"(T)o say that the individual is culturally constituted has become a truism. . . . We assume, almost without question, that a self belongs to a specific cultural world much as it speaks a native language." James Clifford

Monday, December 4, 2017

Advertisers Remove Ads on YouTube: Fair to YouTube and Video-Producers?

One day after Thanksgiving in 2017, “a fresh wave of advertisers suspended commercials on Youtube after their ads showed up next to videos that appeared to attract pedophile viewers.”[1] Youtube had removed ads from roughly 3 million videos, but the company’s use of human and AI checkers simply could not keep pace with the number of uploaded videos. Even so, Diageo, maker of Smirnoff and Johnnie Walker (alcohol drinks), announced it would hold off its ads until “appropriate safeguards are in place.”[2] Mars and Adidas took a similar line. The question is whether those advertisers were being fair to Youtube and even the producers of the videos.

After a similar revolt the previous March, YouTube and hired more human reviewers and furnished advertisers with new tools to control where their ads would appear. Did not those companies have some responsibility to keep tabs on their ads, especially given the incentive to do so.  “Advertisers don’t want their brands associated with objectionable content and as well can face criticism if their advertising money goes to support the videos’ creators.”[3] It would not have been prudent to leave it to YouTube to review the ads, especially if the advertisers knew that YouTube was short-staffed. Unlike the advertisers, YouTube’s management had little incentive; the pull-out of certain advertisers in March, 2017 had “little impact” on Alphabet’s (Google’s) overall business. In fact record profits were posted.

Of course, the ability and will to review ads, whether by the advertisers or YouTube, would not in itself have caught the cases in which the videos themselves were salubrious and yet received unsavory comments from viewers. An advertiser could hardly be blamed for placing an ad in such a video; neither would YouTube be culpable in having permitted the video in the first place. So even if sordid comments could be readily removed, the incentives would be lacking. To be sure, YouTube is responsible for removing such comments, and just because blame would not be justified concerning innocent videos does not necessarily mean that such blame would not be exacted anyway.

The nuances of responsibility suggest that the reaction of the advertisers was rather blunt and even impulsive, and not entirely fair to YouTube and the video-producers. Distinguishing between objectionable and proper videos, and then between the latter and disgusting comments would be part of a smarter, more refined approach.




[1] Stu Woo and Sam Schehner, “YouTube Deals With Another Advertiser Backlash,” The Wall Street Journal, November 25-26, 2017.
[2] Ibid.
[3] Ibid.

Wednesday, November 29, 2017

Customers Give Uber a Pass: A Lapsed Enforcement of Business Ethics

A letter from a former security employee at Uber claims that the company’s Marketplace Analytics department “exists expressly for the purpose of acquiring trade secrets, codebase and competitive intelligence.”[1] The letter caused the judge to delay the trial in which Uber stood accused of stealing trade secrets involving self-driving cars from Waymo. “I can no longer trust the words of the lawyers for Uber in this case,” Judge Alsup said.[2] Ouch! The question remained whether Uber customers would punish the company by turning to Lyft instead. Unfortunately, the typical customer may overlook unethical practices at a company if a good deal is to be had. Economizing monetarily serves self-interest, whereas “walking with your wallet” oftentimes does not. Standing on principle may simply not register when people have their consumer hats on.
After its systemic customer-fraud was exposed, Wells Fargo’s management simply offered sweeter terms to entice existing customers to stay put and even to attract new ones. Although the bank had to pay in the form of offering better rates, society at large may have expected more in the form of an exodus of customers from the sordid bank for such institutions in which fraud is so systemic should arguably not continue to exist.
Even before the revealing letter was read to Uber’s judge, the company had gotten the attention of its customers by “grabbing headlines for ignoring complaints about sexual harassment at its headquarters as well for a variety of corporate practices” that had piqued the interest of regulators.[3]  Even so, Uber had reported a 10% increase in second-quarter (2017) bookings over the first quarter, according to Bloomberg.[4] Uber hit 5 billion rides in more than 70 countries during the summer of 2017. This suggests that “for a majority of consumers, disgust over corporate misconduct doesn’t always translate to ditching a reliable service.”[5]  Managements can thus buy themselves out of trouble by retaining the vast majority of customers by offering better terms.
Lest it be decried that such self-rescues should not be allowed, we have only to look at the customers who look the other way as they single-mindedly pursue their self-interest. Admittedly, they could point to government regulators as being the proper instruments for holding wayward managements accountable. Unethical conduct is not always illegal, however, and where such conduct is widespread and ingrained in a company, nothing short of bankruptcy may be just. Of the latter point, justice at the hands of a court of justice or a regulatory agency may not go far enough to exact what is just ethically.
 To be sure, Lyft was making inroads on Uber’s turf. TXN Solutions reported in 2017 that Uber’s market share had slipped to 75% from 90% in 2015.[6] Uber’s valuation may have fallen from a high of nearly $70 billion to close to $50 billion.[7] Of course, these trends could be from improvements at Lyft rather than any ethical fallout at Uber. Put another way, Lyft should arguably have been able to make more of a dent, given the sordid culture and practices at Uber’s headquarters. The sad truth may be that consumers don’t really care if a company’s management is ethical unless the consumers themselves are gouged; everyone is out for oneself without concern for principle. I submit that such a mentality—such a culture—is not in a society’s interest; the good of the whole is not merely the aggregate of individual, self-seeking choices. Even Adam Smith saw a need for government, and, moreover, of moral sentiments as enveloping a free market. Hence his text, A Theory of Moral Sentiments, should be read along with The Wealth of Nations to give the economist’s full theory.   





