Monthly Archives: June 2017

Yet Another Bonus Chapter From “Survival of the Richest”

With the official publication date of July 4 rapidly approaching, I’m publishing a third deleted chapter from Survival of the Richest on my blog. Hope you enjoy.

The Customer is Always Wrong

The nature of any human being, certainly anyone on Wall Street, is ‘the better deal you give the customer, the worse deal it is for you’.
– Bernie Madoff


If you’ve ever tried to get a company to honor an extended warranty, you understand just how antiquated the classic axiom “the customer is always right” has become. It’s terribly disillusioning to spend an extra amount of money on a product, and be assured repeatedly  that this will provide special protection and garner “your money back, no matter what,” if the product stops working, and then have the company invariably find a loophole, once the product breaks, enabling them to deny the claim. Virtually all stores offer these same kinds of warranties, for nearly every electronic or computer product they sell. In the same vein, we find auto dealerships boasting about “bumper to bumper” warranties, on each vehicle they sell. They, too, however, also push customers to purchase an extended warranty. Now, to a novice like me, everything associated with an automobile is between the bumpers, mitigating the need for any “extended” coverage, but it is often very difficult to file a claim on these kinds of plans, as the dealer or manufacturer finds an exemption of one sort or another in order to deny it.

If we had an actual free enterprise system, with unfettered competition, we’d  know it. We’d see companies slashing prices for the same products their competitors are selling. But we don’t see that. Ever. Gas prices are uniformly the same, within a few pennies in each general location, regardless of what brand of gas the station is pumping. Safeway, Giant, Shoppers Food Warehouse and other large grocery chains charge the same amount for bread, milk, and other items, again within a few pennies of the competition. Not only would we see free enterprise in motion through competitive pricing, we’d see competitive service as well. Companies would compete against one another to see who could give the best customer service. This situation has really deteriorated over the past twenty years; before the late 1990s or so, for instance, Giant Food used to feature nearly every item in their stores at half price, in bi-weekly sales. Now, their “sales” are almost always laughable, with ten or fifteen cents off the regular price the “new norm.” Safeway does much the same thing.

The reality is, instead of competition, we see collusion. The service is going to be uniformly subpar, most of the time, at McDonald’s, Wendys, Taco Bell and Burger King. The cashiers will generally be no more friendly at CVS than they are at Target or Walmart. Sure, there will be individual exceptions, but the companies themselves are not mandating smiles or good service, no matter how much they may claim to be. The Bureau of Labor Statistics tells us that the average retail worker makes just over $21,000 per year.  In all reality, one cannot expect happy employees behind the cash registers at any company, since all retail pays such a paltry wage (with little or no benefits, to boot). So, the consumer is actually paying for the small amount he or she may be saving in list price, as the only possible benefit from outsourcing and free trade, with pedestrian service and shoddy quality. In the same way that restaurants expect the consumer to supplement the pittance they are paying servers with generous tips, retail stores expect consumers to be patient with inadequate customer service, because, as a friend of mine once told me years ago, after complaining about how much the regional managers at his retail company who “did nothing” made, “What do you expect when we’re being paid like this?”

Some companies mandate what the Huffington Post referred to as “surface acting.” For example, Walgreens recently dictated that their retail people use the canned phrase, “Be well” to customers. (Huffington Post, February 20, 2014). The author of this particular story didn’t address the crucial matter of salary; it certainly must be hard to act pleasant and utter a scripted line multiple times a day, when one is earning the kind of compensation retail stores inevitably provide. Such in-authenticity at the cash registers reflects the fraudulent nature of the companies as a whole, much as their mindless advertisements and forgettable slogans do.

