An interesting discussion on rising education costs

You can read the entire article here.

It would make a lot of sense to cut military spending and use that money to solve the whole problem, wouldn’t it? Why the hell shouldn’t every kid have the opportunity to go to college? College is expensive because it’s great! We’re a rich society. But I don’t see any big infusion of public money coming down the pipe. Can things go on as they are? Or must the whole higher education paradigm shift – maybe even collapse? If so, what’s the least bad way that can happen?

My thoughts on the topic:

 A few decades back, we changed the routing of funding for education and new costs emerged as a consequence. This began as necessary state level budget cuts, but was eventually touted as bringing choice to students. At any rate, as senior administrators I listen to periodically joke: ‘we used to be state funded, then we became state assisted, in a year or two we’ll be fortunate to be state located.’

With budget cuts, we now receive the same contribution per student that we did in the 1990′s, with costs courtesy of 2012. The difference has to come from somewhere.

But it’s so much more than just a great recession, rising health care costs, technology investments or general inflation. A part of the explosion in student (perceived) cost is nothing more than shifting from subsidy to direct billing.

However, when we made this transition, our mission changed (whether we realized it or not). We now have a dual mandate – the development of knowledge AND the recruitment of students.

We now have to build our system around attracting and retaining students, and with that a whole new slew of expenses emerge.

You NEED new facilities (not just to use new technology), but to make your University attractive to students choosing where to spend their dollars. You NEED better entertainment and a high quality athletic program to attract students and retain alumni commitment. These needs then NEED new administrators to administrate the new needs. All of this then leads to a NEED for new administrators to beat the bushes for new money to pay for the salaries of those we need to manage the things we now need.

It’s all quite rational in a thoroughly irrational sort of way.

Atop this, of course, we have a woefully inadequate financing system for the bottom up pay model we now use as others have noted.

Simply reversing the funding spigot would not, I suspect, solve this problem at this point. We have institutionalized administrative bloat – and that’s not turf protecting, greedy middle management. Quite the contrary, those new administrators are NEEDS in the system we have re-engineered. It’s a somewhat logical system response to our sourcing needs for our primary dollars (student tuition and fees). I doubt we can simply put the lid back on this box.

Making sense of nonsense: A review of copyright and digital reproduction

I was just directed to James Grimmelmann's remarkable dissection of digital cable reproduction as a function of copyright compliance.  In "Why Johnny can't stream," you get a very detailed breakdown of the technical hurdles required to create and maintain the cable industry.

These same hurdles are now simultaneously blocking more logical technologies while creating strange legal alternatives that make little technical sense.  I highly urge reading this entire entry.

In the Digital Publishing industry, not all publishers are equal

In my entrepreneurship class last term, I delivered a small lecture topic on self-publishing as a small business model.  Along with Kickstarter and some other domains, digital publishing (be it apps or books) is an area I find very exciting. Small businesses (literally single-individual shops) can pop up, reach a market and achieve profitability in ways we never dreamed of a decade ago.

So, I found today's Digitopoly post an interesting read.  There are some interesting (and legal) things afoot in price-fixing and price-setting in digital publications.  In particular, DoJ is currently investigating allegations of price fixing by Apple.  In that story, Amazon is largely the good guy, trying to create an innovative new market platform.

The Digitopoly article references, this post by Andrew Hyde, which breaks down his experiences with the publishers distribution/royalty costs for publication.  Apparently, while Amazon has been the most friendly distribution house for digital readership, it's not necessarily the best outlet for authors.

Bear in mind, the Andrew Hyde link is focused entirely on costs.  It costs him more, as an author, to reach Amazon customers.  BUT, Amazon is the overwhelming distribution channel choice for his readers.  So, it costs him more... but he sells more.  Remember, business models are a trade off between margin and volume.  As I see it, if you want margin - avoid Amazon... but if you want volume, Amazon is far and away the superior choice (using his sample of one, of course).

What do you think?

