Category Archives: Business

Consumerism Gone Utterly Utterly Mad

amazon-patent-afc

I’m not sure whether to love or hate Amazon (the online retailer). I love the one-click convenience and the mall-less shopping experience. But, Amazon’s lengthy tentacles are increasingly encroaching into every aspect of our lives. Its avaricious quest to “serve the customer” has me scared.

I don’t want Amazon to be the sole source for everything that I eat, wear and use. I don’t want Amazon to run the world’s computing infrastructure. I don’t want Amazon making and peddling movies. I don’t want Amazon tech eavesdropping on my household conversations. I don’t want Amazon owning telecommunications and fiber infrastructure, nor do I want it making phones. I don’t wish to live in a nation that has to all intents become a giant, nationwide Amazon warehouse. And, this leads me to the company’s latest crazy idea.

The company was granted patent #9,305,280 in April 2016 for an “airborne fulfillment center utilizing unmanned aerial vehicles for item delivery“. You got it: a flying warehouse stocked full of goodies hovering over your neighborhood armed and ready to launch your favorite washing detergent, a pair of Zappos shoes, diapers and a salame to your doorstep via missile drone.

Apparently the proposed airborne fulfillment center (AFC) “may be an airship that remains at a high altitude (e.g., 45,000 feet)”. Not surprisingly, the AFC mothership will use unmanned aerial vehicles (UAV) — drones — “to deliver ordered items to user designated delivery locations”. But, in addition, the patent filing suggests that “shuttles (smaller airships) may be used to replenish the AFC with inventory, UAVs, supplies, fuel, etc. Likewise, the shuttles may be utilized to transport workers to and from the AFC”. The proposed airship will also deliver customized airborne advertising tied to its inventory enabling on-the-fly (pun intended) product promotions and fulfillment.

As Annalee Newitz, Tech Culture Editor, over at ars technica remarks, “sounds like something out of a Philip K. Dick novel“. Yes, and while Dick’s many novels were gloriously imagined, we don’t necessarily need them to enter the real world. Please let our androids continue dreaming (of electric sheep).

Image: Figure 2 from Amazon’s patent for an airborne fulfillment center utilizing unmanned aerial vehicles for item delivery. US patent #9305280. Courtesy: USPTO. Public Domain.

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Hate Work Email? Become a French Citizen

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Many non-French cultures admire the French. They live in a gorgeous country with a rich history, and, besides, its crammed with sumptuous food and wine. And, perhaps as a result, the French seem to have a very firm understanding of the so-called work-life balance. They’re often characterized as a people who work to live, rather than their earnest Anglo-Saxon cousins who generally live to work. While these may be over-generalized aphorisms a new French law highlights the gulf between employee rights of the French versus those of other more corporate-friendly nations.

Yes, as of January 1, 2017, an employee of a French company, having over 50 staff, has the legal right to ignore work-related emails, and other communications, outside of regular working hours.

Vive la France! More on this “right to disconnect” law here.

From the Guardian:

From Sunday [January 1, 2017], French companies will be required to guarantee their employees a “right to disconnect” from technology as the country seeks to tackle the modern-day scourge of compulsive out-of-hours email checking.

On 1 January, an employment law will enter into force that obliges organisations with more than 50 workers to start negotiations to define the rights of employees to ignore their smartphones.

Overuse of digital devices has been blamed for everything from burnout to sleeplessness as well as relationship problems, with many employees uncertain of when they can switch off.

The measure is intended to tackle the so-called “always-on” work culture that has led to a surge in usually unpaid overtime – while also giving employees flexibility to work outside the office.

“There’s a real expectation that companies will seize on the ‘right to disconnect’ as a protective measure,” said Xavier Zunigo, a French workplace expert, as a new survey on the subject was published in October.

“At the same time, workers don’t want to lose the autonomy and flexibility that digital devices give them,” added Zunigo, who is an academic and director of research group Aristat.

The measure was introduced by labour minister Myriam El Khomri, who commissioned a report submitted in September 2015 which warned about the health impact of “info-obesity” which afflicts many workplaces.