If “Mom and Pop” shops still existed in any quantity, as conservative propaganda would lead you to believe, then consumers could take their business there, pay a little more for the product, but receive better service and support local industry as well. What “Mom and Pop” store can compete with the big grocery chains, the huge oil companies, the national drug store chains? Instead, we have seen massive mergers in nearly all fields of business over the past few decades, culminating in the ugly reality that six companies now control 90 percent of the mainstream media, whereas the number was fifty companies as recently as 1983. (Business Insider, June 14, 2012). We’ve seen the same monopolistic mania throughout our capitalist system, from airlines to oil companies to big banks. Bigger is definitely not better when it comes to business, from the point of view of the average consumer. Through what feisty internet site Reddit calls “the illusion of choice,” ten mega corporations have consolidated things to such an extent that they  control nearly every purchase we make. To give just one example of the present “competition” in the marketplace, the giant Nestle Corporation owns nearly 8,000 brands worldwide. In the world of finance, Mother Jones disclosed that the number of banks has dropped, due to mergers, from 12,500 to 8,000. Meanwhile, the ten largest financial institutions control 54 percent of our total assets, a number which has increased dramatically from 1990, when they held just 20 percent. Even corporate stalwart Forbes magazine had to admit the obvious, in an October 22, 2011 article headlined, “The 147 Companies That Control Everything.” We see the same kind of intense consolidation of wealth and power in corporations that we see in individual wealth.

The illusion of choice is one of the most hilarious games corporate America plays with consumers. The farce is aided and abetted by the mainstream media, who pretend that companies are fiercely competing for customers. The fact is, if your child wants the latest video game system, or smart phone, you’re free to buy it from several “competing” outlets, but the price is going to be almost exactly the same. The same thing applies to automobiles; while every dealer loudly and garishly proclaims they are having a “monster closeout sale” virtually all year, every year, when they add up all the taxes and surcharges, the price is going to be pretty much identical, wherever and whenever you buy it. And if you want the sadly but undeniably superior Japanese engineering, you can find comparable-and I mean almost exactly comparable-“levels” of cars for each company. They’re going to look similar, get the same kind of gas mileage, and cost pretty much the same. If these companies were really competing against each other, at least one of them, especially the American ones-who have every reason to slash prices, since the public lost confidence in their vehicles a long time ago-would have advertised the “best deal anywhere,” and developed a new model for under $10,000, including taxes, freight and shipping, etc.

Figures from the U.S. Energy Information Administration reveal that gasoline usage has fallen dramatically in this country over the past decade. In 2000, Americans reached a peak of over 59,000 gallons of gas used every day. By 2014, the daily number of gallons had plunged to less than 18,500. Some enterprising wit on a conspiracy forum tallied the numbers from the 1980s, using an average price of $1.50 per gallon, and compared them with the lower usage numbers from 2014, at an average price of $4 per gallon. Not surprisingly, the figures matched exactly. So the oil companies are losing nothing by the sharp drop in usage, and were calculating enough to raise the price per gallon just enough to continue a consistent profit margin.

Obamacare, more kindly known as the Affordable Care Act, appears to be a corporate-like fiasco that is about as unfriendly to the “customer” as possible. Critics discovered recently that the toll-free line for Obamacare was almost exactly 1-800-FUCKYOU. Actually, if you dial that specific number, you get a sex line that now gives you options for Obamacare. This is because the actual number our government leaders set up for this health insurance plan is 1-800-F1UCKYO. I don’t think you have to be a “conspiracy theorist” to find it impossible to attribute this to innocent, bureaucratic red tape. The odds of them randomly coming up with a number spelling out something like that is incalculable. Those who misrule us appear to have a macabre sense of humor; is this their “inside joke” way of giving a literal middle finger to the suckers who bought into this misnamed “affordable” monstrosity? Is it just another way of saying the customer is never right? Did the bureaucrats and lobbyists “earn” whatever it was they were paid to devise this dastardly program?

While small businesses have had to cut positions and employee hours because of the additional costs of the new healthcare law, McDonalds and twenty nine other big corporations (including PepsiCo and Foot Locker) were given a special “waiver” that allowed them to bypass the requirements that those who aren’t “too big to fail” had to abide by. Also exempted were Democratic Party favorites AARP, the United Federation of Teachers and the Teamsters. This is really just the most recent version of the “rich man’s exemption” instituted during the Civil War. Some things never change. (Bloomberg Business News, October 7, 2010). Meanwhile, the Catholic Church was understandably upset that their soup kitchens, hospitals, homeless shelters and other social service organizations weren’t granted an exemption from the law. They were strongly motivated by the fact that part of the “healthcare” the Church must provide to its employees includes contraceptive drugs and services, which of course violates the tenets of their faith. In a baffling inconsistency, other religions, like Muslims, Christian Scientists, and the Amish, are exempt under the law.  (Insurance Financial Advisor News, February 7, 2012).

