It’s been said that entrepreneurs have to think globally
to survive locally. This statement is more true today than ever before, as the competition (large, multinational corporations) is looking overseas to improve cost efficiencies by reducing overhead. Unfortunately for the local “mom and pop” establishments we have come to cherish, the economics make staying in business harder to manage.
One thing I love about Minnesota is the emphasis on “locally sourced” products, as this instills in us a tremendous sense of pride in the collective sweat equity of our state’s workforce. My wife and I believe that patronizing local businesses is a great way to show our appreciation, and we are both attuned to the benefits of local entrepreneurship and how such establishments can make or break the character of a particular neighborhood.
This has inspired me to take a more in-depth look at what “globalization” means, how it impacts other countries, and whether it is the type of villain that should be taken on by the agents of S.H.I.E.L.D. (which is one of my favorite shows now that this season of Scandal has concluded). The fanciest definition I was able to find (on Google®) is “increasing integration of economies around the world, particularly through trade and financial flows,” but it is easier to comprehend globalization as the movement of people (labor) and knowledge (technology) across international borders.
In other words, globalization stimulates free trade that motivates American corporations to move operations overseas to developing countries so that they can circumvent union activity and take advantage of cheaper labor opportunities. Quite often these countries are located in third world developing countries like Asia, Africa, and Latin America. These countries have also historically suffered from high unemployment, political instability, corruption, and little—if any—government interference or regulation.
Because of this, the word “globalization” has become an ambiguous and emotionally charged term—a mixed bag of acceptance and rejection. Some see it as leading to positive free trade that leads to healthy competition, higher productivity, and economic prosperity for both the developed and developing country. Others see it as enabling a negative trade system that exploits developing nations. Whichever way you see it, it is widespread and it is here to stay.
American corporations easily find that they can contract out their raw materials to overseas factories in countries like India, Indonesia, Pakistan, Mexico, China, and Brazil because unemployment is high and many of the people are willing to compete with each other to work for less. Economists and politicians have referred to this as “downward leveling” or a “race to the bottom.” Developing countries pit themselves against each other to see which can offer multinational corporations the cheapest labor.
Accordingly, some see globalization and the rise of multinational corporations overseas as creating substantially increased demand for child labor in developing countries. While companies say that they do not condone the use of child labor, the reality is that these corporations “sub-contract” out their work to smaller companies that do use child labor as a way of competing with other companies to lower labor costs substantially.
Look, I get it: globalization ushered in free trade and open markets, which in turn encouraged multinational corporations to look for the cheapest labor markets. Who isn’t guilty of trying to save a buck here and there? But let me step onto my portable pulpit here for a moment. Shouldn’t we be tying the protection of children to free trade and the prosperity of developing countries? The progress, success, and wealth of a nation are dependent upon the education of its children. Multinational corporations have a social responsibility to live up to high standards that value children first over profits.
Clients often come to me for their first estate plan because they have recently had a child. Many clients think that estate planning is unnecessary unless they have won the lottery or have had a child. Not true. If I think about many of the more complex or messy estate administrations with which I have assisted, probably half involve estates of single people or couples without children.
One reason you need an estate plan is to plan for the possibility of temporary or permanent incapacity. This is something that affects everyone, not just people who are married and have children. Everyone should have a health care directive (appointing someone to make personal and medical decisions for you if you are unable) and a financial power of attorney (appointing someone to make financial decisions if you are unable). Both are very simple documents to prepare and are especially important if you do not have a spouse. If these documents are not in place, and you happen to be temporarily or permanently incapacitated, the only option for your friends and loved ones is often an expensive and public court proceeding to appoint someone to make those decisions.
Also, with the recent death of L’Wren Scott, Mick Jagger’s longtime girlfriend, we are reminded that many unmarried couples are otherwise long-term committed partners sharing homes and the rest of their financial lives. Without an estate plan, one partner would not benefit from the other’s estate, would not have rights to sentimental property, may have to move from the home, and would not be allowed to participate in the administration of that person’s estate. The legal rights otherwise given to heirs do not apply to committed partners, so such a partner would be entirely excluded from all aspects of the process.
Finally, everyone has assets (even modest assets) to pass on to beneficiaries. It is important to be able to select the recipients of your property, and to nominate the person you would like to wrap up your affairs. If you are a single person and have no estate plan in place, the law would allow your parents, maybe your siblings, or perhaps even your creditors to make all of those decisions. Also, people without a spouse or children often have nieces and nephews or charities that they love and support and would like to provide for in the case of their death. Such arrangements really need legal assistance and can be tricky to draft correctly.
