Stuck in Merrill Lynch beneficiary hell

The Thinker by Rodin

It sure is nice to inherit some money. Good luck in collecting it, at least at Merrill Lynch.

My father passed away in February 1. Some weeks afterward our stepmother told us we were beneficiaries to some of his accounts. It turned out to be a fair amount of money, considering there are eight of us, roughly $80,000 each. My sister spent a few weeks on the phone with M/L going in circles. Frustrated, she asked me to be the family’s liaison. She still has a job. I am retired.

Sure. Whatever. I’m used to playing the good brother role and I did have the time. And boy it sure takes time if you mean going around in pointless circles. They are clearly loath to let go of Dad’s accounts. In fact, it’s hard to imagine how they could make it any harder to claim money that is rightfully ours.

Over more than thirty years my father had a relationship with “Lee” at M/L, who apparently owns a brokerage under the M/L umbrella. Over the decades a lot of things have happened in this industry. For M/L, already a huge and impersonal company, it meant being acquired by the world’s largest and most uncaring bank: Bank of America. This is something I learned later on. Had I known, I would have taken it as an omen of what was to come.

It sounded pretty straightforward. Dad had about 28% of the funds he wanted to bequeath us in a simple account, a “Cash Management Account” to use the M/L term. The rest were in Roth accounts, which were tax advantaged. So you would think it would be pretty simple: sell any mutual funds in these accounts, divide the totals by eight and cut each of us a check for that amount.

Ha ha! Of course not! The first set of excuses I got when I made my initial queries was, “It’s tax season, we’ll talk to you after April 15.” They were so busy in the M/L office that they can’t be bothered to help us with this, at least not while they have clients that want to give them money rather than take it away. To say the least Molly, the lady I spoke with, was curt. Feeling a bit ticked off a few days later I dialed Lee.

Lee was all sunshine and light, expressed condolences and said this wasn’t that big of a deal. He’d have Molly send me the forms we needed. One ripple was that since the Roth funds were tax advantaged, we might want to set up inherited Roth IRA accounts. Or we could take the money as cash. In any event it’s an inheritance. No taxes to worry about.

So many of us dutifully decided to set up inherited Roth IRAs, a puzzling process to learn about and hard to set up as you need a death certificate. As for that Cash Management Account of Dad’s, my sister sent me the forms she had. They required notarization. It took some time since there are eight of us but we all found notaries. They sent the forms to me. I double checked them and mailed them in as a batch. Given their importance I sent them certified mail so they couldn’t claim they got lost in the mailroom.

A couple of weeks later after hearing nothing I inquired about them. Molly looked at the forms and said, oh, these aren’t the right ones! I pointed her to emails we had gotten saying they were the right ones. Oh, but that’s a Merrill Edge form (a subsidiary of BankAmerica.) They don’t accept that form because they are Merrill Lynch, not Merrill Edge. Somehow I managed to not raise my voice because it was no small matter of time and expense by eight of us to get all these forms signed, notarized and sent in. Okay, I said, what form do we send in then?

Well, there is no form, Molly replied. You write a letter listing the shares you are entitled to, get it notarized and send it in. Do you have a sample? Oh no, we don’t do that. You have to do it. How do we know it will be correct when we send it in? Well, underwriting will tell us if it’s okay. Oh boy, eight of us, all doing individual letters, with numerous back and forth letters, no guidance, until maybe we crank out one they would accept. And no one will get anything until all eight of us do it correctly. So this isn’t going to work. Well, it’s how we do things. After another chat with Lee he agreed as a “special exception” to give us a sample letter with an attached spreadsheet that listed shares and cash we were each entitled to. I guess they expect their clients to hire CPAs to do these things.

Some weeks passed during which Molly went on vacation. Eventually after dodging calls for a few days I got her on the phone. I learned they could not cash out the funds in the Cash Management Account. My father had requested an “equal division”. In their minds it meant we all had to get proportional shares of the mutual funds in the account. They couldn’t just mail us a check. We needed each to have a broker that would take these funds.

After much back and forth I learned that dividing these shares by eight of us meant there were fractional shares left over. Fractional shares could not be passed to us and would have to be sold. We all had to get whole shares. I figured they would want us to send notarized letters saying it was okay to do sell these fractional shares. Surprisingly they let me as my family’s spokesman authorize it. Of course, they could have volunteered this information weeks earlier, but did not. You have to persistently dig for it and if you ask the right question they will give you the right answer. They won’t volunteer anything. God forbid they give you a document that explains the whole process with a simple checklist to follow.

They suggested we all set up Merrill Edge Cash Management Accounts to make it easier to get the money. Of course this also has the advantage of keeping the money inside the Bank of America Empire. So I tasked my siblings to set these up. By this time of course they were spitting nails. The last thing they wanted was some sort of Merrill anything account. But it looked like it could save months or years of runaround, so I requested they each set one up anyhow. They had a contact in their office that was sometimes available who could set these up. Some siblings gave up in frustration when calls to this lady were not returned and called their local office or set one up online.

Molly said that their system wouldn’t show them our Merrill Edge account numbers unless their office set them up. I assumed she was going to complete the draft letters and put in the exact numbers of shares and our account numbers. When I asked, she said I was supposed to do it. Naturally this was news to me. I now have all these forms done and will mail them out to my siblings, who must get this second set notarized. Except only the letter must be notarized. The attached spreadsheet just has to be signed and dated.

I’m betting that when these all arrive at M/L they’ll find a reason to kick them back and we’ll have to start all over.

Then there are my Dad’s two Roth funds. Here to speed things up we were encouraged to cash them all in. My siblings were fine with this. I had researched the funds in these accounts and they were underperforming funds. Granted my father was chasing stability instead of market trends, but of the five funds I looked at three were real laggards compared with the S&P 500 index and all came with more than 1% annual management fees. Jeebus! Well, at least if we cashed them in we could hardly do worse than how they managed these funds!

But they wouldn’t sell the Roth funds until each of us called them personally and okayed it. That took some time. To “speed up” the process I was told to send drafts of the Roth withdrawal forms I got from my siblings so they could flag errors. I sent them electronically on May 20. There they sit, still waiting to be reviewed. Molly says their staff of four is down to 2 and she is so busy but she hopes to do it next week. Doubtless they will find errors that will have to be tediously corrected. But if I get them all corrected then I can send in this batch of forms and in theory there should be no issues so they can disburse the funds. I’m fully expecting I’ll send them in and they’ll find a reason to kick them back, something they haven’t explained before. We’ll see but it depends on poor overworked Molly actually deigning to review our forms.

In short, it’s a messed up and confusing process. In fact, it’s not a process at all. It seems they make it up as they go along. It seems likely that they are paid based on the assets in their accounts and they don’t want to lose them. Only with persistence, firmness and summoning your inner Donald Trump can you collect and I suspect we are nowhere close to getting our shares. They won’t volunteer anything. Meanwhile siblings who could use the money so it can grow for their retirement can’t get it. Not that M/L cares at all.