Another Kickstarter project

The Elevation Dock for the iPhone is already fully funded - and it's a pretty impressive project.

They asked for $75,000.  They received in excess of $1.4mm.  It looks to be a great product - now that I'm using an iPhone, it's a product I look forward to finding in stores!

Crowdsourcing and Crowdfunding - the business structure of tomorrow?

Alright, so I have recently bashed the JOBS act for it's frightful reduction in transparency allowances.  But, it's rare for a law in Washington to be all bad and JOBS certainly has its nicer elements.  One of those positive elements is the new freedom given to crowd sourcing.  Basically, a small firm can raise up to $1mm in capital with minimal documentation or due diligence.

Wait a minute, you are probably thinking, doesn't he have a problem with the transparency elements of JOBS, but just praised a different piece of transparency reduction in JOBS?

Yep, I just did.

There is a world of difference between two engineers sitting in a garage with an idea (the good part of JOBS) and a firm getting ready to have its stock publicly traded on an exchange (the bad part of JOBS).  The former is really where discontinuous innovation emerges, the latter is a company joining the ranks of "big business."  If you can't afford to behave like a big business, you aren't ready to go public.  That means you need audits, you need disclosure and you need accountability.  But that was the point of my last post.

Crowd sourcing technically applies to a wide range of activities.  It includes open source initiatives like those behind Linux and Apache web servers.  It also applies the innovation research awards like the Ansari X Prize which eventually culminated in SpaceX and the recent Netflix award.  Crowd source projects, like iStockPhoto have caused significant revenue discontinuities for professional photography.  While some might quibble that these projects weren't truly crowd developed, they do represent a very different form of organizing than that common to modern industry.

The more recent innovation, the one the JOBS act positively influences, is the emergence of crowdfunding.  Made popular by Kickstarter, crowdfunding is in some ways a high tech manifestation of the very low-tech world of microlending.

In the crowd funding format - specifically the Kickstarter variant, people start with an idea and ask for money.  This is a cash infusion, but without an equity or debt stake.  Rather, the project managers make promises of what will happen at specific funding levels.  People (literally anyone) consider the pitch from the project manager and decide if they want to chip in.  Kickstarter uses an "all or nothing" funding model.  Either the project raises its 100% goal (it can go over) or its not funded.  Project managers basically promise perks the their sponsors, but the sponsors do NOT become owners or in any way receive financial returns on their contribution.

As an example, consider Muneca Mexicana Handcrafted Food.  The project started with a $1250 funding goal to help kickstart a small foodmaker/caterer.  At the time of this posting, Minerva Orduno has actually exceeded her funding goal by quite a bit.  She has $2710 raised with 19 more days to go.

[NOTE - I am NOT advocating for/against contributions to Muneca Mexicana - this is merely an example of a Kickstarter project]
What has she promised to funders?

Those pledging $10 receive a 4oz jar of handcrafted caramel
Those pledging $20 receive the above and a 16 oz jar of Chorizo seasoning
Those pledging $30 receive both of the above and an 8oz har of Mole Poblanao sauce.

It goes on with different perks up to $250.

Her project proposal notes that investments beyond the current $1250 goal will go towards a catering license, insurance and potentially her own physical location.  Given where the project currently sits, Minerva will certainly be able to expand her inventory and potentially move towards her higher end goals.

Don't make the mistake of assuming Kickstarter is only geared towards restaurants and food.  There are currently 71 technology projects seeking financing with other categories of projects out there.  Several kickstarter projects have exceeded $1mm startup funding and last year Kickstarter projects accounted for roughly 10% of angel capital investment.  This helps grow small business startups and small business is really where the jobs are.

Seminar in Strategic Management: The Vegas Strip Steak Patent

Seminar in Strategic Management: The Vegas Strip Steak Patent

Can you patent a cut of steak?  OSU is trying to.

Is the Facebook IPO the new normal?