Wherever you call now, business or government agency, you are met with an incredibly annoying, increasingly lengthy and complex automated menu system, which is incomprehensibly frustrating to navigate. I have heard almost no public criticism of this menu system, which no one can possibly like. How are these menus an “improvement” in any way, shape or form? The only beneficiary here is the company instituting it, thereby eliminating a general receptionist employee, and a human voice for the caller to talk to. Again, if there was truly “competition” in the marketplace, some companies would discard these automated menus, and advertise that they were doing so. Customers would be attracted and receptive to this, but since everyone uses it, no company has to get rid of it in order to attract business. You can talk to one metallic voice or another, but you really have no choice in the matter.

Ann Brenoff, of the Huffington Post, wrote in a column aptly titled “When Did the Customer Stop Being Right?” that, the answer to her question was “somewhere around 1980.” Citing Gordon Gekko, corporate villain extraordinaire from Oliver Stone’s iconic ‘80s movie Wall Street, Brenoff states that “When eating your young became the new business model, customer service was kicked to the curb in favor of not wasting money.” While Brenoff attributes what she calls, “…an entire generation of disinterested store clerks, rude waiters, indifferent cable company operators and medical office staffs…” to the excesses of Wall Street, as was the case with the earlier cited article from HuffPo, she doesn’t mention how little these positions pay, and also overlooks the calling card of this new uncaring collective persona; the automated menu system. (Huffington Post, August 15, 2013).

One particularly bad investment many Americans make is in life insurance. The only way to come out ahead on this deal is to die, and to die young. Your family may reap some benefit from it, but you will never do anything but make payments. Or you could be murdered, and have your beneficiary collect a double indemnity payment. The only reason such insurance is necessary is, once again, because most people aren’t paid enough to save much of anything, and cannot even meet what the funeral industry indelicately calls “final expenses,” much as they struggle to meet the day to day expenses of life. In 2008, the Federal Reserve System acquired an 80 percent stake in the mega insurance company American International Group (AIG), when it gave AIG an $85 billion loan. The Associated Press dutifully and inaccurately called the transaction a “government takeover.” Of course, in reality the Fed is not a government agency, but a private corporation. The entire insurance world became even murkier as a result. AIG CEO Robert Benmosche got a 24 percent pay raise in 2013, bringing his total yearly compensation to $13 million.

Car insurance is an even worse deal for consumers, but it’s mandated by law if one is to be permitted the “privilege” of driving. A customer can pay for auto insurance for decades, without a single blip on the record, and then one accident, or sometimes just one ticket results in higher premiums, even a cancellation of the policy. Home insurance is a bit more valuable, but even there the only way to come out ahead is to have something disastrous occur. Just as it is with life insurance, car insurance and homeowner’s insurance are necessary only due to the fact most Americans would struggle otherwise to pay the costs of severe damage to either their automobiles or homes. Incredibly, all insurance companies (there’s that absence of competition again) exempt flooding and foundation damage from their coverage. Needless to say, these are very expensive repairs, but the coverage you’re paying for won’t help you at all.

The insurance industry justifies this policy by maintaining that honoring such damage claims destroys homeowner incentive to improve their property. Why then, do they exclude damage from a nuclear war from their coverage? From a tidal wave? How are homeowners supposed to prep for that? The failure of insurance companies to cover certain devastating events conveniently created a cottage sub-industry, whereby homeowners can purchase extra flood insurance, for example. Even when insurance claims are honored, the consumer usually has to pay a substantial deductible out of pocket.  People avoid insurance agents for a reason; they inherently know it’s never going to be a really good deal for them. You’re basically gambling that nothing bad happens, to you, your home, or your vehicle, and the best case scenario would be for you to pay for decades on each policy, while remaining healthy, accident free and storm and flood free. Which would mean, of course, that you paid for nothing. And if you keep contacting them for legitimate claims on your home, the same situation applies as it does with auto insurance; the company will raise your premiums and eventually cancel your policy. It’s a real lose-lose situation.

