"Your Interview Just Started" and Other Mistakes I've Seen (and Made) In Recruiting

I should start by saying that I actually really love recruiting.  I’ve helped a lot of people get roles on my current team and I think that it’s very fulfilling to match a talented person with a role that can further their career.  I’m the person who honestly gets excited when a person that I believe in asks me if I know of any available opportunities.

Having worked at several different companies, I’ve been involved in a lot of very different recruiting processes, both as the candidate and as the recruiter.  I thought that it might be interesting and informative to share some of the mistakes that I have seen (including one that I personally made) throughout these processes.  Let me say that this is obviously not intended to poke fun at those that are being described, and I’ve gone to great lengths to not give away the names or any unnecessary info about the people described.  But each one of these stories did really happen and illustrates a somewhat deeper lesson when it comes to recruiting.  Read carefully and avoid these mistakes when looking for your next role!

Your Interview Just Started

This happened many years ago when I was tasked as a greeter for on-campus recruiting.  My job was simple: my company was bringing in a high volume of candidates to interview, and I would stand outside the interview rooms and shake hands, answer basic questions, tell people where to get coffee or use the bathroom, and generally keep the machine running smoothly.  I actually found this role very satisfying, because most people are very friendly and complimentary when they're encountering someone who works for the company with which they are interviewing.

Unfortunately, not all people are this way.  Despite so much time passing, I still remember one candidate that came in a few minutes early for his interview.  He seemed frazzled and nervous and he had a stack of paper with him.  I introduced myself and told him that they were still finishing up with the previous interview.  I then asked if he needed anything.  I don't remember his exact response, but it was something to the effect of:

"No, I don't need anything.  Actually, if you could just leave me alone for a minute so I can prepare for my interview, that’d be great."

Bad news: your interview just started and you've already messed up.

Now this candidate was young and I'm sure had no idea how the decision process for offers would go.  In reality, everyone (including interviewers and greeters) came together in a room at the end and all shared notes.  When I was asked my opinion on this candidate, I had to relay that story.  Now, I don't believe that it was the deciding factor in his candidacy, but it certainly didn't help his case.  This raises a rule that I've always tried to adhere to: the second you finish dressing for the interview, you are in the middle of the interview.  Every interaction needs to be professional and friendly, because you never know what will factor into the company's decision on whether to hire you.

The Long Pause

Of all the faux pas that I've seen during interviews, I will say that this one was fairly mild.  That said, since it wasn't as obvious as some of the others, it bears repeating because a reasonable person could be convinced that this wasn't a mistake.

I was part of a group conducting an interview one time and the candidate was asked a question.  Now, I don't remember the exact question, but I do know that it wasn't completely out of left field.  Maybe something that the candidate hadn't prepared for specifically, but reasonable enough to expect that it will be asked.  The candidate's response was to ask "May I have a few moments to gather my thoughts?"  Reasonable enough, we all thought.  So we sat there in silence.

What I thought would be five seconds must have stretched into 45 or even a full minute.  I can't describe how uncomfortable it felt to sit in a room with five people, everyone looking at the table or aimlessly at the wall, in complete and utter silence for that long.

Then, he started to speak.  I don't remember his exact response either, but I feel like it was probably pretty good (one would hope after having that much time to get mentally prepared).  Unfortunately, all these years later, I don't remember the question or answer, but I'll never forget the awkward feeling during that long pause.

The fact is that you should always thoroughly prepare for an interview, but you need to be able to improvise as well.  In the workplace, you won't always be completely prepared for every question you get.  Every job involves a certain amount of sales skills and if you can't think on your feet, your career will suffer for it.  Most people conducting interviews will realize this and be unimpressed if you are unable to come up with an impromptu answer.  Sometimes spending the requisite amount of time coming up with the absolutely perfect answer to every question can be fatal.

The Great Leader

I can't impress upon you how serious I am: this example is not a joke and it actually happened.

Someone I have worked with at one point once told me a story about an on-campus interview that he or she had during school.  Near the end of the interview, the recruiter asked this person for an example of a great leader.  Honestly, this should be a slam dunk: there are hundreds of great leaders out there, and the question is asking your opinions, so there really is no wrong answer.  An obvious answer would have been Warren Buffett, which nobody would question.  Steve Jobs, John Mackey, Larry Ellison, Jack Welch.  All of these would have been defensible answers.  You could even go outside business and mention Gregg Popovich, Mike Krzyzewski, or Bill Belichick.  It's a little riskier due to individual sensitivities, but mentioning a well-known politician would probably be acceptable.

No.  This person's response when asked for a great leader?  Adolph Hitler.

To hear the story, this person tried to hedge by saying that Hitler was obviously a horrible person, but that the way he unified Germany showed that he had the confidence and rhetorical skills that are essential for leadership.  I suppose you could consider that a fair point, but I can almost guarantee that the interviewer stopped listening as soon as the words "Adolph Hitler" were mentioned and started mentally planning on how best to relay this story to friends later.  Needless to say, an offer was not extended.