Under the new law, companies will be obliged to negotiate with employees to agree on their rights to switch off and ways they can reduce the intrusion of work into their private lives.

Read the entire article here.

Image courtesy of Google Search.

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Uber For…

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There’s an Uber for pet-sitters (Rover). There’s an Uber for dog walkers (Wag). There’s an Uber for private jets (JetMe). There are several Ubers for alcohol (Minibar, Saucey, Drizly, Thirstie). In fact, enter the keywords “Uber for…” into Google and the search engine will return “Uber for kids, Uber for icecream, Uber for news, Uber for seniors, Uber for trucks, Uber for haircuts, Uber for iPads (?), Uber for food, Uber for undertakers (??)…” and thousands of other results.

The list of Uber-like copycats, startups and ideas is seemingly endless — a sign, without doubt, that we have indeed reached peak-Uber. Perhaps VCs in the valley should move on to some more meaningful investments, before the Uber bubble bursts.

From Wired:

“Uber for X” has been the headline of more than four hundred news articles. Thousands of would-be entrepreneurs used the phrase to describe their companies in their pitch decks. On one site alone—AngelList, where startups can court angel investors and employees—526 companies included “Uber for” in their listings. As a judge for various emerging technology startup competitions, I saw “Uber for” so many times that at some point, I developed perceptual blindness.

Nearly all the organizations I advised at that time wanted to know about the “Uber for” of their respective industries. A university wanted to develop an “Uber for tutoring”; a government agency was hoping to solve an impending transit issue with an “Uber for parking.” I knew that “Uber for” had reached critical mass when one large media organization, in need of a sustainable profit center, pitched me their “Uber for news strategy.”

“We’re going to be the Uber for news,” the news exec told me. Confused, I asked what, exactly, he meant by that.

“Three years from now, we’ll have an on-demand news platform for Millennials. They tap a button on their phones and they get the news delivered right to them, wherever they are,” the editor said enthusiastically. “This is the future of news!”

“Is it an app?” I asked, trying to understand.

“Maybe. The point is that you get the news right away, when you want it, wherever you are,” the exec said.

“So you mean an app,” I pressed. “Yes!” he said. “But more like Uber.”

The mass “Uber for X” excitement is a good example of what happens when we don’t stop to investigate a trend, asking difficult questions and challenging our cherished beliefs. We need to first understand what, exactly, Uber is and what led to entrepreneurs coining that catchphrase.

Read the entire story here.

Image courtesy of Google Search.

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Open-Office or Home-Based?

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Enough with the open office. Despite claims to democratize the workspace, improve employee camaraderie and boost interactions the open office layout reduces productivity.

Employers, here’s a better idea. Let your employees work from home. It really works: cuts corporate costs, increases productivity and morale, and reduces greenhouse emissions (from less commuting). Everybody wins — except, perhaps, for those who thrive on office gossip or require an in situ foosball table.

From the Washington Post:

A year ago, my boss announced that our large New York ad agency would be moving to an open office. After nine years as a senior writer, I was forced to trade in my private office for a seat at a long, shared table. It felt like my boss had ripped off my clothes and left me standing in my skivvies.

Our new, modern Tribeca office was beautifully airy, and yet remarkably oppressive. Nothing was private. On the first day, I took my seat at the table assigned to our creative department, next to a nice woman who I suspect was an air horn in a former life.  All day, there was constant shuffling, yelling, and laughing, along with loud music piped through a PA system.  As an excessive water drinker, I feared my co-workers were tallying my frequent bathroom trips.  At day’s end, I bid adieu to the 12 pairs of eyes I felt judging my 5:04 p.m. departure time. I beelined to the Beats store to purchase their best noise-cancelling headphones in an unmistakably visible neon blue.