Earlier this year, congress passed and President Obama signed into law, the JOBS act.  I found the act chilling in terms of the externalities it adds to markets under the auspices of making it easier for tech firms to go public. Students enrolled in either my entrepreneurship or strategy seminars heard a number of lectures (near rants) on the problems with this bill.  I"m surprised I didn't blog about it, but I was in the midst of the posts about gas prices and things got sidetracked.  Now, with the Facebook IPO fiasco upon us, I find myself wondering if we are seeing the new harbinger for tech IPO's.

What the JOBS bill did, was:
1.  Reduce or eliminate audit requirements for tech firms seeking to IPO
2.  Remove penalties for executives who distort their financials in public presentations, provided that the prospectus contains more accurate information

The bill was wildly popular in congress, easily passing both houses during a congressional period renowned for partisanship.  However, int he business press, it was far from popular.

Now we are looking at the Facebook IPO and the JOBS act should be at the front of the discussion.  While there are problems with NASDAQ's handling of the IPO, the larger concerns lie in the allegations of information distortion.  It is alleged that Facebook pedaled two sets of financial information.  One overly optimistic set of numbers to small investors and another, more conservative (and accurate) set of numbers to large banks.  Those with superior information were able to take advantage of initial price movements to obtain profits not justified by the 'true' financial shape of the firm.

Congress is now investigating the distortion, but given the JOBS act, I wonder if the investigation is really just political theater.  Facebook's IPO is exactly what is expected under the JOBS act.  Indeed, investor information is likely to get worse under the JOBS act.  Indeed, it appears that the anti-disclosure requirements may be counterproductive to an active tech IPO market, with several upcoming IPO's delayed or halted.

For markets to operate efficiently, we require equal access to accurate information.  We can not have efficiency where one party has an advantage in information quality.  The cost of this transparency is disclosure, auditing and governance law.  Removing this transparent layer adds too many questions to the veracity of IPO information.  The smart money either will (a) get it's information early or (b) sit out.  In the long-run, this leads to an under-developed IPO market, which hurts (not helps) tech companies.

The sad thing is, this is a predictable outcome from JOBS.  And, it's likely to get worse, not better.

Harvard University promotes open access academic publications

This has been an evolving issue this past year, but the conflict between journal publishers and University researchers continues.  The Guardian reports that Harvard University has asked its professors to cease publishing in subscription based academic journals.  They have further asked for faculty to resign from posts serving such journals.  In its stead, they ask faculty to publish in open academia journals.

The driving force is the increasing cost of library subscriptions for such journals.  While this has been a substantive problem for public Universities, Harvard is one of the richest private schools.  Their complaint has to be seen as a broadside in favor of academic freedom.

As a published researcher, I am sensitive to the problems cited by Harvard.  Given the rise of electronic and self-publishing options, I wonder whether we are witnessing the opening rounds of a substantive conflict.

Five rules for promoting your small business on Facebook

Social media sites like Facebook, Twitter and YouTube provide small businesses with inexpensive, yet effective means to promote their business.  Facebook, in particular provides an outstanding medium to increase your customer retention levels while also allowing you to use the power of social networking to reach new customers.  However, getting the most out of Facebook takes more than just building a profile for your business.  The following are five tips that should help you get the most out of your social media marketing via Facebook.

1)   Remember the “little details” like your address, hours of operations and phone number. While this may seem like a no-brainer, a surprising number of small businesses forget to fill out their “info” section of Facebook. Sure, your repeat customers already know where you are, but their friends don’t! Your business Facebook profile is (hopefully) going to be viewed by new potential business. Help them find you!

2)  Increase the size of your businesses social network. In Facebook, this primarily happens through the “friend” function. After setting up your business profile, your number one job needs to be getting your current customers to connect to you. Offer incentives to encourage your customers to add you to Facebook.

3)  Post, post, post! The Facebook wall is one of your cheapest advertising tools. Update your wall regularly to let customers know what’s happening at your location. Are you running a sale? A special event? Launching a new product line? Hosting a club? Promote the activity of your business with regular updates to your Facebook wall. Don’t overdo it, though! Multiple promotions a day will get lost in the clutter. Have a regular, but not spammy Facebook outreach strategy.