Now this person has gone on to have a very enviable career.  So the good news: a mistake like this can be overcome.  But it proves what should be a very obvious point: make sure any answer you give in an interview passes a quick sanity check.  Not every answer needs to be perfect, but you need to avoid huge, memorable mistakes.

My Biases on Display

To show that I am not above some of these blunders, I will include an example of a mistake that I personally made during a recruiting process a while ago.

I was conducting interviews for a variety of roles and had seen candidates all day.  Honestly, it's very difficult to remember details after such a whirlwind of a day, so I relied on some key notes that I had made.  I had a read a book that said to not ignore your biases and personal experiences in recruiting, the idea being that if you have something in common with the candidate that you know has helped at the company, don’t discount that under the guise of trying to be as impartial as possible.  Personally, I had an extremely difficult major in undergrad (electrical engineering) that required a herculean effort on my part to graduate with a fairly average overall GPA.  I wear it as a bit of a badge of honor these days, and I am predisposed to be more impressed by others who have undertaken majors that were outside of their comfort zone.

When all of the interviewers convened to talk about the candidates, I clearly had my favorites.  There was a lot of widespread agreement on many of the candidates, while others inspired vigorous debate.  One candidate in particular seemed to have almost unanimous agreement from the group as one of the best.  This candidate had a 3.9 GPA and graduated with the highest honors with a degree in psychology.  Nearly everyone in the room was in awe of the GPA and seemed ready to move on to discussing the next candidate.  Then, I decided to open my mouth:

"Well, sure she has a high GPA, but it was in a psychology major.  I would be more impressed if she had actually challenged herself."

The room went silent.

What I had forgotten is that while I am biased towards students that have studied subjects that are traditionally seen as more difficult, not everyone else has that bias.  In fact, anyone who has read Malcolm Gladwell knows that there is evidence that “the best students from mediocre schools [are] almost always a better bet than good students from the very best schools.”¹  In other words, students with proven success might even be better hires than those who pushed outside their comfort zone and weren’t as successful.  Not to mention, I found out later that there was a psychology major or two in the room.

In the end, this candidate got an offer and I had my foot stuck in my mouth.  I didn't impress any of the other leaders in the room with my comment and I ruined what could have been a great networking opportunity for myself.

I think the best lesson from this is not to ignore all of your personal experiences during the recruiting process, but to use those to make decisions in a way that is respectful of your peers and with an understanding that group consensus often should outweigh your individual predilections.

So that’s it.  What interesting stories do you have from recruiting and what have you learned from them?

1 - Gladwell, Malcolm. David and Goliath: Underdogs, Misfits, and the Art of Battling Giants (p. 87). Little, Brown and Company. Kindle Edition.

A Federal Reserve Primer for Mark Wahlberg

“And the Federal Reserve is a...prison?” - Detective Terry Hoitz, The Other Guys

If you haven’t seen it already, go rent The Other Guys.  You will not be disappointed.  It has one scene in which Mark Wahlberg’s character, Detective Terry Hoitz, and Will Ferrell’s character, Detective Allen Gamble, listen to an SEC employee attempting to explain the function of the Federal Reserve.  Mark Wahlberg refuses to be educated and continues to believe that the Federal Reserve is a jail where he can lock up criminals.  Will Ferrell’s character remarks in frustration, “He still doesn’t understand the concept.”

Well, I really hope Mark Wahlberg is reading this post (I can only assume he spends his downtime perusing my blog).  Central Banking, of which the Federal Reserve is just one example, is one of the most commonly misunderstood concepts in the world.  I had no idea what the Federal Reserve was until I was probably 24; even then, it took me 8 years and an MBA to gain a really deep understanding.  I’ve spent a lot of time studying the Federal Reserve (or “The Fed” in common parlance).  In fact, I took a vacation day in 2013 to tour the Federal Reserve building in Atlanta, something my wife views as nerdier than driving a DeLorean to a Star Trek convention dressed as Gandalf.

Though the average person might not grasp all of the functions of the Fed, I think most people have a vague understanding that the Fed sets interest rates.  But what does this really mean?  Is the Fed actually telling banks what rates they can charge on loans?  I don’t want to focus on the goals or historical results of the Fed at this time; the subject is far too complicated for one short post and I don’t feel fully-qualified to write it.  What I want to do is to attempt to describe what interest rates really are and how the actions of the Fed affect these rates.  I hope that this will done at a level that will bore an economics major, be fairly insightful to an MBA, and be a thunderbolt of information to someone without a business education (Mark Wahlberg, I’m sorry, but I’m assuming you’re in the last category).  Alright, here we go!

I think that most people realize that when you deposit money in the bank, the bank doesn’t actually take all of your money and store it in a vault.  Some of it is placed in a vault and the rest is loaned out to other individuals or institutions in need of capital.  The idea is that, if you want your money at some point, you will be just as happy if the bank pays you back with someone else’s money as your own.  The concept is referred to as fractional reserve banking and it is the foundation of our financial system.

