End of the metaphor?

I’m reading Jeff Jarvis’ book “What Would Google Do?” and have come to the part where he recommends that web content be put in a format that is easily identifiable by Google.

This has a subtle impact on written communication style. Just as speakers of global languages change to accommodate non-native speakers (using fewer idioms or slang, for example) so too are people changing the way they write in order to reach a wider online audience. This online change is very different from George Orwell’s rules on effective writing.

Jarvis recommends that dentists with an online presence not call themselves “smile doctors” or anything apart from dentist. In other words: remove the metaphors (whether they are elegant or not) in order to be indexed by Google. Orwell’s comparable rule was: “Never use a metaphor, simile, or other figure of speech which you are used to seeing in print.” Orwell did not recommend against the use of metaphors, but rather recommended being inventive in their use. He never lived to see a search engine.

So now we have another potential point of change for global languages. The desire to optimize search engine results will remove some of the poetry from the everyday written language so that we may reach a wider audience.

Michael Lewis article on The End of Wall Street

A friend sent me an article by Liar's Poker author Michael Lewis about The End of Wall Street .

In the article he expertly weaves in anecdotes about subprime mortgages, CDOs, rating agencies and his old boss, John Gutfreund, former CEO of Salomon.

I heard Gutfreund speak at the 2002 Columbia Business School panel that that Lewis referenced in this article. Oddly enough, the panel was held on the eve of the first year corporate finance final and so it was sparsely attended. It was a surreal event -- Gutfreund didn't weep, but he almost broke down when he recounted how proud he was of his son's decision to become a teacher. Having read Liar’s Poker years before, I sat there, puzzled that many of my investment bank bound classmates who had the most to gain from hearing Gutfreund and the other speakers were still studying for the corporate finance final, unlike myself.

Will your data be your destiny?

It is not enough to work to protect your own data these days. You must also think about how the myriad organizations you deal with protect your data, whether or not you have a choice in the matter. Let’s look at a few examples and consider their implications.

Web browsing habits from the home, which may bring out the lowest common denominator in many people, though mostly innocuous, were initially ordered to be revealed by user name in the Viacom v. YouTube case before bulk views was agreed upon.

Many people have grown accustomed to using publicly available online resources where the implicit way these same resources are managed changes over time. Over the years we’ve seen companies that provide free email turn specific messages over to authorities, such as when Yahoo provided a journalist’s email to his government which then imprisoned him for divulging state secrets.

An employee of PA Consulting Group lost a memory stick with unencrypted data on tens of thousands of prisoners in the UK. The worst here is that the loss itself does not represent the real incompetence. I’m sure people will continue to lose things well into the future. But my guess is that the data were unencrypted and on a memory stick simply for the convenience of working with them in that format. It was probably PA Consulting Group policy not to work that way, but with a tight deadline, less safe timesaving methods were used.

There are further examples of how corporations do not protect personal information simply because they do not deem it worthwhile. For example, ConEd online account information (address, phone number, email) is available simply by inputting an account number. No password is required.

The Princeton Review published personal information and test scores for tens of thousands of students on its website.

There is also the possibility of data theft after information is turned over (we see enough examples of thieves stealing or companies losing credit card, social security and other personal data).

Protecting personal information is not solely in the domain of the individual. Companies that have access to personal data will continue to lose this data in the future. We just have to ask that they do a better job of protecting this data to begin with and give individuals a clear and easy to use option of keeping their data private.

Seriousness to the individual of the following:
Viacom v. YouTube: low to medium, depending on ability to identify individuals from the data.
Yahoo email share: high, since this resulted in a prison term for the journalist.
PA Consulting Group memory stick loss: potentially high.
ConEd: medium. Mostly a risk of identity theft or unintended pranks such as changing address or payment schedules.
Princeton Review posts student data: low to medium. More of an ability to snoop on data that will eventually be revealed to schools to which the students apply.
Credit card or Social Security data theft: medium to high. Opportunity for identity theft and fraud.

Sunday, August 18, 1805

I recently read the Journals of Lewis and Clark, a nearly day-by-day account of the expedition sent by Thomas Jefferson to survey the Louisiana Purchase. Here is one journal entry from Meriwether Lewis on his birthday, while passing through what became the state of Montana.

