Posts by wdorfmann

Integrity Framework – “The Hidden Power of Integrity and Access to Vast Increases in Performance”

A few months ago I attended a talk entitled “The Hidden Power of Integrity and Access to Vast Increases in Performance” by Michael Jensen of the Harvard Business School.  I was interested because I knew Michael Jensen from when I did my MBA at the Simon Graduate School of Business that University of Rochester. (Actually, I knew of him is more like it.  I was a plebian MBA student.  He was an academic superstar.)  He is an interesting and eclectic guy – and was one of the founders of Agency Theory which, if you’ve studied Accounting or Finance, you probably know about.  Since he was going to be giving a lecture on Integrity at UBC, I thought it would be interesting to hear what he had to say.

His lecture was a pleasant surprise.  He wasn’t talking about integrity in the context of ethics (i.e. good or bad), but rather he was talking about integrity as something being “whole” or “complete”.  He argued that a system, organization or person cannot achieve their full potential unless they have integrity in this sense.  And then he went on to explain that being in integrity means to “honor your word”.  And he provided simple definitions for what is meant by “giving your word” and what is meant by “honoring” your word.  I was expecting a talk on integrity from an ethical perspective, but instead he provided objective definitions of an integrity framework that could be put to work immediately – and to great effect.  Ethics should include this form of integrity, but integrity is so much more than ethics, and is really a prerequisite for full organizational effectiveness.

I encourage you to learn more about Michael Jensen’s integrity framework.   You might start by reading the following article from SSRN “Integrity: Without It Nothing Works”.  If this resonates with you, take the time to watch a video of the lecture from March 26th: “The Hidden Power of Integrity and Access to Vast Increases in Performance”.  (Unfortunately, the lecture is nearly two hours long – but it is interesting, and will definitely be time better spent than watching Mad Men or Game of Thrones).  The slides from his lecture can be found here.

Anyway, Mr. Jensen’s simple and straightforward integrity framework is a breath of fresh air.  I hope you are enticed by it as much as I have been.

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Sale of Goods Act in British Columbia: You call the shots, not your cell phone provider

The BC Sale of Goods Act (SOGA):

If you live in British Columbia, Canada consider yourself lucky.  BC has (probably) the strongest consumer protection legislation in North America.  I am not a lawyer, but learning about BC’s “Sale of Goods Act” was an epiphany to me.  I’ve used it successfully many times.  You should know about it so that you can benefit from it also.  You can find the act at the following link (the relevant sections are 16, 17, 18, and 20):  Let’s call it the “SOGA”.

[Please note that when the act discusses a "condition" of a sale, it means this: A “condition” of a contract is an essential term of a contract.  A breach of a condition by either party leads to a discharge of the contract.  If the seller (i.e. the person who you bought, say, a cell phone from) breaches the contract, then the buyer can ask the court to restore them to their pre-contract position (i.e. get their money back from the seller and discharge they buyer from any further obligations). If a "condition" is breached by the seller, then it is up to the buyer of the goods as to the remedy, not the seller.  So you can elect to return the goods for a full refund.  (A "warranty" means that you are entitled to compensation for damages/loss, but not a full refund).  So as you might imagine, conditions of a sale are very important and powerful.]

Section 17 of the SOGA says that the goods much match their description, e.g. if you purchase something from a catalogue.  I used this clause successfully once when I purchased a textbook.  It was shrink wrapped and the description on the back of the book touted the “companion web site”.  As it turns out, it was a new edition of the book and the companion web site was not available.  So a few weeks into the course I returned the book for an older edition.  I explained that the goods didn’t match the description.   This can be a powerful clause.

Section 18 says 3 important things:

  1. Fitness for purpose is a condition of the sale:  If you describe your purpose and rely on the seller for their recommendation, it is a condition that the goods will meet that purpose.  Otherwise you can return the goods for a full refund.  What this means is that you shouldn’t go into a store and tell them you want a particular model of a product (e.g. power tool, cell phone, bicycle, skis, computer, or whatever).  Rather, you should tell them what your need is and rely on their recommendation.  If you buy it based on that recommendation and the product doesn’t meet the need you stated, then the condition of the sale was breached according to the SOGA.  You as the buyer can demand a full refund.
  2. Goods are of merchantable quality is a condition of the sale:  If you get a “lemon”, a condition of the sale has been breached.  Obviously subjective, but can be quite powerful. I would ask for a full refund and cite the SOGA.
  3. Goods will be durable for a reasonable period of time. This is a condition of the sale.  Reasonable period can be a bit subjective, but is helpfully defined for you when you are offered an extended warranty.  Personally, I think that 3 years is a “reasonable period of time” for a cell phone to last if I purchase it on a 3 year contract.  And just because a TV comes with a 1-year warranty, it doesn’t mean that 1 year is the “reasonable period of time” for it to last under normal use.  I find that the inevitable offer of an extended warranty is a good time to discuss how long something will last with the salesperson.  There will probably be a lot of arm-waving and backtracking if you ask them in response to their suggestion of a thee year warranty on your TV:  ”But won’t this TV last for at least two or three years?”.  The salesperson will generally say “yes, but …”.  Write their name on the receipt and make sure to mention their name when you take the store to small claims court because your TV died on day 366 and they refused to replace it or refund your money.