I read with a mixture of humor and sadness about the teen in Florida who lost her
father’s age discrimination settlement when she posted on Facebook that her father’s former employer would be paying for her vacation in Europe, thereby violating a strict nondisclosure stipulation in the settlement agreement. I would guess that family dinners in that house were pretty strained for a while.
A funnier story is that of a Pennsylvania man wanted for assault who
shared his picture on Facebook – obtained from the police department’s website only moments after it was posted – which he accompanied by “LOL” (“laugh out loud” for any Luddites reading this) and other comments mostly consisting of deleted expletives. The police immediately noticed the re-posting, contacted him posing as a woman, and arranged to meet him for a cigarette. After hiding from the police for three months, the man engineered his own arrest within one hour after his gleeful use of Facebook.
There are hundreds of these stories. Although amusing, I can’t help but wonder what on earth these people are thinking. Or more accurately, are they thinking at all? But while these are obvious blunders, what about the more subtle disclosures that the average person makes every day? “I started my new job today at ABC. Thankfully I have only a 10 minute commute.” “City opened a great new dog park right next to my apartment. Great for that after work outing.” “Have to be in Dubuque again next week – only flight that gets me there for Monday meeting leaves Sunday at noon.”
Bits of information like this are communicated all the time, and seem innocent enough. But put them together with your professional bio on LinkedIn, photos of your house and dog on Instagram, cookies showing your shopping history…well, you get the picture. And so can others.
Among other things, the massive amount of data that we voluntarily disclose has enabled cybercriminals to refine their phishing scams. The once popular generic mass emails from the Nigerian prince or Swedish lottery have given way to the personal email from a bank, credit card company or neighbor. Using the personal information that is freely available, “spear
phishers” are able to target individuals or shared-interest groups with personalized communications in an attempt to gain access to really valuable personal information, such as passwords, credit card numbers or even social security numbers.
If you’re curious about your own vulnerability, do a simple Google® search of your name and look at the “images” item that will show up near the top of the search results. I’m not a big social media user, so I found mostly a bunch of trademarks (I’m listed as the attorney of record in the publicly available records of the United States Patent and Trademark Office), sketches of fellow entreVIEW bloggers, photos of others at Gray Plant Mooty, and a bunch of things that mean nothing to me. There was also a picture of my mother (maybe from her obituary?) and a vacation picture of some friends that I simply cannot figure out how it was connected with me. Even with this limited information, someone could put a pretty good profile together for emails that might look legitimate to me.
So, think before you post, don’t “friend” anyone you don’t really know, never give up a password, and study that email address and message before you click on the hyperlink. Or just don’t click on the link at all.
Is it only a matter of time before we have Darwin Awards for social media postings, or is it something that already exists and I’ve just missed it?
The Federal Trade Commission (FTC ) is the most active and aggressive federal government agency to investigate and enforce data privacy and security laws against businesses. Section 5 of the FTC Act empowers the agency to bring enforcement actions against businesses for unfair or deceptive trade practices. Thanks to Section 5, the FTC has already brought over 50 data privacy and security actions against businesses that have resulted in settlements and consent decrees.
So, it was with some surprise that, when the FTC filed suit against the Wyndham hotel franchisor following a data security breach initiated by hackers from Russia, Wyndham was not anxious to settle the case. Instead, Wyndham challenged the FTC’s basic authority to assert an unfairness claim against a business based upon data security practices and brought a motion to dismiss the claim. A ruling in favor of Wyndham would have sent shockwaves through the privacy world and stymied FTC actions going forward. This, however, was not to be.
On April 7, Judge Esther Salas denied
Wyndham’s motion to dismiss and affirmed the FTC’s authority to initiate and enforce such actions relating to data privacy and security. The case will now proceed to determine Wyndham’s potential liability, unless Wyndham folds and settles.
TOP TEN LESSONS LEARNED FROM THIS FIRST ROUND IN WYNDHAM:
1. Review website privacy policies and terms of use and make sure they are accurate and consistent. Judge Salas was not persuaded by Wyndham’s argument that its privacy policy expressly disclaimed responsibility for the security of customer data collected by its franchisees, and applied only “to the extent we control the Information.” Wyndham cited language in its privacy policy that “expressly disclaims making any representations about the security of payment-card data collected by the Wyndham-branded hotels.” The court however pointed out other language in the same Wyndham privacy policy that emphasized the “importance of protecting the privacy of individual-specific (personally identifiable) information collected about guests” and stated that it “applies to residents of the United States, hotels of our Brands located in the United States, and Loyalty Program activities.” The court found that a reasonable customer might have understood the policy to cover data security practices at both company-owned and franchised hotels to the extent Wyndham controls the information.
