Immortal Burgers

Came across this article on the web: http://www.naturalnews.com/030074_Happy_Meal_decompose.html, and watched the video at: http://www.youtube.com/watch?v=mYyDXH1amic, and thought I should blog about it.

I am really glad I read the article, and I really hope more people watch the video. The article is very well-written, and I am sure the mainstream media would not have published it in its current form. We have to thank the "democracy of publishing" enabled by the world-wide-web and the social media tools.

There are multiple worrisome points from the article:

• Some of the fast-food chains are selling hamburgers that don't decompose over long periods (15 years). Even micro-organisms like bacteria/fungus/mold/yeast etc. don't want to touch these burgers for some reason  - and the conclusion by the author is - that it is not food (and that these are laced with chemicals, sodium & pesticides)
• Not clear how the government approved the food in spite of this funny feature. A huge number of Americans (25%) eat at fast-food restaurants every day, and this can be a major public-health issue (or even worse a national security issue as well)
• This phenomenon was observed by a consumer in 1989, but none of the mainstream media  published  this information till now (in-spite of the shock-value of the news). Fast-food restaurants spend lot of money on advertising (tens of billions every year), and possible this has something to do with it.
• The corporation in question here is McDonalds - one of the top brands in the world. You would imagine good brand-image brings about some social responsibility (even for marketing sake), but that doesn't seem to be the case here. More worrisome is how most of their marketing is done to entice children.

While the relationship between edible/healthy food and its decomposition-characteristics is not very clear to me, it definitely goes against my experience with food thus far, and thus worries me a bit. I most probably will stop my urge to visit a fast-food restaurant in the near future.

I believed that corporations are the solution for my anti-Malthusian theory (food production overtaking human population growth), but am not so sure any more. Hopefully, consumer activism - more than government regulation - will help reduce the dangers posed by these industries.

Data sources, persuasion & marketing

Some years back, during a discussion at a small gathering at a friend's house - I argued that nature has a way of controlling things, and that we can't fool nature (e.g: if humans find a way to live longer/forever, something to the opposite effect will happen - reduced human fertility rates, natural calamities, resource depletion etc. - and that nature has a way to self-regulate). The quotation "we can't fool nature" drew some derision from one guy, and I was mocked about my qualifications to make the statement. To gain some credence, I attributed the quote to a British philosopher (I don't know if he did, but thought he must have at some point :)). There was a slight pause, and the person came around - and said the quote is very profound, and he is sold on the idea.

This incident happened a long time back, and it did surprise me at the time. I used to think - the strength of the argument is more important than who makes the argument, but I learnt a great deal from my experiences over time. Persuasive tactics (using our inherent biases) can easily steer us away from rational thinking, and in the process - drive us to take irrational decisions.

For example - when a well-known analyst/researcher/industry-group publishes/takes a position on a certain issue, the argument gains a lot of credibility, and the general public are easily persuaded to migrate towards the argument, and make it their own. We believed that the earth was flat and that we are the center of the universe for a long-time, and even persecuted people who said otherwise. In the end, we came to know the truth because of some seriously adventurous folks who were willing to question the authority. 

And for marketers, this piece of social psychology is of great help. Next time you have to sell a product/service, buy the most credible analyst/researcher/industry-group relevant to that product, and get their endorsement - and people will start buying.

I feel that - lot of us are victims of this practice (bought a particular argument/product because of the credibility of the source and got burnt) at some point or the other. And yet, we seem to have an innate ability to fall for the same trap again and again. 

• We all know that we need to buy the soaring internet stocks to make money during the dotcom bubble - these dotcomers are going to revolutionize the world, and make trillions of dollars (thanks to the marketing dollars spent by dotcom companies and the credibility of the market research firms like Gartner, IDC etc. - everybody believed this). The most rational of the human institutions - equity-markets - failed to check the simple facts, and in the process - lot of ordinary people lost their money.
• During this time (dotcom bubble), every telecom company knew that they need to lay fiber to meet the exponential growth in internet traffic, and they needed to move faster than their competition (CEOs at these companies are reading the same news and analyst reports that we - ordinary folks - were reading). They borrowed huge sums to create new telecom infrastructure, and went bankrupt in the process. Ten years after the bust, only a small fraction of this laid-out fiber is used.
• We all know how real-estate prices are going to hit the roof, and why we should buy a house right away in-spite of the insane prices (thanks to the persuasive real-estate industry, and the bankers). Each one of us - including the revered Alan Greenspan - with his army of economists, all his econometric-simulations - fell for this, and did very little to regulate the market. We lost trillions of dollars, and lot of ordinary people lost their life-savings, and jobs.
• We all knew how well our financial institutions are run, their risk-management experts, their ingenious ways of making money, and nobody can match these guys in brain-power (great brand-building by the financial institutions). Again, every one of us were sold on the idea including the Fed and the equity markets, and nothing was done here resulting in the recent major financial crisis - only matched by the great depression.
• We all know that the Fed-stimulus money is going to the poor citizens out there who lost their jobs (thanks to Henry Paulson), and it is so urgent that we need to write a check right away without going to Congress. Now, we know where it actually went.

In all the above cases, majority of the public believed in the data pushed out by a few, and never questioned the methodology or the sources. Even the most rational decision-makers (equity markets, Fed, CEOs) followed the crowd, and never questioned the data. The press which is supposed to conduct due-diligence to bring out the facts failed miserably. In each of the above cases, the press/analysts published articles/reviews that only exacerbated the situation.

