Facebook and Cryptocurrency: What Could Possibly Go Wrong?

Facebook’s announcement that it would be entered the cryptocurrency market with its Libra brings us one of these moments: What on earth are the people running this company thinking?

Oh, but Facebook says the Libra is an entire into loans and the credit world. If you have a Facebook page, the whole world knows what your BFF had for lunch. Again, what could possibly go wrong?

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The Lost Wallet Study: International This Time

With kudos to Alain Cohn, Michael Andre Marechal, David Tannenbaum, and Christian Lukas Zund for a culturally deep and comprehensive study on civic honesty.Science June 19, 2019. https://science.sciencemag.org/content/early/2019/06/19/science.aau8712.

The authors sent research assistants into public places (hotels, stores, bank) and explained to receptionists, desk clerks, and other types of employees that they had found the wallet on the street and were in a hurry. They asked the person to see if they could return the wallet using the information that was visible. The visible wallet contents includeds cash (and some with no cash), and a business card for a fictitious freelance software engineer, a ploy that keeps the finders from trying to contact employers. There was also a grocery list and a key in the wallets. The names and business cards were changed to reflect the culture/country/city. in 355 cities (for a total of 17,303 wallets). There were 25 cities in the United States, from Albuquerque to Memphis to New York.

In the wallet study the authors learned the about the wallet entrustees:

-They do not operate under the old adage, “Finders keepers, losers weepers.”
-They are more likely to turn in the wallet if there is cash in it.
-The more cash in the wallet, the greater the likelihood that it will be turned in.
-The wallets with the largest amount of cash has a 72% return rate compared to 61% for the lesser cash wallets
-The wallets with no cash had a 46% return rate

What gives? It turns out that we think of the following things when faced with the wallet:

We do not want to be known as thieves. And we think about that in our processing.
We give great weight to the psychological cost of how we treat others.

A majority of us continue to rely on a vey basic test: How would we feel if it were our wallet? And e behave accordingly.

By country: Highest return rate: Switzerland and Scandanavia. Lowest return rates: China and Morocco.
The United States is just average.

There is so much data in the study, so more to come, as the Barometer digs deeper. But, there is a little spring in the step with the reassurance of the returned wallets.

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Gaming the GPA: Alternative High Schools

If there is one thing the Barometer knows is a certainty in this life it is that the human mind knows no limitations when it comes to figuring out ways to meet numbers goals without actually having to achieve the very purpose of those number goals. If a company implements a wellness program — rewarding employees for healthy living– healthy living will not be the goal. The goal will be to meet the metrics used by the company for giving employees healthy living rewards. For example, if the company gives employees Fitbits and rewards employees for reaching 10,000 steps per day, one will soon find Fitbits strapped to hamsters that are running in wheels, or strapped to the top of a powered-up table saw. Or even just sitting at their desks shaking the Fitbits with their hands.

Enter high school students, not in pursuit of knowledge or excellence, who just need a GPA to get into the college of their dreams. These would be the students whose parents could not afford to lay down some serious scratch for bribing coaches, etc. There is a new crop of online and alternative schools in which high school students can take the really difficult courses, rack up AP courses, or just take courses in what employees at some of the schools say “lack sufficient academic rigor.” The courses count on their high school transcripts as completed courses, and, well, the GPAs do rise.

In some of the alternative schools, administrators’ bonuses are geared to the number of sessions they deliver to a large part-time student population. The more courses, the more course sessions completed, the higher the bonuses. So, what we have in these schools are students there to game the GPA system who are being led by instructors and administrators who are gaming their system for reaching high sessions numbers. Some of these schools have created symbiotic dynamics — the desire to game is their common fuel.

The whistleblowers are out and about in the schools. Next stop? Regulation of both alternative courses and the businesses that offer them.

