One sure fire method of garnering positive comments for your product or service is paying for online reviews. And with plenty of companies and services available to assist in this questionable strategy, there’s surely temptation to create an instant halo effect for new product launches. However, consumers are getting savvier in spotting fictitious reviews, and such an approach ultimately harms more than helps your brand.
Despite the recent privacy row with smartphones and other GPS enabled devices, a Wisconsin doctor is proposing use of an inhaler with built in global positioning system to track where and when asthma sufferers use their medication. By capturing data on inhaler usage, the doctor proposes that asthma sufferers can learn more about what triggers an attack and the medical community can learn more about this chronic condition. However, the use of such a device has privacy implications that need serious consideration.
For millions of people on a worldwide basis, asthma is no joke. An April 9, 2011 Economist article mentions that asthma affects more than 300 million people, almost 5% of the world’s population.
Scientists and the medical community have long pondered the question; ‘What triggers an asthma attack?’ Is it pollen, dust in the air, mold spores or other environmental factors? The key to learning the answer to this question is not only relevant for asthma sufferers themselves, but also society (and healthcare costs) as there are more than 500,000 asthma related hospital admissions every year.
In an effort to better understand factors behind asthma attacks, Dr. David Van Sickle, co-founded a company that makes an inhaler with GPS to track usage. Van Sickle once worked for the Centers for Disease Control (CDC), and he believes that with better data society can understand asthma in a deeper manner. By capturing data on asthma inhaler usage and then plotting the results with visualization tools, Van Sickle hopes that this information can be sent back to primary care physicians to help patients understand asthma triggers.
A better understanding of asthma makes sense for patients, health insurers and society at large. The Economist article notes that pilot studies of device usage thus far have resulted in basic understandings of asthma coming into question. However, there are surely privacy implications in the capture, management and use of this data, despite reassurances from the medical community that data will be anonymized and secured.
Should societal and patient benefits outweigh privacy concerns when it comes to tracking asthma patients? What do you think? I’d love to hear from you.
Film specialist Ellen Summerfield says that movies can challenge our values and even raise awareness of other cultures. And in terms of exposing finance’s “survival of the fittest” culture, there are few films better than Oliver Stone’s Wall Street. Interestingly, while Oliver Stone had meant to preach a message on the ill effects of avarice and hubris, the movie actually had a counter effect of inspiring thousands to emulate the bad behavior of Gordon Gekko. Undoubtedly then, sometimes the best intentions to influence thoughts and actions may not have the desired effect.
For those unfamiliar with Wall Street’s story, stockbroker Bud Fox (played by Charlie Sheen) finally gets his big break working for ethically challenged M&A maven Gordon Gekko (played by Michael Douglas). In a rag to riches story, Bud is asked to discover then trade on insider information—which makes him wealthy and Gordon Gekko even richer. Things come crashing down as Bud Fox is cornered by the Securities and Exchange Commission (SEC) into providing state’s evidence on his former boss.
More interesting than the narrative is the impact of Stone’s Wall Street on popular culture and B-schools across the globe. In the Sept. 24, 2010, issue of the Financial Times, an article titled, “How ‘Wall Street’ Changed Main Street,” quotes several executives on how the movie unwittingly glamorized banking culture.
For example, Frank Partnoy, now a professor at University of San Diego remembers how, as a math student at the University of Kansas, he was mesmerized by the movie. “I was naïve,” he says, “but it actually inspired me. It made Wall Street seem exotic and alluring.” And former UBS banker, Ken Moelis says, “(Wall Street) became a cult phenomenon on business school campuses,” where students could often be heard reciting line and verse of key movie quotes, such as “greed is good” or “lunch is for wimps.”
In Wall Street, Olive Stone attempted to bring a harsh spotlight to an otherwise opaque industry. Jean Yves Fillion, a banker at BNP Paribas in New York, says:,“The movie was a reflection of the industry as it was at the time, but it also captured a turning point. Finance used to be about stability, values and relationships. The movie was at the opposite end of the spectrum. It showed a different side of finance that was taking hold.”
And in fact, this “different side” of finance ruled the roost for 30 years (with some minor blips) until the grand daddy of market crashes, the global meltdown of 2008, brought both markets and investors to their knees.
