Marina Gorbis's Blog, page 1477

Getting Excellence to Spread

Bob Sutton, Stanford University professor, talks about his book, Scaling Up Excellence: Getting to More Without Settling for Less (coauthored by Huggy Rao).

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Every Leader’s Real Audience

You deliver a big public speech to a group of potential investors who can make or break your results. You prepare it knowing that it could be a milestone in the turnaround of your institution. But who else is listening most intently? Your own team of implementers. They couldn’t care less about ringing rhetoric quotable by future generations. They want to know whether to update their resumes or renew their commitment to the work.

U.S. President Barack Obama is a larger example of the position faced by many turnaround CEOs who must sell their agenda to stakeholders through public communications. They must rally their own troops first, before the promises they present have a prayer of coming true.

Obama’s 2014 State of the Union address was delivered before Congress and watched by a global audience.  He emphasized opportunity — the minimum wage, education for job skills — and U.S. competitiveness (manufacturing centers, and transportation and infrastructure investments). Regardless of whether you agree with the content, I was struck by the possible impact of the speech on turning around a demoralized executive branch. The true test of the speech’s effectiveness is not the public critiques immediately afterwards, but what its impact will be on his immediate team and thousands of key public servants. The speech had to lean toward them anyway, because his “Year of Action” is designed to bypass Congress. But if they did feel motivated by the speech, their energy and determination as they hustle to take action could even have an unanticipated, counter-intuitive consequence: Positive results, however small, could end up garnering enough public support to influences members of Congress to get back to work with related legislation.

Regardless of a leader’s level of influence (President of the nation, founder of a new venture, or head of a business unit) or the scope of the communications forum (a national television broadcast, a Q&A with reporters, or an advertising campaign), leaders must speak to the people who aren’t there in person but are hanging on every word.

These are the people who will carry out your agenda, and their motivation rests on what you say to the public. They must explain it to their family and friends. Their reputations are at stake as well as yours.

The best leaders convey four key messages to associates with their public communications:

“I care about your work. Your work is important.” Obama did this for his implementers by affirming, not denigrating, public service. Keeping the focus on employees’ work is why new General Motors CEO Mary Barra will talk only about cars, not herself, and The Weather Company CEO David Kenny returned science to the center of the company.

“I won’t give up, and you shouldn’t either.”  This is a variant of the tongue-in-cheek mock-Latin saying, “illegitimi non carborundum”  (don’t let the bastards wear you down). Opponents and barriers must be put in perspective: they exist, but they can’t stop everything. This is the message Obama was sending to his team when he said of the Affordable Care Act, with a bit of a laugh, “Let’s not have another 40- something votes to repeal a law that’s already helping millions of Americans like Amanda. The first 40 were plenty.” In the audience, you could see Secretary of Health and Human Services Kathleen Sebelius appreciating that message.

“Even in the worst circumstances, there’s something we can do.” Obama said in his speech, “America does not stand still, and neither will I,” of his plan take whatever actions he can that don’t require Congressional participation. Even if these actions are relatively small, I have proposed often that any action is better than none. Keep moving, and change is possible. Even small wins keep people motivated.

“I stand behind you. My job is to make yours successful.” This message is subtle, but it is implicit in the resolve that a leader projects in stating a plan that will work. Leaders must turn a long-term vision into a practical set of short-term steps that are credible — that’s the essence of turnarounds, as I show in my book Confidence.

There’s a little nuance to these statements. One mistake leaders can make is to act as if big public communications are all about themselves. It’s the Carly Fiorina trap: she put herself in HP ads soon after becoming the first woman CEO, while long-time employees fumed. The team takes the opposite position — they often think that communications should all about them. They will be sensitive to the number of “I’s” versus “we’s” that the leader uses.  Yet – and this is paradoxical – teams also want their leaders to be forceful and decisive in taking responsibility for improving the situation. This requires a few strong “I’s,” like “I will.” In this speech, President Obama, who has often been criticized for expecting that Congress pick up and flesh out his broad ideas, was a forceful user of “I will” — a good sign for the implementation of his agenda.