But wait.  What if everyone wants their money at the same time?  The bank can’t pay everyone with someone else’s money.  This causes a run on the banks, where everyone tries to rush to get their money out before it’s all gone.  In order to ensure this doesn’t happen, the Fed has instituted a reserve requirement of 10%.  This means that the bank can only loan out 90 cents for every dollar that you deposit, and it is supposed to instill stability in the system.

So what happens at the end of the day when a bank only has 9% or 8% of its total deposits in reserve?  In order to not run afoul of the law, the bank does what anyone else does when they need money: get a loan!  And who would want to make an overnight loan to a bank?  Usually, it’s another bank that has reserves in excess of the reserve requirement.  Since the extra money will not earn anything sitting in the vault, banks are happy to make an overnight loan to other banks in need.  The rate at which banks will loan each other money is referred to as the Federal Funds rate, despite the money not coming from federal funds.  Though the Federal Funds rate is referred to as if it is one discrete number, it is actually a target range of interest rates that banks charge each other.

How does the Fed come into play?  Banks also have the option of borrowing from the Fed at a set rate, referred to as the discount rate.  The discount rate is higher than the Federal Funds rate, causing banks to prefer to borrow from other banks.  But due to the simplicity of the transaction, banks still chose to borrow from the Fed sometimes.  While the Fed does not directly dictate the rate that the banks can borrow from each other, the simple fact is that the discount rate sets the ceiling for the Federal Funds rate.  If a bank is offering a rate on overnight loans at or higher than the discount rate, banks would simply prefer to borrow from the Fed at the discount rate.  After all, the Fed has unlimited funds that it is always willing to loan at a predetermined rate, making the search for funds very simple.

But who cares about the rate on overnight loans between banks?  Well, if a bank can borrow money very cheaply to make up a shortfall with regards to the reserve requirement, that bank is much more likely to aggressively lend out money to individuals and corporations during the day.  Conversely, if it is expensive to borrow to make up a shortfall, banks are going to be very careful about lending during the day to make sure their reserves are over 10%.  This applies significant pressure on the rates for loans that the bank offers; if the Federal Funds rate goes down, all else being equal, the interest rate on loans from banks will also go down.

These actions have a tremendous effect on the interest rates on car loans and mortgages.  But looking at recent history, the Fed did not raise its target for the Federal Funds rate from essentially zero from 2008 until 2015.  Does this mean that loans were interest-free during that time?

If only we were so lucky!  Though the discount rate puts significant pressure on the interest rates for personal loans, it is not the only factor.  In fact, when a bank is making a loan, it is essentially making an investment in debt.  As such, your debt needs to be competitive with other debt instruments available on the free market.  And who is the most ubiquitous debtor in the world?  The U.S. Government, of course!

Your mortgage is actually competing on the open market most closely with U.S. Treasury bonds that mature in 10 years.  As the yield on these bonds rises and falls, so will the rate that you are offered for a mortgage.  Certainly, the rates on Treasuries is affected by the Fed (particularly during the Treasury-purchase program known as Quantitative Easing that was just recently ended), but many other factors come into play as well.  An increase in demand for bonds, for instance from a tanking stock market, would increase the prices of these bonds, causing the yields to go down.  As these rates rise and fall, so will the rate on personal loans.

So why is the Fed involved in loaning money to banks at all?  What are its aims and how successful has it been in the past at achieving its goals?  I could discuss this or a thousand other relevant issues, but digging deeper into the Fed can often result in more confusion.  Since Mark Wahlberg is a busy man, I want to respect his time and keep this post short and readable.

The Fed is complicated and very frequently misunderstood, but its influence on the business cycle and global economy cannot be understated.  Though it may require an economics PhD to fully understand it, knowing its functions at a basic level is relevant to every person working in business today...even Hollywood actors.

Lessons in Building Consensus from the New Zealand Flag Debacle

Before having kids, my wife and I decided that we couldn't possibly settle down to a life of changing diapers without having been to Australia.  One last amazing trip and then we would become real grown-ups.  Of course, after watching an intriguing episode of The Bachelor in which women threw themselves at the eponymous man on a picturesque Kiwi farm, we swapped Australia for New Zealand.  That spring, we spent almost two weeks in New Zealand drinking some of the best Sauvignon Blanc in the world, seeing the Hobbiton set from Lord of the Rings, attending cultural demonstrations by the local Māori, and generally having a great time.  Oh, and about twelve months after we flew home, she gave birth to a wonderful baby boy and we couldn't be happier.

All that is to say I have a tiny bit of personal experience with New Zealand (also I have no idea how to start blog posts in an engaging way).  During my time there, I saw the above fern logo in every single store in the entire country.  It was on hats, shirts, underwear, pins, and posters.  It was even the livery on one of the Air New Zealand planes that we took.  Turns out that it is the logo of the All Blacks, which is the national rugby team of New Zealand.  I was shocked when I found out that it wasn't the official country flag, given the ubiquity.

