Tuesday, March 29, 2011

The End of Privacy

I was walking through the waiting room at the place where I work and I happened to notice an article on the front page of Time Magazine. The title was "Everything About You is Being Tracked." This theme is nothing new. Journalists are always coming out with new insights into how large corporations are collecting data in order to exploit consumers. What really caught my attention, though, was the subtitle. Just under, "Everything About You is Being Tracked," the cover read, "Get Over It!"

I could not agree with this sentiment more. Many of us want to reap the benefits of living in a modern, technologically advanced world, but we don't want anyone to know anything about us. We want to earn points on our rewards card to get discounts, but we don't want the grocery store to know what we're buying. We want to have free reign of the world wide web, but we treat it as if it is our own backyard and no one should be able to see how we are browsing. We can't live without Facebook, but the tailored advertising on the sidebar appalls us.

We can't have our cake and eat it too, at least not in the way we think. If we want to experience the joys of living in the contemporary social world, we have to sacrifice a little of our privacy. Period. The only way to escape our preferences being tracked is to leave no footprint. Frankly, I'm baffled as to why anyone would be suprised that businesses are tracking consumer behavior. That is their job. A business is at a standstill if it doesn't know what its customers are buying. To tell a company that it cannot track customers is like telling a doctor that he cannot listen to a heartbeat or a police officer that he cannot dust for prints. If a company cannot track its customers, it cannot adequately perform its social function of providing meaningful products and services for consumption.

Being tracked is good for us. As consumers, we should want companies to know our buying preferences. I think we have this paranoid notion that businesses are out to take advantage of us and, if they have more information on us, they will be able to sell us stuff we don't want. The truth is, businesses aren't out to destroy consumers. Businesses need consumers. When they track consumer behavior, it always benefits the consumer. No company in its right mind wants to sell something to a customer that the customer doesn't want. When companies track our market behavior, they are not like the police officer tracking our prints so that he can catch us and imprison us. Rather, they are like the doctor listening to our heartbeat so that he can prescribe the appropriate medication.

Still, many of us feel like we've been compromised. A line has been crossed. We feel violated. We don't trust marketers. Perhaps that is why they are so secretive about how they collect our information. And then that secrecy breeds more distrust. It's a vicious cycle. Nevertheless, it will go on. We will spend money and companies will watch our every move. Privacy is dead. Welcome to the brave new world.

Monday, March 28, 2011

VCU and Why We Root for Underdogs

I don't really follow sports. Yet, it's difficult for even the most idle of dabblers to not get caught up in March Madness. The excitement of the competition in the 64-team tournament is overwhelming. Fans all across the country are cheering their hometown teams. Nearly everyone I know is drawing up their own brackets. However, if there is one thing that is most exciting about the NCAA tournament, it is this: the underdogs.

VCU. Can anyone tell me what it stands for? As someone who doesn't regularly follow college basketball, I had to look it up. Virginia Commonwealth University. No, not Virginia Tech. Not Virginia. Not West Virginia. Virginia Commonwealth. Sunday night, number 11 seed VCU beat number 1 seed Kansas 71-61 to make it into the Final Four--making them only the third number 11 seed in history to enter the Final Four. Along their way to the Final Four, VCU also ousted Georgetown, Purdue, and Florida State--all teams ranked at higher seeds. Certainly, no one can argue that VCU is turning into one of those true underdog stories that we love so much--a 'Cinderella story' as it's often called. Undoubtedly, many who did not know the meaning of the acronymn 'VCU' will be cheering for Virginia Commonwealth University next Saturday.

But why do we root for the underdog? Why does it give us such a rush to see number 1 toppled by number 11? I think this 'cheering the underdog' phenomenon is about much more than a basketball tournament. I think it's about human nature. We root for the underdogs, because they give us permission. They tell us that we can do it too. We can defy the odds. We can overcome great obstacles. Hey, if VCU can beat Kansas, maybe I will get the sale, maybe that girl will go out with me, or maybe I will pass this exam. Maybe. Underdogs introduce possibility. We see someone else of lesser 'rank' become successul and we are given permission to win as well. If they can do it, why can't we?

And how do underdogs win? They certainly don't do it by believing their 'seed.' They don't accept their 'rank.' Before the game against Kansas, the coach of VCU surely didn't say anything along the lines of, "Well fellas, Kansas is ranked much higher than us. Clearly we don't have a shot." As a matter of fact, VCU coach Shaka Smart is quoted as saying, "Those people (the doubters) don't matter. The only people that matter is the 14 guys on our team, and they never stopped believing." In other words, the players on VCU's team did not accept their label. Whereas the players on Kansas' team may have felt entitled to victory because of their number 1 ranking, the players on VCU proved themselves to be number 1 through victory. They did not let perceptions of who they were effect their performance. They played like champions.