Section 20 of the SOGA says that these rights cannot be waived via a disclaimer, unless they are used goods or goods used primarily for business purposes.  So be careful of disclaimers on used goods or goods you purchase for a business.  But otherwise you have superhuman immunity to those silly disclaimers they put on receipts or mention when you purchase the goods,  e.g. “not responsible for …”, “exchanges only”, “no returns if clothes worn by purchaser”, etc.

Oh, and another interesting point about the SOGA.  It applies to the seller, not the manufacturer.  So you should never have to deal with the manufacturer to assert your rights – only the seller who you purchased the goods from.

So if you decide to exercise your rights under the SOGA, act confidently (but not arrogantly) and talk to the salespeople first.  They probably won’t know what to do and will try to get you to go away.  Ask for the manager at that point.  If you still get no joy, then ask how to contact their legal department.  Write them a letter citing the SOGA and you are likely to succeed in getting a refund and/or replacement of the goods (your choice).  If not, don’t be afraid to use small claims court.  You are likely to win, and the seller will have to pay your costs when you do (about $100 to file a Small Claim).  Small Claims court in BC can be used for claims up to $25,000 and is intended for just this sort of dispute.

A real-life example:

I recently had a problem with a cell phone which developed a camera flaw – dust under the lense which would obviously require disassembly to resolve.  This happened 2 months after I bought it.   I took the phone back to where I bought it.  After examining it, they agreed that it was not something a customer could not fix on their own.  They told me I would have to take the phone to a service center elsewhere in the city and pay an $80 deposit, at which point they would send the phone to the manufacturer for diagnosis and repair. I told them that I did not want to do this.  The phone was defective.  I had used it normally and carefully.  I told them that I would like them to simply replace the phone.  They said that my only recourse was to go to the service center, put down $80, and wait to hear what the manufacturer had to say.  I didn’t like this, and felt that it was time to use the SOGA.  I told them that I had the right to demand a full refund of everything I paid for the phone, and to be freed from the contract going forward.  I’m sure they thought I was crazy.  And, honestly, I didn’t expect the salesperson to play ball.  I asked to speak with their manager, but there was no manager available.   So I asked them for details about how to contact their legal department.  They told me to phone the customer service number.  the customer service line stonewalled me.  So I looked up the corporate headquarters address and addressed the following letter to the legal department at that address:

To Whom It May Concern:

I purchased a Samsung Galaxy Note II cellphone at the XXXXXXX store at XXXX West 4th Vancouver on December 8, 2012. The camera has developed a flaw. On Saturday, February 16th I went to the store and they agreed that it is flawed and is not something a customer could repair. I told them that I want to return the phone for a full refund, as is my right under the BC Sale of Goods Act (see The woman at the store said that my only recourse is to return the phone to the manufacturer via your customer service centre (and pay an $80 deposit on doing so). I disagree, and since I habitually shop with knowledge of my rights under the BC Sale of Goods Act, I would like to discuss the issue with your legal department.

Therefore, please contact me at the number shown below to discuss resolution of this issue.  I would like to hear from you in the next day or two in order to avoid having to pursue the issue via the Small Claims Court of British Columbia.

I also sent the same letter directly to the store where I bought the phone.  While waiting for a reply, I prepared the paperwork to make a claim in the BC Small Claims Court.  Within a week I heard back from the store where I bought the phone.  The manager grudgingly told me that he was told to replace my phone with a new phone.  By rights, I believe I could have insisted on a full refund and a discharge from by obligation under the contract.  But I generally like the phone and figure that if it develops a problem within the original 3-year term I can always use the SOGA again.  So I agreed and the problem is solved.

Note:  If the phone was not defective, or was not used in a way that it was intended I probably wouldn’t have had a leg to stand on.  E.g. if there was moisture damage or if the screen cracked because I dropped the phone.

The moral of the story:  

You have very strong rights under the SOGA, and you should not be afraid to exercise those rights.  Do not be bullied by sellers if you are in the right.