So how do you know when to use “we” and when to say “I”? It’s important to use “we” when describing positive accomplishments, and “I” when taking responsibility for stumbles and indicating resolve to make changes. The people on your team know the difference, and they’re listening carefully.

Leaders have been learning (though not fast enough) that their ostensibly private utterances and emails can break their careers.  Leaders also must understand that their public utterances can make their careers — if they remember their real audience.

Training Programs That Work for Business, Workers, and the Economy

In his State of the Union speech last night President Obama called for an “across-the-board reform of America’s training programs” and said, “We know how to do it.”

We agree with him: Regional and industry-specific programs already in place around the country provide successful models. In our December 2012 HBR article “Who Can Fix the Middle-Skills Gap?” we summarized the key ingredients that research on these programs has shown to be essential to their success:

Multiple employers in the region or industry sector cooperate with one another and with educational and labor institutions to design and fund initiatives to train and hire graduates.
Classroom education is integrated with opportunities to apply new concepts and skills in actual or simulated work settings — an approach proven to be the way adults learn best.
Training focuses on offering workers career pathways, not just skills for the initial jobs.

These programs take a variety of forms.  Some like the highly successful like the Center for Energy Workforce Development are joint union-management initiatives. Some like the NCBioImpact consortium in North Carolina (formerly BioWorks) rely heavily on community colleges. And others like MIT’s Leaders for Global Operations are university-industry joint ventures.

Regardless of their specific form or workforce targets, the best thing the federal government can do to help expand such programs to meet the need for skilled workers is to make the funding it provides contingent on demonstrating that these three features are in place.

One Big Reason Why There Are So Many More Billion Dollar Start-ups

A billion dollar valuation is a huge milestone for a start-up, and not just because Justin Timberlake said so in The Social Network.  The billion dollar mark gets thrown around by venture capitalists as shorthand for the level of success they’re looking for when they invest, since the typical outcome for start-ups is failure and thus VC firms bank on a few mega-hits to generate returns.

But billion dollar valuations are seemingly becoming less and less rare. As The Wall Street Journal reports, at the peak of the dotcom bubble in 1999-2000, there were 18 private, venture capital-backed companies in the U.S. valued at a billion dollars or more. Today there are 25, plus another dozen abroad. Surely, critics contend, this signals a bubble.

Perhaps. Bubbles are tough to define, much less identify. But the simplest reason for the increase in billion dollar start-ups is far more mundane: it’s inflation.

As the chart above illustrates, the number of private, venture-backed U.S. companies with billion dollar valuations hasn’t quite matched the dotcom peak, when inflation is accounted for. A dollar in 2000 is the equivalent of $1.35 today, meaning that the proper comparison is between the number of billion dollar companies in the dotcom era, and the number of companies worth $1.35+ billion today. This adjustment makes a big difference. Of the 25 U.S. companies valued over a billion today, only 15 are valued at more than $1.35 billion; of the 37 globally, nearly half fail to clear the bar.

Those concerned about a tech bubble could rightly point out that nearly as many highly valued start-ups as the dotcom bubble should still signal alarm. But that’s quite different than pointing to a dramatically longer list of billion dollar valuations.

Ultimately, the best evidence against a comparison to the dotcom era may be the revenue multiple at which these companies are valued. As The Wall Street Journal reported in October of last year:

This year, shares of newly public technology companies are being valued at 5.6 times sales, estimates University of Florida professor Jay Ritter, who tracks IPOs. That is well short of the median of 26.5 times sales in 1999. Shares of this year’s tech IPOs have risen an average of 26% on their first day of trading. In 1999 the average was 87%.

Bubble or not, the point remains that inflation accounts for much of the increase in billion dollar valuations relative to the dotcom years. Though the dream of a “billion dollar company” still permeates start-up culture, the fact is a billion dollars really isn’t what it used to be.

