Category Archives: Business and Economy

Happy birthday to all

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Over at Slate, Paul Collins has published an interesting analysis of the validity of Warner Music Group’s $2 million-dollar-a-year copyright claim to “Happy Birthday”:

“It is almost certainly no longer under copyright,” [George Washington University law professor Robert Brauneis] concludes in his study [link], “due to a lack of evidence about who wrote the words; defective copyright notice; and a failure to file a proper renewal application.”

So why do people keep paying up to perform a public domain song?

Insurers, for one: The insurance necessary on film financing often requires that litigation be avoided by paying all permissions fees. And even without that barrier, it’s simply cheaper to pay the bill than it is to fight Warner.

Nothing new here.  Monopolists can’t really be blamed for acting like monopolists.  What’s more interesting about  Collins’ article is the role increasingly comprehensive digital archives are playing into this research:

Google Books and Google News, though, practically burst with “Birthday” clues….It might just be a matter of time—plus the right bit of scanning in a database—before [proof that the copyright is invalid] turns up. And if it ever does, Warner Music may find their $40-million birthday cake left out in the rain.

Now there’s something that we could all celebrate…

Hard to imagine the complex, modern world without bureaucracy

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It is common these days to hear complaints about bureaucracy, often related to the amount of time it takes to get something done or the waste involved in completing a large project. But it is hard to imagine the world we have today without bureaucracy:

For instance, as a student sociologist, I was taught that bureaucracy was essential to an ordered society. A system of administration, based on a division of labour, designed to undertake a large body of work in a routine manner, was deemed essential to advanced economics.

Yet the term is now used to denote obstruction, complication and sheer bloody-mindedness to produce the opposite outcome.

I guess the modern image is one of an army of pen-pushers, or more accurately, dedicated e-mailers, committed to frustrating the desired outcomes or value for money of any project…

We all need the right skill mix, effective teamwork and the most efficient use of defined resources to serve the public well. In that sense, strategic planning is as essential to the desired outcomes as the obvious contribution made by good service delivery.

So, there is a case for bureaucracy, although it is wise to avoid that term. Demonising particular roles and functions is dangerous. It must be always the quality and quantity of product that counts.

Max Weber wrote about how bureaucracy made modern society possible. It is remarkable to think how large societies are actually able to function. Take the United States: it has its problems but considering that it has over 300 million relatively wealthy people from all around the world, has a large land mass, and has undertaken numerous major projects over recent decades, things still get done and life is decent or good for many residents.

This commentary also hints at what Weber suggested was the possible problem with bureaucracy: a soulless, “iron cage.” The term today has a negative connotation often linked to the reduction of individual freedom. Thus, battles about bureaucracy are all around us: how much should you have to pay for your license plate? Should the government require restaurants to put calorie counts next to the menu? Should you be required to have medical insurance? And so on. It’s not bureaucracy that is really the issue: it is how it runs.

It then becomes a “framing” issue as people seek to avoid the “bureaucracy” label. The trend in recent decades has been to suggest governments, large or local, should be more business-like. Businesses are still bureaucracies – any organization can be a bureaucracy – but they have different goals and different methods of operation. Additionally, they are perceived as being less wasteful and more able to change course (both which are not necessarily true). In the current era of tight budgets, all levels of government are looking for ways to trim costs while maintaining service levels. As the commentator suggests, government needs to be more efficient and cost-effective.

If you are for the Smart car, then you are against the McMansion

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Scott Goodson, the founder of an ad agency, argues that the new trend in advertising is selling a movement:

When the Smart car wanted to sell you a new model earlier this year, instead of talking about the usual advertising claims, like how great the car drives and how fuel efficient it is, Smart USA took a radically different approach. It came out with an idea of being against certain things. It asked you, the consumer, to think about what you were against in life, like excess stuff you buy but don’t need, McMansions with four car garages and of course gas guzzlers.

This is an unusual thing for a car company to do. It was not simply pushing polished cars in ads, it was saying something controversial. It was taking a stand against something. And it went beyond advertisements and set up a Facebook page. Why would advertising do this, why would the brand have this message?

Well, the Smart car, with the help of my agency StrawberryFrog in New York, was trying to spark a national movement against dumb mindless over-consumption. The thinking was: “Hey, if we could get millions of people excited about joining the fight against waste and dumb consumerism, it’s a great way to get them excited about the Smart car.”

This is part of a larger trend in advertising. To get people excited about a brand in this new social-media-Facebook-crazy world, you need to dump the old advertising playbook and spark a movement that people can get involved with.