I have no idea if this sort of hassle is typical in the industry, but I can say to avoid M/L at all costs. If you have beneficiaries for accounts, ask to see their process for distributing funds and make it known to the beneficiaries. Make sure the process is straightforward. My Dad didn’t do this. The inheritance was a complete surprise. But being a beneficiary doesn’t mean much if you can’t actually get the money.

I am expecting before this is over we’ll be filing a lawsuit. It will probably go into the bottom of a long queue of similar lawsuits all from angry people like me simply trying to collect money intended for them.

The Walmart egg cracks at last

The Thinker by Rodin

Walmart protesters like me are cheering, somewhat tentatively. We are celebrating Walmart’s announcement this week that it is raising its starting wages. Walmart will boost starting wages to $9 per hour this year and it will raise them to $10 per hour by February 2016. $10 an hour is still not a living wage, but it is at least a start in the right direction. In addition, Walmart is changing policies to allow more predictive schedules for its employees, many of who are part time and many of who have to struggle their Walmart schedules with other job schedules. Employees will know more than two weeks in advance what their hours will be and when their hours will be. In addition, those desiring more hours will be able to request them. This good news is trickling up. Department managers will get a raise too, up from $13 an hour to $15 an hour.

So hip hooray, for Walmart, but certainly not a hip-hip hooray. Walmart has obviously been assessing the optics of its labor policies for a long time. Organizations like Making Change at Walmart have given widespread attention to their lagging wages, and the hassles and often brutish conditions that their employees endure. This included some strikes, sit-downs and walkouts, not to mention Black Friday protests such as I helped organize last year. It is quite likely that without these events there would have been no announcement this week from Walmart.

I have been focusing on Walmart’s unfair labor practices for many years because I believed it was where the fulcrum of labor change needed be applied. This is because it is the nation’s (if not the world’s) largest private employer. So affecting real change in Walmart was likely to have a nudging effect on all the other private employers out there. Indeed, that is the expectation. There is at least one Walmart in any community of size. $10 an hour may still not be a living wage, but when someone looking for a job has a choice between Walmart at $10 an hour and washing dishes at an Applebees at $7.25 an hour, they will go with Walmart. Walmart gets a richer set of potential employees to choose from. To compete at some point Applebees has to raise its wages too.

Unquestionably some of this is due to the improving economy. With the official unemployment rate at 5.8 percent and many disaffected people rejoining the labor market each month, the labor pool is tightening up at last. A number of employers have been proactive. Costco and Wegmans have long paid their starting employees a living wage and not coincidentally have prospered. Starbucks, Gap Inc., Hobby Lobby and IKEA have all seen this freight train coming their way and recently raised wages. Walmart then is something of a laggard. However, due to its size it has sent a signal that other employers must respond to or have their businesses put in peril.

I doubt that the bean counters at Walmart have figured this out, but raising their employees’ wages is good for their bottom line as well. Most likely much of the raises will be spent at Walmart. As starting wages are raised nationwide Walmart stands to increase sales, as they cater to value customers that come predominantly from the middle class, working class and poor. Happier employees are likely to be more productive as well, which means that Walmart’s notoriously poorly stocked shelves may be less so in the future.

It also means, however marginally, that money which would have otherwise gone toward the rich, where it is unlikely to be spent, will instead go toward the working class, where it will almost certainly be spent. In short, it will mean that the economy will grow more than it otherwise would have. Since the United States leads the world economy, our greater prosperity and our demands for goods and services will spur the world economy, the beginning of a virtuous cycle.

None of this should be news, but it may be to those who favor austerity. Walmart’s and all employers’ low wage policies are ultimately self-defeating. Low wages create high turnover and lower employee morage. Low wages do not build employee loyalty and give no onus for employees to be productive. Low wages make employees feel used instead of valued. It creates unnecessary conflict between employees and management and creates the conditions for labor to organize that employers don’t like. It taints businesses by projecting them as cheap, uncaring and harsh.

It also tends to stifle business creativity. Fast food restaurants like Chipotle are prospering by offering fresher, tastier, trendier and more natural foods. Chipotle’s simple use of a cafeteria line moves customers through more quickly and more cheaply while allowing them to pay employees more while needing fewer of them. In short, this makes them more productive and profitable. McDonalds, which has used the counter methodology for its more than sixty years in business, can’t seem to rethink its business model in such obvious ways. Clinging to tradition rather than embracing change is a major reason for their lackluster sales.

Employers that demonstrate that they value employees in the form of living wages set up a virtuous cycle wherein higher profits are a probable outcome of a generous corporate philosophy. Walmart is beginning to dimly grasp this but in fact this is what worked for American for most of the latter half of the 20th century. In truth, Walmart’s profitability is centered on its ability to treat its employees with respect through living wages and humane working conditions. Without employees it simply cannot survive. It needs to see its employees as invaluable and treasured assets, not as commodities. Living wages are the primary way to demonstrate this. Then Walmart may see sustainable increases in sales and profits again.

A taxing situation for Intuit and TurboTax

The Thinker by Rodin

Corporations of course are out to make money, but surely one of the first things you should learn when you study for an MBA is not to antagonize your loyal and profitable customers. TurboTax is by far the largest selling income tax software out there, in part because it was the first to market. I remember you could buy TurboTax for MS-DOS back in the 1980s. TurboTax apparently decided to screw the pooch this tax season by deprecating a lot of features in its TurboTax Basic and Deluxe versions that have always came with the price.

It sure was a shock for me when I got down to the part of our form 1040 where I report self-employment income and it politely informed me to pony up an extra $40. It also wanted me to pony up $35 to create a Schedule D. (I wasn’t sure I needed to, but we did convert some stocks to cash last year.) My reaction was unprintable but I can give its acronym: WTF???

I sat in my chair kind of dumfounded. Basically, the $39.99 TurboTax Deluxe software I bought was unusable to me. Even if I downloaded the self-employment income forms from the IRS and filled them out myself, there was no way to integrate the numbers into TurboTax Deluxe to calculate the correct refund. I either had to give them $40 more or buy some other tax software. This was after having invested a few hours already putting in much of our income into it.

Okay, caveat emptor. I could have read the box carefully before buying it. But after twenty years or more of using tax software and with the features of each version never changing, I just picked up the box at my local Costco and threw it into my shopping cart assuming nothing had changed. (That was the first mistake. I bought a CD and my new iMac doesn’t have a CD drive. So I had to call TurboTax and download a version of it. Curiously, they never asked me to prove I had bought it. I guess this is one way to get a copy of it free, if you are unscrupulous.) My mistake though was completely understandable because it never occurred to me that a company with a reputation like Intuit would do such a brain-dead thing. Maybe they could have named it TurboTax Deluxe Lite or something, to clue us in. You don’t often see a company screwing the pooch, and this was more than just screwing one pooch. It was screwing a whole kennel full of them!

The firestorm on social media has been unforgiving. However, when one company chooses folly, smarter and more agile companies try to move in for the kill. H&R Block quickly figured out this was the way for them to earn some new loyal customers and market share, at TurboTax’s expense. H&R Block has always been Pepsi to TurboTax’s Coke. I suspect a lot of TurboTax customers had no idea H&R Block even sold tax software, so automatic is it for them to reach for the TurboTax box. They do, although until a few years ago their software was simply known as TaxCut. Most of the time I used H&R Block tax software, but I like to vary the software I use, as the price tends to be the same. Last year I tried an online solution, It was okay, but I noticed it missed a few things, so I decided to give it a pass this year, even though overall it cut my tax software costs in half. For those of you with simpler needs, you might want to give it a try.