How to Build Brand Religion

On Thursday at 11 a.m., the Supreme store in Soho debuts a new sneaker design, and people wait around the block to be the first to purchase it. Roughly a mile away in Madison Square Park, a line snakes past manicured lawns as people wait an hour in line to buy a Shake Shack cheeseburger. Further downtown, Tyler, the Creator, the impresario leading man of the hip-hop collective Odd Future, hosts a pop-up shop on Orchard Street with a thousand kids waiting in line to meet the artist and buy his gear.

Typically, lines get a bad wrap: They’re inconvenient and annoying. But if you look closer, you’ll see people — especially young people — actually enjoying it.

Why? Sometimes, the experience of anticipation can be just as powerful as the product you’re selling. And if the product is good and the demand exceeds the supply, the line will be a microcommunity of your very best fans wanting to pay patronage to your brand. The line, at this point, ceases to be a pattern of inconvenience. The line instead is the physical embodiment of brand religion.

So what, exactly, is brand religion? This question is best answered not by looking at the history of brands and their ethos, but by looking at how some religions spread from a niche sect to the masses. Malcolm Gladwell noted in his book The Tipping Point that religions spread not by the force of their charismatic founders, but by the emotional zeal of its followers that spend their days marinating in the dogma. The more a community convenes to exchange ideas around the dogma, the more emotional they grow about the ideas. They, in turn, become influencers in that community and grow more motivated to seduce more followers to the religion.

Cultural or brand fanatics behave similarly. From my experience, fanatics — be it sport, religion, music, or otherwise — are cajoled by emotion. When a fanatic becomes emotional, he or she is more apt to pay more, wait longer, and share louder – elements of what I call “irrational commerce”. The key is to create physical and virtual moments for fans to congregate, share their urgency, and reward them with scarce products or experiences they can’t find anywhere else. The fan, in turn, captures the moment socially (via Instagram, for example) to recruit others who are less fanatical about the brand. The more communal moments brand fanatics can share with one another, the more brand religion can grow. Gary Vaynerchuk cites in his most recent book, Jab, Jab, Jab, Right Hook, that community managers should curate these social moments (what he calls “jabs”) to provoke fans for an emotional reaction. A series of these “jabs” will in turn lead to a consumer call-to-action for that fan (i.e. the “right hook”).

And while large brands like Nike cater to fanatic fans through the release of limited run shoes, for example, brand religion is particularly important for small-to-medium businesses because it leverages the power of small communities to evangelize the product. This is valuable for several reasons: Small brands can’t just open online stores and expect to be successful without hosting and curating a vibrant and nurturing community. If they do, they’ll fall prey to the dynamics better served for large incumbents like Amazon and Zappos, whose direct response-driven purchase funnels are fundamentally based on cost-per-acquisition and impressions served. Huge ad buys can be prohibitively expensive for small businesses and might not deliver sales, let alone long-term fans.  Additionally, competing to be the “most affordable” won’t cut it.

Though price is a valuable differentiator in the marketplace, it won’t promise loyalty because a mere fan will only be as loyal as your cheapest competitor. Even Apple, arguably the most powerful brand on the planet, stumbled when it released its value-oriented iPhone 5c to lukewarm demand. At that aggressive price-point, there were just too many other affordable Android handsets to consider (not to mention it’s own higher-end iPhone 5s, which far out-performed its cheaper sibling).

I’ve seen much of this first-hand: My wife recently started working at SoulCycle, arguably one the most cult-like exercise franchises out there today. At the heart of the SoulCycle brand is the experience: the combination of anthemic music, atmospheric lighting, and motivational exercise from an authentic and charismatic instructor. Fans don’t spin; they “ride,” picking the locations of their bikes on the company’s website, much like reserving a seat on a flight — with those seats closest to the instructor selling out first. All the merchandise sold is exclusive and limited run, refreshing every month. This scarcity only feeds into the fanaticism driven by the experience endured by its hardcore fans and makes up 12% of the company’s revenue. In my estimation, all these tactics ladder up to one governing principle: the founders made a conscious decision to build a brand, not a gym.

Ultimately, this is what brand religion is all about: stoking emotion with a combination of scarcity and urgency. It’s irrational commerce at its finest.