Sunday, August 18, 1805

“This day I completed my thirty-first year and conceived that I had, in all human probability, now existed about half the period which I am to remain in this sublunary world. I reflected that I had as yet done very little, very little, indeed, to further the happiness of the human race or to advance the information of the succeeding generation… [I] endeavor to promote those two primary objects of human experience, by giving them the aid of that portion of talents which nature and fortune have bestowed on me, or in [the] future to live for mankind as I have heretofore lived for myself.”

With improved health and longer lifespans today, maybe people can get away with having this thought at age 39, instead of 31 (though Lewis only lived another four years). But still, for someone who had achieved much at a young age, what a journal entry.

A riveting definition of impact

An online search of some business and innovation keywords led me to the following sentence used by a well-known organization to describe itself:
“Make a difference. Make History. Our products have captured the attention, imagination and loyalty of generations of diverse individuals since our founding over 150 years ago.”

Any organization that can claim to have such a rich cultural impact over a century and a half while also appealing to individuals to join and “make a difference” and “make history” must be quite impressive. I tried to guess what organization it was. I was way off. The above sentences came from a Levi-Strauss ad.

No disrespect to Levis or to the fashion industry but jeans were not the first thing I thought of when the search engine presented me with that sentence.

But then again, as the world has moved from local, customized artisanal production to mass production handled by global entities, the sheer size of these organizations does allow them to claim wide impact on the way people live. At large scale, whether clothing, food production, communications, transportation, retailing, or entertainment, a more efficient process or innovation in design can truly have an impact on millions of people.

The Levis ad later states that it had an impact on “activewear for women in the early 20th century” (could it have helped the passage of the 19th Amendment?) and led the “casual businesswear revolution of the 1990s” (would dotcom employees have worn suits instead?). If Levis thinks of itself in these terms, then why don’t more organizations appeal to individuals similarly?

The pastry that changed my life and a new stage for business

I recently sampled a kouign aman made by my friend Romina, who is a pastry chef superstar and an amazing person. Her kouign aman immediately became my favorite pastry. Too bad she lives two thousand miles away.

Romina was in NYC recently and worked as a stagaire at a couple of restaurants here. The concept behind the stage is that a chef will work in another’s kitchen for a day or so in order to get exposure to other techniques or cuisines. Restaurants are certainly businesses and I began to imagine whether non-food business managers could offer the same courtesy to colleagues from other organizations.

What would work the same:
- The stagaire agrees to respect specific innovations of the organization itself
- The stagaire actively contributes to the new organization
- The stagaire quickly learns and appreciates what could apply to his/her own business back home

What would work differently:
- The timeframe would need to be longer. A one-day stage in an office probably wouldn’t suffice, whereas a one-day stage in a restaurant would
- While anyone in an organization as a stagaire would be trusted by the owner/manager, their presence may be viewed differently by compliance organizations and other employees. Security issues would need to be addressed
- In non-food businesses, the stagaire may be better off observing, sitting in on meetings and discussing with the manager at day’s end

In a sense, the traditional management consultant is something of a reverse stagaire, going into a new organization for a time to bring in ideas and processes from outside and not necessarily having the relevance to apply what he/she sees on the client side to the consultancy. Other than consultants, typical business stage-like exchanges include the formal (case studies, articles, best practices) and the informal (talking business outside of work). It’s important to do this, no matter what business you’re in.

Photo fakes, data loss and co-evolution

Over the last year there have been some high-profile photographs that initially caught the world’s attention and were then revealed to be fakes.

Picking some that I followed in the news we have the recent famous photo fakes from China (which for some reason are all animal-based) and include the wild tiger, photo contest pigeon shot, and antelopes by the new train to Tibet.

Now we also have augmented photos from the recent Iranian missile launch.

Sure, photographs have been altered since there has been photography and some fakes have lasted more than 100 years before being found out (such as one from the US Civil War). Intentionally doctored photographs were more difficult to make but certainly were made in the past.