4)  Improve the quality of your customer relationships. A simple thanks for shopping goes a long way. When you have repeat customers who are also Facebook friends, take time to thank them for stopping in. You don’t need to write a 1000-word treatise, just a “thanks for stopping in and looking forward to seeing you again” is generally enough. Specialize the message when the situation warrants it. Being proactive with your customer contact turns out to have a double benefit on Facebook. Not only does your customer learn that you appreciate them, but their friends learn that they frequent your store and that you’re a friendly business owner.

5)  Reach out to your friends’ friends. While it’s important to get your customers to friend your facebook page, it’s just as important to get them to ‘talk’ about your business on Facebook. Every time your customers post information about your business to their Facebook page, you reach all of their friends. That’s potentially hundreds of warm leads for every referral. Develop promotions for your Facebook friends when they “like” one of your wall posts. Similarly, use promotions which encourage your customers to “share” your Facebook promotions to their network. Finally, whenever possible, encourage and reward “friend” referrals.

In the REO Speedwagon song, “Take it on the run,” the band sings about ‘hearing it from a friend who heard it from a friend who…’  That’s social networking in a nutshell.  We are all linked together in social networks.  Effective social media marketing is all about reaching out to your network of customers and then enlisting their help in reaching their networks.  The good news, for your business, is that it’s not just a friend who hears it from a friend.  It’s 10 friends who heard it from a friend and 100 friends who heard it from those 10 friends, and it goes on, and on, and on!

Gas prices are no longer rising

Picked up originally from Econbrowser, who reports from the WSJ.  Gas futures are dropping, suggesting that gas prices themselves are about to follow.

The story of April that I posted in March appears to be playing out again.  Gas prices spike in April, then retrench.  However, the overarching trend of an upward climb remains unchecked.

The rising price of gas is actually occurring despite a reduction in miles driven in the United States.  Doug Short provides visuals from department of transportation data:

This is the vehicle miles driven adjusted for population growth.  The U.S. population has been growing steady, all told that alone will account for increased miles driven.  However, the average American is driving fewer miles per year than they were back in 2005.

We are driving less, in more fuel efficient vehicles, and paying more for gas.  As I said in an earlier blog, it's not taxes, it's not about us.  It's a global supply/demand equation.  We can no more stop the rise of gas prices than we can stop the tide.  What you can do is prevent the rising gas prices from impacting you too substantially.

Returning to Intellectual Property

I recently wrote a blog entry arguing against SOPA/PIPA, the proposed legal changes that would dramatically constrict the Internet as we know it.  This post will update a bit of information on this topic.

First we see that file sharing and illegal downloads are not really theft as we classically define theft.  Without question, illegal file sharing and copyright infringement are illegal - but simply aren't theft.  Additionally, we find some discussion at Freakonomics extending the Times Op-Ed.  Virtual goods (and by extension knowledge goods) do not share the same economic properties as physical goods. 

Further, there is emerging evidence that cracking down on piracy doesn't increase sales of virtual goods. Looking at results in France, where a three-strike law fighting online piracy has been in place for seventeen months, piracy is down - but sales are not up. 

Evidence suggests that free access sites are seeing some increased traffic, but the direct sales of music have not increased.  I would like to take some issue with the review of French piracy though.  If Beezik and Spotify are seeing noticeably increased traffic following the crackdown - indirect revenues should be impacted. 

Essentially, stopping piracy may not increase sales of music or video.  But, stopping piracy appears to increase use of other business models.  These business models (analogous to radio in the pre-Internet era) do pay licenses back to the IP holders and typically generate their own revenues from advertisements to the "free loaders."

So, for those keeping score at home:

- File sharing may not be theft as we know it, but
- Economic damages do manifest from IP theft, however
- Those damages do not relate in any way to direct sales, and
- The real economic damages are probably felt by third party intermediaries who might otherwise provide the content "for free" via advertising revenue.