Goodson suggests that it remains to be seen how consumers will respond. However, these sorts of ads are needed because “traditional ads” no longer work and advertisers need ways to reach consumers.

I’ve seen some ads like this recently. Such ads still target the identity of individual consumers but with a twist. First, they suggest that there are morally good and wrong choices to be made. The Smart car ad is suggesting that people in four-car McMansions are on the wrong side while virtuous Smart car owners are on another side. Second, they tie individual identity to a collective of like-minded consumers. While a cynic might suggest that such consumers are simply participating in the capitalistic movement, Smart car owners are told that their purchase makes them part of something bigger. If you put these two ideas together, consumers can still follow their individual tastes (however influenced they are by outside forces) but feel like they are participating in virtuous action with others.

Regarding the Smart car ads: what would happen if Toyota started advertising the Fit with the Smart car as its enemy/opposite movement? It seems rather easy to pick on McMansions and excessive consumption but what if it was a similar product?

In the long run, does this cheapen more traditional social movements that are looking to right social wrongs?

I wonder if advertisers would say these these movement-based ads are more effective with younger consumers, particularly emerging adults who might be yearning to be part of larger collectives.

California housing forecast includes fewer McMansions, depressed construction industry

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Several researchers from UCLA suggest California housing industry will experience some changes in the next few years including a construction industry that will need years to recover:

UCLA forecasters have seen the future of California’s housing market, and it looks like this: more apartments near the coast, fewer McMansions in the desert…

That’s bad news for the state economy, however, for two reasons. One is that construction of multifamily homes requires less labor than construction of single-family homes. Second, areas such as the Inland Empire and Central Valley that were hit hardest by the housing bust won’t get a construction boom to help pull them out of the economic doldrums.

This means “there is an even larger structural unemployment problem in California than we originally thought,” Nickelsburg wrote in the forecast. “Not only do we have excess construction, real estate and support skills, but some of those that will be demanded will be in the wrong geography.”

California won’t start adding a significant number of building permits until 2013, forecasters say, which is one of the reasons the state’s unemployment rate will stay above 10% until the middle of that year. Nonfarm employment in the state won’t return to pre-recession levels until 2014, and construction employment won’t reach those levels until at least 2021.

The demographic shifts and move away from McMansions have been predicted elsewhere but the longer-term impact of a troubled construction industry has sort of flown under the radar. I wonder how much of the current unemployment troubles in the US are the result of the lack of home construction, i.e., what percent of the unemployed are construction workers? Where do construction workers end up working in a prolonged housing industry slump?

All of this is a reminder that the housing crisis which helped lead to the economic crisis is a longer-term issue. Lower housing prices don’t just influence homeowners who wish they could sell or get a return on their home or large lending institutions who lost a lot of money – millions of construction workers are under- or unemployed and communities can no longer rely on quick single-family home construction to help revive their economies.

Reversing Righthaven

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The court system issued another stunning rebuke of Righthaven and its business model, as an Electronic Frontier Foundation press release reports:

In a decision with likely wide-ranging impact, a judge in Las Vegas today dismissed as a sham an infringement case filed by copyright troll Righthaven LLC. The judge ruled that Righthaven did not have the legal authorization to bring a copyright lawsuit against the political forum Democratic Underground, because it had never owned the copyright in the first place. [emphasis added]

This is a big win for bloggers, and the news gets even worse for Righthaven:

As part of his ruling today, the judge ordered Righthaven to show why it should not be sanctioned for misrepresentations to the court.

More coverage at Techdirt.

I guess we’re starting to get that copyright law clarity I was hoping for…

Foreclosure as legal remedy

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Digtriad.com reports about a Florida couple who foreclosed on a bank (yes, you read that right):

It started five months ago when Bank of America filed foreclosure papers on the home of a couple, who didn’t owe a dime on their home.

The couple said they paid cash for the house.

The case went to court and the homeowners were able to prove they didn’t owe Bank of America anything on the house. In fact, it was proven that the couple never even had a mortgage bill to pay.

Not surprisingly, homeowner Maurenn Nyergers ran up some costly legal bills defending herself against Bank of America’s egregious mistake, and the judge quite reasonably ordered BoA to pay Nyergers’ legal fees.  This is where things got interesting:

After more than 5 months of the judge’s ruling, the bank still hadn’t paid the legal fees, and the homeowner’s attorney did exactly what the bank tried to do to the homeowners. He seized the bank’s assets.