One thing that all of the above examples have in common is that the doctored photos improve upon the composition of the original. The other thing they have in common is that they lessen the belief that we have in the photographic image, especially those from official sources. Further, the notoriety of these fakes will not dissuade people from creating more fakes; rather, more care will be taken and future fakes will be harder to spot until fake-spotting techniques also advance, resulting in better faking techniques, ad nauseum.

The issue is one of co-evolution. That is, once there is a way of protecting something valuable – a lock and key, for example – eventually someone will develop a way to pick the lock. We see this in areas as varied as encryption technology, the recent man-in-the-middle attack that freed the hostages in Colombia, elongated trumpet-vine flowers matched with elongated hummingbird beaks, and so on.

This continuous development of ways to break through security requires that corporations continually step-up controls on sensitive data. It is also why we can always expect to hear about examples of unintentional data loss in items as varied as social security numbers, pension data and credit card numbers. Mistakes also happen (a laptop with sensitive data is left on a bus) and databases are hacked. Since we have to share some degree of personal data in order to easily maneuver our way through this world, we need to prepare for eventual possible data loss. Therefore, corporate (or personal) data security is not only a question of what you do to prevent data loss, it is about what you do after it occurs.

Burmese days

Over the years, working in Asia/Pacific I was fortunate to visit Burma (Myanmar) a couple of times. Apart from being an absolutely beautiful country, my experiences were often with people so friendly that they went out of their way to help travelers such as myself.

Some things in Burma are unnecessarily unusual. Take the currency, the kyat. When I first went there, the denominations still included 45 and 90 kyat bills. Those denominations were introduced by Ne Win, who believed that he would live to the age of 90 if the country had currency in multiples of nine. It worked.

So in other words, for the sake of one person, the entire country had to sacrifice simple efficiency in daily commerce.

Now we have a situation where the recent cyclone has killed tens of thousands of people and the Burmese junta prevented or limited foreign aid from entering the country, ostensibly because of a fear of looking weak or of losing power. Add to that the lack of investment in Burmese infrastructure, education and a slow openness to communication from outside (you need a permit to have a fax machine and the Internet was only selectively legalized in 2003).

So perhaps given their past experience and current realities it should not be surprising that the military junta decides to retreat and fortify its position in the new capital of Naypyidaw. There is just no benefit for the junta to try to improve the situation in the country if there is no possible way for them to remain in power afterwards. It therefore has to pull back and fortify itself in the new capital and try to postpone the inevitable.

If both think it’s the other one’s fault, neither one fixes it

I worked with a new telecommunications service provider that had started to send large volumes of voice traffic to China. As part of their buildup, they installed additional equipment and software from a third-party vendor. Initial computer-automated tests showed good call quality to selected cities and so they initiated the switchover early. The launch was a total flop.

The telecommunications service provider received many complaints about calls that did not connect and they had to replace the new service with a more expensive alternative. Accusations flew. The service provider said it was the fault of the equipment and software vendor. The equipment and software vendor said it was the fault of the service provider or even their customers who were dialing incorrect phone numbers. Both pointed to the initial successful tests as a reason for why it was the fault of the other. Nothing happened.

I didn't know who was at fault. I simply made 100 phone calls using the problematic telecom system. I made several calls to every province in the country over a couple of days.

About 1/2 of the calls failed. I knew that something was wrong so I looked at the location of the calls that failed; they were all in the same set of provinces. The successful calls were in the remaining provinces. Could it be as simple as that?

I talked to both the service provider and equipment/software vendor. We eventually discovered a slight difference in the way equipment across Chinese provinces handled the calls that led to the high failure rate. A slight tweak and call completion rate almost doubled.

Problems sometimes have simple solutions; taking an open approach without assigning blame can help us solve them.

Bear Stearns and the Tour de France

There is another case of email messages being used to identify possible wrongdoers in the financial services industry (see “Prosecutors in Bear Case Zero In On Email”, Wall Street Journal).

Anyone in the US financial services industry should be well aware that regulatory compliance requires that employee email, IMs and file uploads are tracked and cached. Over the last decade when prominent cases emerged where old emails were used as evidence I thought that this common knowledge would not so much improve ethical standards as push unethical behavior to other forums, such as the phone, face-to-face meetings and the use of allusions.