H&R Block at least knows how to be agile. All you have to do is prove that you purchased TurboTax Basic or Deluxe and you can download a copy of their version for free. (It takes a couple of days to get the link to the software.) Accept their generous offer and guess whose tax software you are likely to buy next year, especially when TurboTax filers discover there is no big difference between the two, but H&R Block doesn’t screw its customers? I’m sure one of the first things they will do (after giving you the software for free) is collect your email address and remind you next year to buy their software.

Anyhow, Intuit CEO Brad Smith (Intuit also makes Quicken, which I use) finally figured out that he made a catastrophically stupid mistake. He is promising that customers with these versions won’t have to pay to upgrade, although Intuit is not agile enough to figure out how to do this quickly. Meanwhile, those customers that did pay extra for features that used to come with the product can apply for a $25 rebate, which is $15 less than the cost of the upgrade. Presumably the rest of it will come in time. You can see an amusing and self-deprecating 3:28 video of Mr. Smith saying he’s sorry here.

CEOs of course are responsible to shareholders, and doubtless he was trying to meet their expectations for increased profits. It all made sense on paper; it just failed the common sense test. What’s amazing is that he did not figure this out until after his mistake. I have a hard time believing his underlings did not question his decision.

For voyeurs of business mistakes, this is a whopper. For me, it not only pissed me off but eventually amused me too. There has been a dearth of philandering politicians to criticize lately. In the annals of bad business mistakes there have certainly been worse things, like the Deepwater Horizon oil spill which soiled British Petroleum’s reputation and much of the Gulf of Mexico not to mention it also killed millions of animals. There was also Dow Chemical’s 1984 Bhopal Disaster, which killed 3,787 people in Bhopal, India and exposed more than half a million Indians to methyl isocyanate. Both of these incidents were preventable too, but not as obviously preventable as this public relations disaster by Intuit. All it required was to put customers first.

I got to say, Intuit had it coming.

IBM: The Dilbert of companies

The Thinker by Rodin

We all BM

HARLIE (the computer), from When HARLIE was One, by David Gerrold

I grew up in an IBM town. IBM pretty much owned Endicott, New York when I lived in the area. The exception was the Endicott-Johnson shoe factories, which were in serious decline in the 1960s. In fact, IBM was founded in Endicott, New York in 1911.

Big IBM-white boxy concrete buildings line McKinley Avenue and other Endicott streets. If you didn’t work for IBM, you prospered from mooching off of IBM. IBM guys were cool if white guys in white shirts, black pants, narrow ties and short hair could be cool in the 1960s. In any event they lived well, worked hard and gave their all to the company Thomas J. Watson founded. It sure looked like a cool company to me back then. Not only did they rake in all these billions in revenue, but also their employees were happy with terrific pensions, great salaries (because IBM hired top talent only) and had pretty much a guarantee of lifetime employment. Management actually listened to their employees and encouraged them to be creative and innovative. The guys (and they were almost all guys, except in the clerical or punch card pool) wore THINK buttons on their suits and shirts. It was embedded in their logo — so much so that it was hard not to associate IBM with THINK (in capital letters).

That was then, but it bears no resemblance to the IBM of today. At least that’s my conclusion having finished Robert X. Cringley’s eBook on IBM, The Decline and Fall of IBM: End of an American Icon? Cringley has been a tech journalist since the 1980s, and made a name for himself (under a pseudonym I am pretty sure) writing for InfoWorld, the tech publication that focuses on information technology in the enterprise. I credit InfoWorld for much of my career success, since it was always topical and ahead of current trends, plus it told me stuff I needed to know to succeed in the workplace of the moment.

InfoWorld is still around, but its print publication is long gone. So, in fact, is Robert X. Cringely. Well, not quite. You see, there are two Robert X. Cringleys. There’s the guy that wrote the original columns over many years, and then there’s the trademark “Robert X. Cringley”, which InfoWorld claims to own. So there is still a reputed tech spy named Cringley on, but not the real Cringley, the tech guy that amused us with likely fictitious anecdotes about his relationship with “Pammy”, a curvy younger woman that ran hot/cold. Reading his column was half neat behind the scenes tech news, and half soap opera. It was fun and addictive. Anyhow, the first and legitimate Cringley, now 60+, is still one of the few people doing honest information technology journalism, and can be read on his website. And I assume the model in the picture is “Pammy”.

Cringley has been studying IBM for a long time, having grown up in an IBM town like me. He believes the company is ready to implode. This is because, very sadly, the company has morphed into the Dilbert of companies. It is overrun by pointy-haired bosses that are busy working their employees into early graves, if they are not being summarily fired to hire greatly discounted and frequently incompetent employees from India who largely have no idea what they are doing, or who have mastered the idioms of American English.

From the perspective of Wall Street, IBM is doing great. The managers are doing a great job of increasing their earnings per share quarter after quarter. It’s a metric they are focused on like a laser beam. You know what the problem is when you focus: it distracts you from the rest of the world. As Cringley’s analysis points out, the things that should matter about IBM are simply being ignored. It’s crazy what its managers are doing to its core assets, not to mention its employees. They are burning the seed corn, to use an analogy from the Civil War. For many years they have been relentlessly firing their best employees, mainly because they cost too much. They cut pensions and eventually did away with them altogether. They outsourced a lot of their work overseas, adding huge communications barriers and dispensable employees, who were often just cheap contractors, to handle technical interactions with their global services customers. These are very profitable customers that need a long-term relationship with a tech firm to manage their complex systems. To do this right, it requires a deep understanding of their technical needs, their business and a rigorous, engineered approach to managing their complex technical infrastructure. Done right these are hugely profitable customers for life. They used to do this right, and now it’s hard to find an example of a company that does it worse, or charges more for the privilege.

Sadly, the more you read of this relatively short eBook, the more appalling the whole thing becomes. (It’s a quick read and at $3.99, this self-published book that no publisher would otherwise touch is also a bargain. About half of it is an appendix of comments he has received over the years.) It doesn’t take much reading though to discover what the real problem is: managers come exclusively from the sales ranks, not the technical ranks. Consequently overall they have little clue what their customers want, and lack the creativity to direct their employees to give them what they want, or even bother to ask them. Moreover, it has more bureaucracy than the federal government, so many incredible layers of hierarchical management, despite implementing a flawed version of the Lean efficiency program.

Managers and employees often widely geographically separated, causing stilted communication that adds cost and delay. Not that employees have the time to give feedback. They are kept working like slaves: sixty or more hours a week, for now below par industry wages and they are massively overcommitted, with the grim reaper of outsourcing always at their heels. Their customers are being pick pocketed too: they pay highly inflated prices for crappy services, made worse by contracts based on billable hours that are often inflated. The smarter customers have moved on, which is fine with IBM. They then lay off more employees, which helps increase earnings per share, and Wall Street applauds because they equate this with good management.

