Should the Internet Forget, or Should We Be More Forgiving?

If you follow me know is that I read a lot of blogs, that I connect well with the wisdom Seth Godin, and that I used to work on SEO and search engines and am all to familiar with the ubiquity  of them.

So yesterday Seth had a nice story - Personal branding in the Age of Google - a very good piece of advice. Anything you ever do will invariably find it's way onto the Internet were the search engines, and Google in particular, will never forget it. So if there's anything you don't want others to judge you by, just don't do it.

Now that is good advice for an individual. But now lets expand that to us as a society. Also last week there was the story on CNN (which they ran for several days - must have been a slow news week) about a man in Ft. Collins who was convicted of murder and sent to prison based on questionable evidence and an aggressive prosecutor. He's no free and his conviction has been overturned, but he's struggling to rebuild his life. One element is that any background check an employer does finds 'charges dismissed - first degree murder'. So here is the real-life equivalent of Seth's Google example. A fair number of people probably conclude that he's guilty nevertheless, a success of lawyers rather than innocence.

So all this begs the question: Is there something wrong with our system where all this information is readily available and can haunt you for the rest of your life? Is that fair? Does that help us as a society?

My take is, and it has invariably been proven that way in business, having data is way better than not having data. If you don't know about it, you can't make informed decisions. However knowing puts the burden on us to not only make an informed decision, but also to make a fair decision.

So really the answer is not that the Internet should forget, or that Google shouldn't remember all these details. The answer is that as a society we need to be better at making judgements and be a bit more forgiving at times.

And just like many things that people don't handle well if it only happens to a small fringe group of society, because we've never been forced to think about it or confront all aspects of the problem, having Google remember all these details about pretty much everyone in our society I think is actually a great advancements. That forces everyone of us to confront the fact that nobody lives a perfect life, that everyone in their lifetime has done something that 10 years later they think was totally stupid, but that these things don't really reflect on the person's value when taken in complete context.

So Google - keep collecting facts, and people, let's face it, we need to be better at judging people on who they are, rather than just single factoids.

I can lay more people off than you can

These are interesting economic times for sure, and rarely a day goes by where there aren't some statistics that say it wasn't that extreme for the last 30 years, or since we started collecting data.

What strikes me though is that in how we react to this crisis hasn't fundamentally changed from how we got into it - short sighted, self centered, unimaginative, risk averse thinking and acting - or in short continued incompetence.

Let's explore this on the topic of layoffs. We have lost a lot of jobs in the last few months. In fact this graph by Nancy Pelosi (courtesy via Consumerist: Just How Bad is this Recession) paints the picture visually and thus much more impactful than the daily barrage of news ticker stories. And few are talking about a few jobs lost here or there. Most of the time we round to the closest 1,000 if not 10,000. That element alone shows that this is a numbers game - because otherwise there would be rational that these 9,845 people aren't doing projects supported by their NPV and thus should be restructured.

I find it hard to believe that all these companies really have that many people to lay off. Sure some are on the brink of bankruptcy and don't have enough cash in the bank to pay people. Circuit City was at the end of the road, and their employees bet on the wrong horse and there's no way around it. Car sales are down 50% YoY, and that means you simply need fewer people on the production line because there aren't enough cars to be built for that demand. So some capacity cuts are unavoidable.

But even in the case of the car companies, a slightly longer term view might be advisable. With nobody buying cars right now, that means the average age of everyone's car is going up, a few more cars are being nursed by mechanics to stay in service through this downtown which may otherwise have landed in the recycle bin. That means once we work our way through this, there will be a spike in demand for new cars as everyone finally gets around to a much needed upgrade. Once that spike hits, companies will be hard pressed to find skilled workers to do the job, and a lot of time will be spent training and re-integrating workers, potentially missing a key market opportunity. Instead some companies could take this downturn as a window of opportunity to redeploy these workers and do some much needed technology upgrades and other research that will put them in a perfect spot when things turn around. But that would require long-term perspective, would require guts and imagination, would require willingness to take some risk, show some leadership.