[2] Ibid.
[3] Marco della Cava, “Underterred by Uber, Lyft Says It’s Destined to Be No. 1,” USA Today, November 29, 2019.
[4] Ibid.
[5] Ibid.
[6] Ibid.
[7] Ibid.

Saturday, November 25, 2017

Uncovering the Root of Poverty: An Addictive Habit

Addictive pain-killers killed 64,000 residents in the U.S. in 2016, in part because physicians tended to rely on patients’ self-determined ratings of pain on a scale of 1 to 10.[1] Such subjective ratings were of course vulnerable to self-seeking motives willfully negligent or even reckless in terms of health. A habit or marked tendency in favor of choices at the expense of a person’s own long-term well-being stems, I submit, from weak impulse-control. This factor can explain a lot about why poverty exists and goes on. 
Poverty, it has been said, is the cruelest form of war, for such war can go on and on and wreck subtle though tremendous damage on the afflicted. Yet the mentality that can get a person into such a war and associated bad choices can be easily overlooked by elites that deign to study the problem of poverty.
Attempting to explain escalating rates of suicide, overdoses, and alcoholism among uneducated Americans, Angus Deaton and Anne Case, who spoke at the CEO Council sponsored by The Wall Street Journal in November, 2017, pointed to the diminishing number of jobs “with a ladder up, with on-the-job training, with benefits.”[2] With less incentive to focus on doing well at work and less opportunity to get involved in a union, a person can easily feel despondent, especially given the breakdown of the nuclear and extended family and the decline of mainline Christianity. Drugs, including nicotine and alcohol, and ultimately even suicide, can remove the resulting sense of nihilism.
The job/family/religion explanation strikes me as overly formalistic, even external, however. For example, the rise of individualistic evangelical Christianity, which Deaton and Case claimed does not allow for a sense of community because of the theological emphasis on an individual's relationship with Jesus, can nonetheless provide social opportunities for people. A visit to any megachurch can demonstrate that “extra-curricular activities” go on in spite of the individualistic theological bent. Megachurches typically have coffee shops and fitness rooms, and even put on plays (e.g., at Easter). 
Similarly, not being able to get involved in a union does not exhaust the things a person can do with others in a group; political activism, for example, is open to workers outside of the work context (e.g., working on a political campaign).
I also take issue with the claim that uneducated workers do drugs because a promotion into management is no longer as easy as it may have been in the past. The work ethic is not predicated on advancement; rather, hard work itself is valued as a virtue. To be sure, the technologically and off-shore based relative loss of manufacturing jobs and the lack of satisfaction from working in a fast-food restaurant, for instance, have made it more difficult for uneducated people to find fulfilling jobs or jobs at all. Faced with loads of empty time--rather than trying to start an enterprise (e.g., a site online) or volunteer--drugs and alcohol are easy apparent fixes, or fillers. Yet the decision to have empty time is a course of least resistance rather than a fait accompli. The willingness to be lazy is itself significant, for it gets us closer to the underlying problem, which is internal
I submit that drug use, including alcohol and nicotine, does not stem from having lots of time from being unemployed. Rather, people who succumb to drug addition can be said to have weak impulse control; they do not have or use the strength of will to resist the urge to take another hit, or to try some drug in the first place. I've never tried heroine or cocaine even just to see what they are like because I know they are highly addictive so I have resisted offers to try them. So I'm surprised when I hear people who use those drugs treat them so casually, so conveniently, without any hint of impulse control. 
The lack of a college education is a contributing factor, for a surprising phenomenon of ignorance is its presumption to not being able to be wrong with respect to itself. So presuming to know all about heroine or cocaine and being able to manage them as if a physician fits with being uneducated. In college, students think through critiques of theories rather than taking them at face value; the professors model this. Being accustomed to critiquing other people's theories can get a person in the thought-habit of critiquing even one's own, even implicit, theories. In contrast, the assumption of ignorance that it must be right goes unchallenged by the uneducated. Interestingly, the difference is not just cognitive, for attitude is impacted by whether or not a person turns reason on oneself. The arrogance of ignorance contrasts with the humility that is ideally in putting one's own assumptions and beliefs about oneself and the world under the proverbial knife. Such an orientation necessitates the use of impulse-control, which in turn implies valuing it rather than conveniently assuming that it is not worthwhile. 
I submit that the “Two Americas” are separated by two trajectories of habitual thinking and values that stem from whether or not a person values and has good impulse-control. People who value such control loathe being around people who don't. Put another way, evading impulse-control is acceptable in some quarters while looked down on in others. The two respective cultures are each self-reinforcing, and social distance between those cultures naturally widens and is not just a matter of being educated or not. Unfortunately, I have been exposed to three "ghetto" apartment complexes, complete with "ghetto property-managements" whose mentality goes beyond garden-variety incompetence to reflect the lack of impulse-control evinced by many of the residents with respect to each other (e.g., being inconsiderate with noise late at night, and having a tendency to lie--failing to resist to impulse to take the easy out).  
