade Commission has starting cracking down on some of the most egregious examples, and fears that the examples it found are "far from isolated instances."

A technological solution may be on the way: academic researchers are now "trying to devise mathematical models to systematically unmask the bogus endorsements."

I like the idea, although I'm just cynical enough to suspect that the moment such an algorithm is devised, someone else will have designed an algorithm to get around it.

Maybe we should rethink hive-mind reviews altogether. I have more confidence in the Times' restaurant reviews than in Yelp, and more confidence in what Consumer Reports says than in glowing reports on Amazon. Because even if I don't know those reviewers personally, I know what they stand for.

Here's Hoping that Reporting a Practice Will Lead to its Demise

Recently, as a result of news accounts of expensive business trips underwritten by a corporation's not-for-profit foundation, I wrote suggesting that "gimmes" were a bad idea in whatever industry you mention. We all like to think that we're not influenced by "trinkets" ... and the research suggests that we're all wrong.

In today's New York Times, reporter Robert Pear writes that

To head off medical conflicts of interest, the Obama administration is poised to require drug companies to disclose the payments they make to doctors for research, consulting, speaking, travel and entertainment.

What you're hearing now is the sound of me, applauding.

Apparently, if a company has even one product that is covered by Medicare or Medicaid, it would have to disclose all payments made to doctors who are not its own employees. However, it's not clear to me how "payments" is defined.

After all, Pear reports that approximately one in four doctors receive cash gifts from device or drug makers, and that those payments can add up to the hundreds of thousands and even millions of dollars.

Moreover, an estimated two-thirds of doctors accept gifts of food, ranging from a bagel-and-schmear breakfast for the staff, at which at pharmaceutical representative makes a presentation, to an elegant dinner for the doctor. And what about all the pens and clipboards and notepads that we see when we go to the doctor's office, nearly always emblazoned with the logo of some unpronounceable drug?

If you think I'm concerned about something so small as a gimme pen, you're right. Pear writes,

The Times has found that doctors who take money from drug makers often practice medicine differently from those who do not and that they are more willing to prescribe drugs in risky and unapproved ways, such as prescribing powerful antipsychotic medicines for children.

Pear quotes a pharmacist and consumer advocate at the Pew Charitable Trusts:

Patients want to know they are getting treatment based on medical evidence, not a lunch or a financial relationship. They want to know if their doctor has a financial relationship with a pharmaceutical company, but they are often uncomfortable asking the doctor directly.

Speaking as a patient, "Yes we do (want to know) and Yes we are (uncomfortable asking)."

My hope is that the payment-disclosure requirement will lead to the complete demise of the gimmes practice. If it happened tomorrow, it wouldn't be too soon.

There's Good News and Bad News, and Bad News and Good News

First, the bad news: According to the 2011 National Business Ethics Survey, nearly half of American business employees observed either ethical or legal violations at their workplace. Actually, that's good news: it's about the lowest level reported.

The really good news is that about two-thirds of those who witnessed violations reported them. But then there's more bad news: about one in five of those who reported violations experienced some form of retaliation, up sharply from previous years. In addition, pressure on employees to cut corners and compromise ethical standards is at an all-time high.

The Ethics Resource Center conducts the Business Ethics Survey every two years. The press release is available here, and the full downloadable report is available here.

Get Rid of the Gimmes, Whether Small, Medium, Large, or EXTRA Large

As far back as 2009, I wrote about "gimme pens" and the like, and how easily we can be influenced by even the cheesiest tchotchkes. A study conducted with third- and fourth-year medical students indicated that even small gifts -- clipboards and notebooks -- had a measurable impact on how the students viewed competing drugs.

Thanks to humans' astonishing capacity for self-delusion, most of us are sure that we wouldn't be influenced by such gifts, even though they might be. The solution, I said then (and still think now), is to get rid of them all.

Now if a $0.50 pen or a $2.00 clipboard can have an effect on your attitudes and behavior, what do you think a $60,000 visit to Australia might do?

Yeah, that's what I'm thinking.

For a couple of months now, I've been following a story on inquiries into trips offered by the "Pearson Foundation", the not-for-profit arm of Pearson Education, the big publisher. In October, the New York Times' Michael Winerip wrote about trips that state education commissioners have taken to various countries to "get ideas for improving American public schools" ... and to meet with senior Pearson officials. In late December, the Times' Winnie Hu reported that New York's attorney general Eric Schneiderman is investigating whether the Pearson Foundation "acted improperly to influence state education officials by paying for overseas trips and other perks." And yesterday, Winerip showed that it's not just the state commissioners who have benefited from the Pearson Foundation's interest, but even some local school superintendents, too.

According to Winerip's account, six months after a Kentucky school superintendent took a Pearson trip to Australia "to exchange ideas on creating schools for the 21st century" (and to admire the kangaroos in Canberra!), she was voting on which of three companies should win the bidding to run the Kentucky state testing program. Even though CTB/McGraw-Hill submitted the lowest bid (and not by a few dollars either, but by $2.5 million), the committee recommended .... Pearson!

Are you surprised? Me, neither.