With Wall Street, Oliver Stone had attempted to weave a moralistic tale of the dangers of greed and change people’s behavior. However, his movie had the opposite effect of inspiring hundreds of thousands into the industry. And considering markets around the world are still digging out of the mess created by the last global meltdown (see Greece, Portugal, Iceland, Ireland and more), it begs the question of whether society as a whole is ready to re-review Stone’s original intentions.
For example, San Diego University professor Partnoy says that for future quants and math majors, the allure of Wall Street is still there, but is now moderated. “When I show the original (Wall Street) movie in class, the ethics of students have changed 180 degrees,” he says. “In the 1990s, (the movie) was seen as inspiring; today’s students get the morality tale right away.”
And in a recent letter to editor of the Financial Times, 17 prominent City of London bankers attest that, “it is essential to restate and affirm the social purpose of financial institutions. Through work we all seek to realize ourselves as people, provide for our dependents and make a contribution to the social good.”
Ultimately, big Wall Street paychecks aren’t going away. And the industry will likely continue with its dog-eat-dog mentality. However, perhaps there’s also room in the industry for a return to customers instead of counterparts, relationships instead of transactions, and advising in place of selling.
Economies of the world, companies and individuals rely on the availability of credit, insurance, and other financial services to survive, expand, and thrive. The finance industry is necessary for economic expansion. But maybe a kinder, gentler, more constrained industry focused on its “contribution to the social good” is in order as the London bankers suggest.
In regards to his sequel, Wall Street: Money Never Sleeps, Stone says; “The issues in this film are the same as those in the last one: Is greed good? Does it work? Are human values more important than financial ones? These are all issues we face in our own ways.”
Good questions, all of which are still relevant. Perhaps it’s time for global communities to revisit them.
• In Wall Street, Stone aimed to ask important questions and motivate people to change their conduct. Instead, his movie had the opposite effect of galvanizing thousands to ape the mannerisms and bad behavior of Gordon Gekko. Can you think of instances when you attempted to influence an outcome and your efforts had a completely opposite effect?
• On the topic of “influence”, what did Stone get wrong? What did he get right?
One step forward, three steps back. It seems that every time the finance industry makes an effort to stabilize and repair its tattered image, it promptly shoots itself in the foot. The latest case of foreclosure “robo-signings”—where foreclosure documents were signed en masse without certification of basic information—certainly won’t help boost finance’s reputation in the eyes of customers and investors. Can the finance industry fix its brand in the eyes of stakeholders, or is it too late?
Advertising agency founder David Ogilvy once defined a brand as the intangible sum of attributes, such as name, packaging, price, history, and reputation. However, with a $2 trillion dollar mess still looming from the 2008 financial crisis, “Main Street” rage bubbling over financial bailouts of large institutions and minimal credit supplied by financial firms (despite interest rates at all time lows), there is much for financial companies to do in terms of brand repair.
In the United States, the finance industry still supplies a significant portion of gross domestic product. With so many people employed by the finance industry, and the importance of credit to an economic system, it is certainly in the industry’s best interest to restore consumer trust. Enclosed are two steps (there may be more) towards this effort.
A wise teacher once counseled that “anything worth doing is worth doing right.” This is a lesson that the finance industry has continually failed to learn. James Surowiecki from The New Yorker points out in “Back Office Blues” that banks have created another PR mess that could have been easily avoided. He says, “(Banks) have foreclosed on homes without having the proper documentation and (instead) relied on unqualified people to sign affidavits attesting to things they didn’t know. In a few cases, they seem to have actually tossed people who didn’t have mortgages out of their homes.” And now, Surowiecki notes, “As a result, federal regulators and attorney generals in all 50 states are now investigating.”
The costs saved by employing minimally qualified personnel to daily sign thousands of foreclosure documents will likely be dwarfed by litigation costs and an eventual settlement that could range in the billions. Surowiecki continues, “Banks have preferred to do things on the cheap, which is an open invitation to trouble, including fraud.” Indeed, cutting corners to save a buck, in most instances ends up costing two.