I still remember the analyst recommendations about the impending world-transformation by dotcom companies, the huge number of newspaper articles on why real-estate market has to go up, and regulators gloating about how ingenious our financial institutions are. This could have pushed the skeptical minority to follow the gullible majority (which analyst could write negative information about the dotcoms in 1999?, or go against Greenspan and talk about impending real-estate bubble).

I feel understanding the study methodology, strength of the argument, and the incentives of the research team is as important than the data itself. Also, I feel relying too much on the credibility/branding/authority of the source is a big mistake.

Before using a piece of published data by a credible source, you should make sure

• to understand the incentives and the motivations of the data publisher
• to spend sometime understanding the study methodology & the assumptions made
• to have some skeptics on your team (in addition the yes-boss types), and let them ask questions
• factor in the variability of data when working on your plans (what-if scenario analysis).

Corporations, their influence and government regulation

Had a chat with a good friend recently about free enterprise and government regulation, and I thought I should share my thoughts on this topic.

I believe that corporations brought about lots of changes in the way we live, play, learn & work (and quite a number of other verbs) over the past 400 years.

• We go to work in a car/train/bus produced by one of the half-dozen or so corporations
• Most of us work for corporations (after government, aren't corporations the largest employers?)
• We listen/read/watch news/movies/ broad-casted by corporations
• We communicate using phone-calls/sms/internet-chat using phones/laptops produced by corporations
• the water we drink, the food we eat, the clothes we wear, the medicines we take, the energy we consume and the list goes on....

Whether we like it or not, corporations are playing a major role in our everyday lives - wherever you live in the world.

It is also possible, human evolution got a big boost by these corporations. First it is the monarchies that set the pace of evolution, then it is the religion, and now it is the commerce (or corporations) that is ruling the world. 

• Who could motivate millions of people to work hard toward a common cause under their own free will? Religion and Monarchies provided the impetus for our ancient cousins, but neither could match the motivation supplied by the current day corporations. Unlike their ancient brothern, the current day corporations invest huge amounts of money & time to figure out what motivates the minions without coercion (salary, power, title, bonus, stock, awards, travel, houses, cars, gym, parties, sense of empowerment, self-actualization and what not - talk to your HR if you are in doubt).
• Who is willing to sell products and transfer technology without any national/ethnic/religious boundaries? Advances made by governments are never shared with other nations (competitive advantage in cases of war), while everything is for sale for a price when corporations are involved. Profit maximization motive makes sure that corporations engage in cross-border commerce. I think this global, multi-national aspect of the corporations can be the biggest factor for speedier evolution:
• it made transfer of all kinds of technology to remotest parts of the world possible
• it brought the entire world under one umbrella - think about economies of scale & efficiencies in everything that we do
• in the end, it is possible corporations hold the key for peace between religions/nations/ethnicities - because war is not good for commerce
• Who could make more efficient resource utilization than corporations? Maximizing stock-holder value combined with the invisible hand of Adam Smith - makes sure that corporations and thus societies employ the most efficient utilization of the factors of production.
• per-capita of US is around $45K ($14trillion/330million), per-capita of India $1K ($1.2T/1.2B)
• per-capita of a Microsoft Employee is around $600K ($60B/100K) 
• This means - from a productivity stand-point - each Microsoft employee ~ 13 US Citizens or 600 Indian Citizens (I am comparing GDP to corporate revenues here - possible gross-profit is a more accurate comparison - in which case Microsoft per-capita is down to $500K)
• Think about moving the CEO of Microsoft to India, give him absolute power and ask him to run it like Microsoft (with slightly different metrics) for 10 years - I am sure India would be a much different country (I am not advocating that CEOs will be good at public policy, but I am assuming they are good at placing the right incentive structure in place and in improving organizational efficiencies)

In lots of ways, each one of us - is much better off because of the corporations than without them.We are living much longer (pharmaceutical, food, clothing, housing & security industries), we are more connected (telecommunications), we can visit more places (airlines, automobile & hospitality industries), we know more about each other and about the world (telecom/internet, media & news industries), we are enjoying more (media & entertainment industries) than our brothers who lived on this earth only 100 years back.

If somebody asked you to build your own car/refrigerator/house from scratch with absolutely no help from anybody (imagine Will Smith in "I am Legend"), I would doubt if you can build any of these in your life-time.

So what is the problem? In spite of all these advantages, there are problems posed by some of the corporations. Some of these corporations are becoming too big for our own good ("market failure") with a possibility of causing serious damage to our way of living, and for our future generations. Like what was said of the monarchs of the ancient times - absolute power corrupts absolutely; in the case of corporations: absolute stock-holder value maximization corrupts absolutely.

There are quite a number of instances about the unethical excesses of corporations for profit maximization at the cost of their employees, their stake-holders, and their neighborhoods - from the early days of corporations    (1600s: British East India Company, Virginia Company) to the recent financial crisis (Merrill Lynch, Bear Stearns, Lehman Brothers, AIG, Wachovia, Washington Mutual, CitiBank, Goldman Sachs etc.).

There are instances where corporations are involved in human-right violations, coercion of the work-force, violating labor laws, inhuman working conditions to regime changes, supporting brutal regimes, controlling corrupt governments, enacting favorable laws,  to polluting rivers, dumping industrial waste, endangering the ecosystem, exposing populations to dangerous chemicals, to collusion, anti-competitive practices, tax-avoidance, and other corrupt practices.

I have quite a number of examples to cite here - showcasing how corporate negligence effected/killed thousands of people, how corrupt governments were bribed to let the perpetrators go scott-free etc..
But the most important debate should be on how we can regulate these corporations, and to avoid market failures - whether it be through government controls, or social activism, or removing informational advantages or through putting the right incentive structure in place.

I think I should leave this to my next blog topic.