All the same, we need a massive overhaul and international standardization of intellectual property rights and enforcements.

What's Driving Gas Price Rises?

Three forces, industrialization, post-industrialization and population size.  Consider the following figure.

Here we see per capita GDP presented as a proportion of the United States per capita GDP from 1997 to 2010. The source of this data is the World Bank.

Per capita GDP results from taking "the market value of all goods and services produced by a country," and then dividing it by the population size.  Per capita GDP can, therefore, be thought of as a representation of standard of living in a country.

I used the United States as the base case here.  That means, for every year I took the US per capita GDP and set its value at 100.  Every other country on the figure shows the percentage of US per capita GDP.  So, don't take this as meaning the United States isn't improving - but look at this as a global race of "keeping up with the Joneses," with the U.S. being the Joneses.

I present data on three advanced economies, the United States (always at 100, see above), Canada and Norway.  Note that the US and Canada are relatively stable while Norway has experienced increasing standards of living over the last decade.

More important to our story, though, is that of the BRICS.  Brazil, Russia, India, China and South Africa are some of the fastest growing, large population economies in the world.  Brazil (205mm) and Russia (138mm) each have around half the population of the United States and  South Africa (49mm) has about an eight of the population.  India (1.2bn) and China (1.3bn) are around 4x a large as the United States.

Each of these countries has benefited from globalization.  Increased manufacturing has moved these countries through a rapid industrialization phase.  As manufacturing increased, so to did global fuel consumption.  In the United States, we felt this as rising gas prices.

However, each of these countries is also moving towards post-industrialization.  During this transition, economies tend to experience an increasing middle class accompanied by consumption patterns people in advanced economies take for granted.  The net result is another fuel consumption explosion.

The above figure shows the move towards post-industrialization for the BRICS.  Russia is rapidly approaching this spot.  Brazil and South Africa, while closer to the US than India and China seem relatively stagnant.

China and India though, while the farthest back, are clearly making up the most ground.  Both are on pace to achieve 20% of the US standard of living in the next decade.  That's 8x the people experiencing 1/5 the standard of living.  Or... roughly 1.5x the potential consumption to the United States.  Move forwards another decade and you're looking at something in the vicinity of 8x the population enjoying 1/3 the standard of living.  That's about the equivalent of 2.4 US consumption patterns.

That's a lot more cars, televisions, mobile devices, computers and the like.  That's a lot more fuel consumption.  That's a guarantee that fuel prices will continue to rise... and rise at a faster rate most likely.

The rate of change in the price of gas is rising

In my last post I was a bit surprised by the increased spikeyness in gasoline in what I had dubbed the "new trend" starting around 2001. One way to look at spikeyness is to look at changes in prices over time (in this case, the rate of change from week to week).

This picture is the week to week change for the national average price of a gallon of gasoline from 1994-present. As with the prior two posts, the chart is built using data available at www.eia.gov.

In this chart, data points above zero mean the gas prices went up that week. Data points below zero mean that gas prices went down that week. Data points around zero mean gas prices were largely unchanged that week. With that in mind, some observations:

1. From 1994 to 1998 gas prices were "mostly stable". You can see year over year trends hovering around the zero mark. While large spikes upwards occur, these are eventually offset by more prolonged but lower downward spikes afterwards (prices rise fast, but lower slowly).

2. Peak prices (highest spike points) often occur in April. So, I suppose there's a reason why the urban legend that started me off on this road happened across three Aprils (1997, 2011 and 2012).

3. To my surprise, the new trend I talked about didn't start following the 2001 recession. It began in 1999. Starting in 1999, most of the data points are above zero. This suggests that the price of gas began - and continued - rising.

