Kaffiyeh Kerfuffel (or Rachel Ray Suicide Bomber)

I first learned of the dust up over the scarf that Rachel Ray wore in a Dunkin' Donuts online ad yesterday morning on LinkedIn, the business networking site, of all places. In the "Answers" section there was a question from a branding professional asking for opinions on DD's decision to pull the ad after protests from conservative commentators. A few minutes later the anchor at Boston's WCVB-TV announced that the story about Rachel's scarf was among the most popular on its web site.

This isn't really about a silly ol' scarf; what has been classified until now is a CIA discovery that virtually all terrorists can prepare their meals in 30 minutes or less -- and how could that be possible without some covert coaching from the diva of rapid cuisine?!

DD obviously blew this one. In response to the taunts from a few shrill voices, the chain overreacted and now faces charges of racism, corporate cowardice, and serving weak iced coffee. The ad has probably been seen by more people than ever would have seen it otherwise and most of the comments I've seen online are strong protests against the donut maker. One organization has called for a worldwide boycott.

Blogs are buzzing with comments on this incident: Jake Summers, The Jawa Report, Ugly Doggy, The Conglomerate, and Lalablahblah are just a few. It's been picked up on Yahoo, Newsweek.com and other outlets. This has become a textbook example of how not to respond to hot headed criticism.

If you are going to play in the online world, you have to learn how to deal with situations like this. You are in the land of conversation, not monologue and people are going to comment positively and negatively on what you are doing. You have to know when and whether to engage. In this case, either silence or a simple clarification that the scarf wasn't a kaffiyeh but that kaffiyeh's are worn by millions of non-terrorists (some DD customers, no doubt) --without pulling the ad --would have been much more appropriate and productive for the brand. Personally, I would have sent the offending paisley scarf to Michelle Malkin -- the commentator who got much of this fired up -- with a suggestion that she wrap it around her own neck really tight.

Malkin and her fellow travelers in Arab bashing and fear mongering, nattering nabobs of negativism, to borrow a phrase from one of their conservative forebearers, must be thriled at all of the attention this story has received.

But Rachel Ray a terrorist sympathizer? Get real. She only terrorizes with her ubiquitousness and indeftatigable drive to be perky at all times. Check the lists of the top 10,000 people most likely to be abetting terrorists and you won't find her Ray-ship there except those kept by the truly delusional and paranoid.

The upside that I see is all the commentary from those of us who are appalled at all of this and who decry the racism in the equating a commonly worn garment with terrorism. Shame on Malkin. Shame on Dunkin' Donuts. I'm going to go buy a kaffiyeh and wear it out to buy coffee!

Gas prices and the Arctic

I was listening to a report on NPR this morning about the Congressional hearings at which the heads of the big oil companies were called to testify. The senators gassed on about the impact of the high cost of oil on American families -- the impact on families is true enough but they should have thought of that before starting a war in the Middle East that both consumes a lot of oil and raises uncertainty in the region -- and the first (reported) response from an oil executive -- if we'd only let them drill more places in the U.S. all of this wouldn't be happening.

It made me think -- is part of the rising price gas (and the tolerance of it by the White House and others in Washington) a plan to make the pain at the pump intense enough that Americans drop their opposition to drilling in the Artic National Wildlife Refuge and other environmentally sensitive spots?

The people I know in the oil business realize that they are in the energy business, that fossil fuels are only part of the answer, and that U.S. reserves are too tiny to provide a long-term solution. However, I only know people at one big energy company well and they've been out front in talking about strategic energy interdependence and the need for alternatives to fossil fuels. Needless to say this wasn't the company quoted in the story.

Many, many in the oil business drool at the thought of drilling in the Artic and off our coasts. I don't want to claim a vast oil-wing conspiracy, but I wouldn't put it past these companies to try to take advantage of any opportunity to finally get what they have lusted after for years.

Microsoft and Yahoo!

Microsoft is back in the hunt for at least part of Yahoo! They are desperate to gain ground on Google in online advertising. To me, Microsoft's great interest is an indication that the party is about to be over in online advertising (and eventually people will realize in all advertising).

Quick show of hands: how many of you have ever clicked on a banner ad (on purpose)?

Advertisers keep trying to get more and more clever (and intrusive) because consumers are getting better and better at avoiding ads -- we don't like them very much. They are annoying. We put up with them because advertiser-supported content is generally free (or at least low priced) content and we all like free. Those two trains -- advertisers wanting advertising that is measurably effective and consumers wanting free content -- are on a collision course.

More important, Microsoft is better at being big than it is at being good (ask the users of Vista). Perhaps they would be better served by spinning some cash out as investments in other companies and then leaving them alone to grow. They could harvest innovation, technology and financial returns along the way if they can just get over the need to suck them all into the mothership. They need new thinking more than greater heft.

Microsoft has long lived with a world view that offers two options for any obstacle they encounter: eat it or kill it. Neither of those will work for them now. They need to adopt a Save-the-Children model -- let's call it Save the Start Ups. They need to start sending money without expecting much in return for awhile. They need to learn to nurture.

Obama Rubin '08

I had the chance to spend time with a senior strategist from the Boston Consulting Group. Among the things he told me was that he believes we are entering a period of significant inflation that could last 10 - 15 years. The inflation will be driven by demand for basic commodities thanks to the growth of China, India, and other emerging economies as well as our own lust for consumption.