 [Note:  If you are a lawyer and feel that I've gotten any of this wrong, please send me an email pointing out my mistake.]
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Password diversity

A friend’s email was hacked recently.  I received an email with a single cryptic web link in it, and the title of the message was deceptively misleading.  Also, the email was CC’ed to many people.  All of these are obvious signs that the email account of the sender was hacked.  Here’s the email I sent the person after phoning to tell them about the problem.  It highlights one of my biggest concerns:  password diversity.

“As I told you on the phone a few minutes ago, it appears as if your email account has been hacked.

I’ve attached a PDF of the email which was sent from your account.  I recommend you change the password on your account immediately.  Use something that is eight characters or longer, and contains upper case letters, lower case letters, number, and special characters.   E.g. “Argo=BestPic.2013″

The other problem if someone has figured out your password is that you probably use the same password for different accounts.  So you should assume that those accounts have been compromised also.  Put different passwords on those accounts.

I know this is a pain in the a–.  But I contend that the biggest problem to security in this new on-line world we all participate in is a lack of password diversity.  If someone gets a password, they’ll try to use it everywhere else where they think you’ll be doing things on the internet:  Internet banking, Library accounts, University accounts, Facebook, Linkedin, Google, etc., etc.

Even if you use a strong password (as recommended above), there are some web sites and services that have security flaws that might enable someone to get at the cleartext passwords.  The only protection against that type of thing is to have different passwords everywhere you sign up for something on the internet.  For instance, I have an account with a service called “Evernote”.  Last week it was revealed that 500,000 Evernote accounts were hacked and passwords were potentially revealed to hackers.  Because my password on Evernote was unique, I didn’t worry.  I just visited Evernote and changed my password.  None of my other on-line accounts would have been compromised.”

Please note:

  1. I phoned the person as soon as I realized there was a problem.  They will want to know, and they should know if their email is hacked so they can deal with it poste haste.
  2. I explained the simplest procedure, i.e. to change the password — and to use a strong password.
  3. I explained the importance of password diversity.

(I forgot to tell my friend not to click on the link in any such email received.  In this case I think she’s smart enough to know not to do that.)

Don’t fret over the amount of email hacking that is occurring.  Do something about it.


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Some observations about the Jenkins Report and SR&ED…

It seems that the Harper government is about to introduce tax-regime changes based on last year’s Jenkins report (see It’s important for governments to question government largesse and the effectiveness of its expenditures. But as stated previously in this blog, SR&ED may not be the most efficient way of stimulating R&D, but it does help create jobs in Canada and it does keep technology companies in Canada.  In fact, I’ve seen it reverse the tide of outsourcing for some companies.. It all reminds me of Winston Churchill’s statement about Democracy:  ”Democrasy is the worst form of government, except for all those other forms that have been tried from time to time”.  It ain’t perfect, but without SR&ED it is almost certain that a large chunk of our technology industry would disappear.

The problem I see with SR&ED has largely been the enforcement (or lack thereof) and the complex, oblique and ambiguous rules surrounding the program. It just lends itself to exploitation the way it is being administered at present.

The changes proposed to SR&ED by the Jenkins report don’t seem all that bad: Base it more on labour costs; increase the rates (I like that part); reduce the amount of refundable credits (will surely encourage profitability); and make the pre-review process more of a pre-approval process. This all seems quite reasonable.

They should also create some more “bright lines” in the rules. For instance: If they’re going to make the credit primarily labour-hours-based, they should prescribe that time records be kept, plain and simple. No exceptions. Currently, you are supposed to have good supporting evidence, preferably in the form of time records, but they don’t prescribe the nature of the data to be kept in those time records (and believe me there is a lot of latitude in this area). And if you don’t have good time records, they will often let you hobble together other information to support the time claimed – but that often ends up being an “allocation” based on questionable methodologies. It seems to me that it would be virtually costless to always insist on seeing the time records, and to check that they at least meet some basic characteristics before approving a claim. That would save probably $3,000,000 of the approximately $3,500,000 the government spends on SR&ED each year. And who could reasonably argue against such a rule? The beneficiaries? Hardly. It is other peoples’ money after all.

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More about patent madness

Interestingly, right after my previous diatribe I sat down to read the latest economist and saw this article about the problems with the US patent system: Then, lo and behold, the most recent Wired magazine has an article about my former employer (Kodak) being forced to become a patent troll: It’s the laws & patent system, it’s not the companies taking advantage of it that are the problem. (Arggghhh… And maybe if Kodak hadn’t shelved their prototype digital camera in favour of the crappy Kodak Disc camera in the early 80s, Rochester would be a compelling place to live again.)

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