Cringley has solutions but IBM’s leadership has proven both tone deaf and hostile to creating growth again in the company. As for listening to their employees, they simply can’t be bothered. Which means that IBM is a shadow of its former self. And this has been going on for a decade or so. I know people who have been laid off from IBM. As I read Cringley, I wonder why they didn’t bail long ago. In many cases, it’s because they are in their late 40s and 50s, and it’s hard to find a job that pays as well or even at all.

IBM is also buying back tons of its own stock, often with borrowed money, simply to prop up its earnings per share. No one seems to be looking at its sales and how they have been dropping, and how many of their largest customers have gone elsewhere. No one, least of all its management, is looking at the quality, innovativeness, or value of its product lines. Management simply isn’t interested.

What is IBM management good at? It’s good at creating Potemkin Villages: shells that look good to outsiders, but with hollow or non-existent insides. Its major advantage is a huge legacy of accumulated cash from its glory years that lets it hide its inefficiencies and which they apparently won’t invest in innovative products and services. Touring Endicott, New York, where only a couple hundred of the thousands that it employed in its glory days remain, easily demonstrates its hollowness as a corporation.

Cringley’s analysis, and it’s voluminous as well as filled with insider dope, is unfortunately right. I don’t invest in individual stocks, but if the price of increasing earnings per share is to piss off its customers and stop creating products that lead the market or offer greatest value, then it’s only a matter of time before its house of cards collapses. From the looks of things, it shouldn’t be too much longer. It won’t matter to its managers. Much of their pay is based on IBM’s earnings per share so their prosperity is already assured, so in some sense they are betting on failure. By tying pay to earnings per share, IBM embraced a false Wall Street value. Real growth and real value comes from companies that innovate, like Apple Computers. IBM is proving to be the stodgiest and most tone deaf of companies. The Davids of the corporate world have already hit this Goliath with a rock on the forehead. Goliath simply hasn’t figured out that he is falling to the ground.

At the start of the book, Cringley relates a real story. As a child in the 1950s he had a great idea that he took to IBM. Thomas J. Watson himself read and forwarded his letter. He actually got an interview with a group of IBM engineers. To say the least those days are long gone. Watson should be rolling in his grave. Most likely though IBM executives will remain clueless until Wall Street finally notices, and the company collapses into a bunch of sub-prime parts that get sold off by ticked off stockholders. Pretty much any company out there could do a better job of managing these parts than IBM.

I hope you will read Cringley’s book. It doesn’t take long and should make you cry, particularly if you knew the IBM that used to be. It should also make you very angry.

The power and profitability of treating workers with dignity

The Thinker by Rodin

It’s taken a few years but striking fast food and Walmart workers are slowly getting some national attention. This Black Friday there was a continuation of strikes and protests that happened on Black Friday 2012, only bigger, with at least 111 protestors arrested around Walmart stores nationwide. Organizers at Our Walmart, a group organizing Walmart workers (I have given to their strike fund) claim 1500 actions at Walmarts nationwide, up from 400 last year.

One-day strikes at fast food restaurants, which used to be rare, are now becoming routine as well. Just the other day a strike was held by workers at a McDonalds inside the National Air and Space Museum here in Washington, D.C. The workers there are making the minimum wage of $7.25 an hour. You would think that since these are federal facilities, contracts with fast food vendors would require contractors to pay their employees a living wage. But you would be wrong.

Even Walmart would agree that the facts prove their minimum wage jobs do not pay a living wage. Studies of various states routinely show Walmart employees as the largest group of recipients of food stamps in the state. Unsurprisingly, McDonalds is usually number two. On their employee web sites, both Walmart and McDonalds suggest their employees utilize public subsidies to increase their standard of living, a standard of living they refuse to provide.

This week in Washington D.C. the first two Walmarts opened in the city. There was much rejoicing, but not because their employees were going to be paid a living wage. Walmarts in the city mean that the city’s voluminous poor no longer need to take long and expensive subway and bus trips to the suburbs to get those Walmart low prices. It’s increasingly obvious though why their prices are so low. It’s because Walmart doesn’t see a point in paying a living wage when the government will keep their employees from starving for free. Food stamps will help provide basic nutrition for their employees, and Medicaid will provide health insurance of a sort thanks to the Affordable Care Act. In fact, don’t expect Walmart and McDonald’s lobbying firms to be pressing the government to get rid of food stamps and Medicaid. Their business model and profit forecasts depend on them.

What’s particularly infuriating though is that both of these employers could easily pay their employees a living wage and still make stockholders happy. They just choose not to do so. Various studies have looked at the cost of these benefits versus their profits, and it is easily affordable. They just see no point in doing this because federal subsidies effectively take taxpayer’s money and give it to their shareholders instead. And this is because we have no law that says employers must pay a living wage.

Critics of those proposing a national $15 an hour minimum wage simply say this means that employers will cut jobs. After all, they can hire two people at $7.25 an hour for one person at $15 an hour. The problem with this logic is that you cannot actually survive on $7.25 an hour without public subsidies and likely a second or third job as well. Naturally, this doesn’t bother these employers. They are in business to make money, not to be sensitive to their employees’ feelings and wallets.

If all public subsidies were removed tomorrow and the minimum wage was not raised, these employees would be showing up at work hungry (as many already do, particularly toward the end of the month) or, more likely, would have no fixed address because they could not afford rent. Their unwashed condition would probably not allow them to be employable at all. Which goes to prove that a minimum wage is not a living wage. Instead, it is a recipe for continued poverty.

There are reasons that even a Republican should embrace for paying a living wage. For those who think the government should do less, making employers pay a living wage means that federal and state governments don’t have to provide food and social services to these low wage earners. It reduces the costs and scope of the federal government.

It also ends indirect corporate subsidies. It allows companies to prove that they really are more efficient than other companies by removing the incentive toward employee inefficiency that comes with government subsidies. Think about McDonalds today and compare it to McDonalds thirty or forty years ago, if you are old enough to remember back that far. I am old enough and I can tell you for a fact very little has changed other than the menu has gotten unhealthier and the cash registers are now electronic. For forty years McDonalds has not really rethought how its restaurants could deliver better food, do so more efficiently and — here’s a crazy idea — with some actual employee engagement.

Yet Costco has found a business model that more than pays their employees a living wage, and still allows them to thrive as a business and be a leader of low prices. What incentive does Sam’s Club (a subsidiary of Walmart) have to prove their mettle when Costco can do what it refuses to do and Walmart’s profits can be boosted by government subsidies to its employees?

Perhaps most importantly, any employer worth his salt has learned long ago that employees will be more productive if you make it worth their while. They must have missed those videos by sociologist Morris Massey, such as this clip you can see on YouTube. If you want to get the best from your employees, listen to what they have to say.

It’s not that Walmart and McDonalds employees are unproductive. They are like a hamster on its wheel. They always work at top speed because they are always being monitored. They are also being told exactly how to do their job with no ability to be innovative. So mostly, they burn out or turn dull and unremittingly sullen. You can’t keep this up forever at $7.25 an hour so you will tend to quit. Even if the next job only pays $7.25 an hour, you quit on the hope that maybe you won’t have to run so quickly on the wheel with the next employer.

