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The ongoing joke that is Silicon Valley Privacy

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SnapChat just revised their privacy policy. I decided to read it. It looked pretty good. Then I got to the section How We Use Your Information. How does SnapChat use the information? To provide services. To communicate with me. To monitor trends. And so on.

The final bullet point? Carry out any other purpose for which the information was collected.

In other words: SnapChat has no privacy policy, and places no limits on what they can (and presumably will) do with your information.

Google’s privacy policy is similar. It sounds really grand, but if you read it carefully, in critical areas it exempts Google from any actual restrain on behavior by including similar clauses to the SnapChat clause.

Please face it: Silicon Valley, that supposed bastion of libertarian respect for individual rights, is no such thing. It’s a collection of disingenuous, deceptive, liars who are happy to write multipage privacy policies for PR purposes, which have no teeth whatsoever.

Be very, very careful of anything you put on a computer you don’t own. And I’m sure that the license agreements we agree to when we buy our computers and install Windows or Mac OS X will contain similar escape clauses if they don’t already.

If a policy does not have genuine, real teeth (“Corporation agrees to pay $1,000 for every violation of our privacy policy”), then over time, all such policies that supposedly protect consumers will be eroded. It seems to be a natural law, and it makes me believe more and more in regulation. I would rather slow progress than have process come at the expense of the well-being of consumers. Business was invented to serve us, not the other way around.

Corporations seem to be nothing if not explicitly immoral. It is very sad to watch.

Please work for free. Not.

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I’m sure you have never asked someone to work for free. But just in case you know someone who has—or if you’ve ever been asked—here’s the kind of thing you really should say.

Today I received this letter:

Hello Mr. Stever,

 

I am writing to you on behalf of XYZ, a non-profit, CSR project of ABC (a $4 billion conglomerate operating in 16 countries). … We bring together advisors and speakers from some of the top business schools in the world… we are committed to building local intellectual capital and leveraging a business model that ensures sustainability and relevant development opportunities to our present and future business leaders.

 

To begin a relationship, we would be interested in having you as one of the subject experts for our Webinars to conduct a live complimentary webinar on a topic of your choice, and also offer you to write exclusively on our blog<.

My response:

I find your request confusing. I am a professional, who has spent several hundred thousand dollars and several decades developing my expertise.

 

While I believe I might have valuable content to offer, the key word is “valuable.” You say that you are a project of a $4 billion conglomerate, yet your business procedure seems to be asking people such as myself to work for free. That doesn’t sound like partnership; that sounds like crass exploitation. You have the money to pay your vendors, you would just rather have them work for free.

 

That is not the kind of business practice I stand for or am interested in. If you are training entrepreneurs, it is a business practice you should object to as well—any entrepreneur who does not make sure they are well-paid for their product will quickly go out of business. I strongly suspect that neither you nor the CEO of your organization work for free. I can only follow your lead and decline your offer, in favor of clients and partners who believe in paying for the value I provide.

Income inequality is simple math

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Simple math is a great way to understand a system’s behavior. I picked up this trick from Warren Buffett’s writing and speaking. Warren often figures out which mathematical elements drive behavior of a stock or industry, and then uses that to set a boundary on his investment decisions. He gave a great analysis in February 2000 of why the first internet bubble had to pop. Three weeks later, it did.

His analysis depended entirely on noting that valuations in the internet companies were assuming profit growth of 15%, while the economy as a whole was growing at 2.5%, and profits were remaining a constant share of the economy. As he put it, “mathematically, that relationship can not continue to hold. I don’t know what will collapse, I don’t know who the survivors will be—and there will be many of them—but I do know that eventually the house of cards will tumble. It has to.”

The Simple Math of Wealth Inequality

Thomas Pitteky’s new book about income inequality is apparently making a big splash. I haven’t read it, yet, but I’ve been told he is very sympathetic to my point of view. Here’s my analysis, before reading the book.

I’ve long held that the driver of wealth inequality is much simpler than policy, philosophy, or ideology. It’s simple mathematical fact, given our tax rates.

I finally ran some numbers.

Starting position: rich own 25%, everyone else, 75%
Overall tax rate on everyone else, 39% (25% federal + 14% FICA)
Overall tax rate on the Rich, 17% (mainly capital gains)
Assuming the Rich can get an average ROI of 15%, while everyone else 10%
(a reasonable assumption, given that the entire class of high risk/high return investments requires one to be an accredited investor. I.e., rich.)