Additional coverage (and pictures) at the Daily Mail.

Lots of news and blog commentators are talking about this story with phrases like “sweet justice” and “very satisfying”, but I think several other lessons can be drawn from this story.

1.  Foreclosure is a very powerful legal remedy.  Cash can disappear, cars and boats can move, but land and buildings (generally) stay put.  Nothing gets an owner’s attention like the prospect of losing their real estate.  It’s amazing how fast BoA paid up once they realized a local branch was threatened.

2.  Foreclosure is open to everyone.  “Equal justice under law” is sadly an ideal not always present in the real world.  Nonetheless, this story illustrates how anyone owed money can use it to get paid.  “The system” does sometimes work!

3.  “An ounce of prevention is worth a pound of cure.”  Consider all of the opportunities BoA had for this to be a non-issue:

  • They could have double-checked their paperwork to see if a mortgage existed before filing a lawsuit.
  • They could have double-checked their paperwork after filing their lawsuit.
  • They could have settled quietly with the homeowner after they realized their error instead of forcing a court to rule against them.
  • They could have paid their bill quickly to avoid further embarrassing publicity.

Instead, of course, BoA has created a national news story that makes it look disorganized, bullying, and a deadbeat.

Chicago area businesses looking to move from suburban campuses

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The suburbanization boom after World War II was not just about the movement of residences to the suburbs: it included a large migration of jobs and business headquarters to suburban locations, often large “campuses.” Crain’s Chicago Business suggests this trend may now be going in reverse as Chicago area business look to leave these suburban campuses:

Fleeing urban decay, companies like Motorola Inc., Allstate Corp. and Sears Roebuck & Co. built fortress-like complexes on the fringes of metropolitan Chicago. Jobs and residential development followed, fueling sprawl and congestion across the region.

Today, Sears Holdings Corp. and AT&T Inc. are looking to escape their compounds in northwest suburban Hoffman Estates. A shrunken Motorola has space to let in Schaumburg. Sara Lee Corp. eyes downtown office space after less than a decade in Downers Grove. Companies from Groupon Inc. to GE Capital hire thousands in Chicago while their suburban counterparts shed workers.

All reflect changes in the corporate mindset that spawned the campuses dotting outer suburbia. Empire-building CEOs from the 1970s through the 1990s craved not only cheap real estate but total control of their environments. They created self-contained corporate villages that cut off employees from outside influences.

As the 21st century enters its second decade, many companies are discovering the drawbacks of the isolation they sought. Hard-to-get-to headquarters limit the talent pool a company can draw on and feed a “not-invented-here” insularity that ignores major shifts in industries and markets.

This article suggests more corporations seek the opportunities that cities provide. Chicago certainly has opportunities – it was #6 in Foreign Policy’s 2010 global cities index. I wonder how much of this is driven by different factors:

1. Young people (college graduates, recent graduates) living in the city. We have some evidence that younger generations want denser environments and cultural opportunities. This would seem to go along with Richard Florida’s “creative class” idea that people and businesses move to exciting, innovative, culturally hip places.

1a. As a corollary, suburban places are no longer hip. These campuses are now decades old and involve stodgy suburbanites driving to stodgy workplaces. This is kind of interesting because the technology that would make instant connections possible may still not be enough to keep companies from relocating to the city.

2. Is there a particular business or city that has spurred this new thinking? If this has been shown to “work” elsewhere, it wouldn’t then be too surprising if other businesses followed suit.

3. Some have suggested that some businesses originally moved to the suburbs because their CEOs had already made the move and wanted their workplace to be closer to their homes. Could it be that CEOs and other important people in these corporations are now living in the city?

4. Tax breaks. This has been in the Chicago news recently with several companies, including Motorola and Sears, threatening to leave if they don’t get a better deal. Do these businesses get better incentives from the city of Chicago? Can increased tax breaks keep these campuses in the suburbs?

Incorporating Hispanic businessowners into civic and business groups

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Many communities have civic and business groups comprised of local businessmen. In Iowa and in other places in the United States, it has been a challenge to incorporate Hispanic business owners into these organizations:

Main Street Iowa, like other programs nationwide, has been working to overcome barriers, many of them cultural, that keep Hispanic-owned businesses from joining the historic preservation group.