These “associates” have no particular loyalty because they are not given any incentive to be loyal. Give them incentives, in the form of higher pay, more interesting and challenging work, and by incorporating their ideas into the business, and you might earn some loyalty and by extension more profit. More importantly, you unleash the power of their imaginations. They’re not stupid and have plenty of great ideas on how to do things better, just no incentive to divulge them. Leveraging their ideas is a great business model. With Costco’s living wage they became keys to Costco’s success, and the key reason Walmart’s revenue stream is suffering.

The slaves on southern plantations gave all they could as well, and generally resented it. At some point they either rebelled or simply gave up. A death by beating is at least an end to suffering.

Walmart, McDonalds and most of these retailers and fast food outlets simply suffer from a poverty of imagination. The way to a sustainable business model and a happy workforce is to stop treating their “associates” like cogs in the great wheel of business. Instead, treat them as people with actual needs, like the need to have a roof over their heads and food to eat.

As a matter of public policy, there should be a national minimum wage guaranteed to be a living wage and it should be indexed automatically for inflation. It should probably vary geographically depending on the local cost of living. For those employers too unenlightened to understand that real profit comes from harnessing the minds and creativity of their employees, it at least sets a bar of decency. Any businessman worth his salt will be anxious to pay their employees more for the privilege of leveraging their thoughts and creativity to make their business thrive long into the future.

SuperShuttle: Have you no shame?

The Thinker by Rodin

No, I suppose not. You are a business, after all, and businesses are all about making profits through all means fair and unfair. So this article should not have surprised me. Yet it made me, a mild manner person, so irate I wanted to throw a brick through the window of SuperShuttle’s corporate offices.

SuperShuttle of course is the ubiquitous blue van found in many U.S. cities. They exist principally to get travelers to and from the airport. I fly reasonably regularly, mostly for business, so I cannot help but be acquainted with SuperShuttle. Most often I am on a SuperShuttle going to and from Denver International Airport. Most recently I was on a SuperShuttle from Boulder to DIA on April 1st.

A couple of years back I was chatting with the driver (they tend to be quite loquacious with customers) and I learned that he was not an employee of SuperShuttle, but a franchisee. He was mentioning that he had to take some time off from work to finish his taxes, not a small thing if you run your own business. I remember finding his remarks curious but until today I had forgotten about them. But today’s Washington Post article resurfaced this memory, and the memory of the less than a handful of us passengers who made that trip from Boulder on April Fools Day on a blue SuperShuttle.

It’s clear where SuperShuttle is making its money, and it is principally off franchisees. Holy nickel and diming, Batman! They are more creative in adding fees for their franchisees than TicketMaster is at adding reservation fees, surcharges and Will Call fees. Only it’s not customers who are paying these fees. Shuttle rates tend to stay relatively static. Rather it’s the franchisee. As the Post reporter Emma Schwartz reports it:

Enajekpo doesn’t complain too much. Any money will help, especially this week when he already owes SuperShuttle $1,054.45. There’s a $197.59 fee to pay down his franchise purchase, $179.20 for his van lease, $144.31 to cover insurance and a weekly $500 system fee for using the SuperShuttle reservations and equipment. He also has $33.35 in fees that SuperShuttle charges him for customer discounts or additional booking fees from third-party Web sites.

On top of that, Enajekpo owes SuperShuttle $79 from last week. Plus, he’ll have to pay the company revenue sharing fees — 10 percent of fares for runs to the airport and 27.5 percent for runs from the airport, plus an airport fee.

SuperShuttle is hardly alone in its franchisee model. Fedex drivers are often franchisees, not to mention the guy at your local UPS store.  Many franchise opportunities are great. Others, like apparently SuperShuttle’s, are traps that screw many if not most who sign up on the hope of living the American dream.

Fees are just one way these drivers are screwed, but there are so many other ways to screw them. The most common way, which I witnessed during the two years as a commission salesman, is to saturate the market with salesmen. What it did was turn the sales floor into a dog eat dog world, where salesmen would literally race to be first to a customer entering their sales territory. But at least during my days doing retail, for the now defunct Montgomery Ward Corporation, I was an employee. (The Wards brand was purchased, but it is an online only retailer now.) Granted, my time as an employee would have been pretty limited if I could not earn in commissions more than they had to pay me in minimum wage. But I had certain rights and while I might in theory need to pay Wards back for wages I did not earn in commission, payment would come in the form of a kick in the ass out the door with my pink slip. A franchisee for SuperShuttle is not an employee, thus has no rights, but is legally obligated to pay for the privilege of driving a blue SuperShuttle van, plus those other fees, with no guarantee that he will have enough customers to make it all profitable.

Just as Wards loved to saturate the sales floor with extra salesmen, SuperShuttle has learned to saturate the market with franchisees. They say they don’t do this, but the article makes clear that many franchisees simply cannot make enough money to keep up with their fees, let alone earn minimum wage because they don’t have enough customers. The fees are owed regardless, but curiously there are no corporate guarantees that they will have sufficient customers to earn those fees. The predictable result is that many if not most of these drivers are caught up in a no-win cycle. They are unable to drop the franchise because they have payments to make on their vans for which they are legally liable, and no way to know if SuperShuttle will deliver them enough customers to earn enough money. The predictable results: a lot of bad feelings, angry franchisees and lots of long hours hoping to make up the revenue they need to keep their business afloat.

Some of these franchisees are wondering why they aren’t employees. SuperShuttle used to have employees driving their shuttles, and they had salaries and benefits. The bean counters apparently ran the numbers and determined the company would be more profitable if they were franchisees instead.  The predictable result: lots of franchisees feeling like they have been screwed. They have been. Money is essentially being pulled from their pockets to keep SuperShuttle profitable. It doesn’t appear that SuperShuttle plans to raise rates, or if they do, that they will share more of it with their franchisees. And why the hell would they? They have their franchisees right where they want them: by the scrotum. And why not saturate the market with new franchisees? After all, all those fees just adds to their bottom line.

Franchising has gone too far, but we may not yet have seen its logical end. If Fedex and SuperShuttle drivers can be franchised, then why not airline flights as well? I should probably hesitate to give airlines like United any ideas, but they could charge a franchisee $100,000 a week for the right to run an aircraft with their logo on it, and let them worry about aircraft maintenance, and hiring pilots and flight attendants. United would still control the fare, of course, but they wouldn’t need any stinking employees, in fact they could be in hock to them instead. What a win for United shareholders!

SuperShuttle in fact has gone too far. Apparently in Denver, SuperShuttle drivers have won the right to form a union, but Denver is the exception. Shuttle drivers perform a service, protect the reputation of SuperShuttle, and they will do a much better job of it if they become the employees they actually are, rather than the legal abstraction of a franchisee.

I must be a socialist, but I think there should be legislation tightly reigning rules for franchises. There is a large difference between owning a McDonalds restaurant franchise where you have a store parked at one location where the owner hires his own employees and a SuperShuttle franchise consisting of one guy or gal where you are constantly on the move and have no say about how many other SuperShuttle franchises you will be competing against. These employees-in-essence absolutely deserve the right to be real employees. Meanwhile, anyone thinking a SuperShuttle franchise is going to be his or her step to realizing the American dream should read this article and look elsewhere.