4. The prolonged downward trends in gas prices are generally associated with recessions (2000-2001 and 2007-2009).

5. Also, to my surprise, the "new trend" isn't linear, it's curvilinear. Beginning in 1999 you hardly ever see prices hovering around the zero mark. There are short stretches of unchanged prices (April to August 2010 for instance), but in general, a trend line for price change would be somewhere around the 1% mark. Basically, since 1999, the rate of price increase has itself been increasing by about 1% a week. This has been punctuated by brief (but large) spikes and longer (but lower) price drops. 1% a week doesn't sound like much, but that's a pretty substantive annual change...

6. We actually had a pretty nice downturn in prices between April 2011 and December 2011. I'm not sure what's happening there, but that's a prolonged downward price movement during an economic recovery (albeit a slow one).

Gas prices are rising... as they have been

Data from The U.S. Energy Information Administration tracks the average price of gasoline in the United States.  For purposes of the following graph, I am using all grades, reformatted prices.  For reference, changing the formulation of gas changes the prices - but not the general shape of the curve.

So, this is what gas prices have looked like since 1994.

1. Regardless of the time frame, gas prices fluctuate. Whatever the trends, there will be times where we are way above or way below the trend. Don't let yourself be lulled into believing that low prices are a sign of the future - they are temporary distortions. Use the short-term savings to help cover the next spike over trend.

2. There is a somewhat stable, but mildly upward sloping trend evident from 1994-2000. Those were the good old days, they are over.

3. After the 2000-2001 recession low point, gas prices have since risen and generally by a fairly accelerated amount. This is the new trend. Our current prices are a bit over the new trend line, but at the tail end of last year they were below that trend. Enjoy the short downturns, don't expect them to continue.

4. Since 2000, variation in gas prices has been a lot more spikey. Fluctuation around the trend are larger (in both directions).

5. The last big downward run in gas prices was in conjunction with the 2007-2009 recession. I suppose you could hope for $1.50 a gallon prices again if you want 12% unemployment. I don't think that trade off is a good one though.

The real driver of price is growth in the global economy which has averaged around 5% (barring the 2007-2009 recession). The story is in the emerging and lesser developed economies - which are growing faster and have a lot more people than the advanced economies.  I will put something together on this next week.

Nothing suggests this general trend is going to change. Capacity (far more important to the problem than drilling) has been increasing globally by about 2.5%. For reference, growth in China alone has exceeded global refinery capacity.

Realistically, the question isn't why are prices so high, it's why aren't they higher? The answer is fuel economy. We are getting a bit better at burning fuel, somewhat offsetting the rising global demand patterns.
If you REALLY want to help, sitting out on a day of fueling up isn't the answer. At best it does nothing to that days global demand. At worst, you hurt the employment status of some average Joe/Jane working at the gas station.

Really helping involves making smart decisions on your fuel consumption. Use more fuel efficient vehicles, carpool where possible, travel outside of traffic congested times (if possible), work from home, heck even the much maligned 'check your tire pressure.' They are all fairly insignificant, but they actually address the underlying economics in a way that screaming into the wind (a fuel boycott) doesn't.

Higher gas prices lead to bigger hoaxes?

The following image made the rounds through email forwarding recently.

There is an awful lot wrong with this proposed boycott. Not even considering the basic fact that the boycott merely shifts demand around by roughly 24 hours, this particular boycott is just full of wrong.

Some facts are in order:

1. Throughout the month of April, 1997 the national average price for a gallon of gasoline varied from $1.25 to $1.26. If this famous protest did occur in April, 1997, it failed miserably.

2. Additionally, April 1997 gas prices were right in range for the entirety of 1997. For 1997, the lowest point for the average gas price was $1.19, occurring in December. The high point for the average gallon of gas was about $1.32 in September. Again, if this April protest is more than an urban legend it was a pretty dismal failure.

3. In paragraph three, the protest organizers want you to not use gasoline on April 15, 2011. Now, I don't know about you, but I'm pretty sure my time machine doesn't get good gas mileage.