When I spoke with my friend Neil Blumenthal, co-founder and co-CEO of Warby Parker, he reinforced these points by explaining the tactics his company employs to deliver a cult-like brand. The team first created its ethos (“our commandments,” Neil said), which is the articulated reason for your existence. This guides your business practices while also letting fans know you’re filling a deep emotional void. At the heart of Warby Parker’s particular ethos is full, unbridled transparency.

When building their community, they made a point to talk about issues that typical corporations sweep under the rug. After the company launched, for example, it became clear they couldn’t keep up with the demand of their trial-at-home offering. Consequently, they temporarily suspended the program (a move that other growth companies would avoid in lieu of more sales). They were proactively apologetic about it and explained in great detail why they had to curtail one of their most differentiating aspects of their offering. Customers were quick to forgive, and everyone moved on.

Warby Parker’s transparency was also evident in their unique approach to marketing communications. Each year since 2011, the company unveils an Annual Report. In it, fans can find everything from key unique metrics that are driving the business (tidbits they know ardent fans will drop in cocktail conversation), down to the beer and bagels the employees prefer to drink at their Happy Hours or eat at their breakfast meetings. This quick, quirky snapshot of their culture adds a unique flair of personality to the brand, which makes it stand out against competitors.

Finally, Warby Parker’s use of scarcity and urgency to build brand religion has been masterful as evidenced by their frequent limited-run capsule collections they release. “Most of our competitors put out two capsule collections a year,” said Neil. “We put out 20.” Most of these collections sell out in the first 48 hours and add to the fever pitch of the fans following the brand.

If there’s one thing the new world of social commerce has taught us, it’s that there are no rules any brand must follow to attract an engaged audience. But building a strong, emotional brand by tapping into urgency and scarcity is an important perspective to consider. Like musicians and sports teams before them, brands doing it right regard their community members more as fans rather than customers. And if you can fuel their addiction to your brand ethos, you’ll likely convert them for a fraction of the customer acquisition cost typically associated with winning them over.

HBR’s Guide to Obama’s 2014 State of the Union

Last night, President Obama laid out a set of goals and proposals for his next year in office, with a substantial portion of the speech focusing on business and economic issues. He mentioned a number of themes that we cover regularly here at HBR: the minimum wage, inequality, women in the workplace, manufacturing, and health care to name just a few.  As the President sets out on a post-speech tour to sell his policies, here are management experts’ perspectives on some of those proposals:

Minimum Wage

Obama proposed raising the minimum wage to $10.10, and will do so for federal workers by executive action. MIT’s Zeynep Ton says a higher minimum wage could help employers, provided they know how to structure their business around a “good jobs” strategy. That view is shared by University of Colorado’s Wayne Cascio, who in 2006 wrote about the high cost of low wages for business. Meanwhile, Wharton’s Peter Cappelli has a related message for employers: It’s not ok that your employees can’t afford to eat. Finally, HBR editor Justin Fox lays out the economics of a higher minimum wage.

Inequality and Economic Mobility

Rising inequality and lack of economic opportunity for the middle class was a major theme. HBR’s Julia Kirby and author Chris Meyer argue this is an issue businesses must care about as well, and after surveying the latest data on mobility, Justin Fox says this issue can’t be left to the economists. For those curious about the relationship between inequality and economic growth (in either direction), the data is murky.

Hiring Veterans and the Long-Term Unemployed

Obama said he plans to partner with CEOs to encourage the hiring of the long-term unemployed. For businesses interested in doing so, don’t miss HBR editor Gretchen Gavett’s interview with MIT professor Ofer Sharone on the topic. He also noted his administration’s efforts to train and promote the hiring of veterans, which Derek Bennett argues is also good business.

Women in the Workplace

In one of the biggest applause lines of the night, Obama declared, “It is time to do away with workplace policies that belong in a ‘Mad Men’ episode.” HBR did a deep dive on women and business this fall, and a good place to start is this research roundup covering discrimination, work-life balance, ethics, compensation, and more. From there, check out this set of quick facts on those topics. Finally, HBR editors Sarah Green and Amy Bernstein discuss these issues, and our coverage of them, in this video.