Take the case of Microsoft which recently announced 5,000 layoffs, the first mass layoff in the company's history. Given the total size of the company, the gross margin of the company, and the enormous amount of cash on hand, I find it hard to believe that a layoff of 5,000 people makes even a noticeable dent in the cash balance. Microsoft can afford to keep these 5,000 people without even blinking. Whether they should for a whole host of other reasons is different discussion for another day. Here we're simply looking on the basis of economic need to lay people off because of cash flow.

Back to my assertion that this is short sighted: every person laid off right now, is a person that is cutting back spending. They won't buy the next car, they won't buy the next computer, a new suit, or whatever else they would spend money on. That is consumer demand that is gone. Yet it's that very same money that drives the economic activity that all these companies rely on. And even if the employee doesn't directly buy a company's product, he/she goes to restaurants, whose workers in turn may buy these products. There is a lot of downstream economic activity that is being impacted with every layoff. And for every person laid off, 10 of his/her friends fear for their job, and instead of spending their money, they hang on to it just in case they're the casualty of the next short-sighted executive move. It's a self-reinforcing downward spiral.

The end-result? Everyone is shooting themselves in the foot. Actually, no, in both feet. Unless you have to, the absolutely last thing any executive should be doing right now is to lay another person off. They should look at their balance sheet, and if they can sustain the current workforce levels through at least part of this turn-around, keep folks employed, it will make the downturn shorter for everyone. Redeploy people and invest in things that in the bustling days of two years ago you just didn't have resources to get around to. That is a the right investment to make at this time.

But alas, reading the daily news appears to be just a case 'Hey, I managed to lay 10,000 people off, I'm bigger than you!'. After years of CEOs growing their companies at rapid pace over the objections of the bean counters, this is the year of the CFO, who finally has the power of balance and can get rid of all these people he never thought should have been hired in the first place. Yes, Wall Street is watching, and doing a few token layoffs is thought by some to show signs of making the 'tough decisions' that will re-ensure investors and avoid a free fall of the stock price. Well, recent trends haven't proven that. In fact there are some stories that show that this correlation no longer holds, and in fact produces no results, but vastly erodes the confidence and trust in our executive leadership. At the Davos World Economic Forum the key question was what can CEOs do to recapture the trust in their leadership? First answer: stop short-sighted layoffs. That would truly be a 'tough decision' to make that would be newsworthy for once.

There is always need for leadership, in good times and in bad times.

When does a product become so ubiquitous the public thinks they own it?

This morning I was reading a story on the public backlash to Microsoft's Genuine Advantage in China. While no doubt the experience of losing the functionality of your computer is traumatic, I'm intrigued by the insistence of many of the people quoted in the story that insist that such action is interfering with people's rights, that it's interfering with property they own.

"Microsoft has no right to control my hardware without my agreement." and "If, when I'm programing, the computer screen goes black, that will probably cause some important information to be lost,".

Well, each of these users took initial action to install Microsoft's software on their computer. It is not that Microsoft's tool is interfering with other 3rd-party property, it is merely disabling functionality within software that was created by Microsoft and then distributed to users. The fact that it is the operating system, without which the computer ceases to function is an important factor but not an obligation. In fact by installing Microsoft's software they have given them permission to manage their hardware and provide essential services to any other application and data used on that computer.

Even with a pirated version of the software they presumably all clicked through the 'Agree' button on the EULA screen. So right there everyone gave that agreement they feel Microsoft's action lacked. Have software makers created a blind spot with the ever present EULA during install that user's forget its function?

The complaints have no merit. But the much more interesting fact is the reaction people have. Would that same reaction have happened if the software in question were an operating system with maybe 1% install base, or simply an application like Firefox. No doubt people would be annoyed but after expressing their frustration they would move on. The fact that Windows is an operating system, and that it has an install base that is so ubiquitous that it has few alternatives changes the game.

The cost of success. And the perils of having a user base as broad as the world population in technical knowledge, legal acumen, and cultural attitudes.

Oil Prices & Bubbles

Today the CEOs of 12 major US airlines sent a single letter to Congress to ask it to reign in under-regulated speculation which they believe is one of the reasons for the recent run-up in the oil price that is affecting the global economy.