With these assumptions, in 50 years (say, 1960 to 2010), the income distribution goes from rich 25%, everyone else 75% to rich 85%, everyone else 14%.

If we assume that both groups get equal returns on their money, rather than the rich getting higher returns, we still go from 25/75 to 48/51 in just 50 years

The Rich Get Richer, Purely By Virtue of Ownership

As long as the overall tax rate on the rich is lower than the overall tax rate on the poor, even independent of the range of investment opportunities available (and the rich also have enough money to have a portfolio of large-enough bets that a single winner will ultra-increase their net worth), the rich will eventually own everything.

This is independent of whether they work harder, whether they are more committed, whether they “create jobs,” or anything else. It’s purely based on their after-tax rates of return. (And as for them being job creators, note that to the extent that they can lay people off, their rates of return will increase. Hiring decreases it.)

I don’t understand why this simple mathematical fact never comes up in these discussions.

Even If The Rich Allocate Capital Poorly, They Still Win

If you run the numbers, it doesn’t matter if the rich get below-market returns. Berkshire Hathaway, Warren Buffett’s company, has only gotten market-level returns in recent years. But he’s still owning more of the economy than you are, every year.

The tax rate differential is high enough that Warren Buffett’s interest income still has a better after-tax return than you have on your entire income.

Good businesspeople oppose free markets

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A friend on Facebook posted an article about New Jersey outlawing Tesla’s direct-to-consumer car sales. My friend was decrying how Gov. Christie is being anti-free-market. And I agree 100%.

From what I’ve been able to see, it’s pretty clear that the big conservative political donors hate free markets. What they love is whatever give them, personally, the ability to get more wealth. By “free market” they mean “don’t do anything that interferes with my personal ability to make money.” For example, the Koch brothers compete by using their money to alter laws so they win. They don’t compete by being better businessmen.

When it comes to competition, they hate it and undermine it at every opportunity, unless they’re the winner.

When it comes to level playing fields (supposedly the bedrock of markets), they hate it.

When it comes to producing the best product at the lowest cost, they hate it.

When it comes to contributing to the infrastructure they use freely that was funded by the public, they hate it.

Business People Should Loathe Competition

It’s a real education to go to business school and ask: how much of this education is devoted to finding ways to gain a market advantage without actually having to do a better job? The answer: most of it. It’s called “business strategy.” We teach our students how to be anti-competitive and anti-free-market, all in the name of free markets.

This works, however. It works because with the right playing field, pitting anti-free-market forces against each other results in more efficient companies through market selection of companies that are fundamentally better than other companies. This produces better ultimate outcomes for the consumers and society who created the markets to begin with.

But never miss the critical point: free markets work because the players are all trying to gain market advantage by doing a better job than each other. The players themselves are not striving to have a fair market, they’re striving to win and eliminate the competition (and thus the market).

It’s the job of government to make sure the playing field is level enough to keep enough market participants that the market continues to function. Players all want monopoly, government wants thriving market participation.

Mr. Christie’s error is that he’s acting as a businessman. That’s not his job. His job is to take care of all his constituents overall, not just the business ones.

Can you align business with ethics?

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Is business anti-ethical by nature? I’m reading an article today about how it’s in no one’s business interest to help protect consumers whose cell phones get stolen. Cell phone companies make more money when a customer’s phone is stolen, since the customer has to buy a new one. Furthermore, this logic applies to all cell phone companies, so even though it’s technically possible to permanently identify and deactivate a stolen cell phone, no player in the industry has the incentive to implement the technology.

Given that the technology certainly exists to disable a stolen phone, and customers spend hundreds of dollars on a phone, is it ethical for the cell phone providers not to help stop this, when (a) they could, and (b) they are the only people in the system who can?

This is a case where business interests and consumer interests clearly diverge. It’s a rather extreme version of Frito-Lay designing Doritos to give a rapidly-vanishing burst of flavor that psychologically hooks eaters into eating another chip. They know it’s unhealthy for people to stuff themselves on refined carbs, but they create a product designed to encourage exactly that. The cell phone companies, by not implementing theft protection, are encouraging cell phones to become the high-cost, high-tech equivalent of Doritos.

(How’s that for a tortured metaphor?)

I’m of mixed minds on this one. On one hand, I don’t know that it’s fair to force the phone companies to implement theft-protection on their phones, even thought it would stop an entire category of crime. But at the same time, no one else can do it, and I don’t know that I like the precedent of saying that business interests trump the societal interests of eliminating an entire category of theft and black market trading. (At the end of the day, I believe that we allow business to operate to benefit society, not the other way around.)