As for me, I discovered that the apparently socialist Denver Regional Transportation District has hourly buses between Boulder and DIA, even early on Sunday mornings when I need to leave, for a $13 fare, less than half of what SuperShuttle charges. They even load and unload your suitcases for you. Moreover, their drivers are employees who earn a living wage. I’ll be on the Route AB bus next time.

4/23/12: Corrected to show that Fedex drivers, not UPS drivers, are often contractors. Also found this video of conditions at LAX:

Governments should not be run like a business

The Thinker by Rodin

It’s hard to listen to a politician today without hearing them tell you that the problem with government is that it’s not being run like a business. For example, Mitt Romney says his private sector experience running a venture capital firm (Bain Capital) was great preparation for being governor of Massachusetts and, he hopes, president of the United States.

In reality, a primary reason our government is as messed up as it is is because incoming politicians have tried to treat government as a business. The resulting mess tends to be ugly and ruinously expensive. As one example, for a couple of decades now our esteemed national leaders have declared that since the private sector can do everything better than the government, we must outsource as much of the government as possible to gain the wonderful efficiencies of the private sector.

Outsourcing the government has been great for businesses, but not so much for government and for the taxpayers. Ask Blackwater. There was a need, they had the product and they had a business model designed to shaft the government. A grunt private, even with pension and various other benefits costs a tiny fraction of the cost of a guard provided by Blackwater. How much more? It’s hard to say exactly, but add in benefits, profit and nice corporate offices in Arlington, Virginia and even the most unskilled guard from Blackwater likely bills at least $100 an hour. A private does not have a problem following orders. It’s not just a good idea, it’s required, even when inconvenient. Failure to do so may result in a courts marshal. Ask a Blackwater contractor to do something not explicitly in the contract and they will either refuse or it will require the payment of some sort of high usury fee.

Businesses are entities designed to make profits. Governments expressly don’t want to make profit because taxpayers resent paying a dime more in taxes than they have to pay. If government were truly run as a business, the IRS would charge processing fees to process your tax return and charge $1 a minute for tax advice over the phone. In fact many of us pay a fee to file a tax return, but the government doesn’t get a dime. It’s private sector entities that add value and profit by facilitating the transaction so you can get a refund faster.

If government charged a fee for every service, it would grow corrupt. How many civil servants do you see driving around in luxury cars? I’m a pretty well paid civil servant, and I’ve never come close to having the income to buy a Lexus. Those few that do are likely political appointees or elected officials, and with luck their crimes will be discovered by salaried detectives and prosecuted by salaried DAs.

Here’s the thing: the civil service works best when people are paid a respectable but not lavish living wage, they are held to a strict and impartial code of conduct and they are permitted to exercise as much independent judgment as their position allows. I know this from working inside it for thirty years. When you get a fair deal, you have incentive to work in the interest of the government. Job security in the government is not something evil; it is a feature of a job that enhances loyalty and makes it easier to put the peoples’ business first. Pay a civil servant too little and there is incentive to take bribes. This is the problem in most third world countries where bribery is rife: no one can afford to live on the pittance that is their actual salary. Corruption simply breeds more corruption. Paying civil servants a living wage solves the problem.

There are so many silly myths about the private sector that you would think experience would have debunked them. One is that businesses are oh so efficient. Businesses tend to be as efficient as they need to be and never more. The ones who are really bad at efficiency tend to go out of business. Small businesses in particular have a hard time at it. People think they are cut out for being an entrepreneur, but in reality it is very hard and the odds are against you. Take a look at the docket at your local county bankruptcy court sometime. Look at the stack of business bankruptcy filings. Businesses fail all the time, some for reasons that suggest incompetency, some because they have the wrong product or service for the market, but usually for both reasons. Every business out there wants to have a lock on a particular market so they can raise prices and reduce quality. That’s why companies like Google and IBM spend significant amounts of money to buy out competitors. They don’t invite competition. They want to cut competition off at the knees. This is done by means legal, legal but unethical, and outright criminal actions which pragmatic businesses do hoping they won’t get caught. An obvious example: companies like Citibank accused of robo-signing hundreds of thousands of home foreclosures.

Maybe that’s fine in the world of business, but do we really want to inculcate this attitude in our government? I would hope not! Government exists to address common societal issues that are not suited to business. Some of the reasons are because they must be done impartially, because the work in inherently unprofitable, and because there are long-term interests that need to be addressed.

This may be hard to believe, but there are some things the government does much better than the private sector. In general, education is one of them. It may be hard to believe when you think about failing inner city public schools, but most schools are not failing and get high marks from parents. There are enormous efficiencies when you can buy textbooks for a school district in bulk, or need to ensure that 10,000 teachers adhere to the same standards, or that your students at least get one healthy and nutritious meal a day in the school’s lunchroom.

The public sector is exceptionally cost effective delivering higher education, as evidenced by state universities near you with well moneyed alumni. A public college tends to be half the cost, or less, than a private college, and often achieve better results. They serve a critical need: making higher education relatively affordable, something the private sector could not do, which is why government created them. Community colleges are an even bigger bargain. I am wrapping up teaching a semester course at a community college. I was hired to teach the course for less than $3000. My students got plenty of individual attention. They paid a few hundred dollars each for the course. It just so happens that a similar course is available down the street from Oracle Education, at a cost of several thousands of dollars. Arguably, my students got a much richer educational experience at a tenth of the cost. Yes, community colleges are bargains, which is why they are expanding like crazy and are one of the growth sectors in this crazy economy. What’s not? Try private colleges, particularly career-oriented private colleges like Kaplan University, owned by the Washington Post. Their success rate is miserable and their costs are high. They do excel at convenience, but they have little incentive to make sure their students graduate. They are after a profit, not the success of the student.

In general, government is a much different domain than the private sector. You want those leading your government to be people who understand this, and understand what makes government work efficiently and effectively. You want leaders who align the government with the current and future needs of the citizenry. You don’t want someone who thinks that a private sector business model will work in this domain. Instead, you want someone who has demonstrated competence leading and managing governments and other non-profit institutions. This leaves out most of those currently running for president. You would be wise not to vote for any of them, because they are likely to leave your government worse off when they leave.

Not so smart on Wall Street

The Thinker by Rodin

I had a feeling that our cruise would occur during an auspicious time. A last minute debt deal at least assured me that I would not be on furlough when I returned home. On the day our cruise set sail for Bermuda, the stock market plunged over six hundred points, the sixth worst point fall on record. Since then the trend has been mostly down, with the Dow Jones Industrial Average down some four hundred points for the day as I write this (August 10, 2011). It feels a like 2008 all over again. Markets are especially nervous about national debts and obligations. The United States is hardly alone. Greece, Spain, France and Great Britain are among those countries that make their creditors nervous. The trigger this time was the downgrade of U.S. treasury bills by Standard and Poors, which last Friday cut our rating from AAA to AA+ status, the first downgrade in our history.

