Smartphones: Essential Tool or Luxury?

An article in today’s Wall Street Journal has commenters doing their typical rant about how others are idiots.  I wonder.  Here’s my take as I commented there:

The tools have simply changed for those of us who earn our living in the service economy. I use my iPhone 4S for my email, calendar, GPS, Twitter account, and LinkedIn updates, among other things.

In the ’80s I needed a desktop computer and a laser printer. In the 90s, laptop, internet and color laser printer. A smartphone and blog/website in the next decade became indispensable. I’m sure in the next decade, it will be a chip-enabled pair of carbon fiber Google Goggles that will allow me to multitask while listening in on interminable conference calls. With added sound, I’m sure I’ll be able to conduct simultaneously translated speaking engagements with audiences in other countries, rather than having them listen in on headsets as they did in South America in 2008.

Economists used to say “guns or butter.” Now apparently, it’s phones or food

Yes, all four of us have smartphones in our family, and although I “occasionally” go ballistic at my children’s multitasking while we watch t.v. together (almost never at the dinner table, which is a no-no), I also am proud that my children know how to use their iPhones to navigate in new cities, read the New York Times or Kindle books, keep in touch with friends they’ve made at schools in other states, and keep their parents informed about where they are and what they’re doing.  I managed to thrive without computer, wireless phone, or internet in college, but that world is long-gone.

How much do you and your family spend each month on cellular phones and service, and is it worth it?


Can the Economy Recover Without More Trust

Richard Leader, CFA, writing in the Houston Chronicle, had this to say about the trust and the economy:

Central to financial markets around the world is the issue of trust.  Trust enables people to do business with each other.  Lack of trust causes economic stagnation.  Lots of different things have contributed to this mess we find today.  Governments have promised benefits that they can’t deliver.  Corporations flush with cash are offering few new jobs.  Worker compensation is stagnant even as productivity has soared.  Add to this the repercussions of the dot com implosion of 2000, the housing collapse of 2008, and the sub-prime mortgage market treachery and it’s not surprising that people are unusually cynical.

Top economists say that trust is necessary for an economy to grow.  It’s the oil of the engine of capitalism.  Without trust, the engine seizes up.  Distrust is arguably the primary reason this economic crisis won’t go away.  The world economy is stuck in first gear.  While people generally want to be trustful, many institutions have not acted in a trustworthy manner.  Financial institutions, in particular, have done a very poor job of honest dealings with their customers.  The recent housing collapse looks like a replay of the 1930s, a time when Americans completely lost faith in bankers.

We couldn’t agree more with Mr. Leader.  Without greater trust in our institutions, particularly the institutions of business and government. we don’t our economy will grow fast enough to reemploy all those who lost their jobs in the Great Recession, as well improve the financial picture for the vast majority of working Americans.


Starbucks Initiates Job Creation in Low Income Areas

Our ongoing tough economy received some welcome news from Howard Schultz, CEO of Starbucks today, as reported in The Wall Street Journal:

Starbucks Corp. Chief Executive Howard Schultz, who has been on a mission to cut the national debt and boost job creation, has pledged to donate at least $100,000 of profits annually from two Starbucks stores in low-income areas to boost jobs in those communities.


Getty Images

We can’t wait for Washington,’ said Howard Schultz on Tuesday.

Profits from Starbucks stores in the Harlem section of Manhattan and the Crenshaw neighborhood of Los Angeles will go toward two community organizations that work to improve education and job training for young adults in those areas. High-school students in those neighborhoods also will receive barista training at the Starbucks shops.

“We can’t wait for Washington. Business leaders have to step up and do our part,” Mr. Schultz said in an interview.

Mr. Schultz, whose political giving skews heavily Democratic, recently got more than 100 business leaders to join him in a pledge to withhold campaign contributions to Washington incumbents until Congress strikes a long-term debt deal.

Comments from readers of the Journal have been quite negative, but I say any private sector initiative that helps put people back to work has to be good.


Income Inequality and Distrust

This from today’s New York Times:

But as a recent Economix post by Catherine Rampell reports, cross-country surveys show that income inequality is negatively related to trust. Largely as a result, the average level of trust is significantly lower in the United States than in more egalitarian countries, particularly those of Scandinavia.

And we seem to feel less trusting every day. A survey released at a recent World Economic Forum indicated that trust in both business and government had declined more steeply in the United States than in other countries as a result of the recent financial crisis.

Have sharp increases in inequality in the United States since the 1960s made us more cynical and suspicious?

I don’t agree with all of the author’s points in her article, but I do agree that rising income inequality, to the extend that it is due to government policies that favor certain groups over others, can certainly contribute to greater levels of distrust within society.  In particular, because the Federal Government provided bailouts to certain sectors and groups and not to others during the past several years, and because subsidies, favorable tax treatments, and other forms of economic support have been provided to certain groups and not others for decades, it is not surprising that we are trusting each other less.