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Boeing Inches Closer to Truth

Since the time of the second crash of one of the company’s 737 MAX jetliners, Boeing has been defiant, slow-to-react, silent, and circuitous. Each passing day has brought new information, new testaments from pilots, and new revelations about the 737 MAX. Quality control in production, training of pilots, disclosures on warning light issues, and more drips and drops. There were some close calls, i.e., “We made a mistake, but others are to blame for what happened.” And some false reassurances that Boeing was “relentlessly focused on safety to ensure tragedies like this never happen again.” However, Boeing’s CEO,Dennis Muilenburg, just spoke to reporters a few days ago at the Paris Air Show and said, “We clearly made a mistake in the implementation of the alert,” (The alert related to the angle-of-attack-sensors on the two jets that crashed). Boeing waited fo a year to inform airlines and regulators about the issue after concluding from an internal investigation that the issue with the sensors “did not adversely impact airplane safety or operations.” Bottom line? The warning light on the sensors did not work unless the airline purchased a separate cockpit indicator. The airlines and the FAA were not told immediately.

The FAA faulted Boeing for the year-long delay in disclosure during a May hearing. Pilots suggested months ago that they should have been told. Data showed that the pilots in the Ethiopian crash performed all the procedures Boeing recommended but could still not gain control of their aircraft. Initially, the idea that pilots on foreign airlines were not trained as much as necessary in simulators had ben floated. Painfully, the truth has emerged, and the “mistake” admission has finally followed. But, it is an admission by an organization that ceded the ethical high ground and now finds itself trying to rebuilding trust with airlines and passengers. Airlines have canceled Boeing orders, and delays in delivering 737 Max jets have shaved off $1 billion in revenue. To really rebuild trust, Boeing needs an examination of its culture — how and why the one-year delay in disclosure. What was everyone at Boeing thinking and why? Then on to explore the delay in admission following the first and second crashes. Same questions. The company will find that the answer to the questions for both delays is the same. The Barometer suspects that there are some very bright employees, engineers, and managers who can offer tremendous insight into the realities of the Boeing culture.

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KPMG Fined $50 Million for Exam Cheating and Getting Advance PCAOB Info

The last time the SEC fined an audit firm $50 million was when Deloitte Touche settled with the agency for its audit work for Adelphia. Deloitte neither admitted or denied that its audit work, which meant that the world was unaware that the Rigas family had perpetrated a $2.3 billion fraud on investors by hiding off-the-book liabilities as well as conducting a classic piggy-bank raid of company assets. Arthur Andersen missed the off-the-debt problem at Enron, yet another multi-billion-dollar-fraud. Arthur Andersen is no more. Deloitte and KPMG were both auditors on the HP acquisition of Autonomy, which turned out to be an $8.8 billion fraud. PwC was the auditor for AIG, Tyco, Yukos, and Satyam ($1.5 billion fraud). PwC also messed up the best picture award in 2017 (LaLa Land was announced incorrectly as the winner because the PwC partners gave the presenters the wrong envelope). KPMG was fined for the $1.5 billion earnings fraud at Xerox over a four-year period and had a partner plead guilty to charges of insider trading by feeding a friend client information. The so-called Big Four have one heck of a track record when it comes to following the money, or the fake money.

The record for these audit firms, which audit 98% of publicly traded companies, is not stellar. So, in this round, KMPG executives decided to recruit Public Company Accounting Oversight Board (a quasi-government entity established post-SOX to audit the auditors of publicly traded companies, AKA, PCAOB) employees to let KPMG folks know which of the KPMG client audits would be subject to PCAOB reviews so that, one guesses, the firm could do a crackerjack job on those audits. They got the information from PCAOB employees for two years.

Then, to add to the evolving ethical culture at KPMG, certain employees who had passed the PCAOB training exams (required by PCAOB for all audit firms under its jurisdiction) shared their answers to fellow KPMG employees so that they could be assured of passing the PCAOB exams. The subject of the training? Integrity and other professional topics.

KPMG is admitting the misconduct in the settlement, expected to be approved by the SEC this week, and has also agreed to have an independent consultant for one year to assess “remedial measures” and “compliance with ethics and integrity requirements.” The Barometer’s advice? Do a little root-cause analyses on all the ethical lapses over the years to see what happened and why things keep happening. Then have the independent consultant interview employees (front-line types) to find out what the KPMG culture is really like. Until KPMG gets at its culture, there are no remedial measures that will work.