4. Incidentally, the average price of gas in April 2011 was about $3.78 just before the proposed 2011 protest. This is a recycled bit of urban legends (so, kudos I guess for "going green" with your urban legends).

5. For those scoring at home, gas prices in April 2011 went up the entire month (closing at around $4.01). The 2011 protest was about as effective as the 1997 one apparently.

I will post a photo of average gas prices from 1994 to present in a later blog post. It's pretty clear that the slight upward trend in gas prices from 1994-2000 turns into a hectic upward trend from 2000 on. Plan on gas prices rising as a trend going forwards. There will be some down-spikes, but those are lulls in the storm not a new trend in itself.

Fake movements like this really irritate the heck out of me. They don't help, they distort reality and by making people feel like they have done something, they actually prevent working on resolving genuine underlying problems.

(Source of rebuttal: U.S. Energy Information Administration, www.eia.gov)

Censoring the Internet?

A good deal of attention has been paid recently to the promotion and subsequent demise (or at least delay) of SOPA and PIPA.  Collectively, these two bills proposed a fundamental new approach to policing intellectual property rights on the Internet.  The furor over the bills, rightly, focused on the lack of due process involved, the incompatibility between the laws themselves and the technology driving the Internet, and the criminalization by association of ISP’s and content providers built into SOPA/PIPA.

It is frightening how close these bills came to passage with minimal public discourse.  Even more alarming is the strong, bipartisan support each bill enjoyed prior to the major Internet outcry.  Even with much of that support eroded, a significant number of members of congress support SOPA/PIPA.  With SOPA/PIPA more or less dead in the water, focus should be turned to the reason these bills existed in the first place.  Because of these reasons, we will see more of the same in the near future.

Some attention is currently focused on greed as a determinant.  Primarily these charges come from the more extreme SOPA/PIPA opponents, indeed some of these opponents are openly guilty of the piracy and copyright infringement that SOPA/PIPA were designed to combat.  These charges, though, miss the point in the larger debate.

The larger debate is an ongoing battle over the meaning of Intellectual Property in a globalized, digital world.  Virtually every advanced economy offers some form of market protections for inventors and creators in the form of patents and copyright.  Unfortunately, various countries have different standards for IP protection and the Internet exacerbates this problem due to the ease of rapid proliferation of digital works.  Further, our current copyright laws are highly confusing.  So much so that it is quite possible that the author of the SOPA bill himself may have committed copyright violation on his own website.

This fundamental right protects the creator’s ownership of IP, enabling them to leverage supernormal profits during their protected period.  While this seems like an affront to basic free markets, it is an affront commonplace in market-based, capitalist systems.  Further, if it is an affront, it carries some very well defended proof of need.  Lacking such protection of creative IP, market forces actually work to erode IP profitability – so much so that the costs of creativity generally exceed profits in a non-protected market.

In short, we need some form of IP protection.  The questions that emerge are how much, for how long, and in what form?

This is an incredibly important topic for small business, and business in general.  The Internet, in its current form, opens the door to many small businesses.  Whether we are talking about self-publishing e-books, writing apps for mobile devices, selling goods, or any number of other fronts, small business is thriving on the Internet. 

Given that neutral parties assess the overall economic damage from piracy to be rather trivial, we should take great caution before passing an act like SOPA/PIPA.  Effort should be made to protect IP, however that actions should take the form of standardizing IP definitions across countries and working to establish multi-national agreements to protect IP and enforce actions against extreme violators. 

At the same time, we should engage in a discussion of length of protection for IP.  Our current length of IP protection is based on a print economy wherein travel and publishing time ate into the profit potential period for the creator.  Given advancements in production and distribution technologies – and indeed due to the instant distribution capabilities of the Internet, we probably need to shorten (not lengthen) the window for copyright protection. 

We do need to remember that IP protection has a beneficial purpose.  While there are vested interests on both sides of the current debate, we need to work towards some form of simple, standardized, enforceable IP protection. 

SOPA/PIPA was not what we needed and worse, both bills may still come back. 