Health Care Costs

Of course, the President addressed health care as well, not just to defend Obamacare, but also to note the challenge of rising health care costs. On the latter topic, check out Michael Porter and Thomas Lee, who lay out a strategy for improving the health care industry. For even more, HBR recently completed a series on the health care industry with the New England Journal of Medicine that covers the issue in depth.

Manufacturing and Insourcing

Obama mentioned a trend toward “insourcing” — the return of manufacturing jobs from abroad — and vowed to promote advanced manufacturing via four new manufacturing “institutes.” For a little more nuance on the insourcing trend, read Brad Power on GE. As for whether America really needs manufacturing to maintain its economic strength, Harvard Business School professors Gary P. Pisano and Willy C. Shih go beyond a simple yes or no answer in a 2012 article. For even more on this and related issues, check out HBR’s series on American competitiveness.

Immigration

Reforming America’s immigration system came up last night, and is considered by some pundits as one of the few areas of potential legislative action this year. Vivek Wadhwa of Stanford and Duke argues that this issue must go beyond talk of talent shortages and gluts to focus on innovation and a growing economic pie. And Jack Mollen of EMC connects immigration reform to the tech sector.

Climate Change

“The debate is settled,” Obama noted. “Climate change is a fact.” If policymakers can no longer ignore the threats of climate change, neither can companies, according to Andrew Winston who calls it the largest risk and opportunity currently ignored by investors.

Gun Safety

Harvard’s David Hemenway argues businesses can play a role in promoting gun safety, as does Eddie Yoon.

Education & Training

The President emphasized the need to improve education to “prepare tomorrow’s workforce,” and proposes better technology in schools, “redesigned” high schools, and improved access to higher education. But missing from conversations about the economic benefits of a college degree is a looming question of professional relevance, argues Alan Kantrow. One critical step to answering that question, he writes, will be helping craft better tools for measuring education. As for worker training, another topic of emphasis in the speech, Thomas Kochan, David Finegold, and Paul Osterman lay out a strategy to address the skills gap in this post.

How Couples Can Cope with Professional Stress

Most of us are familiar with the cycle. At work, the pressure to be “always on,” to meet deadlines, to serve the demands of colleagues or customers, or to deal with a difficult coworker can create stress that leaks into our personal lives. This stress can cause us to be impatient with romantic partners or kids or to neglect our duties at home, creating a vicious cycle of anxiety outside the office that makes work stresses even harder to face.

There are countless examples of couples driven to the edge by work-related stress. And psychological studies have shown that outside stressors — particularly stress at work — can push relationships to the breaking point. But they don’t have to. The vicious cycle of work–home stress can become a virtuous cycle when partners learn to cope with stress together. We are social beings who tend to be happier when connected to others. Our romantic partner is, almost by definition, the person on whom we rely to provide support, and recent research has shown (PDF) that partners who practice dealing with stress together early on can actually strengthen the durability of their relationships over time.

Below are a few thoughts on how couples can cope with professional stress.

Listen and support. There’s a time to question, challenge, or offer solutions. But often when helping a partner deal with professional stress, listening and support are most valuable. Research conducted by eHarmony, for example, found that partners who are supportive when their counterparts share bad events maintain relationship satisfaction and create an environment that leads to fewer arguments. And we’ve almost all experienced the benefit of a friend or partner simply letting us talk through our problems, encouraging us through active listening. Silence can be one of the most powerful forms of communication. And asking thoughtful questions can help your partner gain clarity and come to his or her own conclusions.

Recognize and respect different coping mechanisms. Partners often cope with stress differently. In our marriage, one of us likes to talk everything out as soon as possible after a hard day, and the other needs a little downtime after work to decompress. These aren’t the most compatible coping mechanisms — and when we’re both coping in our own way, we tend to drive each other crazy. Over time, we’ve learned to compromise. Recognize that you and your partner may have different ways of dealing with stress, and there isn’t necessarily a “right” way of coping. Try to accept those differences and then find ways to accommodate one another. For example, let a partner who needs downtime after work have 30 minutes in front of the TV or on the treadmill, but ask that partner to agree to engage more later — over dinner or out for an afternoon stroll. Identifying and working with those differences can be essential to productively dealing with stress.

