Your assumption that a chunk of your hard earned money that goes to the government is wasted does not go unfunded. For the celebration of the 150th anniversary of Canada, the Ontarian government is spending $120,000 on a giant inflatable rubber ducky. This is one of many cases where you wonder who makes these decisions? How does this happen? We will never know in this case but having worked for a large organization in the past I have insights on how stupid decisions happen. It’s easy to blame the Premier/leader for such stupid waste but with so many levels of management and bureaucrats, I think good ideas are lost in the process and are affected by the result of group think. Here’s my take on the rubber ducky fiasco.
First, a comity probably set a budget for the festivities. With the help of a HR firm, they hired a bunch of people (like Bill and Randy) with MBAs to come up with ideas how to spend the money. Lacking ideas, Bill and Randy hires an external consulting firm to come up with something exiting. The very expensive per hour +fees consulting firm gladly accepts the task. The consulting firm runs a bunch of focus groups, do some “market research”, and other gimmicks to fill up their pricey report. Bill and Randy then send the report to the comity for approval. The comity, looking for ways to justify is existence, hires another consulting firm to have a 2nd opinion. The consulting firm suggests some changes to justify their fees. The comity submits the amended report to some board to get it approve. The board then sends the report to some regulatory agency with their own army of bureaucrats to make sure that none of the ideas were too over the top because you wouldn’t want a scandal on the 150th anniversary of Canada. This takes a lot of time and the report is sent back requesting some changes. By that time, the original people that were hired, Bill and Randy, got transferred to a different department and were replaced by new hire Linda and Hank (both MBAs). Hank and Linda goes back to the drawing board to come with new refreshing ways to celebrate Canada’s 150th. During the process, Hank is off on paternity leave for a year and Linda is unfortunately on medical leave. Again with the help of an external HR firm, the comity manages to temporarily replace Hank and Linda with Tim and Gus (MBAs) at the last minute. With time running out and knowing that he has no job prospect following this project, Gus decides to smoke weed with his buddy Bobby (Bob) that has a rubber ducky company. Bob makes a joke about a giant rubber ducky and that’s when Gus decides to use it as his idea to celebrate Canada. Gus suggests the giant rubber duck idea to the comity and plugs in his buddy’s rubber ducky company. The board submits the idea for approval to a few agencies like nature, ethics, marketing, First Nation, Second Nation etc… And finally Bob gets the contract because he’s the only one that submitted a bid since nobody else has a giant rubber ducky in their inventory. Gus is then poached by Bob’s rubber ducky company and becomes an official lobbyist. Happy 150th Canada Day!
I think that what happened. I think that’s how a lot of serious decisions are made. I have seen some of the stuff above happened when I worked in the private sector. I don’t mind giant rubber ducks. I just wish it was private money that funds it. Anyway if the rubber ducky ever comes near my home I will bring my daughter to see it so I can tangibly show her why her school is broke.
As for what’s to come next, since the giant rubber ducky has no particular meaning, it could be used for a bunch of other government celebrations. With about 200 countries around the world and a scarcity of giant rubber ducks, this could lead to situations of over bidding which would result into a gold mine for Bob since governments are not in the business of saving money any time soon.
If you like financial history, this piece of marketing is too good not to share. Thanks to François Denault, a value investor from Montreal, for the find. Here’s the pamphlet of Long-Term Capital Management (LTCM)’s marketing pamphlet. The stock photos are absolutely ridiculous. I can’t imagine anybody working there looking like that. If there’s a museum of ridiculous financial artifacts, this should be up there.
For the younger readers of this blog, Long-Term Capital Management (LTCM) almost brought down the financial system in 1998. LTCM was founded in 1994 by John W. Meriwether, the former vice-chairman and head of bond trading at Salomon Brothers. Again with the financial history, what happened at Salomon Brothers wasn’t pretty either. You may remember Meriwether from such books as Michael Lewis’ Liar’s Poker, in which Lewis painted his old boss as a high-stakes gambler (read it if you haven’t). Anyway, John Meriwether, the investment wizard (gambler/speculator), assembles the “dream team” of Wall-Street, which included two economists with a Nobel prize and the Vice-Chairman of the Federal Reserve. The best of Wall-Street under one roof.
Initially successful at first, LTCM used a highly leveraged strategy that backfired following the 1997 Asian financial crisis and 1998 Russian financial crisis requiring financial intervention by the Federal Reserve. By 1998 LTCM had amassed about $125 billion in debts against $4.7 billion in assets, and the notional value of its derivative positions had ballooned to well more than $1 trillion. On the eve of the bailout, LTCM’s leverage ratio had ballooned to 50-to-1, but investor flight further reduced the firm’s capital base before the bailout could calm the herd. The Federal Reserve of New-York organized a $3.6 billion bailout because LTCM’s failure could cause a chain reaction in numerous markets, causing catastrophic losses throughout the financial system. This was similar to what we saw in 2008 on a larger scale.
I don’t know how I missed that colossal flop but in 2006 ESPN released a black-and-red Sanyo flip phone with an ESPN logo above a 1-inch screen. It was called Mobile ESPN, the company’s ill-fated attempt at launching a sports-centric mobile service. Remember this was 1 year before the launch of the iPhone and Blackberry’s handsets were dominating the smartphone landscape. You’re probably scratching your head at how something this ridiculous can happened. I’m being polite here but someone wasn’t: “Your phone is the dumbest fucking idea I have ever heard.” That, according to the book These Guys Have All The Fun, was how Steve Jobs introduced himself to George Bodenheimer, then-President of ESPN, during a 2006 Disney board meeting (Jobs was on the Disney board).
For the special privileged of receiving score updates, launch GameCast, browse ESPN.com content, and a host of other features on the limited capability phone, customers had to fork over as much as $300 for the phone itself, and between $65 and $225 per month for content. It’s small change when you need your Sunday game score update in a couple minutes on a phone with basic functions (3G network or worse I assume).
According to this Bloomberg article, the project cost $150 million to develop, including a $30 million Super Bowl ad (see below), and attracted a grand total of 30,000 customers. ESPN scrapped it after seven months. As I don’t need to explain, it turned out to be a massive commercial failure. From the Wall-Street Journal:
Mobile ESPN’s model doesn’t appear to be winning over consumers. The start-up, which was launched in February, had signed up fewer than 10,000 customers through May, according to people familiar with the situation. Robert Iger, Disney’s chief executive, said on the company’s first-quarter earnings conference call that initial sales from Mobile ESPN were “lower than hoped.”
I’m glad ESPN quickly turned the page instead of throwing money at it. Still $150m is a lot of money. I understand a company needs to be innovative and sometimes has to experiment with different things, but this was simply not a good idea. I wonder if the person that came up with this great idea is still employed. For some reason, I have a feeling the phone is worth a lot of money today. It’s probably one of those collectibles. I searched on Ebay and I couldn’t find one.