It turns out that I'm not the only one thinking the actual New Zealand flag needs changing, as the country is currently going through the process of selecting a new official flag.  I think this is generally a good idea; the current flag doesn't seem to represent the New Zealand as much as it represents the United Kingdom.  It is also virtually indistinguishable from the Australian flag, and anyone who has seen Flight of the Conchords knows that Kiwis are a little touchy about being confused with Aussies.  Unfortunately, New Zealand has gone about changing the flag in the worst way possible.  Fortunately, there are a lot of lessons to be learned that are applicable in any situation where consensus is required.

The first step of the process of changing the flag was issuing an open call for designs.  Over 10,000 entries were submitted.  Some were good, and others had kiwi birds with lasers coming out of their eyes.  From this, a government-appointed panel of 12 selected the "long list" of 40 flags that were to be considered.  Already, many people were upset that their favorite design (or the design they submitted) was not in consideration.  However, many presumably were able to find an agreeable design among the 40 selected, and became attached to one of the long list flags.  Three weeks later, without any official consultation with the public, the panel reduced the list of 40 down to 4.  Already there are Kiwis petitioning to add their favorite designs back to the list of 4.  Essentially, the government has assured that everyone has now been spurned at least once, and many have been twice.  This brings us to the first lesson: engagement decreases each time stakeholders feel their opinions are not taken into consideration, so minimize the number of times that this occurs.  All this does is create animosity and a feeling of betrayal.  These individuals then remove themselves from the process completely or, even worse, protest.  The New Zealand flag process feels like it was designed to give the impression of popular vote without the messiness of actually needing to abide by popular opinion.  By conducting the search under the guise of popular opinion, but reducing the choices to the ones the government deems acceptable, all they have done is get the hopes up of everyone in the country multiple times, only to have them dashed.

Unsurprisingly, a very high percentage of the proposed flags featured the silver fern design.  However, the official silver fern logo is a registered trademark of the NZ Rugby Union.  All those shirts and hats that I saw containing the design?  All licensed (for a fee) from this group.  If this design was selected as the national flag, the NZ Rugby Union would have to sign over all rights to the design, without charge, to the government of New Zealand.  Needless to say, the union is not eager to do this.  As an intellectual property lawyer from New Zealand commented: "It's almost like handing over the crown jewels, so to speak, of their business to someone for no commercial gain."  So any design with the silver fern had to be removed from contention.  The government should have known: never present a group with a popular option unless you know it is viable.  The fact that nobody in the government checked about the feasibility of this logo prior to the initial design submission is honestly shocking.  Everyone in the entire country knew this would be the design to beat.  Giving the citizens false hope that the logo could be the selected design ensured a lack of commitment to the process.

Though the official fern from the All Blacks has been disqualified, other fern logos are still allowed.  In fact, all four of the final designs feature a fern in some way.  Two of these designs are literally identical except for the coloring, and both look somewhat like they were designed by committee by incorporating the four stars from the current flag.  The fourth flag is a Māori design, which technically represents a fern as well.  Now there is no doubt in my mind that the committee wanted to make sure that one Māori design made the final four, as about 15% of the population identifies as Māori and the group tends to be very protective of their culture and traditions.  However, with the incredible variety of original submissions, how did the final four all end up with variations of a fern?  New Zealand officials should have known that if you're presenting a group with a choice between multiple options, make sure there is a real choice.  Allowing the country to choose between option 1 or option 1a doesn't truly provide much of a selection for the citizens, especially when it isn't representative of the breadth of options that truly existed.  The way the final four has played out gives the appearance that the government wanted to ensure that there would be a fern on the flag and wasn't going to take any chances at letting the public screw that up.

Now that the final four designs have been selected, the citizens (through postal referendum) will vote for their favorite of those four.  The winning design will then go against the current flag in a second referendum in March 2016, with the winner of that becoming (or remaining) the official flag of New Zealand.

In the end, I think this process will end right where it started: with New Zealand's flag having a small Union Jack next to some stars.  The government has done such a poor job of building consensus that I think the majority of Kiwis will vote to retain the current flag either out of spite or in the hope that there will be another chance to change the flag soon.  It is a shame, because the current flag of New Zealand truly should be changed, and New Zealand's half-hearted reliance on popular democracy has hindered progress.  If the government had merely picked a design without any input from the citizens, at least those citizens would not have felt as deceived as they currently do.  By providing multiple instances for the citizens to provide input, then disregarding that input, the government has created a public relations nightmare that has overshadowed the entire process.

Think about these lessons next time you try to build consensus in a group.  If you ask for input, make sure you genuinely take that input into consideration.  Don't let the group get carried away with options that have no chance of being implemented.  And give the group real choice, or none at all.  If there truly is only one possible right decision, realize that you may be better off just making the decision yourself.  In the long run, your co-workers may be happier and more engaged if you do.

How All Global Business Is Driven by One Meeting at a New Hampshire Ski Resort

If I told you that every decision your business makes is affected by agreements made between an American Treasury official who was probably a Soviet spy and a homosexual British celebrity in a luxurious ski hotel in New Hampshire during WWII, would you believe me?