While opinions are abound on what is wrong with the oil market, it does appear to come down as the failure of a number of elements that have this combined effect. As with many system failures of catastrophic impact it usually takes the summary of multiple problems to make it happen. Today's systems, whether it is a computer or our economy has enough safe guards to deal with single failure points, but not always with multi-point failures.

So what are the failures in the oil market?

1. Supply & Demand Imbalance - A number of the worlds biggest economies, mainly India and China, but also other smaller ones are developing at a rapid pace. In the process they're developing a hunger for energy that is not dissimilar to what the US has gone through decades ago. The result is rapidly growing demand which is not matched by equal growth in supply. For several years now the margin in the world wide oil market capacity has hovered in the single digit percentage points. The supply is further hampered by a healthy dose of environmental concern which has limited development of some of the more intrusive oil supplies, further tilting the supply & demand balance towards the extreme of demand. That is true not only for the raw oil industry but also the refining industry which hasn't built a new refinery in the US in several decades. There is a lot of NIMBY attitude going on.
2. Political Struggles - The inability of the world's political leaders to solve the tensions in the Middle East has left much of that region in a state of tension and disrepair as it comes to oil supply. At the same time a significant amount of oil supply in other regions is controlled by regimes who have found appetite in playing outcast roles on the global stage and flexing their oil muscle in the process, causing extra uncertainty in the market that does not have enough margin to prevent even the slightest jitters from affecting the mood.
3. Ineffective Energy Policy - When there are no economic incentives to develop energy independence, the natural tendency of the consumer and free market players will be to ignore it. The inflation adjusted extremely low cost of energy in recent times has allowed the various energy consumers to go on a consumption binge. Unfortunately it takes a lot of time and money to turn that ship. It's more like a super tanker (no pun intended) then a canoe. Millions of American consumers have gas guzzling SUVs which are still tied up in car loans that are under water, and prevent people from selling them for smaller, more fuel efficient cars, even if the market were able to produce sufficient supply of replacement, which is not the case either. It would have taken the forward looking thinking of real leaders to create the right policies that would have provided the right incentives to balance this picture ahead of time.
4. Speculation - It does appear that a lot of trading in the energy market right now is driven by investment funds that actually have no stake in the oil other than it is a place to make money. That in turn is adding significant pressure to an already stressed market. It is this speculation that the letter from the airlines is targeted at. But to be realistic, our global economy has an enormous supply of investment funds always in search of an attractive target. Because the supply and demand of the investment wealth is tilted towards the supply side, there is always one element of our global economy that is in a 'bubble' status, exploiting some form of unrealistic exuberance and willingness to ignore market fundamentals. In the late '90s it was the dot-com boom that his money chased. Once that crashed, the money chased the housing market. Which has since crashed. So the oil market was the next logical thing for the bubble to gravitate to. Ultimately in this global economy there is only one thing to burst a bubble - give it a new shiny object to chase.

So in summary, this is a complex multi-point failure in the global system. There won't be any easy and quick fixes for it. But it will be a piece of our history, with its share of law suits and text books written about it.

And in the end it will not end until the next disaster comes along. This can be easily observed in the news coverage, which gives over proportional attention to a single subject of crisis. For months one couldn't listen to the TV or read news sites on the Internet without being bombarded on the credit crisis. Is it over? No. Is in the same proportion to the extent it still exists on the air? No, because the oil prices are the disaster du jour.

Update on 9/13/2008:

Per the following story in the Seattle Times it's now much better understood just how much of the price run-up can be attributed to speculation.

Are today's mortgages maybe just rental contracts?

While driving home yesterday I listened to an interesting discussion on NPR's 'Fresh Air'. The discussion concerned a newly published book which looked at the recent meltdown of the financial markets as a result of the sub-prime lending binge Wall Street went on.

One comment the guest made caught my particular attention. He was describing how he was surprised about some of the creative mortgage instruments that had been created, and in particular one that allowed the home owner to pay less than then either principal or interest and instead add to the total debt value. His surprise was centered on the notion that everyone's incentive is to pay the debt off, and that adding to it was counter intuitive.