We've already begun to see it with rising prices for gasoline and many food products. What was interesting was his forecast that it could last for more than a dozen years. We haven't had an inflationary spell like that since the 1970's. I'm old enough to remember those days (and was getting my undergraduate degree in Economics at the time) but many business leaders have never been through these conditions. It's going to be a rough ride.

This got me thinking about the upcoming election and Barack Obama's options for vice president. I'd like to suggest that he consider Robert Rubin. In case you've forgotten, Rubin was a senior advisor and then Secretary of the Treasury in the Clinton administration. He's about the smartest people I've seen on economic matters, has a passion for building economic literacy, and has great credibility on Wall Street.

The next President is going to inherit an economic mess and, according to my BCG colleague, it isn't going to get better for quite awhile. S/he'll need solid financial advice from a trustworthy source. Rubin would also add a bit of gray hair that an Obama ticket could use.

Obama/Rubin '08. It has a ring to it.

Happy, happy, happy

I spent the most wonderful day yesterday leading a discussion about happiness and its implications for business. It may seem a bit esoteric to the unitiated but there is a fair amount of hard science in the study of happiness and its benefits for us.

The meeting was convened at Harvard with the support of Coca-Cola. Among those participating were Annie McKee, Robert Provine, Ellen Langer, Nancy Etcoff, Marc Mattieu, and Robert Biswas-Diener.

Beyond the hard science was the general belief that a positive approach to life yields greater benefits than a focus on weaknesses and faults. Businesses that want to engage customers and employees would do well to gain a deeper understanding of happiness.

I'll be posting more on the discussion in the days ahead. For now, I'm just basking in the glow of a great meeting with wonderful people.

Health Care Idiocy

Why are we still on first base with our national discussion of healthcare reform when the rest of the industrialized world has figured it out? Almost all of them pay less and get better results. A recent Frontline laid it out pretty clearly.

Why aren't we discussing how we can adapt what others have learned to work here?

Enough worrying about rejiggering competition or becoming more patient-centered. Just look around, see what everyone else is doing that works, and appropriate it for ourselves. Yes, it will take toughness to stand up to those who do well under the current system but that's called l-e-a-d-e-r-s-h-i-p.

Short, obvious post for a short, obvious solution to the healthcare problem.

The High Cost of Media Efficiency

Mr. Gimbel (or was it Mr. Macy) famously said that he knew that half of his advertising was wasted but he didn’t know which half. That inefficiency funded a wide array of magazines, television and radio stations, and newspapers. It made it possible to field teams of investigative reporters to keep an eye on government and corporate malfeasance. It funded the publishing of essays and fiction and poetry; new voices, quirky voices, defiant voices. It allowed us to see and better understand the world around us.

The richness of those days is soon behind us. Yes, the Web has brought us even more content and greater choices. But the hyper-efficiency of measuring activity on the Internet means that the successors to Mr. Gimbel and Mr. Macy know exactly what they are buying with each dollar of advertising. They know which half of their advertising is wasted and they do something about it.

Publishers are trading analog dollars for digital pennies as the economics of off-line media collapse. The actions of the advertisers are perfectly rational and the consequences for publishers easily predictable. This is an example of classic market behavior where the actions of buyers and sellers drive out inefficiency.

What we are missing, however, is a way to calculate the cost of the lost benefit of the original inefficiency to the society as a whole. We benefited – as consumers, as citizens, and simply as human beings – from the abundance of the inefficient mass media. It as if a farmer planted a wide range of crops in all of his fields because he didn’t know which would provide get him the highest price that season and, as a result, the people around him could feast on everything from asparagus to yams. Then, through better forecasting tools, the farmer learned how to plant just the crops that would be in highest demand and in quantities that would maximize his return. Does the farmer benefit? Certainly. Are the people around him poorer for it? Absolutely.

As newspapers, then magazines, radio, movies, and television came on the scene, they expanded and enriched the dialogue in the public square. Despite predictions that each would kill its predecessors, they complemented each other because they were relatively equally inefficient in terms of measurability by the advertisers that supported them. The Internet, however, is the game-changing killer app that can obliterate it predecessors simply by allowing capitalists to do what they do best: make rational microeconomic decisions.

The macroeconomic costs will be paid and it may be too late to do anything about it by the time that the check arrives on the table. Who would have uncovered the disgraceful conditions at Walter Read Army Hospital besides journalists given time and resources to pursue a story over time? Which on-line news organization has reporters in Darfur, Iraq, and other global hot spots? How many bloggers are covering the Supreme Court effectively? How many Web sites have fact-checking departments? The heavily lifting to get us all the information we need – information we can trust and on which we can base decisions -- is still being done by the AP, the New York Times, the BBC, NPR, CNN, and the rest of the much maligned “mainstream media.” The Internet has democratized publishing and shrunk the costs of distribution to near zero. That’s wonderful. It has not produced any viable model to allow the workhorses of content generation to thrive or new peers to emerge.

The technology has been abetted by regulators who encourage media consolidation. As corporate ownership of media has grown – more capitalists making rational microeconomic decisions – so too has the need to produce profits. Gone are the iconoclast publishers and broadcasters who valued voice over shareholder value. Dying are the journalists able to tell truth to power from a position of strength. Dwindling are the muckrakers willing to take on industry or government with only determination and a broadsheet.

There is a high cost to media efficiency that we’ll all have to pay. Unfortunately, no one is watching the tab.