I recently finished reading The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order by Benn Steil.  This was a very detailed history of the conference between delegates from 44 nations in Bretton Woods, New Hampshire near the end of WWII to determine the financial order of the post-war world.  The first thing I learned from this book is that dense, wonky, academic books are very difficult for me to read.  I suppose there's a reason I got an MBA and not a PhD.  But, as someone not familiar with the entire history of global finance, some of the implications of the conference were fascinating.

As WWII was drawing to a close, it became obvious that the financial order of the post-war world would need to be decided in advance of the final shot fired.  The British, probably aware of their waning power in the world, were very reluctant to cede the position of leader to the Americans.  However, the British were also up to their ears in war debt from fighting Germany--a debt that was not fully repaid until 2006!  Enter British celebrity economist John Maynard Keynes.  If you've heard of one economist (and it's not Milton Friedman), you've probably heard of Keynes.  He's so well-known that his theory of economics, appropriately referred to as Keynesian economics, persists to this day.

Facing off with Keynes was American Harry Dexter White.  While it is clear that the Americans were sometimes overly charmed with Keynes, White was determined to push an American agenda at the conference.  First and foremost, this meant establishing the US Dollar as the world's reserve currency in the post-war world.  The other countries represented at the conference would peg their currencies to the US Dollar, essentially adopting US monetary policy as their own.

So what is a reserve currency and why is it important?  With so much business occurring between two nations with different currencies, it is important to have one standard for exchange.  Theoretically, this is the most commonly-accepted, credible, and sound currency available.  By maintaining a store of this currency, transactions can occur without constant need for foreign exchange.  As you can imagine, there are tremendous network benefits: in other words, there is a great incentive for an entity's reserve currency to be whichever reserve currency is most popular for other entities.  This might even outweigh concerns about the currency's viability.  Think Facebook: as much as you may hate it, you won't delete your account as long as everyone else is on it.

There are major advantages to the country that has its currency as the predominant reserve currency.  For one, there will always be demand for that currency, contributing to its strength (though this can also hurt exports).  This also decreases costs for businesses in that country, as they will deal exclusively in that currency, and enables those businesses to borrow at lower rates.  This can provide downward pressure on prices of goods from that country.  The reserve currency is also the currency in which major commodities are priced, such as oil and gold, so the strength of the currency can have a major affect on commodity prices.  Finally, and somewhat ominously, the country issuing this currency has great power over other countries, and is thus in a position of additional military power.  After all, it is Mayer Amschel Rothschild who is quoted as saying "Let me issue and control a nation's money and I care not who writes the laws."

Knowing full well this meant that the country with the world's reserve currency would be the preeminent super power in the post-war world, White somewhat deviously maneuvered to make sure that this currency was the US Dollar, which he claimed was as good as gold.  As Steil explains in the book, this was done in a way that it was part of the agreement without Keynes becoming aware until after the conference had ended.  The US government then promised to allow any country to redeem their dollars for the value in gold at any point.  Eventually, this system became unsustainable as the US could not maintain required gold reserves and Nixon severed the tie between the US dollar and gold in 1971.  As Steil points out, somewhat cheekily, "Dollars were not synonymous with gold, as White had contended; only gold was gold."

There were numerous other agreements made at the Bretton Woods conference, such as establishment of the International Monetary Fund.  But if the core agreement of a US Dollar global reserve currency, redeemable in gold, is no longer valid today, why is the conference still important?

Just because the dollar lacked gold convertibility did not mean it lost its designation as the most widely used "safe" currency.  According to Wikipedia (I'm not writing this for a class, so Wikipedia is a legitimate source), to this day around 63% of the world's reserves are held in dollars.  Looking at the history of reserves, it is clear that increased confidence in the Euro has been one major detractor to the usage of US Dollars.  What does this mean if the Greeks exit the Eurozone and the Euro eventually collapses?  Will the increased demand for dollars increase imports to the United States?  Even if the Euro remains a legitimate reserve currency, where would American business be today without the borrowing advantage that it is continually afforded?  What would have happened in the Cold War if another currency had been selected as the world's reserve, such as the Soviet ruble?  What will happen if the Chinese Yuan is elevated to be the dominant global reserve currency?

The book quoted a government report around the time of the conference: "There is virtually no public opinion about the Bretton Woods conference...there is no interest because there is no comprehension of the issues involved and the plans proposed, or their importance."  Even Keynes and White didn't have much time to care about the results of the conference; Keynes suffered health problems almost immediately after the conference that would eventually kill him while White was accused by Joseph McCarthy (with fairly convincing evidence, actually) of being a Soviet spy.  Both were dead from heart attacks within three years of the war ending.  Personally, I have sympathy for an apathetic public, as I can't say that I understood the implications of every action at the conference even after spending so much time learning about it.  But the results of Bretton Woods undoubtedly have had a tremendous affect on the landscape of business and finance, even 70 years later.