The market is desperately searching for safe harbors for capital, but is finding few of them. Our financial world is riskier than it was. Doubtless with these stock market declines my portfolio has been badly hit. Doubtless I lost my illusory millionaire status. I have no idea if we are plunging into a double dip recession or worse, but the tealeaves that our economy was having difficulty have not exactly been hard to read. Over the last few years, Wall Street has exhibited irrational enthusiasm and drove up stock prices to artificially high levels. It did this largely on hope, probably because recessions typically don’t last too long.

Wall Street obviously discounted the signs that this recovery, at least here in the United States, would be largely an illusion. Yet the signs were clear and unambiguous: an unemployment rate that would budge only grudgingly, a fearful middle class with no extra income, relatively high inflation and political intransigence that ensured that common sense would take a holiday. Standard and Poors finally acknowledged the obvious by lowering our bond rating. It did so not because our ability to pay bondholders was really in doubt, but because our country refuses to find a sensible financial path forward. With the debt ceiling deal, as usual, we pushed problems into the future and did not really fundamentally address any of them. We created a dubiously legal entity called a Super Congress which appears doomed to be dysfunctional. Everyone knows what would really calm the markets: some measure of tax increases to accompany expenditure reductions. This, of course, is exactly where Republicans in Congress will not go. While I am hopeful plunging markets may force Congress to exercise some common sense, it is mostly a fool’s hope. Perhaps the 2012 election will bring clarity, but if I were a betting person I would not bet on that either. So expect the stock market to remain in turmoil for some time.

I remain not too worried for myself as long as I have a decent job. I leave it to my financial advisor to keep me on a sound long-term financial strategy. But I can pretend to be scared like mostly everyone on CNBC, one of the few channels available to us here on the cruise ship. I once opined that capitalism is our true religion. Watching CNBC certainly reinforced this opinion. From watching CNBC, it is hard not to conclude that the financial class is largely a nattering bore, obsessed with the minutia of the moment and largely tuned out to the facts in front of them. There are only a few things that really matter about investing in a company, but you would never know it from listening to these CNBC talking heads. What matters is a company’s track record, how leveraged it is by debt, the opinions of their customers and their ability to innovate products that people want.

Look at the companies that are truly prospering, like Apple Computers. You know that money invested in Apple will probably return growth and dividends over the long run. I have no idea whether their share prices are overvalued or not, but I do know owning shares of Apple means your money is probably not invested down some rat hole. Whereas when you look at other companies, say Bank of America, whose balance sheet is rife with risky subprime mortgages, you can reasonably infer it’s a risky stock in the long term, because it was being managed by short-term profit-obsessed bozos in the mid 2000s when clearer heads were needed. I know I would need a lot of convincing to invest in Bank of America. Fool me twice, shame on me.

Instead, I simply refuse to become obsessed about short term trends in the stock market. To the talking heads on CNBC, that seems to be all that matters. In my opinion, short term investors are basically gamblers. I put no more faith in them than I would on some guy on a winning streak in a Las Vegas casino. Short term investing is a dangerous game. If you have the nerve for that sort of financial life, like many investors tuned into CNBC, go for it, but you are likely to end up losing a lot of money. Instead, us non-financial wizards can save ourselves a lot of angst by investing in companies with the attributes I mentioned above, holding on to them for the long term, balancing our portfolios yearly to meet our financial goals and cashing them in selectively during retirement. These short term market changes always disappear over the long term. The only short term decisions I would make would be to buy solid companies whose stock price is artificially discounted as a result of irrational and wholly short-term fears on Wall Street, but only if I had some spare cash. Presumably my other assets would remain solid for the long term, and I’d want to hold onto them.

I am not a stock analyst. However, I do know a fool’s errand when I see one. Despite the endless blather on CNBC, it’s obvious that even the wizards on Wall Street cannot accurately predict short term trends. In fact, no one can since by definition the future is always unknown. So if you are listening to CNBC analysts thinking they see things you don’t, disabuse yourself of the idea.  Instead, when judging the economy, judge it by the economy you see and experience, which is the one that matters.

The short term market is driven principally by fear and greed, which depend on each other. It’s like an endless game of tug of war and like a Las Vegas casino, the odds are stacked against you by default. Rumors that are widely believed can be as good as gold for a short while, even if they are wholly fallacious. All sorts of short term fools will follow analysts on CNBC and elsewhere and dump perfectly good stocks for potentially risky ones elsewhere. You are likely a better predictor of market trends than they are. After all, these wizards built up stock prices on the hope for a recovery that never really materialized. Once again they have been proven catastrophically incorrect. And yet the economy will truly recover in time. It always has. When it does you want your portfolio to be full of solid and meaningful assets.

Instead, I recommend that you do your best to tune out the daily stock market ups and downs and keep investing in the long term. If you are not someone who wants to waste your time getting into the minutia of stock market analysis like me, then get a trusted financial advisor with the long view who will allocate your investments into funds that are well managed and include companies that have the attributes I mentioned.

New Hampshire’s civil unions decision is good for business

The Thinker by Rodin

New Hampshire’s decision yesterday to allow its gay and lesbian residents to have legal rights equivalent to marriage is not only a just and equitable thing to do. It is also a smart way for the state to keep its economic edge.

Mind you, I think it is terrific that New Hampshire is giving equal rights and privileges to gays and lesbians through progressive acts like legally recognizing civil unions. The religious community will doubtless argue to death the morality of the issue, but it is not arguable from the standpoint of American values. While it took the United States a while to extend equal rights to women and minorities, we eventually did the right thing. It was hard to get past our own Declaration of Independence that declared all people equal in the eyes of the law. Those who dismiss the declaration as a historical but not a legal document need only look at the 14th amendment to the U.S. Constitution, which prohibits the federal government or any state from giving preference to one individual or group over another. Slowly states and courts are wakening up to the fact that it may be unconstitutional if gays and lesbians are not given equivalent rights of heterosexuals, because otherwise they do not really have equal protection under the law.

It can be taken for granted that New Hampshire’s decision is going to ruffle feathers. It takes a generation or two for both minds and hearts to change. Yet change they will. Much of our latest generation is growing up in a multicultural America. In my generation (the Baby Boomers), homosexuality was rarely acknowledged openly. In fact, I was a teen before I had much of an inkling of just how prevalent homosexuality actually was. Certainly, no one I knew admitted to being gay.

While unfortunately many Americans still treat homosexual behavior as immoral, even the most homophobic of us realize that homosexuals are still human beings. Being homosexual has no bearing on intelligence or your capability to perform any kind of work, except possibly in the narrow career of heterosexual sex surrogate. The homosexuals that I know are among the most gifted and creative members of society. If I ran a business, I would not want to limit my talent pool. States that discriminate against homosexuals are essentially giving homosexuals a reason to move to more gay friendly states. If I were a gay person, I would seek to live in states where the laws respected my human dignity. I would avoid states like Virginia, where I live. In Virginia, homosexuals can be legally discriminated against in employment and can be kept away from their spouses at hospitals. Unfortunately, these are not the only Virginia state laws that discriminate against homosexuals.