In a letter to the editor of the Financial Times, dated Nov. 9, 2010, twenty professors from prominent universities, such as Stanford, MIT, and Berkeley, openly criticized regulatory reform passed by most advanced economies. “Banks high leverage and the resulting fragility and systemic risk contributed to the near collapse of the financial system,” they wrote. The authors suggest that higher capital requirements—or a buffer against volatile markets—are in order to ensure a healthier banking system, rather than focusing on “high returns for banks’ shareholders and managers, with taxpayers picking up the losses and economies suffering the fall-out.”
A healthy banking system is still one that takes risks, but also has an appropriate capital buffer for turbulent times. Holding a sufficient capital buffer makes it less likely the financial system will need another taxpayer bailout. Ultimately, better risk management strategies will help renew trust in the banking system.
When asked about qualifications needed to obtain credit, JP Morgan famously replied, “The first thing (needed) is character … Because a man I do not trust could not get money from me on all the bonds in Christendom.” What suggestions do you have for the finance industry to restore its reputation?
Related: Reputation Management—Not Needed Until It’s Needed
With very few exceptions, it’s not a good idea for companies to make and sell substandard products and services.
Yet, that’s exactly what happened leading up to the 2008 financial crisis where banks bundled shaky and suspect mortgage loans known as collateralized debt obligations (CDOs) and resold them to pension funds and other investors worldwide. And while some financial services companies have since settled with the United States Securities and Exchange Commission for their role in misleading investors, most have not admitted fault.
Which leads to a larger question—when is it acceptable to knowingly sell a substandard product?
Charles Morris, author of “The Two Trillion Dollar Meltdown” aptly describes the period leading up to the financial crisis of 2008 as “sheer idiocy”. To start with, he says, debt to equity—or leverage—by many financial firms was as high as 100:1. In addition, high risk mortgages were more than the flavor of the month, as CDOs in 2006 were created from “more than 40% of all mortgage originations.” And of course, we haven’t even mentioned derivatives such as credit default swaps (CDS) that tied global banks together in an intricate web of interdependency.
What is the end-result of the 2008 financial crisis? The International Money Fund (IMF) estimates losses from the financial crisis at $4.1 trillion, jobless rates still hover at 12.5% or more in some states, and 401K account’s are still recovering from losses of 30-50% and sometimes more! Indeed, if anything has been learned from this global meltdown it’s that —caveat emptor still reigns—otherwise known as “let the buyer beware”.
Let’s get back to CDOs for a minute. A collateralized debt obligation is simply a bundle of 100-200 mortgages that are sliced and diced into “tranches” and then priced and sold to investors based on a risk management formula. Investment banks engaged in buying mortgages from “mortgage mills” and then packaged and resold these CDOs to investors. Not a bad concept, unless you know beforehand that the package consists of fraudulent and dubious loans that will likely never be paid.
In fact, Carl Levin, chairman of the US Senate’s Permanent Subcommittee on the Financial Crisis scolded a row of investment bankers on the process of producing CDOs and other financial products saying, “You people think it’s a piece of crap, and go out and sell it!”
But here’s the rub—as the writer of the Financial Times Lex Column describes it; “…selling crap is no crime per se.” In fact, the writer goes on to say, “If the SEC is so against the practice, it should also prevent people from the buying of crap too.”
In fact, there are many businesses that profit greatly from the buying of distressed assets including foreclosed homes, flailing companies, and even tarnished brands. Obviously, these sales should continue. However, the writer of Lex must also remember that some US states do prohibit the “knowing” sale and re-sale of defective products; for a good example see lemon laws for pre-owned cars.
A Financial Times reader responds—tongue in cheek—to the Lex column by saying if it is indeed a legitimate business practice to sell substandard products that the Lex column author, should “bear this principle in mind (the next time he/she) visits a doctor, dentist, pharmacist, lawyer or accountant.”
With the advent of the internet, the Smartphone explosion and now social media, global companies cannot afford to take the risk of knowingly selling sub-standard products. This advice of course, only applies if companies care about brand perception, reputation and integrity.
For many companies—reputation is one of the last bastions of competitive advantage. Millions if not billions of dollars in brand equity and goodwill are at stake. And consumers have long memories. There are no real shortcuts when it comes to quality.
Questions:
• In an age of “asymmetric information”—where the seller often knows more than a buyer—why are brands so important?
• When is it OK to sell a substandard product?