The Future of Computing: Why You'll Never Buy Another PC Again

Before starting, a small confession: when I say you'll "never" buy another PC, I actually mean that you'll probably continue to buy PCs for another 10-15 years and then never again after that.  One lesson I've learned in blogging (and perusing the metrics for the website I manage for AT&T), is that click-bait titles really drive engagement.  If I wanted to maximize clicks, I would have titled this blog post "Taylor Swift and Jennifer Lawrence just wanted to catch a cab...you won't believe what happened next."

Semi-provocative title notwithstanding, I do have a serious point about the future of the market for personal computers and what it means for the business and you as a consumer.  The market for PCs has endured changes through the years, but one thing has remained constant: people generally purchase a computer for themselves or their family that has the features they want at a price they can afford, use it until it breaks down or no longer performs the functions they require, then sell it for a fraction of what they paid and buy a new one.

So, what's wrong with this?  First of all, it's bad for consumers for a variety of reasons.  Despite their ubiquity, computers are actually very complicated machines and most people simply do not have the technical expertise to maintain them, much less repair them.  Support from the manufacturer tends to be expensive, and, in my experience, generally just recommends creative ways you can spend more money to fix it.  And when the computer starts to break down, it tends to happen at the most inconvenient time.  This process is also extremely inflexible.  Buying a new computer is a big purchase and not something people do frequently.  In fact, sometimes computing needs change drastically and in unexpected ways, for instance when someone returns to school, starts a new job, or sees that a new version of Doom is released.  And when a new computer is purchased, just the process of transferring data and setting it up can be painful.

The solution to this problem is something corporations are already starting to do: cloud computing.  When most people hear the "cloud", they probably think about Google Drive or Dropbox or some similar service (though I did read a statistic that 1/3 of people think it refers to actual rain clouds or something to do with weather).  That is cloud storage, but I'm referring to cloud computing.  If your hard drive can reside in a remote location over the internet, why can't your processor, memory, and applications as well?  In fact, the only aspects of your computer that need to be physically present with you are your monitor, any input devices (keyboard, mouse, etc.), and some way to connect to the internet.  The computer you will use will become a "thin client" that is almost completely dependent on the cloud for functionality.

Think about what this means for consumers.  First of all, these "thin clients" will literally be much thinner, as powerful processors and hard drives will not need to be present.  The real computer that a consumer uses will exist in another physical location, which means that it can be maintained by a professional.  No more worrying about virus scans, upgrades of operating systems, or updated drivers; that will all be taken care of.  When your computer no longer suits your needs, your cloud computing provider will have an option to upgrade to a more powerful machine in a matter of minutes (and you won't have to go through the indignity of selling the old one on Craigslist).  All of your data will exist in the cloud and will be automatically backed up on redundant, secure servers.  All of this with no massive one-time fee to purchase a machine, but rather a small monthly fee to gain access.

That's not to say that there are no negatives to this new model.  First, connectivity goes from being fairly essential to absolutely and utterly indispensable.  Any outage could paralyze a user or business from doing anything.  Security will also be more important, as all of a user's data is stored remotely, though the industry is trending in this direction anyway.  This will make practices such as two-factor authentication much more common.  Also, privacy policies will need to be monitored.  Consumers are accustomed to seeing targeted ads on the websites they visit, but what if a company decided to put ads on your actual computer?  Are you ready to fire up your machine in the morning and see Flo from Progressive Insurance as your desktop background (even if it means your monthly rate is reduced)?

As stated earlier, corporations have already started down this path.  There are a variety of reasons this is a more obvious step for a company than an individual.  For starters, this provides scalability options that companies would not otherwise have.  A company that has seasonal needs (think a tax return preparation firm, for example) would want to scale up during peak season and down during off-peak.  Many corporations would prefer the ability to book the cost of computing as an expense rather than a capital expenditure (which will depreciate) as well.  And some companies just do not have the resources to staff an IT department devoted to maintenance of employee machines.

What does this mean for the industry as a whole?  With apologies to Apple, computers will become even more of a commodity than they already are.  Design, style, or brand of the actual computer will not matter at all (though this may still be an issue with the thin clients that consumers use).  Consumers will buy based on price, reliability, and service level.  Presumably, the total cost of computing will come down.  The industry of cloud computing power will be able to pool resources; in other words, they will not have one computer for every user, because every user does not need their computer 24/7.  The concept is similar to fractional reserve banking: the bank does not actually have the money that it claims is in your checking account, because it's highly unlikely everyone will need their money at the same time.

Furthering the analogy of fractional reserve banking, will government require a "reserve ratio" of computing power as a percentage of total users?  How will this be enforced?  Could there be a "run on the computers" that would leave some users with slower speeds or potentially without computing power at all?

I, for one, am excited about the future of personal computers.  By using a cloud computing model with monthly access fees, users will receive a machine more suited to their needs, probably at a lower overall cost.  Less technologically-savvy users will have better support and upgrades will be more seamless.  It'll be interesting to see how the industry reacts to such a disruption and how the new cloud computing providers will differentiate their businesses in what is sure to be a competitive market.