Speaking once with a security guard whose company covered one such “ghetto complex” in addition to other, “non-ghetto” complexes, I was struck by how he distinguished the “ghetto” residents. “They think they live in houses, playing their music as if people are not on the other side of the wall. We don't have this problem at the other complexes we handle. The people in that area of town are not so inconsiderate.” I could see why uneducated poor people live together and other people avoid them; the difference is not merely monetary. People who resist the urge to play music or movies loud at night so not to disturb neighbors also resist the urge to lie when doing so would get them off the hook. In apartment complexes populated by poor, uneducated people, the mentality is exactly the opposite, and such a sordid mentality based in a convenient refusal to engage in impulse-control (for selfish reasons) is anathema to other people, who thus keep their distance and even perhaps urge public policy that hurts the poor. Regardless of how sordid the attitude is, I contend that poor people's human rights to sustenance should be respected and protected. This is particularly so because of how intractable the attitude truly is. A person who is used to dismissing impulse-control (i.e., not valuing it) is not likely to go down the other track, unless the motive comes from sustained suffering. 
In terms of not being employable, the lack of a college education again does not tell the whole story. A low-level employee interacting regularly with customers gets heat from a manager if the attitude is, "I can't be wrong about X." Lying about the customer is also not acceptable. Impulse control is vital to virtually any vocation. 
A day after Thanksgiving in 2017, I faced a middle-aged cashier who insisted that people could refuse to recognize that it was Thanksgiving and instead validly select another holiday to celebrate that day, including Christmas and even July 4th.  I countered that Thanksgiving and the other two holidays are set by the U.S. Government, and so are on determined days.  She dismissed this out of hand, which was insulting, and repeated, "It can be any holiday you select." She refused to resist her impulse that she must be right even though she was wrong. "No, yesterday was Thanksgiving and this is Thanksgiving weekend--not another holiday," I insisted, but she rigidly held on to her ignorance as if it could be right. Rather than use self-discipline even to consider that she may have been wrong, she failed to resist the impulse of the presumption of being right and being dismissive.
I submit that a culture exists in the poor America that involves not only a difference in wealth and even education-level, but and most crucially in the attitude toward and practice of impulse-control. That is, being inconsiderate, lying, and feeling entitled in being infallible about what a person thinks one knows can become salient norms where enough uneducated poor live. The attitude thinks it receives confirmation because other people in a similar way also have it. The poor are very susceptible to being rude, lying, and using drugs because of ill-used or perhaps impaired impulse-control. Viewing such restraint as of nugatory value, it is easy to be inconsiderate, rude, even highly aggressive (given the overblown or even imagined slights or provocations).
Biking in poor areas near universities, I have noticed the extreme “road-rage” that is distinct among poor drivers. Today in fact, I witnessed one driver get out of his car to shout at the driver in front of him at a red light. The aggressor showed absolutely no impulse-control; his emotions were out of control. Similarly, I've seen poor drivers much, much more than other drivers lose complete control of themselves emotionally and because apparently I had no right to bike on the side of the roads along the curbs! The sheer aggressiveness, outstripping any rational basis in the context itself, has both amazed me and formed in my mind an image of the typical poor driver. My reaction in observing such drivers has been that such people must surely live in a very different world. I couldn't imagine anyone with such pathetic impulse control being in college or holding a job. Clearly, another America exists, with its own mores and values that retain the inhabitants from entering (and being accepted in!) polite society. Being in the habit of evading impulse-control is so different than valuing such internal control that “Two Americas” can be so explained. Both in terms of wealth and, if the stats on drug and alcohol abuse are correct, impulse-control, the America that is expanding is not the one that should be.
If I am correct in my analysis here, simply providing more and better jobs, creating labor unions and other ways for poor people to “get involved” or be in a group only touch the surface, and thus cannot get the job done in eliminating poverty. Even if "ghetto" apartment complexes are "broken up," with the very poor being disbursed such that they cannot form a culture of least resistance, the internal attitude with respect to impulse-control is surely very difficult to change. So study of precisely how such a feat may be accomplished is needed. 