Despite its obvious problems, the open-office model has continued to encroach on workers across the country. Now, about 70 percent of U.S. offices have no or low partitions, according to the International Facility Management Association. Silicon Valley has been the leader in bringing down the dividers. Google, Yahoo, eBay, Goldman Sachs and American Express are all adherents.  Facebook CEO Mark Zuckerberg enlisted famed architect Frank Gehry to design the largest open floor plan in the world, housing nearly 3,000 engineers. And as a businessman, Michael Bloomberg was an early adopter of the open-space trend, saying it promoted transparency and fairness. He famously carried the model into city hall when he became mayor of New York,  making “the Bullpen” a symbol of open communication and accessibility to the city’s chief.

Read the entire story here.

Image courtesy of Google Search.

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Hedging With Death

Wiertz-burial

I’ve never met a hedge fund guy. I don’t think I ever will. They’re invariably male and white. Hedge fund guys move in very different circles than mere mortgage-bound morals like me, usually orbited by billions of dollars and extravagant toys like 200 ft yachts, Tuscan palazzos and a Lamborghini on every continent. At least that’s the popular stereotype.

I’m not sure I like the idea of hedge funds and hedge fund guys with their complex and obfuscated financial transactions, nano-second trading, risk shifting strategies, corporate raids and restructurings. I’m not against gazillionaires per se — but I much prefer the billionaires who invent and make things over those who simply bet and gamble and destroy.

So, it comes as no surprise to learn that one predatory hedge fund guy has found a way to make money from the death of strangers. His name is Donald F. “Jay” Lathen Jr. and his hedge fund is known as Eden Arc Capital Management. Lathen found a neat way for his hedge fund to profit from bonds and CDs (certificates of deposit) with survivor options. For each of his “death transactions” there would be two named survivors: himself or an associate and a terminally-ill patient at a nursing home or hospice. In exchange for naming Lathen as a financial beneficiary the patient would collect $10,000 from Lathen. Lathen would then rake in far greater sums from the redeemed bonds when the patient died.

Lathen’s trick was to enter into such deals only with patients that he calculated to be closest to death. Nothing illegal here, but certainly ethically head-scratching. Don’t you just love capitalism!

From Bloomberg:

A vital function of the financial system is to shift risk, but that is mostly a euphemism. Finance can’t make risks go away, or even really move them all that much. When the financial system shifts the risk of X happening from Y to Z, all that means is that Z gives Y money if X happens. If X was going to happen to Y, it’s still going to happen to Y. But now Y gets money.

Death is a central fact of human existence, the fundamental datum that gives meaning to life, but it is also a risk — you never know when it will happen! — and so the financial industry has figured out ways to shift it. Not in any supernatural sense, I mean, but in the regular financial-industry sense: by giving people money when death happens to them. One cannot know for certain how much of a consolation that is.

Another vital function of the financial system is to brutally punish the mispricing of risk through arbitrage. Actually I don’t really know how vital that one is, but people are pretty into it. If someone under- or overestimates a risk, someone else will find a way to make them pay for it. That’s how markets, even the market for death, stay efficient.

The normal way to shift the risk of death is life insurance — you die, the insurance company gives you money — but there are other, more esoteric versions, and they are more susceptible to arbitrage. One version involves “medium and long-term bonds and certificates of deposit (‘CDs’) that contain ‘survivor options’ or ‘death puts.'” Schematically, the idea is that a financial institution issues a bond that pays back $100 when it matures in 2040 or whatever. But if the buyer of the bond dies, he gets his $100 back immediately, instead of having to wait until 2040. He’s still dead, though.

But the bond can be owned jointly by two people, and when one of them dies, the other one gets the $100 back. If you and your friend buy a bond like that for $80, and then your friend dies, you make a quick $20.

But what are the odds of that? “Pretty low” was presumably the thinking of the companies issuing these bonds. But they didn’t reckon with Donald F. “Jay” Lathen Jr. and his hedge fund Eden Arc Capital Management:

Using contacts at nursing homes and hospices to identify patients that had a prognosis of less than six months left to live, and conducting due diligence into the patients’ medical condition, Lathen found Participants he could use to execute the Fund’s strategy. In return for agreeing to become a joint owner on an account with Lathen and/or another individual, the Participants were promised a fixed fee—typically, $10,000.

