Is Big Business evil? (Makeup post)

So here it is! Last day of the quarter and it turns out a blog post is a nice break from editing a 70-page paper. Who knew? I'm going to talk about something entirely unrelated to my team project.

Something I've pondered during my two quarters at BGI is the question of ideal business size. In the current economic and social climate, large businesses are often vilified for for their impersonal size, tendency to put small companies out of business due to economies of scale, and - let's face it - their incompatibility with the aesthetic sensibilities of the urban bohemian class. Retailers like Walmart, Home Depot, McDonald's and Safeway lose out on popularity points with the socially conscious, and oftentimes the main reason is they're "a national chain." Is this really fair? And what are some benefits of companies being large?

An article I read the other day (and I can't for the life of me remember where it was) argued the idea that, in some cases, big business is superior to small business in the contributions it can make to society. The most obvious is that products become cheaper and more accessible to the middle class (good or bad depending on your viewpoint). But more importantly, there are many products which would simply not be feasible if it weren't for large-scale business with huge R&D budgets.

For example:

• Electronics: Could you imagine if we only had small, local electronics makers? We'd probably just now be getting around to using cell phones, and there would be very little standardization. And I doubt we'd have anything affordable resembling an iPhone or LCD TV. Now, the infrastructure for using those products is a different story, and one might convincingly argue that this is better provided by a public utility.

• Food: I know this might be unpopular, but large-scale food distribution networks make it possible for us to get a steady, predictable supply of food and prevent the famines that were characteristic of early agrarian societies. Western Washington simply couldn't adequately feed the 4 million people living in its urban areas with current technology, at least not year round. Local farms can certainly supplement our diets and provide a solid share of the vegetables we consume during the growing months, but a large portion of our calories come from elsewhere.

Other things that large businesses can often do better than small ones:

• Customer service and convenience: The scale of larger businesses often allows them to provide better warranties that can be serviced anywhere, whereas small companies often operate on tight margins and have a single location. Take REI: customers can buy a product with the knowledge that they can return that product if it doesn't work out, and that the company will always be there to honor that warranty (too big to fail?) This is also the case with the manufacturers of many consumer goods.
• Employee benefits: Small businesses (particularly retailers and restaurants) are often run on extremely tight margins, and one of the first things to go is often employee benefits, such as health insurance and retirement accounts. Large companies have the administrative ability and revenue to cover these benefits. In addition, employee redundancy often allows staff more flexibility in taking time off. Sure, the government should probably be providing universal healthcare, but some of these benefits are really valuable and can't be easily replicated by the government.
• Opportunities for advancement and diverse work: In a small company, oftentimes the only opportunity to move up is by moving to a different firm, whereas large firms offer more opportunities for advancement as well as trying different types of work.

Don't get me wrong! I still faithfully support lots of local businesses, and I believe they are an invaluable part of our economy. But I don't think this issue is quite as simple or black and white as we're tempted to believe.

Private Transit?

So recently I've been thinking about the role that the private sector can play in mass transit. I'm a firm supporter of public transportation as a vital part of urban living, but sometimes it leaves holes that are better filled by other organizations. Taxis are an example of on-demand transit that fulfills a need - that of the carless urbanite who is tight on time or flush with cash. Cabs are also useful after a night of drinking if the bus is too slow or indirect for one's tastes. But cabs are expensive, to the point where many would rather drive drunk to avoid paying the fares, or designate a sober driver who has to deal with the headache of parking in a dense urban neighborhood and refraining from drinking.

In Seattle, I often find myself frustrated getting between a pair of neighborhoods that are geographically isolated from one another, with limited public transit and extremely tight parking. Ballard and Capitol Hill are two of the most vibrant neighborhoods in Seattle, both boasting dense housing, amazing restaurants, and hopping nightlife and music scenes. The two neighborhoods lie on opposite sides of Lake Union:

While a cab or car ride might only take 15 minutes (not counting the time it takes to park), a bus ride takes nearly an hour, including transfers. Metro seems little interested in providing direct routing between the two neighborhoods, although matters will significantly improve once light rail serves the corridor between downtown, Capitol Hill and the University District. Even so, the quickest route between the two neighborhoods will still likely be around 40 minutes, and that's if your transfer is perfectly timed. Not so stellar. Might there be an alternative in the next decade, while the city gets its act together to build grade-separated rail from Ballard to downtown?

I thought I'd engage in a little thought experiment, and start to ask some marketing questions.