[1] Gregory Korte, “U.S. Waging Tech War against Opioid Epidemic,” USA Today, November 24-26, 2017.
[2] Janet Adamy, “’Two Americas,’ Updated,” The Wall Street Journal, November 20, 2017.

Wednesday, October 25, 2017

On the Myopic Hyperbole of Wall Street: Overblowing Small Changes

I suppose that after looking at something closely for a long period of time, virtually anyone would perceive a small change in it as huge. This is reflected in how people formulate graphs. In particular, typically only a small interval is shown, the perceptual impact of which is that small changes look big. For example, msnbc.com reported on June 8, 2011 that the price of oil “soared” on that day “almost $2 to near $101 a barrel.” My reaction in reading the report was that the word “soared” indicates a lack of perspective on Wall Street and the media.

To be sure, a graph showing the price of oil with the y-axis running from $98 to $102 would show what looks like a huge increase, while a y-axis extending from $0 to $150 would show a barely noticeable change on June 8th.  The second graph would be more accurate in terms of the significance of the change.

The modest increase in price was momentary, caused by investors who had shorted oil and wanted to get out because of a bearish expectation. On June 8th, the Organization of Petroleum Exporting Countries (OPEC) talks broke down without an agreement to raise output after Saudi Arabia failed to convince the cartel to lift production. Iran, Libya, Iraq and other oil-producing states wanted to hold production targets while Saudi Arabia sought to raise them so the price of oil would stabilize at between $70 and $80 a barrel. Wise, long-term-oriented Saudi government officials understood that stability rather than short-term windfalls is in the long-term best economic interest of oil exporters—especially if oil is the sole export. According to The Wall Street Journal, "In the wake of the failure to reach agreement, people familiar with the matter said the Saudis are now likely to unilaterally increase their own production by up to one million barrels a day, which would put them well above their stated quota of eight million barrels a day." The Saudi assurance that it would supply the needs of the oil market regardless of OPEC left investors bearish after the meeting, and short-sellers were simply unloading. To report that the price of oil “soared” by $2 after the meeting is utterly misleading. By the end of trading for the day, oil was up just $1.65 (at $100.74).

Even by Wall Street’s own mantra wherein investors tend to do well in the stock market by holding a well-diversified position for a long time, over-dramatic renderings of short-term changes are counter-productive because they can seduce long-term investors to react. If newscasters on CNBC are announcing that the sky is falling today because oil went up $2, the temptation is to do something Anything.  Acting at all would be at odds with taking a long-term position in the market, tweeking it only to maintain a diversified portfolio.