2. Perform a data privacy and security compliance audit. Perform an audit as necessary to determine what policies, procedures, and practices are in place at your business relative to the collection, use, and sharing of personal information. What federal, state, and international laws apply? Are your policies and procedures appropriate and do they follow best practices? Consider both administrative and technical safeguards.
3. Include privacy concerns in all vendor agreements. Data privacy and security issues should be covered in all vendor agreements and not just those that are related to computer software and related technology. The recent Target data breach was the result of an HVAC vendor’s lax protection of its password credentials, which ultimately allowed the unauthorized access to the Target point of sale system.
4. Make sure you have a data breach response plan in place. Do not wait until you have a data breach to have an action plan in place. Appoint a person or team responsible for handling any data breach and have in place a process for dealing with breaches. Legal counsel, upper management, IT, public relations, and employees must all be included in the plan and process.
5. Provide ongoing and appropriate training. Data privacy and security can be easily compromised by lax employees who are not sufficiently trained in the data privacy and security policies and procedures of a business. Through inappropriate activities employees may inadvertently allow for unauthorized access. Training of both employees and management is essential to assure compliance with data privacy and security policies and laws and to mitigate risks of a data breach.
6. Consider available insurance. New forms of cyber insurance are available to mitigate risk of a data breach but should be scrutinized for value and coverage.
7. Learn from past FTC consent decrees and settlements. While consent decrees and settlements are supposed to be limited to the specific facts and circumstances, there are clearly best practices that can be discerned from these actions, and they also highlight activities that should be avoided. In the absence of any specific FTC rules or regulations that set forth reasonable data security practices, a business is almost forced to consider the inadequate data security practices cited in its enforcement actions. For more on this, see this recent
article by Daniel J. Solove and Woodrow Hartzog.
8. Franchisor Liability. Of particular interest to the franchise community was the court’s finding that Wyndham, as a franchisor, was potentially liable. The court rejected Wyndham’s contention that “as a matter of law, it [Wyndham] is necessarily a separate entity from Wyndham-branded hotels,” such that each maintain their own computer networks and engage in separate data collection practices. Franchisors should review their relationship with franchisees relative to network access, connectivity, and control of information.
9. Judge Salas’ April 7 decision is not the final round. This decision was reached by a single federal district court judge and it only denied a motion to dismiss the FTC’S complaint. The FTC’S authority could still be challenged in other district courts or appealed. More importantly, as the district court itself noted, “a liability determination is for another day.” For this reason, “this decision does not give the FTC a blank check to sustain a lawsuit against every business that has been hacked. Instead, the Court denies a motion to dismiss given the allegations in this complaint—which must be taken as true at this stage—in view of binding and persuasive precedent.”
10. Stay tuned for possible federal legislation. In light of the NSA/Snowden affair and the Target data breach, we may finally see some action in terms of federal data privacy and security law. There has been a flurry of activity in Congress, and several legislative proposals are being considered relative to data privacy and security. Five bills have been introduced that would set nationwide standards for data security and breach notification. These bills would pre-empt the patchwork of state laws that currently exist. One of these laws may even become law before the Wyndham case is finally resolved.
As a friendly notice to all of our aspiring entrepreneur readers, the Minnesota Cup recently kicked
off its tenth season. If you don’t know, the Minnesota Cup is a statewide business plan competition for entrepreneurs and small business owners. Gray Plant Mooty has been a long-time sponsor of the Minnesota Cup (and the high tech division). We have posted about the competition many times over the past few years, including here, here and here.
The Minnesota Cup added a new division to its format this year (food/beverage/agriculture) to go along with the other six division categories from last year – energy/clean tech/water, general, high tech, life science/health IT, social and student. Each division will produce one winner, who then will compete for the overall grand prize awarded on September 10th (hopefully after a nice warm summer to reward us all for the Polar Vortexes we endured this winter). Each division finalist and runner-up will be awarded cash prizes, and the grand prize winner will receive $50,000 in seed money. You can visit the Minnesota Cup's website for additional details and information about the competition.
In addition to the prize money awarded to winners of the competition, there are many good reasons for entering the Minnesota Cup.
• Participants will have access to several programs throughout the year regarding various areas of business development (marketing, raising capital, accounting, legal, etc.).
• There are many good opportunities in the program to network with other entrepreneurs and those who serve the entrepreneurial community (investors, advisors, lawyers, accountants, etc.).
• Semi-finalists are also assigned mentors who can help with the development of their business plan. Just participating in the Minnesota Cup will create great impetus for you to refine your business plan and move to the next phase of development.