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Truth Percolating: Facebook’s Zuckerberg’s E-Mails Are a Worry

The issue that has the FTC investigating Facebook is whether the company honored the terms of its 2012 consent decree on honoring the privacy rights of the site’s users. The FTC has requested, and Facebook has provided, thousands of e-mails in which CEO Mark Zuckerberg and others at the company discuss obtaining data and discussing whether proposed actions would be in compliance with the terms of the decree.

The Wall Street Journal has had several stories, based on interviews with those who have seen the e-mails, that the attitude of Facebook may not have been one of, shall we say, strict compliance with the regulatory parameters?

No matter what the PR and communications folks spin, write, and pledge, the truth about any company’s activities always emerges. In this tech era of e-mails, text messages, Chap Snat, or whatever, what we were really thinking at the time, what we were really planning, what we were really doing, and how we viewed regulators and their requirements somehow always seems available, and, too often, contradictory.

We shall see with Facebook, but the company’s push to settle seems to support the notion that perhaps the public statements of devotion to user privacy may not match Facebook’s actions.

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Compare and Decide on the Integrity of the Quotes

The following quote of what attorney John Dowd (working for President Trump at the time) said to Robert Kelne, an attorney for Michael Flynn. The quote was used in the Mueller Special Counsel Report as an incident of potential obstruction of justice:

I]f . .. there’s information that implicates the President, then we’ve got a national security issue, . . . so, you know, . . . we need some kind of heads up. Um, just for the sake of protecting all our interests if we can …

The full transcript of the conversation appears below (sans the Special Counsel redactions):

If, on the other hand, we have, there’s information that. .. implicates the President, then we’ve got a national security issue, or maybe a national security issue, I don’t know … some issue, we got to-we got to deal with, not only for the President, but for the country. So … uh … you know, then-then, you know, we need some kind of heads up. Um, just for the sake of … protecting all our interests, if we can, without you having to give up any … confidential information.

The transcript was released by Federal District Judge Emmet Sullivan, the judge scheduled to sentence Michael Flynn.

Mr. Dowd believes his reputation has been damaged. Alan Dershowitz, Harvard Law Professor Emeritus, called it a “very serious issue.+

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Netflix and the Rush to Judgment

Netflix and its miniseries have become the source to which we all turn for truth. Just because the filmmakers for Netflix are not the traditional Hollywood types does not mean that they do not use cinematic license. We tolerate cinematic license for the sake of a good story. But when we accept the cinematic mini-series as truth, we risk harming those depicted in the series who may differ with the series presentation of “facts.”

In the Wall Street Journal, June 11, 2019, former prosecutorLinda Fairstein, who was involved in supervising the prosecution of the case against the Central Park Five, outlines the errors in the Netflix series, “When They See Us.” There were omissions from the story thread. The most critical fact was that the young men were involved in other crimes that night in Central Park.

However, based on the series, Ms. Fairstein’s publisher has dropped her as an author. She was forced out of a position on the board of her alma mater, Vassar. Based on a TV mini-series, the public has banished her from all activities and her livelihood.

The whole series of events affected the lives of so many. But, at the heart of both sides of the story is injustice. Is it possible that the injustice that occurred in 1989 has resulted in an injustice in 2019? Mob mentality is a dangerous thing, whether in Central Park, in rushes to judgment on guilt, and in condemnation based on a miniseries.

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“We had a rotten job to do, and we did it. You really didn’t think about what you were doing. You were just trying to stay alive.”

Paul Grassley, 95, U.S. Veteran, who flew B-24 bombing runs over Germany. (as quoted in the New York Times). So many stories and quotes emerged from the D-Day memorials. These were men who understood that there was good and there was evil. And they were on the side working to defeat evil. Getting folks to the point of good vs. evil these days is a tall order. That we sometimes must undertake rotten work to defeat evil seems to be an impossible discussion.