I suspect that cause of the hyperbole is tunnel-vision, which is caused by zeroing in on something too closely and for too long. At the very least, it might be a bad idea for Wall Streeters to develop some hobbies that have nothing to do with work. Also, analysts might avoid the temptation to pay so much attention to the talking heads on CNBC. Furthermore, analysts might resist orienting graphs to overplay small changes by artificially restricting the interval on the y-axis. Lastly, Wall Streeters might resist the fun in using overly-dramatic jargon or loose-fitting (at best) analogies.

If the stock market is “crashing,” for example, we had better be talking about thousands rather than hundreds of points lost on the Dow. A plane going from 12,000 to 11,500 feet is not crashing; it is probably just making way for another plane. If a company is getting “killed,” it better be in liquidation without anything going to equity or bond holders. Better still, analysts would gain credibility if they stayed away from the military jargon completely; at the very least, using the vocabulary is an insult to the brave men and women who really have put their lives on the line.

In short, Wall Street could do with a dose of perspective. Such a change would be in line not only with credibility and reputational capital, but also how Wall Streeters fare in the market. As one person might say to another who has been dumped romantically, don’t over-analyze it!


Sources:

Summer Said, Hassan Hafidh, and Benoit Faucon, "New Cracks in Oil Cartel," The Wall Street Journal, June 9, 2011, p. A1.

Oil Price Soars after OPEC Talks Yield No Agreement,” msnbc.com, June 8, 2011.

The Fiat 500: The American Taste for Convenience Revealed

One means of doing cross-cultural comparison is by contrasting consumer tastes; such proclivities tend to evince societal mores by which societies can be perceived to be distinctive. In the case of the E.U. and U.S., Fiat, a European auto company that controls Chrysler, an American company, is discovering some societal differences as it refashions the Fiat 500 for American customers.

For example, the pod of drink holders had to be enlarged to hold American-size “supersize” drinks. According to Fabio DiMuro, chief engineer of the 500, the in-car beverage concept is so foreign to Europeans that the workers didn’t understand his exhortations for more and bigger holders. The American taste for larger portions is known to restaurant owners and managers in the United States, but what does the preference say about the society and its people? Is it as simple as greed—a desire for more and to excess? Or is it simply a preference for convenience—filling up more so the next meal can be pushed back to make room for other activities? 

In terms of convenience, “Americans consider all-season tires a must,” whereas Europeans keep two sets (which must be changed with the advent of the snow season). Of course, this comparison over-generalizes, for we are talking about the Northern states in the E.U. and U.S. Even so, the northerners in America tend to be willing to sacrifice some traction in the snow for the convenience of not having to take the car to the garage to have the tires changed.

Furthermore, the fuel tank of the 500 was enlarged from 10.6 to 14.5 gallons “for longer distances typical in the U.S.”  The larger tank also enables American in-town drivers to drive more before having to fill up. The interstate highway system sports enough gas stations that the longer-distances rationale is perhaps specious; it probably comes from the European misconception of the U.S. being like one of the E.U.’s countries but with a larger territory. The U.S., an empire-level union of republics, is qualitatively as well as quantitatively distinct from a large state like Texas or France.

Returning to the matter of convenience, the comfort-factor may be a relevant difference. The U.S., having excelled in terms of material goods in the decades after World War II, may in the twenty-first century be more accustomed to comfort. Hence, the American 500 is to have an armrest added to the driver’s seat.

A stress on comfort may also explain why “lots more” insulation is needed in the American 500, “to keep it quiet enough for Americans.” This is a rather odd phrase, considering the growth of the car stereo industry in the 1970s and 1980s. Nevertheless, the notion of one’s car as a personal cocoon of sorts resonates. Might this be a manifestation of the individualism for which Americans are so well known? 

If one’s home is one’s castle, one’s car might be one’s bubble through which one passes through public space. Considering the “road rage” phenomenon and general impoliteness, the greater insulation might suggest that Americans are in general rather unfriendly when we are out and about. Hence there are “screening” devices such as fraternities and sororities, as well as country clubs and other private associations. The general American public may contain too many loud, pushing or boorish people to be palatable to the elite.

In general, James Healey’s article on the American Fiat 500 is not flattering to Americans, but perhaps Healey is pointing to indications of undesirable traits that we (for I am an American) should face about ourselves and our society. I for one have noticed that where strangers communicate without any purpose, such as in a store, politeness is the norm. However, as soon as a purpose is added, such as buying and selling a car, renting an apartment or room, or resolving a bill at a restaurant, presumptuous tends to raise its ugly head.