The fact that finalists from the last 5 years have raised nearly $75 million in financing is one measure of the impact that the Minnesota Cup has had on its participants.
Best of luck to this year’s participants, especially those who are regular readers of entreVIEW!
Why: A fascinating cautionary tale of overweening ambition that trumps honesty and fair play.
Full disclosure: Although for a while I was in the running, I ultimately failed to gain admission to the Harvard class of ’79, and so in the back of my mind there’s always been the nagging question of what more I could have done to push my application across the finish line at the Neon H. I ended up at what by anyone’s standards are good schools (Carleton College, Stanford Law School and Oxford University), so it isn’t a case of wondering what went wrong with my life, but what was it about me that Harvard didn’t like?
Fast forward almost 40 years. I’m browsing in the library stacks on a Saturday afternoon and Conning Harvard catches my eye. I flip the book open and read the first sentence: “It is hard to get into Harvard nowadays.” This appeals to my acquired English sense of understatement. I check the book out. It turns out to be a fascinating story.
A 20th-century fascist dictator (think mustache) once said, “If you tell a big enough lie and tell it frequently enough, it will be believed.” The subject of Conning Harvard, a kid named Adam Wheeler, really took this to heart. A public school kid from Delaware, he initially focuses on venerable Bowdoin College in Maine, which does not require SAT scores for admission. He acquires a copy of a compilation of successful college application essays, and, instead of using them as inspiration for his own essay, simply lifts an entire essay, changing a few details here and there. Presto! Next stop Bowdoin!
The technique worked so well in gaining admission that he starts to plagiarize, not always well or skillfully, other people’s work in his classes. Sooner or later a professor gets suspicious, but by that time Wheeler has successfully transferred to Harvard as a result of an application that contains fake recommendations, altered transcripts, and plagiarized essays. His cheating escalates, and he wins prestigious awards based on the superior but little-known work of others. Finally, on the cusp of obtaining Harvard’s endorsement for the Rhodes Scholarship, everything unravels (and even then, he is in the process of transferring to Stanford). At the end of the book, Wheeler has been prosecuted for defrauding Harvard, and has just violated the terms of his parole by submitting another doctored resume for—of all things—an unpaid internship.
This is clearly a smart, resourceful kid. Unfortunately, we are left with no clue as to what motivated him, but by the end the wheels have definitely come off. In any event, his story presents a cautionary tale for those who aim for big things but are unwilling to pay their dues or play by the rules. Is it so difficult to imagine this guy as a midlevel executive at Enron, or the founder of a technology company hell-bent on exiting at the top?
I haven’t gone to a comedy club in at least five years, but that changed this past weekend. I went to the Acme Comedy Club in the North Loop and over the course of 90 minutes watched four different comedians perform.
As I was thinking about what I should write about for this blog post, it came to me: What can entrepreneurs learn from comedians? As one of the comedians noted, most people’s greatest fear is public speaking—and what do comedians do for a living? They speak in front of a group of strangers, and even worse, they try to make them laugh. Some would rather walk barefoot on hot burning coal, eat a live millipede, or sky dive before they would speak in front of a group of strangers. So, there must be something we (entrepreneurs) can learn from comedians…right?
Here are a few lessons entrepreneurs can learn from comedians:
1. Be bold. Comedians must go big or go home. They must own their jokes and deliver them without hesitation. Entrepreneurs must be the same way about their businesses. Live and breathe your business. If you don’t believe and put everything you have into your business, no one else will.
2. Practice your pitch. Comedians practice their jokes several times over. They practice delivering them in front of friends, other comedians, and audiences until they have perfected the timing, tone, and delivery of the joke. It’s important for entrepreneurs to perfect
their pitch as well. Deliver your story in a simple and confident manner. Know the ins and outs of your company and be prepared to answer any question.
3. If something doesn’t go over well, acknowledge it and move on. If a joke doesn’t go over well, comedians acknowledge that fact to the crowd (avoiding the awkward silence in the room) and move on to another joke. Similarly, if a product or service isn’t received well in the market, identify the issue and fix it. There’s no benefit to you or your investors denying its existence.
4. When something does go well, milk it for all its worth. You may not think that catheters are a humorous topic, but one comedian I saw last weekend literally spent over ten minutes on catheter jokes. The first couple of catheter jokes were a hit with the audience and he just kept going, until he ran out of catheter-related jokes. As an entrepreneur, if your product or service takes off, figure out how you can capitalize on that success.
5. Be thankful. After performing, comedians always thank the audience. Similarly, entrepreneurs must value their customers. If you don’t have customers, you don’t have a business. Listen to and appreciate the people that keep your business alive.