Specialists such as Thom Guzman and Norma Ramirez de Miess said the effort is crucial to revitalizing Iowa main streets and downtowns, because Hispanics are rapidly becoming a fixture in Iowa’s business landscape. Hispanics are the state’s fastest-growing business owners and have the fastest-growing population…

Terry Besser, a sociologist with Iowa State University, said Main Street programs — as well as chambers and other merchant or business groups — have their work cut out for them. Her research shows that Hispanic owners often distrust outsiders and government.

A study of 18 rural communities in Iowa, Kansas and Nebraska showed that 24 percent of Hispanic-owned companies were business association members, vs. nearly 70 percent of businesses owned by white men.

The main suggestion in the article is that community leaders need to build personal ties with Hispanic businessowners before they can address commerce issues. How many communities do a good job at such outreach? This is an issue of social networking: white businessowners are plugged into these community organizations which can then lead to other opportunities.

This is a growing concern in communities where shopping areas, whether they be historic downtowns or strip malls or shopping centers, may be split between businessowners of different backgrounds. Working on projects, like building preservation or facade improvement, may prove to be more difficult. Local business organizations, such as the Chamber of Commerce, usually aim to work on improving business opportunities for the whole community but this could be problematic in terms of lobbying or getting things done if large portions of the business community are not on board.

Yet I wonder if the aims of Hispanic business owners and these groups are the same and if it is really a problem if they are not.

Become friends with your Toyota

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Companies are looking for ways to leverage social networking sites for their own purposes. Now Toyota announces plans to create their own social networking service where you will be able to become friends with your car:

Toyota is setting up a social networking service with the help of a U.S. Internet company and Microsoft so drivers can interact with their cars in a way that’s similar to posting on Facebook or Twitter.

Japanese automaker Toyota Motor Corp. and Salesforce.com, based in San Francisco, announced their alliance Monday to launch “Toyota Friend,” a private social network for Toyota owners…

With the popularity of social networking, cars and their makers should become part of that online interaction, [Toyota’s president] said.

“I hope cars can become friends with their users, and customers will see Toyota as a friend,” he said.

There is the whole purpose of this: strengthen the relationship between customer and product. I wonder if Toyota owners would really flock to this concept. They might be loyal customers because of the value and reliability of Toyotas but is there a fervent fan culture that would want to be part of a social network?

But there is an interesting phrase in this article: “cars can become friends with their users.” Perhaps it was not intended this way but it implies that cars have agency. The article talks about how newer cars, such as plug-in electric vehicles, need more monitoring and so users will be open to getting more information from their cars. But in the end, these cars are just cars, machines that help people get around. We are a ways from having cars that could hold human-like conversations with their owners (see this recent piece on progress in tackling the Turing Test).

While some commentators have lamented the difference between off-line and online friends, perhaps this is the next controversial step forward: friendships with products. Right now, you can be a “fan” on Facebook but a friendship implies a closer and more interactive relationship.

With banks and lending institutions owning so many homes, housing values will be lower for several years

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Foreclosures are not just an immediate problem; the New York Times reports that the number of foreclosed homes now owned by banks and mortgage lenders are likely to depress the housing values for years to come:

All told, [banks and mortgage lenders] own more than 872,000 homes as a result of the groundswell in foreclosures, almost twice as many as when the financial crisis began in 2007, according to RealtyTrac, a real estate data provider. In addition, they are in the process of foreclosing on an additional one million homes and are poised to take possession of several million more in the years ahead.

Five years after the housing market started teetering, economists now worry that the rise in lender-owned homes could create another vicious circle, in which the growing inventory of distressed property further depresses home values and leads to even more distressed sales. With the spring home-selling season under way, real estate prices have been declining across the country in recent months…

Over all, economists project that it would take about three years for lenders to sell their backlog of foreclosed homes. As a result, home values nationally could fall 5 percent by the end of 2011, according to Moody’s, and rise only modestly over the following year. Regions that were hardest hit by the housing collapse and recession could take even longer to recover — dealing yet another blow to a still-struggling economy.

Not good news for those who want to sell a home in the near future. It is interesting that we now hear very little about this at a policy level. There are certainly other important pressing issues in the world (jobs, gas prices, military actions, Republican candidates for President?) but housing values affect a lot of people.

At the same time, I have heard and seen new advertisements from the National Association of Realtors. I wonder why they are running these ads now: are they worried that more people will rent rather than buy? Is there an uptick in the number of people who are trying to combat lower housing values by selling the home on their own? Do they feel that there might soon be changes in public policies, perhaps through measures like limiting or getting rid of the mortgage-interest deduction, that would limit the government’s promotion of homeownership? And interestingly, these advertisements have stressed that homeownership helps create jobs.