Of how many things in our lives can we say that we are underdogs? Work. School. Family. Social relationships. Hobbies. How often do we not have the upper hand? Yet, what will we do about it? Will we give up? Or will we play like the victorious underdogs? Life is filled with challenges. We'll win some and we'll lose some. But we shouldn't resign to defeat those challenges in which we are merely expected to lose. Our expectations of ourselves must always outweigh the expectations that others have of us. Only then do we give ourselves permission to play like champions. Only then can we become the underdogs everyone loves to root for.

Wednesday, March 23, 2011

The Reality That Is Globalization

I watched a video last night of Thomas Friedman giving a lecture to MIT students on his now ubiquitous book on globalization, "The World is Flat." Since its publication, many liberal and protectionist pundits have wailed against Friedman as a "free-trader." Many have claimed that the book supports shipping jobs overseas and taking away industry from America. Those who read such ideas into his thesis, I think, are missing the point Friedman was trying to make. At the end is his speech, he said something that really drove home what his view of globalization is really about. "When I was growing up, my parents used to tell me to finish my dinner because there are children in China who are starving. Now, as my children are growing, I tell them to finish their homework because there are children in China and India who are starving for their jobs."

There is far too much debate in the political sphere about the pros and cons of globalization. More talk needs to be initiated about the reality of globalization. For better or for worse, we live in a global world. We are all each others' next-door neighbors. Due primarily to recent explosions in Internet and telecommunications technology, there is no longer a spatial divide between human beings of differing cultures. Instantaneous communication is taken for granted. It is now more than it has ever been truly one world.

What does this reality mean to us as individuals? Well, whatever our line of work is, it means that we're going to have to do a lot more differentiating to be competitive. I believe we've been raised for generations in America to believe that we are entitled to our jobs. Most of probably never stop to think about the value our jobs create. We never consider the reason we are actually employed. We simply push buttons, sign papers, process transactions, and collect our paychecks. We think we are being paid for our activities. In reality, we are being paid for the outcome of our activities. The value we create for the person at the other end is why we are employed. We don't get paid because we made a latte; rather, we get paid because a consumer found the value of our latte to be better than that of the next guy's.

What is my point? There are lattes being made by more people than ever before. There are more people capable of doing your job better than you while requiring less compensation. And I'm not just talking about manufacturing. Even the 'service jobs' we pride ourselves on as Americans are being off-shored. Does the term 'call center' ring a bell? I know, I know. I can hear the objection already. 'But it's not my fault that my job is being outsourced. It's the greedy corporations trying to save money.' Of course there is truth to this. Think of it from the corporation's (or CEO's) perspective. What is really fair? Subsidizing you because you're an American or giving the job to the other guy who is willing and able to do more for less? Isn't it fair to give the job to the one who will create the most value?

But don't throw your hands up in defeat just yet. Though workers from emerging markets may be able to undercut you on price, they do not necessarily have to beat you on value creation. How do you hold your own against foreign competition? Well, you could lobby your politicians for more entitlements because you are an American, or you can simply be more valuable than your foreign competitor. If you don't want your job taken, be better at it--so good in fact that your employer cannot afford to lose you. Corporations are in business not merely to save money but also to make money. How much you cost to your employer can always be offset by how much value you create for him. Globalization is here. It is a reality. The question is, 'are you ready for it?'

Website: http://www.howdoesthatmakeyoubuy.blogspot.com

Saturday, March 19, 2011

If I'm Interested, I'll Call You

"If I'm interested, I'll call you." Salespeople hear this all of the time. It is really just a passive-aggressive way of saying, "Leave me alone!" Perhaps you've found yourself saying this to a salesperson who calls your phone. You're thinking, 'Who is this and how did they get my number?' You certainly don't have any intention of calling them back...ever. You are not interested, because you neither know nor do you care what they are selling. They are interrupting you. If you need something, by golly, you'll go out and get it yourself. You don't need some pushy salesman prodding you to do so.

Or do you? Let's do a thought experiment. Stop and think about all of the things you own. Which of those things did you just go out and get without any advice, suggestion, or referral from someone else. How did you come to acquire your television? Somewhere along the line, someone convinced you of the value in having one--perhaps even one of a particular size or brand. What about your clothes? Why do you wear the style of clothing you wear? Do you think that you chose to wear khakis to work instead of sweatpants simply because you thought it was a good idea? Don't you think that someone, somewhere along the line, convinced you that khakis were more professional? Let's even consider the things you do. Of the 10 movies that are currently showing, why did you go see the one that you did? Weren't you convinced by someone or something else that it was the best of all available options? Whether it was a friend's advice, a movie preview, or the score on Rotten Tomatoes, you were sold by something. You didn't decide on your own.