Kill comparisons. There are at least two types of comparisons couples make that can enhance rather than counteract stress. First, resist the urge to compare yourself or your partner to others professionally — judging your success relative to others. This can lead to doubt, inadequacy, and worry, and it’s a poor substitute for internal motivation. Second, don’t succumb to the temptation to compare stress levels with your partner. When you’ve had a long day and your partner is talking through his or her stresses, it’s tempting to let your partner know just how much bigger and more important your own issues are. But that only creates tension. Learn to simply listen and offer help to your partner. And try to solicit your partner’s help and empathy in your own stress without drawing direct comparisons or judging which is more important. Each partner is an equal, and all stressors are valid and important.

Be active together. One of our favorite activities as a couple is walking in the afternoons. When the weather’s warm enough, we take our son out for a walk around the neighborhood, using the time to catch up and talk through our days. We find that getting out and getting active together is a great stress reliever. Even moderate physical activity can lead to lower levels of stress. Boston University’s Michael Otto has noted, “Usually within five minutes after moderate exercise you get a mood-enhancement effect.” And numerous studies have confirmed exercise as an effective way to enhance mood and fight depression. Exercising together kills two birds with one stone, allowing you to stay physically active and spend more time together.

Find time to cheat (on your job and your kids!). Remember, you are with your partner because you love them — you like to spend time with them, talk to them, and share with them. But often, partners get in a rut. Work piles up. The kids need chaperoning to soccer practices and school events. And the easiest thing to cut out is often one-on-one time with each other. We’ve noted elsewhere that downtime can improve physical and mental health, and we’ve encouraged couples to occasionally cheat on their jobs with their spouses. Similarly, we’ve received good advice from many friends that time together away from kids is just as important as time away from work. So find time to connect as a couple away from the office and outside the home. Make sure that in sacrificing for work and family, you’re not sacrificing all the benefits of being a couple and the stress relief that comes with it.

Laugh together. John Gottman is perhaps the world’s leading authority on marital success. In his “love lab” he successfully predicts which marriages will end in divorce approximately 90% (PDF) of the time after a brief observation. And he claims that shared humor is both a key way to strengthen a relationship and a key “repair attempt” for couples in conflict. Serendipitously, humor is also a key way to deal with stress: Studies have shown that laughter can alter your mood and soothe your stress response. Life’s problems are hard, but when couples can learn to tease one another, to laugh, and to use humor to confront life’s difficult issues, they may also manage their relationship and their professional anxieties better.

These are just a few ways in which couples can more effectively manage professional stress together. Each couple will have to find their own solutions, but learning to cope with stress together is a fundamental skill for thriving at work and at home.

This is the first post in a blog series on taking control of stress. Jackie and John Coleman are contributors to the HBR Guide to Managing Stress at Work.

The Social Disparity Behind America’s Growing Obesity Gap

America is bursting at the seams. Two-thirds of adults and more than one third of kids and teenagers are overweight or obese. For children, obesity has more than doubled in the past thirty years, making it one of the biggest public health concerns in the United States.

Last August, health experts around the country breathed a sigh of relief when the CDC reported that childhood obesity might be leveling off. After years of fighting the war on obesity and campaigning to get kids to eat healthier and be physically active, there was finally some uplifting news. Some experts were cautiously optimistic, while others outright cheered.

Not so fast. Put that cupcake down.

A closer look at the trends reveals that while the overall obesity rate has plateaued, there is more to the story. In a paper published yesterday in the Proceedings of the National Academy of Sciences, my colleagues Carl B. Frederick, Robert D. Putnam, and I show that obesity is falling — but only for one part of the population.

Looking at two national health surveys, we found that obesity has decreased among teenagers who come from wealthy, well-educated families, but it has continued to increase among poor teens. Putting these two trends together, it looks like the epidemic is easing.

But underneath the aggregate trend lies a striking social disparity.