That is, needless to say, from the Securities and Exchange Commission administrative action against Lathen and Eden Arc. Lathen and a terminally ill patient would buy survivor-option bonds in a joint account, using Eden Arc’s money; the patient would die, Lathen would redeem the bonds, and Eden Arc would get the money. You are … somehow … not supposed to do this?

Read the entire story here.

Image: Antoine Wiertz’s painting of a man buried alive, 1854. Courtesy: Wiertz Museum, Netherlands / Wikipedia. Public Domain.

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Poor Leadership and Destruction of Meaningful Work

WomanFactory1940s

First, your boss may be a great leader but she or he has little or no sway over how you assess the meaningfulness of the work you do. Second, while there is no correlation between a boss and meaningful work, a bad boss can destroy any likelihood of meaningful effort.

That’s the recent finding, excerpted below, by researchers from the University of Sussex and the University of Greenwich in the UK.

Therein lies a valuable set of lessons for any business wishing to recruit, retain and motivate employees.

From University of Sussex:

Bosses play no role in fostering a sense of meaningfulness at work – but they do have the capacity to destroy it and should stay out of the way, new research shows.

Published in MIT Sloan Management Review, the research indicates that, rather than being similar to other work-related attitudes, such as engagement or commitment, meaningfulness at work tends to be intensely personal and individual, and is often revealed to employees as they reflect on their work.

Thus what managers can do to encourage meaningfulness is limited, though what they can do to introduce meaninglessness is unfortunately of far greater capacity.

The authors identified five qualities of meaningful work:

1. Self-Transcendent. Individuals tend to experience their work as meaningful when it matters to others more than just to themselves. In this way, meaningful work is self-transcendent.

2. Poignant. People often find their work to be full of meaning at moments associated with mixed, uncomfortable, or even painful thoughts and feelings, not just a sense of unalloyed joy and happiness.

 3. Episodic. A sense of meaningfulness arises in an episodic rather than a sustained way. It seems that no one can find their work consistently meaningful, but rather that an awareness that work is meaningful arises at peak times that are generative of strong experiences.

4. Reflective. Meaningfulness is rarely experienced in the moment, but rather in retrospect and on reflection when people are able to see their completed work and make connections between their achievements and a wider sense of life meaning.

5. Personal. Work that is meaningful is often understood by people not just in the context of their work but also in the wider context of their personal life experiences.

Read more here.

Image: Turret lathe operator machining parts for transport planes at the Consolidated Aircraft Corporation plant, Fort Worth, Texas, USA, 1942. Courtesy: United States Library of Congress’s Prints and Photographs division. Public Domain.

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Sharing the Wealth: Chobani-Style

Chobani-black-cherry-yogurtOK, so I am thoroughly addicted to yogurt (or yoghurt, for my non-US readers). My favorite is the greek yogurt Fage, followed by an Aussie concoction called Noosa. Chobani doesn’t even make my top 5.

However, Chobani did something today, April 26, 2016, that made me want to cheer. The company founder, and majority stockholder, gave 10 percent of the business to his 2,000 employees. On average, each will get around $150,000; some, based on length of employment, will gain millions.

Hamdi Ulukaya, a Turkish immigrant, founded Chobani in 2005. The company is privately held, but is estimated to be now valued at $3-5 billion. Chobani’s employees will reap their rewards when the company goes public in an IPO. In Hamdi Ulukaya’s words:

I’ve built something I never thought would be such a success, but I cannot think of Chobani being built without all these people.

Mr. Ulukaya is a role model for other business leaders, who would do well to follow his great example. Chobani offers us a vision that shows employer and employee working to win together.

I may have to revisit Chobani and my yogurt preferences!

From the NYT:

The 2,000 full-time employees of Chobani were handed quite the surprise on Tuesday: an ownership stake in the yogurt company that could make some of them millionaires.

Hamdi Ulukaya, the Turkish immigrant who founded Chobani in 2005, told workers at the company’s plant here in upstate New York that he would be giving them shares worth up to 10 percent of the company when it goes public or is sold. The goal, he said, is to pass along the wealth they have helped build in the decade since the company started. Chobani is now widely considered to be worth several billion dollars.