Frankly, there is nothing about which you can say you've done it entirely of your own accord. Every experience you have is a seed planted that may someday grow into your future activity. No matter what you do, no matter what you buy, you are not doing or buying those things solely because you 'feel like it.' You aren't merely doing what interests you, what you value. You are doing what you have been convinced that you should value. Like it or not, you have been sold. You have been persuaded to take a particular course of action. But you are okay with it, because it's subtle. You don't realize that you've been sold, so you buy.

Why do you tell the salesperson that you will call him back when you are interested? Why do you say that you will let him know when you are ready? You know that you cannot ever buy anything, or do anything, without knowing what that thing is and what it offers you. Why will you not hear out the salesperson's proposition? It is not because you aren't interested in what they are selling. It is most likely because you don't trust them. You trusted the television advertisement of the big screen tv. You trusted the person who told you how to dress properly for work. You trusted the movie review you read before going to the theater. That is why you made those purchases or engaged in those activities. But you don't trust the salesperson.

Salespeople need to take heed of this reality: trust is the way to a buyer's heart. Maybe then you will at least listen to them.

Monday, March 14, 2011

Price as the Final Decision Variable

How do you make purchasing decisions?  Where do you start?  If you need a new pair of shoes, a new car, a nice dinner, or even a place to get gas, how do you proceed in finding these items?  If you're like many people, it is simply a numbers game for you.  You pick the best price, the lowest number, and you think you are getting the best deal.  You start with price.  You look down the shoe rack and find the cheapest shoe.  You browse auto trader by "price: lowest to highest" and pick the car at the top of the page.  You got to McDonald's.  You use your 'Gas Buddy' app on your smartphone to find the cheapest gas station nearby.  Without a doubt, you are saving money.  But is this the best way to make purchasing decisions?  Are you getting the most for the money that you are spending?

You are not really starting with price.  Even if you think that you're simply looking for the cheapest option, there are categories you have ruled out before you've gotten to price.  Look at the shoes you are considering.  Are they boots, tennis shoes, flip flops, dress shoes, or some other kind?  You may be grabbing the cheapest pair, but they are the cheapest within a given category.  Look at the page on Auto Trader.  You're not getting the cheapest car.  You're getting the cheapest red Trailblazer  within a 75 mile radius, made between 2000 and 2004, with less than 100,000 miles on it.  McDonald's is cheap, but the Aldi next door has a rather filling can of kidney beans on sale for $0.39.  You've merely decided that you need a two to three course meal at a restaurant.  And the gas?  How far are you willing to drive to save a few cents?  Chances are you've eliminated the gas station advertising $0.20 a gallon less but that is a few states over. 

We already inadvertently eliminate certain options in our purchasing decisions, because our subconscious knows sometimes better than we do that there are criteria more important than price.  As a matter of fact, price is only important as a differentiator between two or more products about which we are completely indifferent.  Price should be the last thing to consider.  We should work down to price rather than up from it.  We should walk into the shoe store, looking for shoes that fit our needs for comfort and style.  It isn't until we've narrowed it down to a few different pairs that we should even look at the price tag.  Before deciding between Trailblazers, we should look at the pictures and read about the dealership.  Maybe if you thought about what you really wanted to eat, McDonald's wouldn't even be an option.  And the gas station?  Maybe it is on the bad side of town and is currently being robbed when you go to fill up. 

Next time you are shopping for shoes, a car, a meal, gasoline, or anything else, remember to consider price only as the final decision variable.  Weigh in on all other dimensions first.  We spend money, not to save money, but rather to get value.  The fact is, when we leave price out of the equation until only a few products are left to decide between, we may end up spending twice as much more and not even know it...but we will not care.  We will be getting what we want.  Maybe you spent $20 at Olive Garden when you could have spent $10 at McDonald's, but it is only when you include that $10 reference point within your range of possibilities that it matters to you.  If you eliminate 'McDonalds' from your decision set, spending $20 on dinner doesn't seem so bad.  You can always get something cheaper, but don't fool yourself into thinking you are getting a better deal.  When you decide on price alone, you are more often than not getting ripped off. 