So it is surprising to see people make the same mistake as recently as mid-2007, as the Bear Stearns employees’ old emails may show that they acted contrary to their clients’ interest. My take is that as long as enough money was being made, sketchy actions that improved performance did not attract notice, but once the market tanked, it became a matter of assigning responsibility. Electronic messaging supervision (the active monitoring and spot-checking of emails by compliance personnel) helps catch problematic behavior, but not even the best system can catch every ethical lapse as it occurs.

Breaking the rules in sports is similar. In ultra-competitive contests such as the Tour de France, cyclists have used doping in order to qualify and perform above their natural peak. Again, this strategy calls for breaking the rules to improve performance. Doping is not used by all competitors, but one must assume that all competitors have the ability to use it. Prize money is high. Some are caught and some not. And in the Tour de France, this has been going on for the last century.

Hence the paradox: there are industries and contests so competitive that it can be necessary to break the rules in order to compete. Governance bodies then often eventually identify and ban these same rule-breakers, but only after they have done the damage. A behavior may be prohibited (insider trading, options backdating, doping) but the means to catch the behavior often lags behind the means to evade detection.

Perhaps the only means to reduce these types of unethical behavior is to reduce the dramatic temptation that huge compensation gives to the competitors, whether in the form of a massive annual bonus or prize money and future sponsorship contracts.

Cost/Benefit analysis and the Bryant Park chairs

There are several thousand folding chairs at Bryant Park and by the front of the New York Public Library. None of the chairs are collected or locked up at night: they stay out all the time, a fact that sometimes surprises people. Does it make sense for it to be otherwise? Back of the envelope calculations follow.

Assets
Number of chairs estimate: 3,000
List price $149 per set of two; estimated volume discounted price of $50 each
Total estimated chair asset cost: $150,000

Setup time calculation
Number of chairs that can be set up / collected per person per hour: 600
Number of people setting up / collecting chairs: 5
Time to set up / collect chairs: 1 hour each

Chair setup and collection costs
People involved: 5
Hours involved: 2 per day
Wage per hour estimate: $8
Assume chairs are set up daily: 365 days per year
Total cost of chair setup and collection: $29,200 per year

Chairs replaced per year
Wear and tear: 400 chairs x $50
Total: $20,000

Chairs lost to theft: 5 – 6 per year:
Total cost: $250 - $300

You might quibble with some of the numbers, but the direction is on target. This means that for Bryant Park, there is no economic reason to have people set up and collect the chairs every day. Chairs lost to theft do not even cost 1% of the overall labor, to say nothing of lost use of the chairs at night and I’d even argue, a loss of goodwill. For businesses, trust can be a good value.

The above is representative of some of the work Inticiti does.

On the chair I sat in today, the following plaque:
“Look at all the people”
For 10 years he helped make Bryant Park great.
Mel Kopelman 1926 – 2003.

Thanks, Mel.

Keyboards, convention, efficiency and luck

When Christopher Sholes designed the QWERTY keyboard layout for early typewriters, it was partially to separate the keys of letters commonly used together and thus prevent key jams, which had a secondary effect of slowing down typists once key jams were no longer a problem.

But still, the QWERTY standard is seen on almost all English language keyboards even though it is not the optimal placement of keys. Rather than learn a new arrangement, like the Dvorak keyboard, most people prefer to stick with what they know. (The world’s record for fastest English language typing is held by Barbara Blackburn, using the Dvorak Simplified Keyboard. She had a peak speed of 212 wpm.)

So while most of the English language world uses a substandard keyboard layout what impact does this have on typists of other languages? Is it possible that some languages, purely by luck of letter frequency, use the QWERTY keyboard more efficiently than English language typists?

I looked at the languages for which I had data: English, French, German, Spanish, Esperanto (why not), Italian, Turkish and Swedish and mapped letter frequency to the QWERTY keyboard. A screen shot is below.