According to Mark Nieker, president of the Pearson Foundation, "It just is not true that the Foundation’s support of conferences attended by education officials has the purpose of helping Pearson corporate to win contracts."

Instead, he insists, the purpose of the Pearson Foundation-sponsored trips (oops, I almost said "junkets"!), is part of the foundation's "long-term commitment to foster a productive dialogue between education leaders from the United States and some of the world’s best-performing and most improving school systems."

And you know what? I bet he believes that.

Just as I'll bet that the Kentucky school superintendent honestly believes that her trip to Australia didn't influence her decision on the school-testing bid.

But -- given that nasty little self-delusion thing -- that doesn't mean that what they believe is true.

In previous lives, I've worked on both sides of the aisle. As a car-company employee, I would receive "Christmas baskets" and the like from suppliers. Did it make me feel friendlier towards them? At the time, I'm sure I would have said, "Of course not," in an affronted tone. But in retrospect... I'm not so sure.

On the other side of the aisle, working for advertising agencies and research suppliers and consulting firms, I'd make those little gifts. I enjoyed taking a client out to lunch, and making it clear that we appreciated their business. But would I have done it if I thought it wouldn't help us get more business from that client in the future? Again, at the time, I'd have been insulted by the question. In retrospect....

Winerip quotes the executive director of the American Association of School Administrators -- through whom the Australia trip was organized -- as saying that the group would no longer go on Pearson trips: "Given the climate in public education today, we won’t go on trips."

I don't think it's the "climate" that should make him re-think the trips policy. I think it's the ethics.

Here a Fee, There a Fee, Everywhere a Fee, Fee

But (headline aside), sometimes a big enough outcry can get the fee to go away.

I'll admit it: I hate fees. I hate getting nickel-and-dimed for every last little thing. I hate 'em because they're sneaky, and I hate 'em because they're almost always deeply regressive.

So when I read about the outcry about Verizon Wireless's proposed $2 fee (30 December New York Times story by Ron Lieber and Brian X. Chen, here) , I was quite pleased -- even though the vitriol seemed a little excessive.

After all, as the article pointed out, the fee would only apply "to people who make a one-time credit or debit card payment of their monthly bill on the phone or online. Subscribers who write checks or have the company charge their credit or debit cards or deduct from their bank accounts each month will not have to pay the new fee."

Part of the outrage came from Verizon's stunningly-stupid naming of the charge as a... (drum roll, please) ... "convenience fee"! Part of the outrage came from the general lack of real news in the Christmas-to-New Year's week. Part of the outrage came from the sense of victory from getting Bank of America to roll back its $5 monthly fee to customers who used debit cards. But a huge part of the outrage undoubtedly comes from the you're-holding-me-hostage-with-a-two-year-contract feeling that cellphone customers feel.

This is especially true if you think about who is most likely to make a "one-time credit or debit card payment of their monthly bill on the phone or online."

Is it going to be someone who's got $50,000 in the checking account? Or is it more likely to be someone living paycheck to paycheck, and worried that if she writes the check today, that most recent paycheck won't have cleared and the Verizon check will bounce?

“They are punishing people who need to wait until the last second,” said David O’Neill, who recently lost his job at a Borders bookstore that closed. He is a former Verizon Wireless customer but took to Twitter anyway on Thursday to argue that the company’s move helps the 1 percent get richer, since it rewards Verizon shareholders.

Lieber and Chen quoted a market analyst who said that "it made sense that Verizon was charging for over-the-phone payments, because carriers typically must pay a third-party service to handle those transactions. But Internet payments do not require a third party, he said." But, hello, what is Verizon Wireless anyway? A phone and Internet provider, right? So if anyone can handle over-the-phone or over-the-Internet transactions, it ought to be Verizon.

I keep coming back to the feeling of being a hostage to a Verizon contract as the real motivator for the vitriol. Yes, I know: if you really hate the hostage feeling that much, you can always pay real money for your cellphone, instead of getting it "free" or at substantially reduced price in exchange for the contract. (Full disclosure: I'm one of those tied-by-the-contract Verizon Wireless customers.)

Remember what I said about hating fees for their essentially regressive character? This is another example of that. People who can afford to pay the full cost of a smartphone can avoid the fee; at the lower end of the economic scale, you probably don't have a choice. Perhaps you're a recent college graduate, trying to pay off student loans, minimally furnish your first real apartment, and eat regularly, all while proving to your boss that you're really committed to this job that -- itself amazing enough -- you managed to land in a horrible job market, and so you need to be reachable at all times. You need that new phone. And you definitely can't afford to pay $300 up front for it.

All that said, Verizon did a terrible job of introducing the fee. It didn't make it immediately clear who would, and who wouldn't, be affected. It didn't explain why a fee was necessary in the first place. Even members of Verizon's own "consumer advisory panel" weren't informed of the fee ahead of time.

I'm delighted that it took Verizon only a day to recant their fee. But the Internet and Twitter outrage may have only been part of the reason for that decision. Today's New York Times reports, in an article by Ron Lieber, that "the Federal Communications Commission put out word earlier Friday that it thought the company’s actions merited closer scrutiny."

I hate fees; I love sharp-eyed regulators.