Fool Me Once, Shame on You....

"Consumers are generally more sensitive to changes in prices than to changes in quantity," says a marketing professor at Harvard Business School in an article in today's New York Times by Stephanie Clifford and Catherine Rampell.

That explains why your one-pound box of spaghetti is easier to lift. You haven't gotten stronger; it's gotten lighter.

That marketing professor may be right -- at least the first time. Especially when, as he says, "companies try to do it in such a way that you don't notice, maybe keeping the height and width the same, but changing the depth so the silhouette of the package on the shelf looks the same."

Can we call that by its real name? No, not "smart packaging design."

It's called cheating.

And it assumes that we're all stupid.

One of my all-time favorite quotes about marketing is from the legendary advertising man David Ogilvy: "The consumer is not an idiot. The consumer is your wife."

So why are all these companies treating us like idiots? Do they think we're too stupid to understand that if commodities prices are soaring, it will force them either to reduce profits or to raise prices? And that reducing profits will have an immediate negative effect on their share prices (and that upholding shareholder value is their responsibility)?

Or might it be that, where raw ingredients' prices aren't increasing dramatically, it's an easy way to make a little extra money?

The Times article quotes one careful Texas shopper who notes that she used to buy 16-ounce cans of corn. Gradually, the cans' weight slipped to 15.5 ounces, and then to 14.5 ounces, and now: "The first time I've ever seen an 11-ounce can of corn at the store was about three weeks ago, and I was just floored," she said.

And how does she feel about this "responsible" attempt by a company not to raise its prices? "It's sneaky, because they figure people won't know."

She's nicer than I would be. I'd call it stealing. How is it different from putting your thumb on the scale?

If you have to raise prices, do so. Explain why to me. Be transparent.

You might even use some of that big advertising budget to talk to me as though I had a brain, instead of trying to manipulate me with winsome children and earworm jingles.

Only The Little People Pay Taxes...

...as the late Leona Helmsley, the "Queen of Mean", famously said.

It turns out to be true.

Most individuals don't look forward to Tax Day. And, as corporations are "persons" too, we can freely anthropomorphize and assume that corporations don't like Tax Day either.

But they have resources that aren't available to most of us.

In today's New York Times, David Kocieniewski reports that the 2010 tax bill for General Electric, the country's largest corporation, isn't, in fact, a bill: It claimed a tax benefit of $3.2 billion (on worldwide profits of $14.2 billion, of which $5.1 billion came from U.S. operations).

In a country that has a relatively high corporate tax rate by global standards (top rate: 35%), how is this even possible? And how has GE managed to cut its US tax bill year after year?

Kocieniewski writes,

Its extraordinary success is based on an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting that enables it to concentrate its profits offshore. G.E.'s giant tax department, led by a bow-tied former Treasury official named John Samuels, is often referred to as the world's best tax law firm. Indeed, the company's slogan "Imagination at Work" fits this department well. The team includes former officials not just from the Treasury, but also from the I.R.S. and virtually all the tax-writing committees in Congress.

Don't you wish you had that kind of team?

What's wrong with this, you might ask. After all, they're just using the rules of the game to maximize profits for their shareholders.

Since G.E. does business in so many countries, it can book revenues from one country in another (with a lower tax rate). According to Kocieniewski, in the last three years, "46 percent of the company's revenue was in the United States, but just 18 percent of its profits." The company asserts that the disparity results from "ordinary business factors, such as investment in overseas markets and heavy lending losses in the United States recently."

It may be "smart business", but critics argue that "the assertive tax avoidance of multinationals like G.E. not only shortchanges the Treasury, but also harms the economy by discouraging investment and hiring in the United States."

In fact, G.E. employment in the U.S. has declined by one-fifth over the last decade, while overseas hiring has increased.

G.E. now has a tax team of close to 1,000 employees. Their focus isn't only on adhering to the letter of the law, but equally on finding ways around it: "At a tax symposium in 2007, a G.E. tax official said that the department's 'mission statement' consisted of 19 rules and urged employees to divide their time evenly between ensuring compliance with the law and 'looking to exploit opportunities to reduce tax.'"

With a lobbying budget in the tens of millions of dollars to win new tax breaks, and a tax team expert in exploiting them, it's not surprising that G.E. has been so successful in reducing its tax burden. But it's wrong.

Companies like G.E., that got their start and owe their continued success to American laws, American enterprise, and the American consumer, owe the American taxpayer too. If G.E. isn't going to bring at least a fair portion of its profits home for reinvestment here, why should we taxpayers continue to support them?

Driving Mr. Gambler

Here's the situation: Company A agrees to deliver goods to Company B. It's a profitable arrangement for both. Company A hires Driver D to transport the goods from Location A to Location B.

So far, so good, right?

Is it ethical for Company A to minimize payments to Driver D in order to maximize the company's own profits? And is it ethical for Company B to pretend that it has no stake in this transaction?

This sounds like one of those fifth-grade math "word problems" that I hated, so let's move from the theoretical to the real:

Company A = tour bus companies and Company B = casinos. The goods to be delivered are gamblers, and Driver D are the drivers hired by the tour bus companies.

New York area newspapers and radio and television stations have carried many stories in the past few days about two area tour buses, in which passengers were being transported to Connecticut and New Jersey casinos, and which were involved in serious, even horrific, accidents. (Click here for New York Times coverage of the first accident.)

Questions have been raised about the drivers (were they impaired? fatigued? insufficiently supervised?), about the tour bus companies (was there sufficient oversight? regulation?), and more.

Today's Times has a particularly interesting piece, by Michael Grynbaum and Noah Rosenburg, that shed light on one corner of the overall story.

Yes, driver fatigue is a possible element, those interviewed say. The reporters note: "Federal guidelines limit passenger-bus drivers to 10 hours behind the wheel, within a 15-hour work day, and bus carriers face a fine if violations are discovered. But the hours, recorded in a handwritten logbook, are easily falsified, and even outstanding violations are often ignored: World Wide Travel, the operator whose bus crashed in the Bronx, had been cited several times by regulators for problems with its logs."

But the story is about more than federal regulations. It's about a space, "small, drab and windowless", provided at the Uncasville casino for bus drivers waiting for their passengers. Many of the buses, you see, operate for "overnight gamblers": they leave New York (or other cities) at night and head for the nearest casinos; returns are only a few hours later, after midnight. They're cheap, too -- essentially free, as tickets often come with vouchers for food and gambling.

For drivers, the rewards are few (unless they happen to be lucky at the tables): the pay is low and the hours are long. The fact that Mohegan Sun provides a lounge for them is a positive -- most casinos don't, and drivers who want to nap as they wait for their return trip passengers must do so in their buses, parked out in the bus lots, often several miles from the casino itself.

One driver quoted by the Times expressed his gratitude for the Mohegan Sun lounge, saying of his bus, "in the wintertime, it's too cold, and in the summertime, it's too hot.... It gets over 100 inside the bus in the summer. You cannot stay up there."

I'm shocked -- but sadly, not really surprised -- that such a lounge, tacky and "sparsely furnished with snack machines and worn khaki chairs" as it is, isn't a standard offering at all casinos. After all, the drivers are how Company A (the tour bus companies) get their goods (gamblers) to Company B (the casinos). It's in both companies' best interest to have drivers rested and ready to drive.

Not to mention, it's the right thing to do.