It is no news that obesity is a bigger concern for poor children. But our research shows that the gap is growing. Between 2003 and 2010, obesity rates among teens whose parents have no more than a high-school education rose from about 20% to 25%. Over the same period, obesity rates among teenagers whose parents had a four-year college degree or more declined from 14% to about 7%. We find similar trends when we use a measure of family income instead of parental education to measure socioeconomic status.

The growing obesity gap is bad news for public health officials, who will have to continue to fight costly obesity-related diseases in the years ahead. But the real victims in this failed war on obesity are the kids, whose future health prospects look nothing short of grim. Obese kids grow into obese adults. They are also more at risk for a host of other health problems such as type-2 diabetes, obstructive sleep apnea, high blood pressure, several types of cancer and psychological problems.

So what is behind the diverging trends?

In simple terms, obesity is a result of an energy imbalance — we consume more calories than we use. To lose weight, we should eat less and move more.

Turns out, all kids — poor and wealthy — are eating fewer calories than they did a decade ago. Looking at the eating and exercise patters of teens in both groups, we found that a difference in physical activity may be what is really driving the obesity gap.

One in five kids from less-educated, low-income families report being physically inactive. By comparison, only one in 10 teens with college-educated parents said they had done no sports or exercised in the previous week.  The exercise gap has increased sharply during the last ten years, mirroring the trend in obesity rates.

What is driving the sharp difference in physical activity over the last few years? The answer is complicated, but a good starting point is to look at the role of schools, neighborhoods, and health care professionals.

Teens from poor families are increasingly less likely to participate in organized sports. The introduction of  “pay to play” programs has made school sports a luxury that only wealthy families can afford. Joining the football team in the Arlington school district in Massachusetts costs $500, which almost seems reasonable compared to the price tag of playing tennis in Riverside Local School District in Ohio: $874.  As part of money-saving efforts, many schools have been forced to cut down or even eliminate their sports programs — and these are the schools that poor kids are more likely to attend.

Poor kids are also increasingly more likely to live in poor neighborhoods that provide fewer opportunities for being physically active. Kids who live in neighborhoods with sidewalks, parks, and recreational centers and where they feel safe to bike around the block or run around the park are more likely to be from wealthier families – and less likely to become obese.

Wealthy teens are also more likely to have a regular doctor and get advice on the importance of healthy eating and physical exercise.

If public health experts are to beat childhood obesity and thereby have a shot at reducing obesity among adults, they ought to pay more careful attention to class-based factors that contribute to obesity. Kids should have equal access to physical education and school sports, recreation centers and playgrounds, and they should feel safe walking or skateboarding around the neighborhood.

More than spreading the public health message about the importance of healthy diet and physical exercise, we should attack the problem at its root cause. In the spirit of celebrating the 50th anniversary of Lyndon B. Johnson’s “War on Poverty” campaign, we should make better progress in reducing the number of kids who live in poverty, attend schools with no PE classes, or live in neighborhoods where broken swing sets are a bitter reminder of what used to be playgrounds.

The Financial Crisis May Cost Each American at Least $19,000

Three economists at the Federal Reserve Bank of Dallas calculated how much economic activity would be lost by the time the U.S. returns to the growth path it was on before the global financial crisis began in 2008. Their estimate: about $6 trillion to $14 trillion, or $19,000 to $45,000 for every man, woman, and child in the country, according to The New York Times. The per-person cost rises to as much as $120,000 if the calculation includes the impact on workers’ well-being, the Times says.

Big Data’s Dangerous New Era of Discrimination

Congratulations. You bought into Big Data and it’s paying off Big Time. You slice, dice, parse and process every screen-stroke, clickstream, Like, tweet and touch point that matters to your enterprise. You now know exactly who your best — and worst — customers, clients, employees and partners are.  Knowledge is power.  But what kind of power does all that knowledge buy?

Big Data creates Big Dilemmas. Greater knowledge of customers creates new potential and power to discriminate. Big Data — and its associated analytics — dramatically increase both the dimensionality and degrees of freedom for detailed discrimination. So where, in your corporate culture and strategy, does value-added personalization and segmentation end and harmful discrimination begin?