“I’ve built something I never thought would be such a success, but I cannot think of Chobani being built without all these people,” Mr. Ulukaya said in an interview in his Manhattan office that was granted on the condition that no details of the program would be disclosed before the announcement. “Now they’ll be working to build the company even more and building their future at the same time.”

Employees got the news on Tuesday morning. Each worker received a white packet; inside was information about how many “Chobani Shares” they were given. The number of shares given to each person is based on tenure, so the longer an employee has been at the company, the bigger the stake.

Read the entire story here.

Image: Chobani yogurt. Courtesy of Chobani.

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The Curious Psychology of Returns

In a recent post I wrote about the world of reverse logistics, which underlies the multi-billion dollar business of product returns. But while the process of consumer returns runs like a well-oiled, global machine the psychology of returns is confusingly counter-intuitive.

For instance, a lenient return policy leads to more returned products — no surprise there. But, it also causes increased consumer spending, and the increased spending outweighs the cost to the business of processing the increased returns. Also, and rather more curiously, a more lenient return time limit correlates to a reduction in returns, not an increase.From the Washington Post:

January is prime time for returns in the retail industry, the month where shoppers show up in droves to trade in an ill-fitting sweater from grandma or to unload the second and third “Frozen” dolls that showed up under the Christmas tree.

This post-Christmas ritual has always been costly for retailers, comprising a large share of the $284 billion in goods that were returned in 2014.  But now it is arguably becoming more urgent for the industry to think carefully about return policies, as analysts say the rise of online shopping is bringing with it a surge in returns. The return rate for the industry overall is about 8 percent, but analysts say that it is likely significantly higher than that online, since shoppers are purchasing goods without seeing them in person or trying them on.

Against that backdrop, researchers at University of Texas-Dallas sought to get a better handle on how return policies affect shopper behavior and, in turn, whether lenient policies such as offering a lengthy period for returns actually helps or hurts a retailer’s business.

Overall, a lenient return policy did indeed correlate with more returns. But, crucially, it was even more strongly correlated with an increase in purchases. In other words, retailers are generally getting a clear sales benefit from giving customers the assurance of a return.

One surprising finding: More leniency on time limits is associated with a reduction — not an increase — in returns.

This may seem counterintuitive, but researchers say it could have varying explanations. Ryan Freling, who conducted the research alongside Narayan Janakiraman and Holly Syrdal, said that this is perhaps a result of what’s known as “endowment effect.”

“That would say that the longer a customer has a product in their hands, the more attached they feel to it,” Freling said.

Plus, the long time frame creates less urgency around the decision over whether or not to take it back.

Read the entire article here.

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Anti-Gifting and Reverse Logistics

Google-search-gifts-returns

Call it what you may, but ’tis the season following the gift-giving season, which means only one thing, it’s returns season. Did you receive a gorgeous pair of shoes in the wrong size? Return. Did you get yet another hideous tie or shirt in the wrong color? Return. Yet more lotion that makes you break out in an orange rash? Return? Video game in the wrong format or book that you already digested last year? Return. Toaster that doesn’t match your kitchen decor? Return.

And, the numbers of returns are quite staggering. According to Optoro — a research firm that helps major retailers process and resell returns — consumers return nearly $70 billion worth of purchases during the holiday season. That’s more than the entire GDP of countries like Luxembourg or Sri Lanka.

So, with returns being such a huge industry how does the process work? Importantly, a returned gift is highly unlikely to end up back on the original shelf from where it was purchased. Rather, the gift is often transported by an inverse supply-chain — known as reverse logistics — from the consumer back to the retailer, sometimes back to a wholesaler, and then back to a liquidator. Importantly, up to 40 percent of returns don’t even make it back to a liquidator since it’s sometimes more economical for the retailer to discard the item.

From Wired:

For most retailers, the weeks leading up to Christmas are a frenzied crescendo of activity. But for Michael Ringelsten, the excitement starts after the holidays.