When I moved to Virginia in 1984, I gave no thought to such laws. I was simply interested in living in Reston, a planned community that I fell in love with. I am settled here and gainfully employed in a job that I will probably stay in until retirement. When my wife and I do retire though, we will feel freer to live anywhere we choose wish. Certainly how comfortable we feel in our community will have a bearing on our choice. Although we are years from retirement, we have already discussed states where we might retire. Off the list is Florida, not just because it is gay unfriendly, but because we hate its climate. However, since we are both tolerant people states like Oregon, which is becoming more and more progressive, is on our list, in spite of its rainy seasons.

The effect of New Hampshire’s decision is not only that gay people have incentive to move to the state. It also means that people like me who, if they have a choice of where to move to, can choose a state based on our values. Through its laws, Virginia is telling gays they do not want them as citizens. Yet even in Virginia, things are changing. Northern Virginia, perhaps because of its proximity to the nation’s capital, is trending toward being both more tolerant and Democratic. For example, in the 2004 elections the county where I live, Fairfax County, was one of a handful of counties whose presidential vote moved from the Republican to the Democratic Party.

Businesses everywhere are discovering that being gay friendly is good for their bottom line. Not only does it give them a richer talent pool to choose from, but catering to the needs of the gay community can be profitable too. You have to wonder, for example, what Walt Disney would think of its gay friendly policies. While he might be upset by the morality of Disney’s 1995 decision to allow health coverage for live in partners of gay and lesbian employees, the other part of him would be glad. The Disney management chain demonstrated that it was serious about ensuring that Disney was attracting the best talent. Disney has also figured out that making homosexuals feel included in the Disney experience was good for its profits too. While laws in Florida and California prohibit gay marriage, both theme parks allow gay couples to schedule commitment ceremonies at their parks. In addition, both parks schedule special days during the year for gays, their friends and their families. Doubtless Disney stockholders have benefited from their progressive approach.

What is true for Disney is doubtless true for most companies. Companies that have a choice of where they will relocate will give New Hampshire a special look. Not only is the state known for a business friendly attitude and low taxes, now it is also offering equal rights for gays and lesbians. Most companies already have gays or lesbians working for them. Having them live in a progressive state like New Hampshire will be seen as a bonus.

As for backwards states like Virginia, give it a decade or two. It may decide that to stay competitive it too needs to loosen its discriminatory laws against gays and lesbians. Otherwise, its economy may be left behind while gay friendly states like New Hampshire’s are likelier to soar.

The Two Sides of Google

The Thinker by Rodin

Google is one of these amazing companies that demonstrates how uninspiring and mediocre most businesses in the Information Technology (IT) field actually are. Unlike Microsoft, which claims to be innovative but largely is not, Google can truly claim the mantle. Google is a company with the power to inspire awe. Its search engine continues to be the cream of the crop. Yahoo and MSN will keep trying to best Google, but they will likely continue to play follow the leader. Yahoo Maps, for example, just recently released its Beta mapping application, which roughly compares with Google Maps. Google Maps, of course, has been using the magic of AJAX (Asynchronous Javascript and XML) for over a year to take map usability to a completely new level.

For software engineers like me, the speed with which Google churns out amazing new technologies takes my breath away. Its billions of dollars in ready capital certainly explains part of its success. With its passion for excellence and fearlessness taking big chances, Google simply soars high above the rest of the IT crowd. Mostly it hits the bullseye. Google Earth is just the most recent example of a technology that blew my socks off. It is a killer application, as every bit as revolutionary as the first web browser. We were still being wowed with Google Maps ease of use when Google threw us the Google Earth bombshell.

One of the more recent services introduced by Google is Google Video. It provides a new way to find and share video files. Google acts as the Internet’s ubiquitous high speed and fault tolerant video server. Given its enormous infrastructure, hosting and serving these large bandwidth intensive videos must not be much of a problem. The service even lets you know its most popular videos. Yet this is just one of a number of flashy services that Google provides, most at no cost. Let Google host your blog on Blogger. Centralize your email on the network with GMail. Find the lowest price online with Froogle. Search your computer as you would the Internet with Google Desktop Search. (It just happens to be a feature of the Google Desktop, a clever new application, which looks like a first attempt to break up Microsoft’s desktop monopoly.) Google even has pretensions in the Instant Messaging arena with its Talk client. Clearly, their ambition knows few bounds. While it occasionally bites off more than it is ready to chew (GMail being an obvious example) Google’s numbers of home runs outside the ballpark would make even Babe Ruth jealous.

Scott McNealy of Sun Microsystems was I believe the first to promote the idea in the 1990s that “the network is the computer”. While he was ridiculed at the time, Google has shown us that the network can be the computer. With an infrastructure like Google’s, what seemed impossible can unexpectedly become reality. While Microsoft spins its wheels trying to make its Windows product ever niftier, Google shows us that it is what you can do with a computer that makes it meaningful. Indeed, Google makes a compelling case that its services and infrastructure is the ubiquitous application layer of the future, if not the here and now. I am creating this entry using Microsoft Word, but I have already checked a half dozen facts online using Google’s search engine. I can use any word processor to create this entry. I cannot go just anywhere online to find out the information I need this rapidly. Google demonstrates it is not how pretty your screwdriver is that matters, but how well it helps you turn the screw. Therefore, we get its low-tech web pages, always with the pure white background, the simple text and its generous use of white space. It appears low tech but it is simple enough for a student in grade school to use effectively.

So I have plenty of cheers for Google today. I am especially glad it gave the U.S. Justice Department a Bronx cheer when the department recently requested a week’s worth of its web searches. The Justice Department wants the information to discover how the web is being used by pedophiles and those interested in child pornography. Unlike Yahoo and MSN, Google wisely said no. It valued the trust it has earned with its customers too much to let the Justice Department mine its information. Let us hope it continues to do so. Apparently, Google records the Internet Protocol (IP) address of every search query. Let us hope that if push comes to shove Google simply stops recording the IP addresses of all our search queries. For an administration already deeply in Big Brother land with its warrantless electronic eavesdropping, this is simply an opening salvo by the government to get its hands on our private business. If Yahoo and MSN care that little about my privacy, I will not be giving them my business.

In making a stand in America though, Google apparently is quite willing to compromise its principles to win business overseas. For also in the news this week were stories that Google will allow the Chinese government to censor its search engine content. Maybe I was naïve, but I really thought Google got it. However, apparently they will compromise their principles if it improves their shareholders’ bottom line. Perhaps as a result, Google shares went up 3.4 percent with the announcement.

Google must not understand its own unique power at this point in history. Many of us talk about the importance of human freedom, but few are in a position to do much to expand it. Google can. It is the 900-pound gorilla in the information search business. Rather than kowtow to China’s paranoid rulers it should have said no thanks. Yes, perhaps that might have kept Google out of the important Chinese market. Yet a powerful and uncensored internet search engine is a great beacon for those who believe in the power of ideas. The Google business plan surely was premised on its importance. Google is a trusted broker for finding uncensored information. It expands personal freedom and spreads enlightenment. Its reputation is at stake. Which is why Google should rethink doing business with China. Right now, its search engine is the largest force for the liberation of the human mind in the 21st century. Google can be both profitable and spread human enlightenment at the same time. It should tell China it does not need its business unless it guarantees that its citizens have the unfettered access to its search engine.