I don’t know if it is arrogance or a presumption that the worst is apt to be in others, but I would not disagree with a European assessment of American society in general as anti-social or antagonistic. It is perhaps no wonder that houses are castles and cars are insulated bubbles. Of course, I am over-generalizing, as the U.S. is composed of various cultures. Once flying from New York to Seattle, I was struck by the difference in how strangers treated each other; then I realized (aided by a few anti-New Yorker comments from Seattle airport employees) I had just flown over a continent! To render a continent as akin to a European state writ large is to miss the vital distinction between an empire and a kingdom politically and geographically.

Another possible source of my over-generalizing may be that modern society itself could be too much inclined to the road of most convenience.  Europeans may have their rankles as well, even as they differ from those of Americans. For example, the whole “peers/commoners” thing can be read as a matter of convenience by some at the expense of others. Such a matter of convenience is not apt to show up in an analysis of the Fiat 500. In general, we moderns may be too spoiled and too presumptuous when it comes to dealing with strangers. Humility, it seems, is out of fashion in modernity, at least in the public square. If so, my cultural critique goes well beyond the American shores. Although war and poverty are not to be wished for, it would be nice if greater human solidarity could be realized amid our lattes and 500s.


Source:

James Healey, “Fiat 500: Little Car Shoulders Huge Responsibility in U.S.,” USA Today, June 1, 2011, p. 5B.

Monday, October 23, 2017

On the Unfairness of the Bonus System on Wall Street

Craig A. Dubow, Gannett’s former chief executive, had a short six-year tenure that was, by most accounts according to The New York Times, “a disaster.” David Carr reports: “Gannett’s stock price declined to about $10 a share from a high of $75 the day after [Dubow] took over; the number of employees at Gannett plummeted to 32,000 from about 52,000, resulting in a remarkable diminution in journalistic boots on the ground at the 82 newspapers the company owns. . . .  the company strip-mined its newspapers in search of earnings, leaving many communities with far less original, serious reporting. . . . Not only did Mr. Dubow retire under his own power because of health reasons, he got a mash note from Marjorie Magner, a member of Gannett’s board, who said without irony that ‘Craig championed our consumers and their ever-changing needs for news and information.’ But the board gave him far more than undeserved plaudits. Mr. Dubow walked out the door with just under $37.1 million in retirement, health and disability benefits. That comes on top of a combined $16 million in salary and bonuses in the last two years.”

Besides the inherent unfairness in an incompetent manager getting millions of dollars in compensation (for championing incompetence?), it is morally problematic when, as Carr puts it, “the consequences of bad decisions land on everyone except those who made them.” As already pointed out above, in the midst of Dubow’s “championing” (this word is so broad it has scarce any real meaning), “the number of employees at Gannett plummeted to 32,000 from about 52,000.” One could just as easily point to Bank of America’s downsizing of its labor force in the wake of Ken Lewis’ shopping spree at Countrywide and Merrill Lynch. Lewis really did exemplify the “walmart” mentality applied to banking: an almost-complete indifference to quality in a desire to be everything to everyone. The “exporting” of bad consequences while exuberant rewards are retained indicates that the corporate executive compensation system in the United States is fundamentally broken. The fixation on aligning an executive’s incentives with the financial enrichment of the stockholders has not functioned as anticipated.

For one thing, the vesting of stock, which is meant to orient an executive to the longer term financial interest of the stockholders, is typically bypassed as an executive gets the equivalent in cash (or stock) from his or her new employer. An executive can thus discount having to look out for the eventual downside in his or her decisions.

Moreover, the sheer amount of the compensation cannot be justified on the basis of a competitive upper echelons labor market (which functions more like an oligarchy). Indeed, the degree of fixation on the bonus system alone has resulted in larger payouts (as executives make decisions primarily from the standpoint of the impact on their bonus). David Carr points to the excess as mentioned in a USA Today editorial: “The bonus system has gone beyond a means of rewarding talent and is now Wall Street’s primary business. Institutions take huge gambles because the short-term returns are a rationale for their rich payouts. But even when the consequences of their risky behavior come back to haunt them, they still pay huge bonuses.” Carr’s overall point is that this hypertrophy allies to corporate America—not just Wall Street, though certainly it is salient there too.