In 2004, New York Attorney General Eliot Spitzer announced that a lawsuit was being brought against Marsh and McLennan, the nation’s leading insurance brokerage firm, for “fraud, bid-rigging and antitrust violations.” Spitzer declared, “The insurance industry needs to take a long, hard look at itself…If the practices identified in our suit are as widespread as they appear to be, then the industry’s fundamental business model needs corrective action and reform.” His official press release was titled, “Investigation Reveals Widespread Corruption in Insurance Industry.” One of the numerous buried provisions in the massive Affordable Care Act, which was read by almost no legislator who nevertheless felt qualified to vote on it, is what conservative critics claim is coded bailout language. Will the insurance companies be given billions courtesy of taxpayers, like the banks and auto manufacturers before them were? Insurance companies of all kinds are, in reality, middlemen that are necessary only because the cost of car accidents, death and home repair is beyond the means of almost all poor and working class Americans. The logical solution, as it is in every case, is to pay all workers enough to meet these costs when necessary, not to mention the costs of everyday living. But that will remain impossible, as long as our crony capitalist marketplace continues to bestow such a huge percentage of the money supply upon so few people.

Incredibly, in this field as in seemingly all others, the poor get especially screwed. A 2012 study by the Consumer Federation of America found that “Low-income drivers are routinely charged higher auto insurance premiums than well-heeled car owners.” This is because the insurance industry factors in elements like occupation, credit history, education and residence location, resulting in the poor being routinely labeled higher “risks,” and thus subject to higher rates. The report found that the exorbitant costs of insurance made driving effectively unaffordable for many low-income households, leaving them at a further disadvantage in the rat race by restricting where they can work, shop, find daycare or go to school. The study also exposed the inconsistency of the industry, by pointing out that it apparently doesn’t consider an important fact which should theoretically lower the risk for drivers with less income; the poor drive only about half the annual miles the richest 20 percent of Americans do, because of the cost of gas and car maintenance, entertainment, etc. Estimates vary on just how much more the poor have to pay for the “privilege” of driving, but various comparisons place the difference as at least $300 annually, with perhaps as much as $1,000 per year. (Time, January 31, 2012).

An updated study in 2013 found even more glaring discrimination against the poor. As America Online reported, on January 28, 2013:  “Even if they have better driving records, researchers found that drivers in lower-and-middle income brackets were charged higher premiums than well-to-do drivers in 66 percent of the cases studied. We’re talking more than pocket change. In more than 60 percent of cases studied, the safer driver was charged at least 25 percent more than the one with a checkered driving record.” “What our research at this time, and our earlier reports, show is that this is not a free market at all,” said Stephen Brobeck, executive director of the CFA. “It’s a very uncompetitive market.” Again, we see the marketplace charging those who have the least means to afford it more than anyone else for a product that is practically mandatory in our society.

One of the few areas in which the mainstream media has actually done some real investigative work is the car repair industry. Several times, local and national stories have shown, by use of undercover reporters, how ripping the customer off with unnecessary and/or overpriced repairs is standard operating procedure for many gas stations and national automobile shops. I was told, by two different people who had never met each other, that when they worked at their respective gas stations as youths, that giving wrong directions on purpose to those who asked for them was a proud tradition of the industry. Given that, it’s hardly surprising that these businesses would bilk the public for unneeded repairs. But these undercover exposes have done little to change the practices which are clearly just “a part of the business.” In 2006, for example, NBC’s undercover report exposed Jiffy Lube employees in California selling unnecessary services and in some cases not even performing the services purchased. In 2013, NBC followed up on the story with a hidden camera, and found the situation hadn’t changed at all, despite the fact that the earlier report had elicited an apology and a promise from Jiffy Lube management that they would curb this cheating of customers. (St. George News, May 21, 2013). The automobile repair industry, however, represents one of the only ways a blue collar worker can take advantage of someone wealthy or at least upper middle class. As David Hapgood showed, in his excellent 1975 book The Screwing of the Average Man, this industry, like all others, has its own coded language, its own way of “screwing” the public. If a member of the Rockefeller family has to take his car into a local repair shop, he or she is going to be just as unlikely to understand the jargon of  the lowly paid clerk behind the counter as any one else. How many of us would be able to tell if we really need a new distributor?