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Catholic High-School Principal Arrested at A Strip Bar

Michael Comeau, on a field trip to Washington, DC with his students, took a little detour to Archibald’s Gentleman’s Club. There Principal Comeau, who left the high-schools lads back at the hotel with other chaperones, was arrested after police received a call about an intoxicated man refusing to pay his bill.

Now former Principal Comeau resigned after 5 years as a principal and decades in education. Just the combination of strip club, booze, high-school field trip, and principal should have sent the red flags flying,

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When Prosecutors Edit, They Withhold

Attorney John Dowd was part of President Trump’s team. He was vilified in the special counsel report (Mueller Report) with suggestions of obstruction because of this portion of a taped phone conversation between Mr. Dowd and Michael Flynn.

I]f . .. there’s information that implicates the President, then we’ve got a national security issue, . . . so, you know, . . . we need some kind of heads up. Um, just for the sake of protecting all our interests if we can …

But the actual transcription, just released last Friday, has much more to it:

If, on the other hand, we have, there’s information that. .. implicates the President, then we’ve got a national security issue, or maybe a national security issue, I don’t know … some issue, we got to-we got to deal with, not only for the President, but for the country. So … uh … you know, then-then, you know, we need some kind of heads up. Um, just for the sake of … protecting all our interests, if we can, without you having to give up any … confidential information.

Mr. Dowd’s reputation has been destroyed unless he receives the same sort of attention and coverage that goes with such a story. Here’s hoping that the little Ethical Barometer brings about some attention, if not resolution.

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North Face and the Ad Campaign Using Wikipedia

Anyone can hop onto Wikipedia — the information site run by a nonprofit organization gets it information from users who post, correct, and footnote. However, North Face found a way, through a Brazilian ad agency, to gets its brand and goods imposed on the site’s photos of majestic and natural wonders. In short, North Face products were featured on people at destination places around the world.

Such posts violated Wikipedia’s rules on self-promotion and the use of the sit for promoting commercial products. Nonetheless, the result was that the company got more Google searches as people searched for North Face clothing and equipment.

The company issued a policy and Wikipedia users and supporters suggested that the North Face make a donation to the nonprofit site. Wikipedia responded by calling the actions a “marketing stunt” that compromised the trust users place in Wikipedia.Trust, once breached, is tough to gain back.

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Milton Friedman and Georgia’s New Abortion Law

Disney, NBCUniversal, and WarnerMedia announced that they either will no longer continue filming or be strongly affected in their decision process on filming in Georgia should that state carry out its highly restrictive abortion law.

Economist Milton Friedman wrote about the dangers to businesses that use social and political issues as a controlling factor in their decision processes. Professor Friedman urged particular caution when businesses become involved in hot-button issues. The Barometer calls them “loser issues.” Both labels apply to those social and political issues that find customers divided. No matter what position the business takes on an issue and the decision to boycott cities, states, and other businesses, it will lose customers. The issues themselves are important, but businesses will lose support (and revenue and possibly employees) no matter which position they take. Abortion and gun control are two such issues. They are critical social and political issues, but a business that vows a boycott because a city or state has taken a position its managers oppose will affect the business.

There is one position a business can take on such issues that is universal and easily explicable. That position, the Friedman position, is one made on the basis of the business’s costs and needs. Such a universal position makes the business an agnostic on social and political issues. The business allows the people of cities and states to make decisions on these issues without tantrums and boycotts from a land far, far away (Hollywood). A business should serve people of all views and allow them the freedom to decide for themselves what their laws and regulations will be. Should the residents of a state or city make decisions that infringe rights there is an active and engaged court system designed to handle those emotional issues on the basis of laws and rights, not whether “Black Panther” or “Captain America:Civil War” will be filmed in their state.

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Uber Passengers and Bad Ratings

Uber permits banishment of passengers from the kingdom of ride-sharing. What gets passengers on the list of exiles? Leaving litter in the car. Rudeness. And asking the driver to exceed the speed limit. Manners and ethics — all you need to be a solid Uberite.

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