Let’s say, for example, that your segmentation data tells you the following:

Your most profitable customers by far are single women between the ages of 34 and 55 closely followed by “happily married” women with at least one child. Divorced women are slightly more profitable than “never marrieds.” Gay males — single and in relationships — are also disproportionately profitable. The “sweet spot” is urban and 28 to 50. These segments collectively account for roughly two-thirds of your profitability.  (Unexpected factoid: Your most profitable customers are overwhelmingly Amazon Prime subscriber. What might that mean?)

Going more granular, as Big Data does, offers even sharper ethno-geographic insight into customer behavior and influence:

Single Asian, Hispanic, and African-American women with urban post codes are most likely to complain about product and service quality to the company. Asian and Hispanic complainers happy with resolution/refund tend to be in the top quintile of profitability. African-American women do not.
Suburban Caucasian mothers are most likely to use social media to share their complaints, followed closely by Asian and Hispanic mothers. But if resolved early, they’ll promote the firm’s responsiveness online.
Gay urban males receiving special discounts and promotions are the most effective at driving traffic to your sites.

My point here is that these data are explicit, compelling and undeniable. But how should sophisticated marketers and merchandisers use them?

Campaigns, promotions and loyalty programs targeting women and gay males seem obvious. But should Asian, Hispanic and white females enjoy preferential treatment over African-American women when resolving complaints? After all, they tend to be both more profitable and measurably more willing to effectively use social media. Does it make more marketing sense encouraging African-American female customers to become more social media savvy? Or are resources better invested in getting more from one’s best customers? Similarly, how much effort and ingenuity flow should go into making more gay male customers better social media evangelists? What kinds of offers and promotions could go viral on their networks?

Conversely, an immediate way to cut costs and preserve resources might be to discourage the least profitable and most costly shoppers. Are there clever ways to raise prices, minimize access or otherwise manage those expensive older, single customers and high-maintenance, low-purchase young females? Are there fast, cheap de-markers —such as, say, an Amazon Prime membership combined with age and ethnicity — to quickly qualify prospects worth cultivating?

Of course, the difference between price discrimination and discrimination positively correlated with gender, ethnicity, geography, class, personality and/or technological fluency is vanishingly small. Indeed, the entire epistemological underpinning of Big Data for business is that it cost-effectively makes informed segmentation and personalization possible.

But the law, ethics and economics leave unclear where value-added personalization and segmentation end and harmful discrimination begins. Does promotionally privileging gay male customers inherently and unfairly discriminate against their straight counterparts? Is it good business — let alone fair — to withhold special offers from African-American women because, statistically and probabilistically, they are demonstrably less profitable than Asian and Hispanic female customers?

Big Data analytics renders these questions less hypothetical than tactical, practical and strategic. In theory and practice, Big Data digitally transmutes cultural clichés and stereotypes into empirically verifiable data sets. Combine those data with the computational protocols of “Nate Silver-ian” predictive analytics and organizations worldwide have the ability — the obligation? — to innovatively, cost-effectively and profitably segment/discriminate their customers and clients.

Of course, many regulated industries — notably health insurance, financial services, employment — expressly forbid certain kinds of discrimination. In effect, companies and organizations are required to deliberately ignore or exclude potentially valuable customer information. In America, for example, particular attention is paid to processes and programs that have “disparate impact” on employment. (A future post will address this). Regulators, legislators and court systems worldwide are frequently on the lookout for examples of “disparate impact” and unequal/unfair treatment of customers. There should be no doubt that the intimate customer knowledge that Big Data confers guarantees greater scrutiny from governments worldwide.

But the main source of concern won’t be privacy, per se — it will be whether and how companies and organizations like your own use Big Data analytics to justify their segmentation/personalization/discrimination strategies. The more effective Big Data analytics are in profitably segmenting and serving customers, the more likely those algorithms will be audited by regulators or litigators.

Tomorrow’s Big Data challenge isn’t technical; it’s whether managements have algorithms and analytics that are both fairly transparent and transparently fair. Big Data champions and practitioners had better be discriminating about how discriminating they want to be.