Doing a true comparison of keyboard efficiency in different languages calls for typing speed tests (of letter, not word speed), but lacking these data I made some assumptions. To compare the effect on different languages, I assumed that the Dvorak model was ideal and measured the degree to which the foreign languages followed that model of putting high frequency letters in the middle row and weighted to the right hand.

And the winner is… Esperanto. Yes, by chance, this artificial language should have a faster typing speed than the others. Losers in the speed contest are German and French, both of which have their highest frequency letters in the top row and to the left. That’s the power of convention and luck on efficiency, whether on keyboards or in business.

Then again, maybe we shouldn’t focus on typing fast but rather on writing thoughtfully and well…

Fool’s return?

Beatrice Otto’s book “Fools Are Everywhere” reintroduces the role of the Fool (or Jester) in history around the world. In many past royal and religious courts, Fools acted as a type of advisor to the leadership, having close access to the leadership and the context in which to say anything. Only the Fool could speak so directly, simply and humorously to the leadership and by doing so change accepted thinking and get results.

With the commonplace seriousness of many business organizations, this can a difficult role to reintroduce, though some organizations have attempted just that. A notable example was the Corporate Jester position that Paul Birch held at British Airways (until he was… dismissed). Smaller, more entrepreneurial organizations may take more kindly to the role, but then again, by being less hierarchical in the first place, they may not need it as much. David Firth, author of "The Corporate Fool" offers instruction on the roles that a Corporate Jester should take to make a positive organizational difference. These roles are: alienator, confidant, contrarian, midwife (creative thinking), jester, mapper (knowing who knows), mediator, satirist, truthseeker.

These are basically the types of behavior we would expect to be found informally throughout a healthy organization.

Would Fools have made a difference to the behavior of businesspeople engaged in dubious behavior, such as stock option backdating, sub-prime mortgage issuance, or accounting scandals? This is a tough question but I believe that the difference is that Fools in the past could absorb enough of an understanding of the issues to comment with clarity, direction and wit. Today’s business problems may be more complex (as in the financial scandals) and impenetrable (requiring technical knowledge).

Therefore, if the role of the Fool has a future in modern organizations, it must be spread out among the many, not concentrated in one person. I believe that some creative organizations have accomplished just that through selective hiring and an open culture. We’ll see where it goes.

Speed to marketer

When I first incorporated Inticiti, I was astounded at the speed with which direct marketers contacted me. I incorporated on a Thursday. The following Tuesday I received my first piece of junk mail addressed to the business.

Certainly the process for sending that piece of junk mail was automated and not specific to me. And I did what most people would do – into the recycling bin it went.

The marketers send so much mail because they believe based on their research that each letter they send is worth more in future revenue than the cost of its printing and mailing. What happens if we become a customer of one of those companies and need to call their help desk? General customer experience notes that wait times are excessive (or “feel” excessive) and staff are often not as helpful as we would like (or we “feel” that to be the case). It sometimes seems as if companies believe that each customer served is worth less in future revenue than the cost incurred to serve them.

The second complaint (helpfulness) is more difficult to improve since it requires not only good automated menus and scripts for call center agents but also a degree of familiarity and longevity at the call center, where employee turnover can be 100% per year. The first complaint (wait time) could be easily addressed: simply add more agents. Using knowledge of call busy hours and queuing theory we know that adding a handful of agents to a large call center can dramatically reduce customer wait time. And agents in general are pretty cheap.

So why do we ever need to wait on the phone for the help desk? I think it is mostly a matter of context. Companies traditionally viewed their facility and support staff as costs rather than as potential sources of revenue. Only recently are companies thinking about call centers not as reactive cost centers, but as proactive sources of additional revenue.

Like call centers, direct marketers do not consider costs that exist outside of their business model. The most important one of those externalities to me is the time that I have to take each day identifying and discarding junk mail. Further, there is the municipal cost of disposing discarded mail. And do I throw it away or recycle it? Further to that is a possible increased exposure to identity theft made possible by each additional letter with my name and address on it. Taking all of this into account, perhaps the social costs of junk mail (or call wait time) are greater than the economic benefits that accrue to the marketing organizations and their corporate clients.

Taylorism or Tailorism?