What if someone ran a van between the two neighborhoods, with stops at the most popular spots? Could private transit fill the gap? Here's what I have in mind:

 A pair of 16-passenger shuttle buses (the used one on the left is selling for $4000) could run a fixed schedule between Ballard and Capitol Hill during the evening hours, with regular departures every half hour on the :00s and :30s until, say, 3am. Fares would be about the cost of a drink -- somewhere between a cab fee and a bus fare -- and barf bags would be included. Music selection would fit the mood. Passengers could pay when they board, or pay in advance online (round trip or one-way) for a $1 discount. Because it's a set route with regular departures, people would know they can depend on getting where they want to go, and they'd quickly get the hang of exactly where they need to be to make it home after a night of carousing.

There's some serious benefits to society here too:
-Fewer cars on the road, which means less greenhouse gas emissions.
-One less reason to drive drunk means safer roads.
-Stronger connection between Seattle's hottest neighborhoods and the friends who live there, and a boon to the restaurants, bars, and music venues (and musicians) in the two neighborhoods.

So what do you all think? Would you use such a service? How far would you be willing to walk for a cheap, quick and easy ride to a hopping nightlife spot? How much would you be willing to pay? Would you be more likely to use this traveling alone or in a group? What kind of partnerships might help make this possible (perhaps a public private partnership with the neighborhood chambers of commerce?) Could this actually be a money-making venture if done right? What kinds of costs would we need to look at? Might it even be a victim of its own popularity?

Let me know what you think!

Is marketing evil?

I've been having trouble thinking of what to talk about the last few weeks. Truth be told, I'm not super interested in marketing as an overall subject. I'm interested in the particulars.

Something that does interest me, and has come up quite a bit in class discussions is ethics in marketing. The question "is marketing evil?" is often brought up. I think the answer really must lie in the idea that marketing is simply a tool (or set thereof). It can be used for good and it can be used for "evil," if you will. That is, marketing can be used to discover and satisfy an unmet or poorly addressed need, thereby improving the lives of countless people. Or it can be used to discover where a human weakness can be exploited in order to make money.

Let me try and elaborate: when a company conducts a marketing study to figure out how to sell junk food or cheap toys to children, in my opinion that company is using marketing in an "evil" way. If a startup tries to figure out how to better enable families to keep in touch or stay safe in their cars, marketing is being used for good. Many of the most important technological advances have happened, or at least gained traction, through marketing just as much as engineering. Without proper knowledge of the market and people's needs and wants, a seemingly great idea can fizzle. Even nonprofits benefit from marketing. Fundraising is greatly improved through effective research and outreach. Inversely, a firm understanding of current trends and desires (and maybe brainwashing techniques) can make a useless gadget or toy sell like hotcakes. Ever seen a Furby?

Some amount of marketing is nearly always essential for the success of a business, and it's pretty clear that there are a huge range of businesses with a wide range of goals and ethical standards. Regardless, I'm excited to learn more about how marketing can help regenerative business to be an effective force for improving our world.

Super Sunday

I'm totally fried from this week's quizzes and case study. I'll be writing my post tomorrow.

Decisions, Decisions

Like most teams, my project group has had some difficulty making some of our decisions over the last few months. To be fair, we've done a fairly good job of making smaller decisions regarding tasks or even individual roles. But coming to a consensus on bigger content-oriented questions has been difficult at times, and set us back on the project timeline. Last quarter we didn't pick our problem statement until about a month into the quarter, and we're still picking the organization we'll be auditing this quarter.

So what goes wrong to cause decision-making so difficult in teams, and what can be done to make these decisions easier?

We decided to read "when teams can't decide," an article by Frisch in the Harvard Business Review.

Frisch argues that one of the big problems is that many teams don't ask the right question when a decision needs to be made...

He also talks about the executive decision when an impasse is reached, and how it can lead to resentment and lack of buy-in.

So how can teams come to a decision that will be accepted and embraced by all the members? In a group of four like ours, this buy-in is extremely important.

I think we'll need to frame the question and desired outcome better. What exactly are we looking for from the organization we pick? Do we want an organization that is a leader in the field so we can build on what they're doing right? Maybe we want a company that is making good money? Maybe we want to look at an organization with the same mission statement as us but which is struggling so we can make some helpful recommendations? Or maybe we want someone who will be excited to work with us and share lots of information.

If we can agree on some criteria first, then I think that picking an organization will be much easier.

Back at it with an interesting concept for student loans!

Hi everyone! After a nice long break it's time to get this thing going again.

Having learned last quarter about the current systems in place keeping so many low income students from finishing college, this quarter we will be looking at an organization that is currently working to address this problem. We will then recommend changes that would make that organization more effective.

Something my team discussed at a recent dinner was the idea of tying financial aid to personal and career counseling. As we found last quarter, two of the most important reasons for college graduation failure are finances and stress. What if we could kill wo birds with one stone? What if we required that, in order to receive a low-interest loan, a student must meet with a counselor twice a month to work on personal issues holding that student back? Could we assure financial stress relieve coupled with significant improvement in stress management and life skills? Could this significantly help with college graduation rates for low income students?