Friday, March 11, 2011

The Problem With Corporations

Most of the products and services that I use in my every day life are provided by publicly traded corporations. I wake up in the morning (TGIL), shower (PG), shave (ENR), brush my teeth (CL), get dressed (KSS), make coffee (SBUX), balance my checkbook (HBAN), check my email (YHOO), write a blog (GOOG), read the blogs I follow (APPL), have some breakfast (GIS), read a chapter in a book (NWS), get in my car (GM), and drive (ALL) to work (BMW.DE). And this is all before 8 o'clock in the morning!

The benefit to the consumer of the corporate business model is evident. When fundraising is opened up to the public, more money is made available to invest in product development. Over time, corporations are able to make better products at increasingly lower costs. For consumers, products become cheaper even as quality improves. I understand that Starbucks could not make the high quality coffee nor All-State provide the same level of coverage that I enjoy were it not for the backing of investors. I get it.

The problem I have with the corporate business structure is in the area of responsibility. If I have a problem, no single person can be held accountable. Only policies can be held accountable. Why do I only get 2 shots of espresso in a Venti Latte? Because that's Starbucks' policy. It isn't the Barista's fault. It isn't Howard Schultz's fault. It isn't even any single investor's fault. It is a collective decision made by no one but enforced by everyone.

I often hear statements about how a corporation believes this or that or does not support this or that. Target recently came under fire by Lady Gaga for contributing to a political candidate that opposes same-sex marriage. Does target disagree with same-sex marriage? Is it homophobic? Of course not, it can't be. It is not a free-thinking, decision-making entity. It is not a human being. It is an artificial construct. The same goes for corporations that advertise how much they care about consumers. They may say, 'we care,' but whether or not they realize it, they are lying. They cannot care. They cannot not care. Only individuals can do such things.

So are publicly traded corporations really any different in this respect from independently run organizations? Well, it depends on how large the organization is, I guess. How close can the consumer get to the decision-maker? Regardless, the decisions made buy a business should be traced to individuals. John Smith may care about you. John Smith's Hardware does not have the capacity to care.

Website: http://www.howdoesthatmakeyoubuy.blogspot.com

Tuesday, March 8, 2011

On Being Taken Advantage Of

It's tax season again and I just mailed out the last of the paperwork yesterday. I do my own taxes, but I realize that there are a great many Americans that seek the help of tax professionals-whether they be Certified Public Accountants or hourly associates at H&R Block. I remember not long ago having a discussion with someone about how ethical it is to charge someone in order to do their taxes. Shouldn't they able to do their taxes themselves? Aren't these so-called "tax professionals" ripping taxpayers off-preying on their inabilities or naiveté?

Well, as you might imagine, I don't think so. I'm sitting in the parking lot, waiting for a dentist appointment to have a few cavities filled. When I leave 30-40 minutes from now, I am prepared to write a check for the amount that my insurance does not cover. Is the dentist taking advantage of me? Is he ripping me off? Is he preying on my weakness and my ignorance? After all, they are my teeth. Why should I pay someone else to take care of them? In a couple of hours, I will be taking my cats to the vet and, yes, I will be paying. The vet must be exploiting my lack of veterinary knowledge. Tonight, I will be attending a graduate business course. I do not even need to tell you that this costs money. Surely the university is taking advantage of my inability to grasp the subject matter on my own. After class, I may stop at Starbucks for a latte. They will charge me. But why should I pay for it? Just because I may lack the resources to grow, roast, grind, and extract coffee, does that mean I should have to pay for someone else to make an espresso for me? Surely, Starbucks is taking advantage of me.

I could go on and on. The fact is that every job on Earth exists because someone lacks something. It may be tangible resources like an espresso machine. It may be intellectual capabilities such as business acumen. It may even be-as is more often than not the case in tax preparation-a lack of time. Are these professionals really exploiting us when they require compensation for providing us with what we cannot proves for ourselves? Are they really preying on our weaknesses?

Let's turn the question around. What if we're preying on their strengths? What if we're exploiting their resources, abilities, and time for our own benefit? "Of course you should give me money," my dentist could just as easily say, "but do I really have to fix your teeth? You're just taking advantage of my knowledge, expertise, and time I have set aside for dentistry!"

Let's face it, we take advantage of each other...and that's okay. Sure, we could all be self-sufficient, but we wouldn't be as productive. It works better for everyone when each one of us, as economists say, specialize. I could spend all of time fixing my teeth, watching over my cats, making coffee, etc., bit I'm going to a much poorer job at everything. Why not focus on one thing and let someone else learn how to take care of my teeth, diagnose my cats, and whip me up a fancy coffee beverage?

If anyone thinks he is taking advantage of me for the services he is rendering, the joke is on him. He is the one being exploited.