Ringelsten runs Shorewood Liquidators, which collects all those post-holiday returns—from unwanted gadgets and exercise equipment to office furniture and popcorn machines—and finds them a new home. Wait, what? A new home? Yep. Rejected gifts and returned goods don’t go back on the shelves from which they came. They follow an entirely different logistical path, a weird mirror image of the supply chain that brings the goods we actually want to our doors.

This parallel process exists because the cost of restocking and reselling returned items often exceeds the value of those items. To cut their losses, online retailers often turn to folks like Ringelsten.

I discovered Shorewood Liquidators through a rather low rent-looking online ad touting returned items from The Home Depot, Amazon, Sears, Wal-Mart, and other big retailers. I was surprised to find the items weren’t bad. Some were an out-and-out deal, like this comfy Arcadia recliner (perfect for my next Shark Tank marathon). Bidding starts at 99 cents for knickknacks or $5 for nicer stuff. The descriptions state whether there are scuffs, scratches, or missing parts.

“This recliner? It will definitely sell,” Ringelsten says. Shorewood employs 91 people who work out of a 100,000-square-foot warehouse in Illinois—a space that, after the holidays, is a Through the Looking Glass version of Amazon, selling unwanted gifts at rock-bottom prices. And as Americans buy more and more holiday gifts online, they’re also returning more, creating new opportunities for businesses prepared to handle what others don’t want. Call it “re-commerce.”

The Hidden World of Returns

UPS says last week it saw the highest volume of returns it expects to see all year, with people sending back more than 5 million gifts and impulse purchases. On the busiest day of that week, the shipper said, people sent back twice as many packages—1 million in all—than the same day a year ago.

But those returns often don’t return from whence they came. Instead, they’re shipped to returns facilities—some operated by retailers, others that serve as hubs for many sellers. Once there, the goods are collected, processed, and often resold by third-party contractors, including wholesalers and liquidators like Shorewood. These contractors often use software that determines the most profitable path, be it selling them to consumers online, selling them in lots to wholesale buyers, or simply recycling them. If none of these options is profitable, the item may well end up in a landfill, making the business of returns an environmental issue, as well.

Read the entire story here.

Image courtesy of Google Search.

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MondayMap: National Business Emotional Intelligence

A recent article in the Harvard Business Review (HBR) gives would-be business negotiators some general tips on how best to deal with counterparts from other regions of the world. After all, getting to yes and reaching a mutually beneficial agreement across all parties does require a good degree of cultural sensitivity and emotional intelligence.

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While there is no substitute to understanding other nations through travel and cultural immersion, the HBR article describes some interesting nuances to help those lacking in geographic awareness, international business experience,  and cross-cultural wisdom. The first step in this exotic journey is rather appropriately, a map.

No surprise, the Japanese and Filipinos shirk business confrontation, whereas the Russians and French savor it. Northern Europeans are less emotional, while Southern Europeans and Latin Americans are much more emotionally expressive.

From Frank Jacobs over at Strange Maps:

Negotiating with Filipinos? Be warm and personal, but stay polite. Cutting das Deal with Germans? Stay cool as ice, and be tough as nails. So what happens if you’re a German doing business in the Philippines?

That’s not the question this map was designed to answer. This map — actually, a diagram — shows differences in attitudes to business negotiations in a number of countries. Familiarise yourself with them, then burn the drawing. From now on, you’ll be a master international dealmaker.

Vertically, the map distinguishes between countries where it is highly haram to show emotions during business proceedings (Japan being the prime example) and countries where emotions are an accepted part of il commercio (yes, Italians are emotional extroverts — also in business).

The horizontal axis differentiates countries with a very confrontational negotiating style — think heated arguments and slammed doors — from places where decorum is the alpha and omega of commercial dealings. For an extreme example of the former, try trading with an Israeli company. For the latter, I refer you to those personable but (apparently also) persnickety Filipinos.

Read the entire article here.

Map courtesy of Erin Meyer, professor and the program director for Managing Global Virtual Teams at INSEAD. Courtesy of HBR / Strange Maps.

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