This is the unspoken reality of today’s business world; not only do the companies act as if the customer is never right, they all seem to behave as if they couldn’t care less if you took your business elsewhere. Why don’t they seem to want our business? Is it because they’re all in cahoots together, to offer similar, poorly manufactured products, bad service, and identical pricing? Is their arrogance a result of the fact they know there is no real competition out there, and that you have nowhere else to go? When I complained to Papa John’s a few years ago, because when we opened our pizzas, we found the toppings were wrong and had all slid to one side, the regional director never responded to my email. I tried again, and he came back with a ridiculous reply that said, “Well, you told me you were going to buy your pizza elsewhere, so I figured what was the point?” I don’t mean to single out Papa John’s, but if you go online, you’ll find numerous web sites devoted to complaints about this company’s drivers, food, management, etc. And yet the company just keeps growing more successful. This is in large measure due to all the corporate promotion (remember, Papa John’s is the “official pizza of the National Football League”), but still one would expect consumers who have been burned by them to at least switch to someone else. Has “Papa John” Schnatter “earned” his success? How many companies achieve success through a superior product, as opposed to expensive advertising campaigns and the sheer convenience of plentiful chain stores in numerous locations?

To cite just one example of an inexplicable success story, consider Amy’s Baking Company, located in Scottsdale, Arizona. Their establishment was renowned enough to warrant an appearance on Gordon Ramsey’s Kitchen Nightmares reality show. Watching the episode they appeared on was an uncomfortable experience; owners Amy and Samy Bouzaglo were presumably on their best behavior, yet they conveyed the most arrogant, unfriendly demeanor one could ever envision. To say that the customer was “never right” in their restaurant is quite an understatement; the couple would angrily confront patrons over the slightest complaint and usually insist they leave their establishment and never return. They were shown absconding with their servers’ tips, and treating their staff shabbily. Their personalities were so over the top, it was impossible to believe they weren’t acting, at least to some degree. The Bouzaglos even reacted to online criticism by taunting reviewers with expletive-rich responses. Shortly after the show aired in May, 2013, Israeli citizen Samy’s immigration status was found to be in question, and he faced deportation. (International Business Times, May 22, 2013). Also, Amy’s criminal past, which included a stint in prison, became public knowledge. There are no figures available for Samy’s net worth, but he invested over a million dollars into the restaurant in 2006, in an attempt to fulfill Amy’s “dream.” It is incomprehensible to me how someone with the violent, volatile personality of a Samy Bouzaglo could have accumulated a million dollars “extra” in which to indulge his wife’s fantasy, indicating he’d been very successful in some capacity. And how could a restaurant with food consistently rated so poorly, and service so bad even our jaded mainstream media couldn’t fathom it, have operated successfully for the seven years prior to the airing of this reality show?

My personal experience tells me that success in the business world is not normally the result of hard work, dedication, or exceptional ability. I confess that I often cannot figure out exactly what is responsible for it. When I interact with one uncaring cog after another, in business after business, I’m forced to conclude that the owners of most businesses don’t care whatsoever about consumer satisfaction or delivering the best possible product, and thus haven’t “earned” the wealth they’ve accumulated, nor do many of them seem remotely “worth” what they’re making.

The bad customer service we all now take for granted is reflective of the unconcerned, entitled oligarchs who run the business world. I have known individuals who became successful at business, albeit on a much smaller scale than the examples I’ve generally cited in this book. They have not been ingenious at all; as a matter of fact, they have often been remarkable for their inefficiency and incompetence. They didn’t have good interpersonal skills. Some of them only had rudimentary writing and spelling abilities. They weren’t offering a product that was different from numerous others vying for the same market, or something that was new or daring. One thing they all seemed to realize, however, is that it is inexplicably advantageous to not be overly concerned about the consumer. I saw this in real estate agents as well, over many years in the business. The successful ones were often impatient, unpleasant types who bullied their customers and provided subpar service. An honest marketplace would weed those types out, and force them to either fight for the consumer or the client, or be driven from the industry. Our corrupt, illogical marketplace appears to do just the opposite, rewarding failure, bad service, slow response and ill manners, as if it was being overseen by a team of Bizarro World directors.