I wrote about the economic benefits of a flat rate income tax in one of my junior papers under Professor Harvey Rosen at Princeton.  I am convinced more than ever that this is what we need to do.


$20 for a Movie Ticket — No Wonder I Love Netflix!

Update 5-22-10:

Here’s an additional development reported in today’s Wall Street Journal that will help to spell the quicker demise of theater owners:

Major Hollywood studios and one of the country’s largest cable operators are in discussions to send movies to people’s living-room TVs just weeks after films hit the multiplex, a step that would shake up film distribution.

During a cable industry convention last week, executives from Time Warner Cable Inc. made the first formal pitch to the Hollywood studios for what is known as “home theater on demand.” The cable company presented a variety of scenarios. But the main one, which has received early support from some studio executives, would allow consumers to watch a movie at home just 30 days after its theatrical release—far earlier than the usual four months—for roughly $20 to $30 a pop.

While the plan could be a boon for consumers, it stands to be highly disruptive for the movie business, particularly theater owners. Hollywood would essentially be overhauling the “windowing” system which has sustained the industry for years.

Studios now maximize revenue by staggering a movie’s theatrical release date and the window, or time period, when it is released later on DVD or cable TV. DVD sales don’t diminish a movie’s box-office take, since the discs are sold long after a theatrical run.

But maintaining windows has grown more difficult as consumers have grown accustomed to an array of devices that make it easier watch movies whenever and wherever they want.

Original Post:  5-21-10

This news from today’s Wall Street Journal had me questioning once again a) whether some people didn’t go through the same Great Recession as we did, and b) just how quickly movie theater owners want to drive themselves out of business:

Several theaters will charge $20 per adult ticket to IMAX showings of the animated 3-D family film “Shrek Forever After,” the fourth “Shrek” installment from DreamWorks Animation. The theaters include the AMC theater in Manhattan’s Kips Bay neighborhood, AMC Loews 34, AMC Loews Lincoln Square and AMC Empire 42nd Street.  This weekend’s price increase come less than eight weeks after theater operators instituted some of the steepest hikes in a decade.

Our family loves movies, and sees a great many each year, but the increasing majority of them are either from Netflix, or on-demand cable.  If we lived in New York City, then $20/ticket would mean over a hundred bucks including refreshments for the four of us.  Unbelievable!


The Four Dimensions of Trustworthy Leadership

We just had an interview published in Chief Learning Officer Magazine about our new book, Becoming a Trustworthy Leader:  Psychology and Practice, which is due out next year by Routledge Press:

In the past two years, with the global financial collapse and resulting recession, the issue of trust in leadership has been catapulted into the spotlight. Never before has there been such a public and widespread example of its breakdown, nor such tangible evidence of its impact.

The irony is that while most companies tend to pull back, shut down and centralize decision making during tough times, being open and honest is actually what can save them during these periods.

Just ask Aneil Mishra and his wife, Karen, co-authors of Becoming a Trustworthy Leader, to be published in 2011. A few decades ago, Mishra was studying how the automobile industry was dealing with crisis.

“In a crisis or when you’re faced with tough times, top managers like to seize control, centralize decision making — often the rumor mill takes over because information is so poorly distributed — and people, not surprisingly because it is a crisis and resources are scarce, hoard those resources,” Mishra said. “That centralizing decisions and hoarding information and resources just creates a logjam; it freezes up the system.

“In contrast, when trust was present, we found that managers were much more willing to empower their rank and file, and the rank and file were even more willing to take on that responsibility because they thought, ‘Well, if I make a mistake, and the stakes are high, I’m not going to lose my job because I trust my manager,’” he continued. “Information was shared much more widely. People really felt that it was important to be open and honest about the problems and trying to find solutions to them. [This] created a lot more flexibility to deal with that crisis and help them prevent it from happening again.”

For the complete interview, please go here.


GM Predicts it Will Make a Profit in 2010 — But Will it Make Vehicles We Want?

As reported in today’s Wall Street Journal, GM’s CEO Ed Whitacre, Jr. proclaimed that General Motors will make a profit this year:

“My prediction is we will be” profitable in 2010, Edward E. Whitacre Jr. told reporters at GM’s Detroit headquarters, a sign of rising confidence that also sets a tough benchmark for the still-struggling car maker’s employees. “Do we have obstacles in the way? Yes. But we have a good management team and a good plan in place.”  Mr. Whitacre, who also took the chief executive title temporarily last month, said the company’s new chief financial officer — Chris Liddell, who is joining GM from Microsoft Corp. — could “of course” be a candidate to become the company’s CEO. But he added “that’s up to the board” and noted the search for a permanent boss is still in its early stages.