While this notion is consistent with the way past generations have bought houses, taking on long-term loans with the goal of paying them off in their entirety and living in said house for indefinite time periods, really as a family house.

However, as I look at today's modern and mobile generation, and even my own history of living in different places, I'm not sure that concept still holds. Just like we no longer have life-time employment with today's jobs, we really don't have lifetime home buying in today's markets. I don't have access to specific data, but I think it is safe to day that many houses are being resold within a few years, and long before the mortgage is paid off - the home owner is either moving for job related reasons, is upgrading or downgrading as family conditions change, has to sell the house as part of divorce proceedings, or one of many other reasons.

So if we don't ever plan on paying off that mortgage and own the house outright, then many of these homeowners are treating a mortgage as just a form of rental agreement, with the bank being not just a lender, but in a sense a landlord. Except that the risk formula is quite different - in a normal house rental the land lord is responsible for upkeep and maintenance, and also assumes the full risk of equity changes. In the case of the mortgage all of these duties and risks are borne by the home owner, in return for the ability to take a tax deduction.

Taking this viewpoint makes these new mortgage forms less bizarre, and a lot more logical for the consumer. It also makes them a lot more compatible with today's lifestyle. However, most rental contracts have much simpler termination clauses and penalties. So maybe what we need to look for is not undoing all of the new mortgage marketplace, but matching the rest of the house ownership life cycle up with the fact that these are really only a type of rental agreement, and allowing home owners to get out of them in more structured fashions without the stigma of foreclosure and bankruptcy.

Of course this is a somewhat simplified view of the problem. But listening to the program I couldn't help but think that we really haven't started looking at this space, and what changed with a full appreciation of the reality.

Local Economies

As painful as the current gas prices are to many of us, it is a fascinating play to watch. Rarely do changes occur that cause such widespread behavior change in an economy the size of the US. Some of the more recent ones were more the results of trends and disruptive new product introductions - such as the iPod.

One interesting question to ponder: Until recently the cost of transporting goods around the country has been nominal. For most things we buy we really think on a national level. There's not much of a difference to me weather I buy a piece of camera equipment from an online store in NYC several thousand miles away, or on the local corner. As a result much of our economy has transformed away from the local businesses to the national chains.

But with Diesel at $5/gallon around here in Washington, that equation may be shifting. Suddenly consumers are considering buying from stores closer than the next mega mall, and companies may soon be more conscious about where they source their products. Both could lead to a resurgence of the neighborhood store and the local supplier.

That would be indeed an interesting development to observe...

An Idea For Travel Agents

The other day I was reading a magazine and came across the story behind Netflix: The founder, living somewhere in California, was renting movies like everyone else from the local store and happened to be severely late on one of his movies. Out of the frustration of that experience (the story was more colorful then my short account of it here), he figured there had to be a better way and Netflix was born.

Well, I'm not about to quit my day job and start a travel agency. But...

Today I was supposed to travel from Seattle to Grand Forks, ND via Minneapolis on Northwest Airlines. As is not unusual in today's airline travel, things didn't work out as planned. The inbound plane had encountered a lightening strike and needed to be taken to the hangar for some safety inspections. Long story, short, I wasn't going to make my connection and had to rebook my flight.

So I call my corporate travel agent and I'm on hold for the better part of 10 minutes with a voice interrupting the music telling me that all the agents were helping other customers. Sitting at the gate, trying to figure out what's next this wait was not easy for as impatient a person as I can be at times. So while I'm waiting I'm debugging the system, figuring out what they should do to serve their customers better - particularly, since they know that I'm a good customer calling in via one of their corporate client 800 numbers.

There's a big difference between being on hold for 10 minutes when I'm at my desk trying to change a reservation to a more convenient flight, and being stuck at the gate with a canceled flight trying to make alternate arrangements.