When John Thain of Merrill Lynch gave lip-service to serving the stockholders, even his own subordinates knew he was more concerned with having to play second fiddle to Ken Lewis at Bank of America than with keeping Merrill’s stockholders from losing everything (as Lehman Brothers’ stockholders did). Even as Fleming got $29 per share as a buyout price from Lewis, Thain preferred a line of credit of billions from Goldman Sachs in exchange for a 10% ownership that would keep Thain on top. That was Thain’s driving motivation: to remain CEO. Meanwhile, the general public assumed that CEOs, including Thain, were motivated to act in their stockholder interests—that boards of directors insisted on this agency. However, where a CEO is focused on his or her bonus (Thain insisted on $40 million cash bonus even as Merrill was losing billions) and position (and thus future bonuses) and the CEO controls “his or her” board, the stockholders are in actuality left unknowingly fluttering in the wind—relying on a system of executive compensation that supposedly aligns the executives’ motivation with the financial interests of the stockholders. Much too much is being assumed here, yet assumptions, like habits, are difficult to break.


Source:

 David Carr, “Why Not Occupy Newsrooms?” The New York Times, October 24, 2011. http://www.nytimes.com/2011/10/24/business/media/why-not-occupy-newsrooms.html

Monday, October 16, 2017

An Ethical Dilemma for Cell-Phone Companies? Drivers Who Text & Talk

Long before cellphones became ubiquitous, industry pioneers were aware of the risks of multitasking behind the wheel. Their hunches have been validated by many scientific studies showing the dangers of talking while driving and, in 2009, of texting. Despite the mounting evidence, the industry built itself into a $150 billion business in the United States largely by winning over a crucial customer: the driver. For years, it marketed the virtues of cellphones to drivers. Indeed, the industry originally called them car phones and extolled them as useful status symbols in ads, like one from 1984 showing an executive behind the wheel that asked: Can your secretary take dictation at 55 MPH? “That was the business,” said Kevin Roe, a telecommunications industry analyst since 1993. Wireless companies “designed everything to keep people talking in their cars.” The CTIA, the industry’s trade group, supported legislation banning texting while driving. It has also changed its stance on legislation to ban talking on phones while driving — for years, it opposed such laws; then it became neutral. “This was never something we anticipated,” Mr. Largent, head of the CTIA, said in 2009.  However, Bob Lucky, an executive director at Bell Labs from 1982-92, said he knew that drivers talking on cellphones were not focused fully on the road. But he did not think much about it or discuss it and supposed others did not, either, given the industry’s booming fortunes. “If you’re an engineer, you don’t want to outlaw the great technology you’ve been working on,” said Mr. Lucky, now 73. “If you’re a marketing person, you don’t want to outlaw the thing you’ve been trying to sell. If you’re a C.E.O., you don’t want to outlaw the thing that’s been making a lot of money.” One researcher who spoke up about his concerns was quickly shut down. In 1990, David Strayer, a junior researcher at GTE, which later became part of Verizon, noticed more drivers who seemed to be distracted by their phones, and it scared him. He asked a supervisor if the company should research the risks. “Why would we want to know that?” Mr. Strayer recalled being told. He said the message was clear: “Learning about distraction would not be very helpful to the overall business model.” So why did the industry lobby turn to neutral in 2009, when it had for years resisted any governmental regulation on cell phones? 

It is important to remember the rationale of the “overall business model” so we don’t project some sort of fuzzy corporate social responsibility motive.   The industry’s shift to neutral matches a trend in its bottom line:  in the 1980s and early ’90s, wireless companies got 75 percent or more of their revenue from drivers, a figure that fell below 50 percent by the mid-’90s and is by 2009 below 25 percent.  The negative publicity on cellphones from distracted drivers killing people could cost the industry more (in dollars and cents) than what it could otherwise make by selling phones to more drivers.     Public affairs offices and industry lobby groups are simply reflections of the financial interest of the “business model.”   We ought not be fooled, as if an industry suddenly sees the light and does what is right.  Of course, it is in the financial interest of an industry to have us view it as such, but this is of course just more of the same.   Remember that the cell phone industry had reason to know of the problem of distracted drivers but ignored it in following a single-minded profit trajectory.

Source: http://www.nytimes.com/2009/12/07/technology/07distracted.html?ref=business