It’s been almost a century since the publication of The Principles of Scientific Management. Is there a new Frederick Winslow Taylor, a student of knowledge worker scientific management?

There are a number of drivers in knowledge work and a number of reasons why Taylor’s approach does not work well in this area. For example, there are cost savings arguments to standardization in more complex organizations. Contributing to this is lower employee tenure. According to the Bureau of Labor Statistics, average employee tenure fell since 1996 (from the BLS study “Median years of tenure with current employer for employed wage and salary workers by age and sex, selected years, 1996-2006”). Tenures decreased the most for employee ages 35-44 (a drop of 7.5% to 4.9 years), ages 45-54 (a drop of 12% to 7.3 years), and ages 55-64 (a drop of 8.8% to 9.3 years). When employees change employers more frequently, they must spend more time ramping up in order to add value in their new organization. It would seem that lower tenures add to the benefits of process standardization for knowledge workers.

But there is a limit to how deeply an organization of knowledge workers will want to standardize processes. The problem is that knowledge work tends to be less easily compartmentalized and that knowledge workers, like the manual workers of Taylor’s factories, often resent being told how to do their jobs, especially as it may make them feel like cogs.

What do the stakeholders -- the organization, the employees, the customers – gain and lose from a process-heavy approach? To the organization: possible gains in productivity but less flexibility to act on creative ideas that produce future productivity gains. To the employees: possible improvements in efficiency in some tasks but lower job satisfaction, depending on disposition. To the customers: perhaps lower prices, but possibly less customized service.

Then I thought of my old tailor from when I was based in Hong Kong. His business was incredibly customer-centric. I would stop by his shop, have a cup of tea, talk about work, look at some fabric, talk about suit styles, talk about the family and then make a purchase decision. A very long, inconsistent and inefficient process. Behind the scenes, cutting cloth and sewing, he may have been efficient, but to the customer he gave a personal and, well, tailored series of interactions. I’d say that to some degree the knowledge worker is a customer of his/her employer.

Maybe not all of what passes as inefficiency is true loss.

Business aesthetics

Aesthetics are growing in importance, or perhaps rather, the loss of aesthetic appreciation is waning. Even aesthetics of products that are mostly visual and not very functional, such as Philippe Starck's "Juicy Salif" lemon squeezer, shows that aesthetics themselves can sometimes be the point. The lemon squeezer is apparently poor at squeezing lemons and is primarily to be appreciated as a way to "start conversations". It sold well and lived up to its description.

Similarly, a business may have aesthetic appeal that is broader than the design or use of its products and relates to a larger impact it has on the world.

But there has to be strength of both artistry and finance. Dotcoms for example, did not have an enduring aesthetic. Their value came mostly from potential financial upside and much secondarily from their output. Once the upside disappeared much of the excitement disappeared with it. Older, stodgier, more established companies that worked on similar issues did not reap the temporary benefits of the dotcoms.

Industries that meld aesthetic appeal with financial upside include environmentally friendly technology (health, social and climate benefits / upside tied to high oil prices), pharmaceuticals (health and lifespan benefits / upside tied to waning regulatory regimes that protect drug patents), architecture and urban development (comfort of the local population / upside tied to real estate market). If the importance of the financial upside gets too extreme and is lost, these industries may also lose some of their aesthetic impact.

The classical music cost disease

A paper from William Baumol and William Bowen “On the performing arts: the anatomy of their economic problems” (1965) showed that while productivity improvements have been made in many other fields there cannot be productivity advances in the performing arts (a string quartet still requires the same number of performers today as it did centuries ago). Baumol and Bowen show that since the performing arts could not realize greater efficiencies, their cost rose over the centuries in comparison to other things.

But today the paper seems to be incomplete in that Baumol and Bowen did not expect performing arts output gains outside of live music. Today it is no longer only the process (playing the music live) that the audience pays for. Productivity has come from other developments such as the sale of recorded performances, performing for larger paying audiences and even quality improvements in instrument components. Additionally it may take musicians less time to learn new music by using technology including computerized note recognition and the ability to hear different recorded versions of a piece at a whim. There may be even more room to improve the learning process.