If I were to design their call center, I would design the call center such that any time that there's a wait one set of agents runs triage. They answer calls within less than 30 seconds and get context. If the person is calling from their desk with a non-urgent issue, have them go into a slower queue, or get their number and call them back. If the person is making changes to travel in the next 24 hrs, put them in the medium speed queue, and someone sitting at the terminal, put them in the fast lane queue.

That way, every customer gets helped in a manner that's appropriate. The cable companies have figured out that system. If I call Comcast, I can opt for them to call me when an agent is actually available. Works great. And the triage - no ER could exist with out it. So these aren't really new concepts.

But providing a good customer experience is a tough job, and business as usual doesn't cut it. And by the way: 'all our agents are currently helping other customers' is an imprecise statement. 'None of our on-duty agents is free, we've reserved your place in line' would be more precise. But those are minor semantics.

But then I'm a difficult customer to please. My day job is figuring out how to improve the customer experience for the most highly valued customers of my employer.

Air Travel Woes

Airline travel has always been a source of frustration. Added security measures in recent years haven't helped, and increased the delta between the occasional traveler and the road warriors. In recent months planes have been fuller than ever - that is good for the airlines getting back to profitability, but bad for the travelers. A trip to Colorado this past weekend demonstrated this again.

The reality is that in a move to be profitable at very narrow margins the airlines are selling their planes out, or overselling in many cases, with the result that few planes take off with a single seat open. That makes good sense in the short-term view, and when short-term profits come above long-term customer loyalty and experience.

Where the calculation breaks down is that in a system as complex as the US airlines industry, problems will happen despite extremely tight SLAs and performance standards. There will be a weather system, there will be a mechanical issue that will result in a flight being canceled. With every single seat sold out, there's no spare capacity to absorb the folks that get bumped from the canceled flights, leaving travelers stranded for days. What really is needed is a system where each flight is not sold at 110% capacity, but at 85% capacity, leaving the remaining 15% to provide the needed flexibility.

On the outbound flight on Alaska from SEA to DEN, the plane was oversold by 8 seats. They asked for volunteers to give up their seat assignments. The offer: a free round-trip ticket anywhere Alaska flies, and a reservation on a Southwest flight to Denver 24hrs later.

What's remarkable is that the only open seats they could find was a single flight on another airline, and a full 24hrs later. That is not a lot of room for error.

The return flight turned out to be even more challenging. I was scheduled to fly on Alaska from DEN to SEA. Everything looked like it was going by plan. Then the news that the plane had a mechanical problem on the way to DEN and had to perform an emergency landing in Cheyenne Wyoming. It was unclear if the plane would make it to Denver for the original 7pm departure. An hour later the flight was canceled altogether. But again, there was just a few seats left on a Portland flight, but nothing that would get all those folks out with only 2 days to go to Christmas.

Plan B by the airline was to divert one of their other flights which was scheduled from LAS to SEA, to stop in DEN and pick up the stranded travelers. That was scheduled to happen by 11pm. But 11pm came and went, and the plane never left LAS. Eventually it was determined that the crew in LAS had refused to fly because they had exceeded their allowable flying hours for the day. By 1am everyone was told to reclaim their luggage and get inline for a hotel voucher. Just in case the airline asked for some police presence in case someone got too excited about this.

Plan B, version 2, was to ferry in an empty plane from SEA the next morning to pickup the stranded travelers, which would then leave by 10:15am. I eventually managed to capture one of the few seats on the 7am flight via standby, and made it home 12hrs after I was originally scheduled to arrive, and after sleeping for a few hours in the airport terminal.

Overall the airline handled the situation reasonably well, and had a good ground team which was on duty for more than 24hrs to take care of the travelers. But despite these positive words, good incident management is never an excuse or replacement for adequate planning for what to do when things go wrong. There clearly isn't enough margin in the system the way the airlines are currently selling their capacity.

Of course as the traveler we bear some of the responsibility. We want those cheap tickets and reward airlines that sell cheaper tickets with little differentiation on how an airline performs on these other elements of running their business. This is after all a well functioning market - airlines respond to the pricing pressure, and don't provide expensive operating margin that not enough customers demand.

So as much as I'd like to blame the airline, and as much as we all like to complain about them, we mostly have to blame ourselves.