First, we need to answer a few important questions.

How do we sell the idea to investors?

Investors want to have reassurance that either their investment is low risk, or that their risks are balanced by a high potential payoff. I believe that the former would be the main argument we'd have on our side. Here's why: Most of the risk involved with student loans is the threat of missed repayment. Students who don't graduate have a hard time finding a good job. If they don't get a good job, then they can't repay their loans. If we can do something to significantly increase graduation rates and get good jobs, even if that costs more, we can increase repayment and potentially offer loans to students traditionally considered "riskier" and offer lower interest rates. I believe the costs of providing counseling would be minor and be offset by higher repayment rates. But even more importantly, this could make significant strides in lifting low-income students out of poverty.

What would the students be coached in?

Personal development, career development, study skills, stress management, relationship management, and financial management would be a few of the areas in which any student would greatly benefit, but especially a low-income student. The content would be similar to what we focus on in Leadership and Personal Development at BGI, but tailored to undergraduate students. Counselors would be trained in and focused on helping students to graduate and find a successful, fulfilling career. Upward bound might provide a useful model for coaching and counseling students.

Of course, there's still some research we'll need to do, such as the effect of counseling on student graduation, typical student loan rates, and the cost of providing counseling, but I believe this may be a great opportunity to greatly impact the lives of many students and begin to address income inequality in our country.

 

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Consumer Christmas

[This post was meant to be written on December 9. Instead, I waited 'till the eve of the apocalypse for additional emphasis.]

After weeks of academic writing, it's time to let my hair down a bit and share some opinions! I just finished my Christmas shopping. All in all I think I spent $160 dollars, mostly on useful new things, some made-in-Seattle candle holders, and a few vintage records.

However, by tradition, my maternal extended family insists on a yearly $50 gift - we draw names from a hat and give that person something they probably don't want or need, since it would be rude or shameful to ask for something specifically. And besides, Christmas is about extravagance, not usefulness. It's the most shoppingest time of the year!

This gets me thinking about consumerism in our culture. Last week (let's call it that) I wrote a bit about gross national happiness as an alternative measure to GDP. Consumption is a major driver of GDP in America, and the holiday shopping season is often touted as vital for the American economy. Christmas has the power to create jobs, defeat the terrorists, and save America from certain doom!

According to a recent Gallup poll, Americans on average plan on spending $770 on Christmas gifts this year. 30% plan on spending more than $1,000. While this is off from the 2007 peak of $866, this is still a lot of money and will certainly put a dent in the finances of many Americans. So why do we spend so much on Christmas?

Are we Brainwashed?

Think about it.

Ho-Ho-Hos

Garland

Giant Red Bows

Twinkly Lights

Candy Canes

Jingle Bells

The Smell of Freshly Cut Fir Trees

It's like one giant Pavlovian orgy intended to get us to spend all our money in one month. At the first three notes of "Deck the Halls" we're bending over and asking how much it'll cost us. Then we wake up the day after Christmas and ask ourselves why Christmas just didn't feel like Christmas this year. Wash, Rinse, Repeat.

From our first winter as a child, we are brought up to expect magic every year on December 25. We're told tales about a big fat man with a beard whose sole purpose in life is to stealthily give us useless toys in exchange for some cookies and milk, so long as we're good for the two weeks leading up to Christmas. It's all an elaborate bribe as far as I can tell, perpetuated by the companies who profit from our out of control spending: advertising agencies, toy manufacturers, Macy's, Walmart and Target.

Is Christmas really that great for the economy?

A CNN Money article (from Canada where they're experts on Santa) discusses this question and finds that, with so much of our money going to Asian manufacturers, the economic impact of Christmas may not be as significant as we've been told. Add in the argument that our money is being spent inefficiently on things with little use while building up debt that will hamper future spending, and the case for the Christmas boom sounds a little bit shaky.

And of course this is ignoring the immense environmental impacts of an elaborate Christmas. For instance, how much of our wrapping paper and ribbon is simply thrown away after one day of use? How many gifts are manufactured using coal, shipped to America using bunker fuel, and trucked to warehouse, store, and home before sitting idle and useless in a closet until they are rediscovered and thrown in a landfill? Could this energy and money not have been used for something worthwhile? Paying off household debt, for instance, or donated to a charity? And of course all of this is mere distraction from the things that make the holidays meaningful: goodwill, family, charity, and staying sane during the dark of winter.

An alternative Christmas

I fully intend to institute a gift-free Christmas next year, in order to focus on those closest to me. Eggnog, twinkly lights, candles and a wreath should be enough to have a cozy Christmas with loved ones. I'll just have to see what my family thinks about breaking with tradition.