That being said, classical music today is a money-losing endeavor reliant upon donors and sponsors in addition to ticket sales. What had been the popular music of a century or more ago was the favorite musical type of only 30% of the American public back when Lincoln Center was built in the 1960s and the current favorite music of only 3% of the public today. I believe that some of this problem is related to the fact that classical performers today have found limited success in creating new powerful works and in evolving the performance experience itself. Some steps in that direction have been taken by performances such as those put on by Sympho.

Otherwise, the music exists as if in a museum but with pieces that are preserved not necessarily being the best ones available and the method of their current display influenced by the practicalities of the past.

This is one example of the type of problem we work on at Inticiti.

The risk of measuring business success against false peers

Sometimes companies fall into the trap (or are pushed in by market analysts) of measuring themselves against false peers. A false peer is an entity that is not comparable (for a variety of reasons) and to which comparison may even lead to poor business decisions.

Here’s an example (guess which company). Company X was measured against a set of companies, some of which showed their innovation, skill at execution and cultural maneuverability through a series of acquisitions, new service launches and soaring stock prices. Company X was not seen as being as innovative nor did its stock jump as high, but soon it became involved in a senseless joint venture, money-losing acquisitions and service offerings. A few years later, Company X’s competitors were shown to be frauds in accounting scandals. Did their fabricated success lead Company X to engage in business behavior that it might not have otherwise?

Company X was AT&T in the late 1990s – early 2000s. Other companies it was measured against included WorldCom, Qwest, Tyco, Enron, etc.

Was former AT&T CEO Armstrong pressured into a bold (but reckless and unprofitable) cable play? By spending $100B+ to acquire cable networks and improve the upstream signal quality from the home to cable headends (something that was never intended in a cable TV model), AT&T tried to defend its place competing against false peers. It seems that it destroyed value by doing so.

Round the island

I recently walked around the perimeter of Manhattan – 32 miles – and that walk became a metaphor for me.

I’ve lived in NYC for six years and most of that walk covered places I had never been. During the walk I met people I never would have met otherwise, saw things I wouldn’t have otherwise, including driftwood sculptures, an enormous abandoned trellis, the big Columbia “C” visible from the Harlem River, a fisherman who caught a 2 foot fish.

No matter where you live or where you work, how often do you “walk around your island”?

Mechanical conscience

I’ve been thinking about how businesses react to ethical transgressions. Some types of transgressions, such as those recorded by electronic messaging (email, file uploads, IMs etc), contributed to a number of large corporate court cases in the US since 2000 and came to influence the way companies store and monitor data.

Messaging supervision is a series of processes and tools put in place by organizations to monitor employee electronic communications with the goal of catching problematic communications either in real time or soon afterwards. Businesses (often those in financial services) implementing messaging supervision are often required, or influenced by regulations including NASD Rule 3010 and SEC Rule 17a-4 when they put such systems in place. Businesses also implement these systems in order to protect intellectual property and catch undesirable employee behavior, hopefully before it gets out of hand. Transgressions are caught by the system’s mechanical conscience.

But really, businesses just want to automate compliance and adhere to regulations efficiently. While no regulatory body requires a software-based system to check for possible transgressions, the sheer volume of email is too large for anything but spot checks from compliance staff. Nor should an organization want to actively review all communications traffic. Instead, the bulk of email communication, website visits, IMs and file downloads are scanned by rule-based software platforms. That means that if compliance staff look at a fixed number of tracked communications daily, use of these systems should increase their probability of finding something problematic without adding extra content volume to view.

What the mechanical conscience cannot do is account for context, intent, or employees who write for the censor’s eye. Also, these supervision systems are used at a corporate level primarily in the US. Interestingly Americans, who are normally considered to be privacy conscious, accept the right of their employers to look at their email. In France, for example, employees are allowed to set up private email folders which cannot legally be read by corporate compliance supervisors, should there be any. Further, employee knowledge of messaging supervision also pushes potential transgressors to other means of unmonitored communication: the cell phone conversation or meeting for a drink, which an industry worker once told me is just what the presence of the system is supposed to do.

Does regulatory compliance lead to a different approach to ethics in organizations?