My own purchasing decisions would have a miniscule impact on GM’s profitability in any case of course, but we’re not planning to buy any cars this year, or for the next several years.  Both of our vehicles weren’t in fine shape,and given the significant financial hit we’ve taken thanks to the Great Recession of 2008 and counting, we wouldn’t be buying a new car any time soon no matter how many miles our cars had on them.  Equally important, I don’t see that any of the new vehicles that GM has coming out as compelling in any way.  The Chevy Cruze is perhaps as good as much of its competition in the small car market, but not better.  The Chevy Volt, GM’s electric vehicle, will most likely be priced too high to justify as a money-saver for anyone, and I’ve never been a truck buyer and most likely never will.  Frankly, given that GM’s CEO came from AT&T and its new CFO comes from Microsoft, I’m going to be concerned about the product quality of GM’s new cars.

Just my $.o2.


GM to Furlough Salaried Employees

This from today’s Wall Street Journal:

General Motors Corp. confirmed Wednesday it will force salaried workers to take up to three months off each year with partial pay as part of an effort to reduce costs during its expected summer shutdown of its car-making plants.

The program, called Salaried Downtime Paid Absence Policy, states that salaried and executive employees could be required to take time off in one-week periods. During the time off, an employee’s salary would be reduced to 75% of full salary. The program is in effect starting Friday.

GM told its employees that any required time-off at a 25% pay cut will not exceed more than 12 weeks in a calendar year. It could be mandated during periods when there is lack of work, according to an employee briefed on the program. For an employee asked to take time off for the entire 12 weeks under the program, the salary cut would amount to about 5.8% of total salary.

In our research on downsizing, we’ve found that across-the-board cost cutting like this rarely achieves its intended goal of actually reducing costs.  That’s because such measures have a significant negative impact on employee morale, among other negative outcomes.  I suspect that this new downsizing initiative will only speed up the departure of some of GM’s most talented employees.


Downsizing the Company Without Downsizing Morale


Our coauthor and good friend Professor Gretchen Spreitzer of the University of Michigan’s Ross School of Business was recently interviewed about our article, elaborating on our key findings, and you can listen to the interview here.

Our article on how to improve organizational flexibility, innovation, and internal communication to improve trust during downsizing was just published by MIT Sloan Management Review.  Here is an excerpt:

After more than two decades of research into corporate downsizing, there remains a fundamental question: “How can managers and employees rethink their organizations even as they confront the need to downsize?” More specifically, how can organizations support learning, innovation and creativity while at the same time finding effective ways to improve costs, quality and productivity? Some might argue that these goals are at odds with one another — that you can’t build a better and a leaner organization. We disagree. In our 1998 Sloan Management Review article, “Preserving Employee Morale During Downsizing,” we maintained that strong organizations need to develop resilience so they could take advantage of new opportunities that arise during periods of economic retrenchment.

In the last decade, we have continued to follow the organizations we profiled in our original article and have started studying additional organizations that have undergone significant change, including downsizing. We have conducted scores of additional interviews with top executives, surveyed hundreds of employees and collected performance data. We have also coached managers whose organizations have initiated downsizings as part of their global outsourcing efforts. Through these efforts we have identified three additional success factors that are important to successful downsizing: (1) Organizations must become more flexible; (2) they must become more innovative and creative; and (3) they must improve their communications with stakeholders who are increasingly skeptical of downsizing efforts. The emphasis on flexibility, innovation and communications will require even greater levels of trust and empowerment.

You can go here to register and download a copy of the full article.  Much more information about the research findings and strategies for downsizing effectively can be found in our book, Trust is Everything.


American Greetings and Papyrus merge..sort of

American Greetings sold its retail operations to the parent company of Papyrus (a high end card company) and Papyrus sold its wholesale operation to American Greetings.  I was asked to comment yesterday by the Cleveland Plain dealer about this sort-of merger and here’s what I said:

Karen Mishra, assistant professor of marketing and advertising at Meredith College in Raleigh, N.C., is shocked that Papyrus and American Greetings would become partners because “their products are at opposite ends of the market, appealing to entirely different audiences.”

But the deal makes sense for both, because it gives Papyrus a broader foothold in the consumer card market and it lets American Greetings get out of the day-to-day retail business, she said.

Consumers are unlikely to notice a difference unless Papyrus changes the stores or the products, but she suspects that any changes would be improvements, “since Papyrus produces higher-end products.”

This will actually help them compete with Hallmark who is still the leading card company, so from that perspective it is an interesting and probably good deal for both.

I’m still a huge Hallmark fan, however–I just got my Hallmark gold crown rewards–an $8.00 coupon this time–for being such a loyal customer.  It will be fun to watch to see if American Greetings and Papyrus can beat that.