What do you think? Should phone companies add anti-theft technologies to their phones? Why? Is it morally/ethically appropriate on the part of the government/consumers to require companies to act? Is it morally/ethically appropriate on the part of the companies not to act?

Discuss.

Don’t be a victim in or out of the workplace.

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I have said many times in my podcast and out of it that if you can take some measure of internal ownership for bad things that happen in your life—even ownership of very small parts of the situation—it can lead to a feeling of deep control and responsibility in your life. It sounds counter-intuitive, but if you can say, “I chose to live in that flood zone, and I can choose to rebuild there or somewhere else,” you’ll actually feel less of a victim of your flooded home.

Try it!

  1. Think of a situation where you felt victimized: Today, the checkout clerk was moving in slow motion, ruining my life.

  2. Find (a) one thing you did that you could have not done, (b) one thing you didn’t do that you could have, (c) one interpretation you had that might have been wrong>

  3. Now describe the situation to yourself in terms of those answers: Today, the checkout clerk was moving slowly, which I (c) interpreted as incompetence (rather than, say, physical disability or a slow computer). I could have (a) decided not to buy the product just then, or (b) left the store without buying anything, or offered to help with the register.

Whether or not your behavior changes in the future, re-telling your narrative in terms of your contribution to the situation will often leave you feeling much more centered and in control.

Do you just think you have integrity?

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Do you have integrity? Or do you just think you have it? I have been pondering what integrity is, the last few days.

I have a friend, “Ashley,” who has done some stuff that many people would consider to be well into the gray area of ethical behavior. He admits he did it and explains why.

I have another friend, “Chris,” who has done stuff that hurts many more people than Ashley. What Chris does is legal, however hurtful it may be, and Chris can bend your ear for hours about how what he does really is for the good of everyone, and anyway, “everyone does it.”

Both Chris and Ashley are charming, fun people to hang out with.

I find, much to my surprise, that I’m far more inclined to want to spend time with Ashley. I know where I stand with Ashley. I know where the gray areas are, and where I’m likely to get burned. With Chris, the most well-meaning intentions may someday end up burning me, and it will be “nothing personal, just business.”

To me, integrity has more to do with acting congruently with how you represent yourself than it does with acting in a moral/ethical/”good” way.

Agree? Disagree? Why? By my definition, do you have integrity?

Is texting in meetings rude?

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Do you think it’s rude to text/email during a meeting?

Some say it’s multitasking. An article I read celebrated “the skill of following along in person while simultaneously [doing other stuff]” Alas, that skill simply doesn’t exist. Our brains are not wired to multitask, and splitting attention vastly decreases the quality of thought we bring to the individual activities.

Furthermore, even though you may not consider it rude, it can have very real negative effects for you. Behavioral economist Dan Ariely discusses this in his book The Upside of Irrationality. When someone took a quick cell phone call in the midst of an interaction, the person they were interacting with was quick to retaliate by not returning a cash overpayment. (He then showed that an explicit apology offset that effect. So perhaps texting then apologizing is fine behavior.)

If the text or email is relevant to the task at hand, perhaps we can adopt the same policy we did in elementary school: let the team leader see the notes being passed back and forth. Next time someone texts in a meeting, they have to show everyone the text sent and the response. Then the group can decide whether it’s worthwhile

Sources:

Engaged employees perform best.

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Gallup Organization has been looking at employee engagement for many years. They’ve famously found that only a small percentage of our workforce is actively engaged at their jobs. Often, company discussions about people policies center around employee well-being as an underlying principle driving HR policies. Wellbeing refers to perqs like vacation time, flextime, and so on.

I just read this Gallup research summary that asks: Should a company put effort into employee wellbeing policies, or into employment engagement policies? It turns out to be easy to answer: the greatest driver of wellbeing is employee engagement, not perqs. The research shows that engaged employees perform far better than non-engaged employees, even if those non-engaged employees are given a lot of workplace perqs (e.g. more vacation time, etc.).

Also interesting, though not mentioned in the conclusion, is that flextime is also tremendously important. Having engaged employees and giving them flextime gives the greatest boost to wellbeing.

I know when I’m engaged, my whole life seems better. Next time you’re wondering how to improve workplace morale, instead ask how you can help improve engagement. That answer might change your entire culture.