Part of the problem we face is that society often mistakes hubris and aggressive self-confidence for competence and leadership skills. Successful salespersons in any industry are those who “won’t take no for an answer;” in other words, those who don’t listen to the customer. For whatever reason, a large percentage of human beings respond to this kind of pressure, often obnoxiously applied, by caving in and giving the brash “closer” yet another sale. One of the all-time nastiest “successful” people in any field, Major League player and manager Leo Durocher, unfortunately was all too correct with his philosophy that “Nice guys finish last.” Strict, disciplinarian coaches, teachers, parents and bosses are universally more respected than their laid-back, kinder and gentler peers. Bullies are usually popular in school, and are just as frequently the ones promoted by companies when they graduate to the work force. As a Harvard Business Review study found, “Leaderless groups have a natural tendency to elect self-centered, overconfident and narcissistic individuals as leaders….” Too many humans also suffer from a Stockholm syndrome effect, whereby these bullying, impolite figures are seen as figurative captors, and identified with. Are most bosses, at all levels, “earning” their success with learned aggressiveness? Or are they profiting from unattractive genetic traits, ones that should logically be shunned in polite society? How wide is the line between alpha-aggressiveness and sociopathic behavior? Considering that according to respected journalist Jonathan Turley, several studies have also shown that a high proportion of CEOs from major companies are sociopaths, it appears that “leadership” qualities may be intertwined with darker, truly dangerous traits.

The slogan “The customer is always right” was originally coined in 1909 by Harry Gordon Selfridge, founder of London’s Selfridge department store. The “new norm” in terms of customer service was perhaps first officially postulated by Gordon Bethune, CEO of Continental Airlines. Bethune stated that he realized a small number of passengers were just “unreasonable, demanding jerks,” and that he was going to side with his employees. Well, that kind of loyalty sounds commendable, but part of the “rebuilding process” Bethune instituted were the layoffs of 4,000 of those workers he cared so much about. He initiated a typical top-heavy bonus incentive program, where non-management workers could earn anywhere from $65-100 per month if certain goals were met, while the top 20 company executives could get as much as 125 percent of their yearly salary each quarter if those same goals were met. (Bloomberg Businessweek, May 26, 1996). He also began to outsource some flights to other companies. Bethune was typical of the “successful” middle-agent adolescent we see so often in our modern age, having become renowned during a prior stint with Boeing for collecting a slew of speeding tickets while driving his Porsche. He really knows how to work the system; sitting, as a “retiree,” on the Boards of Honeywell (his yearly compensation there, as of 2008, was just under $260,000), Sprint Nextel (for which he received $243,958 in compensation in 2013 alone), Prudential Financial (for which he was paid $220,000),  and is a trustee of the New York Academy of Art. No figures could be found for his net worth, or any of his yearly compensation while at Continental or elsewhere, but it’s a certainty he has accumulated a substantial fortune. (All numbers courtesy of Forbes).

Of course, there are rude, demanding customers who expect too much and lodge illegitimate complaints. But much like the old expression, usually attributed to William Blackstone, that “It is better that ten guilty persons escape than one innocent suffer,” if a company is truly committed to superior service, then the old adage “the customer is always right” makes perfect business sense, and adds another veneer of civility to our society. Such a policy, and a commitment by management to enforce it, is pro-consumer and thus a perk that the average person used to benefit from. And ignoring input from customers makes a mockery of so-called “competitive” free enterprise.

No matter how you look at it, most business owners at all levels are doing little to “earn” whatever wealth they’ve accumulated. In an office environment, they fret over the trivial costs of pens and stationery, while food establishments monitor the numbers of ketchup and mustard packets, napkins and straws that their employees provide for carryout orders. Many fast food and other restaurant employees don’t even get the free meals and sodas they used to be given, not that long ago. Business owners don’t have to worry about competing, because the competition offers nothing different to the consumer. When the marketplace is dominated by incompetence, someone incompetent has to win.