A President's Day Look at the History of U.S. Presidents and American Business

"The chief business of the American people is business."
- Calvin Coolidge

This President's Day weekend, I got to thinking about which Presidents have generally been thought of as "pro-business" and why.  This is an issue that generates a lot of debate, as everyone seems to want a President who promotes American business, but not everyone agrees as to what constitutes a policy that is favorable to business.  Virtually every President since Washington has paid lip service to the ingenuity of American business, particularly small business, and extolled its role as the driver of the economy.  But in reality, what does it mean to be pro-business?  I've included my thoughts on what the American people view as "pro-business" policies and, as a special bonus, I've included quotes from semi-randomly-selected Presidents on each subject!

Corporate Taxes

"Cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus."
- John F. Kennedy

Certainly, this would be seem to be one of the most obvious (or, at least, easily quantifiable) ways to be pro-business: lower corporate tax rates.  In fact, businesses nearly universally do support lower corporate taxes, since the U.S. has the highest statutory corporate tax in the developed world.  It's safe to conclude that, whether or not corporate taxes should be higher or lower, it is generally seen as "pro-business" when Presidents seek to reduce corporate tax rates.  If only everything else were so simple...

Industry Regulation

"Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it."
- Ronald Reagan

Regulation is a little more tricky.  Many believe that it is "pro-business" to reduce regulation and red tape, but businesses often do not agree with that assessment.  First, businesses (particularly big businesses) routinely favor additional regulation of their own industries.  For instance, the airlines are all very much in favor of government regulation of airport security through the TSA.  None of the major airlines (to my knowledge) want to abolish TSA and have security handled by the airports or the airlines themselves.  Why?  Because, should a terrorist attack occur due to a failure of security, the airlines can now blame the government and avoid being sued by the families of the victims.  With TSA funded on a per-passenger basis, there is no need for airlines to worry about increasing costs by beefing up security, as that is entirely the job of the government, and the risk can be passed on.

Another very highly-regulated industry is banking; would it not follow that banks would prefer less regulation?  Big banks are actually huge beneficiaries of a Federal Reserve controlling the money supply and setting interest rates and an FDIC insuring deposits.  In fact, the concept of the Federal Reserve was first envisioned by big banking interests (while at Jekyll Island, in my home state of Georgia!) due to their concern about the rapid expansion of non-national banks as well as a trend towards business being financed from profits rather than borrowed capital.  Big banks knew that if all banks were forced to have the same reserve ratio, individual banks could not be blamed for failures to produce deposits.  With the FDIC insuring deposits at the same price for all banks regardless of past behavior or size, banks are incentivized to continue risky (and highly profitable) behaviors.  All this is to say that industry regulation is a difficult subject to clearly define and categorize as pro- or anti-business.

Minimum Wage

"Americans support raising the minimum wage.  And that’s because we believe that in the wealthiest nation on Earth, nobody who works full-time should ever have to raise a family in poverty."
- Barack Obama

The minimum wage is a very divisive subject, with both sides pitching theirs as the pro-business argument.  Proponents say that employers that raise wages see higher retention rates, more satisfied workers, and therefore higher profits.  They say that society also has a moral obligation to provide a living wage to all full-time workers.  Opponents say that the minimum wage increases unemployment, makes it harder for small businesses to compete, increases prices, and disproportionately negatively affects the poorest in society.  They think that the minimum wage is an economically-inefficient kickback to unions.  The best I can discern is that either side can be spun as being pro-business to the respective supporters, though it's probably safe to say that lower minimum wages resonate as being "pro-business" (though possibly anti-worker) to more people.

Tariffs

"I am a tariff man, standing on a tariff platform."
- William McKinley

On its surface, this should be a no-brainer.  In fact, U.S. Presidents have been implementing steep tariffs on imports for centuries under the guise of protecting American businesses.  Unfortunately, high tariffs do result in higher prices for consumers.  What is more important is that the consumers and the producers are often entirely separate, as was the case with the Tariff of 1828, set up to protect northern businesses from British competition.  Unfortunately, this resulted in higher prices for the southern states, which were not seeing the windfall of profits that the north was enjoying.  Similarly, high tariffs often result in retaliatory tariffs from the nations affected, thus drying up markets for exports from the U.S. and hurting American business in the process.  There does not seem to be a consensus on tariffs, but it is possibly seen as more "pro-business" (obviously American businesses only) to implement tariffs to protect these businesses from competition that is deemed to be unfair.

Monopolies

"Even the most monopolistic business man disapproves of all monopolies but his own."
- Franklin Delano Roosevelt

Americans have an almost universal distaste for monopolies, price-fixing or other anti-competitive behaviors.  These businesses harm consumers through higher prices through a lack of competition for business.  In fact, around the turn of the 20th century, there was a whole movement (led by Theodore Roosevelt) towards "trust busting", during which monopolistic corporations were dissolved.   It's safe to say that it is seen as "pro-business" to be anti-monopoly and anti-cartel, and nearly all Presidents have stated this to be their view.  Of course, this Presidential distaste for monopolies does not extend to the money supply, infrastructure, education, lotteries, etc.