New Publication: Understanding Plagiarism

Iryna Pentina, Leonard Love and myself are proud to announce the release of a study examining backgrounds of academic dishonesty.  In "Plagiarism: what don't they know?" we examine student awareness and understanding about their roles and responsibilities related to plagiarism.  The article is in print in the January 2012 issue of the Journal of Education for Business.

Our findings suggest that students are reasonably well informed on the meaning and importance of plagiarism.  However, our findings also suggest that gaps exist in understanding what specifically constitutes plagiarism.  Interestingly, the gaps are different for online-only students and more traditional, face to face students.  Further, there are some specific items which most students generally exhibit misunderstandings.

New publication: Mobile Marketing

David Taylor, Iryna Pentina and myself are happy to announce the pending publication of our mobile apps research.  In "Mobile application adoption by young adults: A social network perspective," we examine the influence close advisers have on young adults in their decision to adopt specific mobile applications.  The article will appear in the winter 2011 issue of the International Journal of Mobile Marketing, scheduled to publish in January 2012.

Our findings suggest that (a) having a friend/family member using a mobile app is a significant predictor of ones adoption of the same app, but that (b) young adults are more likely to turn towards their friends for some types of apps while turning to family for other types of apps.  This is the third project Iryna, David and I have published looking at social influences on consumer preference.

e-Destroying your firm’s reputation

I am a bit late to the party addressing this topic, but the story of Paul Christoforo’s destruction of Ocean Marketing and near destruction of his client N-Control is a cautionary one worthy of repetition.

Ocean Marketing was a one-man operation providing services to, among others, the N-Control company.  N-Control had created the Avenger controller, an add-on to the X-box video game controller.  Ocean Marketing was handling order fulfillment until an unfortunate incident unfolded in December, 2011.

A customer inquiry regarding the delivery of the product, led to an increasingly hostile exchange of emails between Paul Christoforo and the customer.  As the customer dialog deteriorated, Paul resorted to an escalating series of name dropping and used several unprofessional comments such as “you just got told *****,” and the unfortunate typo “I wwebsite as on the internet” which has gone on to become an Internet meme.

The customer forwarded the email exchange to Mike Krahulik, otherwise known as “Gabe” from the web comic Penny Arcade.  Since the Penny Arcade trade show Pax East was included in the places Paul Christoforo indicated he had access, Mike (as the tradeshow director) decided to intervene on behalf of the customer.

Paul (writing as Ocean Marketing) continued to escalate his name dropping up until the point he discovered that Mike (as Gabe) would be including the exchange as part of the Penny-Arcade blog and comic strip.  Once that occurred, the Internet took over with websites like the Consumerist, Reddit and Fark quickly spreading the message.  Before the cycle concluded, Ocean Marketing made it to the major news media, landing a not so conciliatory interview on MSNBC.

As the hubbub grew, N-Control dumped Ocean Marketing as a client and N-Control was themselves forced to issue a press release distancing themselvesfrom Paul Christoforo, Ocean Marketing and the incident itself.

The damage is, as they say, done.  Ocean Marketing has lost a major client and Paul Christoforo has quite a bit of unfortunate baggage attached to his name (go ahead and do the Google search).  N-Control also apparently lost a number of orders due to the actions of an independent business partner.

There are three obvious lessons to be learned here. 

1. Most importantly, always treat your customers with dignity.  You may not always have the answer they want – you may sometimes have to say “no” to a customer.  But you should always be professional and courteous.
2. Perhaps the next most important lesson, particularly for the small business, your reputation is affected by everyone who does business in or near your company name.  N-Control didn’t do anything wrong here, but N-Control suffered all the same.  Take time to scrutinize your business partners, particularly those that interface with the public.
3. Finally, any conversation taking place over the Internet is inherently public.  Even a “private” email exchange can quickly cross the web.  Never hit “send” in the heat of the moment.  Always consider how others might read your words.  Always remember the Paul Christoforo story!