Bailouts

"In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action. The question is how we can best give it a chance to succeed."
- George W. Bush

This might be the most confusing issue of all.  The businesses that campaigned for bailouts during the financial crisis said that these were not only necessary for the shareholders, but for the jobs of their employees.  The economy could fall into total collapse and never recover if short-term loans from the government were not issued.  This may be true, but the offer was not extended to small businesses and start-ups, many of which filed bankruptcy during this time.  Essentially, these businesses were forced to subsidize their competitors' insolvency.  And it is difficult (possibly impossible) to say what the long-term effect on corporate decision-making has been now that a potential bailout is a part of the discussion of risk.  In the end, I believe that TARP was generally abhorred by most Americans not working at the companies that received bailouts, though many still viewed it as "pro-business" in that it was a necessary evil for the preservation of the economy.

So what are the takeaways?  First, the term "pro-business" is very difficult to clearly define.  Every individual has a different definition and hardly anyone (in the U.S., anyway) would willingly admit to being "anti-business" regardless of their views.  Second, a policy can be favorable to business in some ways and not in others.  For instance, what is good for big business is not always good for small business.  What is good for business in the short term is not always good for the economy in the long term.  Finally, though virtually every President has ostensibly supported American business, their policies have not always been consistent with their publicly-stated views.  So when thinking about American Presidents and their policies on business, skip the speeches and watch their actions...and remember that not all policies are as simple as they may seem.

The Honest Truth About Dishonesty: Implications for Management

"Where does [dishonesty] come from?  What is the human capacity for both honesty and dishonesty?  And, perhaps most importantly, is dishonesty largely restricted to a few bad apples or is it a more widespread problem?"

These are the questions that Dan Ariely has set out to answer in his book, The Honest Truth About Dishonesty: How We Lie to Everyone--Especially Ourselves.  Considering the subject of this book and post, I feel the need to be completely honest with you: I purchased this book primarily because it was available for $2.99 on Amazon at one point.  I had read Predictably Irrational: The Hidden Forces That Shape Our Decisions and The Upside of Irrationality: The Unexpected Benefits of Defying Logic at Work and at Home, both by Dan Ariely as well.  I really like Dan Ariely (not only because he is a Duke man) and found Predictably Irrational to be enjoyable and informative.  The Upside of Irrationality was, for me, a little repetitive and seemed to be a bit more of a cash-in on the popularity of the first book.  So I wasn't sure what to expect with The Honest Truth About Dishonesty.  I will admit that I have always been amazed at people's ability to justify dishonest or immoral actions and retain an high, and often inflated, image of self-worth.  And at $2.99, why not?

I actually found myself very pleasantly surprised by this book; in fact, I would say I took more away from it than I did from Predictably Irrational.  The first was something that a lot of people probably intuitively know, even if they can't put it into words: people cheat in small enough ways to influence actions that they find desirable, but not big enough to influence their view of themselves as a moral person.  Dan proves this through numerous tests that have clear opportunities for cheating.  When given the chance, people cheated, but not on every question.  And this was only exacerbated when they saw other people cheating, especially when they identified with the person doing the cheating.  At an extreme level, it provides insight into how something like the Holocaust could happen.

Beyond this, as managers in corporate America, what can be learned about the human tendency for dishonesty and how can it be applied in the workplace?

1. Don't overwork your employees.  Dan performs numerous tests in order to determine how fatigue contributes to dishonesty.  The fact is that resisting temptation takes energy and when there are clear incentives to cheat, an exhausted individual is more likely to take those options than a fresh one.
2. Establish a culture of honesty throughout your entire team.  People are much more likely to cheat when they see others cheating, especially if they relate to that individual.  Even one bad apple on a team could quickly spread the disease of dishonesty to other team members, even if the others ordinarily would have very high integrity.
3. Constantly remind your employees that you view them as, and expect them to be, honest.  Individuals reminded of their own morality prior to taking a test are less likely to cheat than individuals reminded after a test.  Every day could bring a potential test for your employees, so make sure that they are aware of the high standards for the team frequently.
4. Address dishonesty and cheating regardless of severity.  Dan discusses the Broken Windows Theory, first explained in a 1982 article in the Atlantic.  Essentially, if some windows on a building are already broken, people are less likely to care about breaking others.  If employees see dishonesty or cheating, even if it is in small doses, they are less likely to be concerned about more severe examples.  Stamp these issues out before they become real problems.

Human psychology has found a way to allow individuals to cheat while still viewing themselves as heroes starring in their own movie.  This is not limited to certain people who are perpetually dishonest, though those certainly exist and should be avoided at all costs.  But by setting an appropriate and consistent culture of honesty and integrity, managers can naturally steer employees towards their honesty tendencies and away from the temptations of dishonesty.