February 2012 - Intro To Business

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Teri Bernstein, MBA, CPA has been teaching full time in the Business Department of Santa Monica College since 1985.  Prior to that, she worked in Internal Audit and Special Financial Projects for the 1984 Los Angeles Olympics, CBS, Inc., and Coopers & Lybrand (which is now part of PricewaterhouseCoopers).  She attended the University of Michigan and Wayne State University.


Can Corporations be held responsible for Human Rights?

02-29-2012 8:07 PM with no comments


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image from corporateaccountabilitynow.org

The online NYT Room For Debate website held a discussion on Corporate Rights and Human Rights. This debate was sparked by a case heard by the Supreme court on Tuesday: Kiobel v. Royal Dutch Petroleum.  The issue was whether the Alien Tort Statute could be applied to sue a corporation for possible human rights violations in a foreign country.

One interesting point: the Alien Tort Statute was made into law in 1789, so the plaintiffs are reaching far back in history to support their claim.  Oona Hathaway, a featured participant in the online discussion, notes that this law is very specific about who has standing to bring suit, and what they can sue for.  She also makes a case for why this statute is an effective vehicle for suing a corporation for wrongdoing:

"Permitting corporations to be sued for human rights abuses under the statute also happens to be an effective way to address the problem of corporate participation in violations of international law of the worst kind, including the universally condemned acts of torture, genocide, crimes against humanity, war crimes, extrajudicial killing, piracy and slavery. Absent liability under the statute, corporations would often escape responsibility, even though they have made additional profit as a result of terrible abuses they directly committed or aided and abetted. There is usually no recourse available in the country where the abuses took place, often because the government participated."

Follow up:

  • Do you think that the Alien Tort Statute should be used to hold corporations liable for horrible crimes?
  • What other corporate crimes, besides the one mentioned in this case, do you think might be brought to justice using this statute?
  • How does the Supreme Court ruling that corporations have rights as individuals fit into the legitimacy of this case?
  • Read the details of the case at the link above, or on Huffington Post. Do you think Shell (Royal Dutch Petroleum) should be held liable for something?

Posted by teri.bernstein

Battery improvement may make electric cars a better choice

02-29-2012 7:11 PM with no comments


 
Battery Breakthrough May be Electric Car Game Changer; photo is a Prius at a 2012 car show

Even those who love the idea of driving an electric car worry about the limited driving range that a single battery charge can provide--sometimes less than 40 miles.  This limitation makes it impractical to have a completely electric car as one's only vehicle.  According to the Marketplace report by Sarah Gardner, "Battery Breakthrough May be Electric Car Game Changer", there has been a new development by Envia Systems that may change the options for car buyers looking for an alternative fueling option.

Envia CEO Atul Kapadia reports that the goal of his company has been to develop a cheaper battery that has a range of more than 200 miles. He says that they are getting close to producing a battery that, for $25,000, could power a car with a 200 mile range...and for $35,000 could power a car with a 300 mile range.

The barriers to production, however, are steep.  The batteries must be thoroughly tested, and gearing up factories for production is a huge investment in time and money. So this breakthrough will not be on the market any time soon. Kapadia just wants consumers--and investors--to know that better batteries are on the way.

(Note: both audio and transcripts are linked at the article name above; Marketplace is produced by American Public Media)

Follow up:

  • Check out this link, Confessions of a Volt Owner , which contains an interview of a professional man who has owned a Chevy Volt for 18 months, and another video story about a CNG (compressed natural gas) vehicle--one version of a Honda Civic.  Including all-electric and any other alternative fueling options, which do you think will become more popular, as gas prices rise?
  • Read one opinion about the Oil Crisis Hoax, and read another about Price Controls on Gasoline.  Find your own articles relating to gas prices and fossil fuel availability. Who do you believe? How do you decide?
  • List and evaluate other reasons to drive an alternatively-fueled vehicle, aside from a perceived crisis involving fossil fuels, if any.

Posted by teri.bernstein

Thinking "out of the box"...literally

02-27-2012 11:30 PM with no comments


 
mark rosenthal for the NYT

Suntae Kim, Evan Polman and Jeffrey Sanchez-Burke wrote about their research on the physical environment's effect on creativity (in this weekend's NYT Business section article, "When Truisms are True").  Anecdotally, sparking their research were reported instances of "embodied cognition."  The example they cited was research where a subject holding a hot cup of coffee described a person they met as "warm" more often than subjects without a hot cup of coffee.

These three author/researchers of this article tested "integrative thinking" in their first project. They asked subjects (120 NYU students) to come up with a descriptive and organizing word that fit three other words.  Their example: "tape" would be the connecting word to: "measure," "worm," and "video."  Some subjects did this while sitting inside a 125 cubic foot box.  Others sat outside of the box. 

What they discovered was that persons outside of the box came up with 20% more creative answers.

In another study, these researchers tested 104 students at Singapore Management University. This time, the subjects were shown pictures of objects made from Legos. They were asked to think of uses for the objects.  They could think about this while walking on a path marked by duct tape on the floor, or while freely walking around.

The results?: "students who walked freely were better at generating creative uses for the objects — coming up with over 25 percent more original ideas. Such creativity was assessed in terms of fluency (the number of ideas generated), flexibility (the number of unique categories that described the generated ideas) and originality (as judged by independent raters)," according to the authors.

In a third study, students were asked to literally hold out their one arm and hold an object, and think about possible uses for the object. Some subjects were told to only use one arm.  Others were allowed to think "on one hand" and then "on the other hand.", These results showed that there was a 50% increase in the number of uses that could be listed--among students allowed to think with both hands, alternately. 

The researchers concluded that bodily experiences can produce more creativity.  How does this relate to business? Businesses depend on creativity and new thinking to adapt to rapidly changing environments. Getting out of the cubicle and working outside or while walking around the office might help get thought processes started. 

The writers' research will soon be published in the journal, Psychological Science.

Follow up:

  • When you are on deadline to complete a paper or a project, have you ever taken time off to do something outdoors, or creative or artistic?  If so, what effect has it had on your ability to focus and complete your work after you got back?
  • Think up an activity that you can do to increase your or your team's creativity in completing a project that you have scheduled this semester. 

Posted by teri.bernstein

Cooperatives vs. Corporations

02-23-2012 1:06 AM with no comments

image from the NY Times

While President Obama is focusing on corporations, and proposing to lower the corporate tax rate to 28%, Jim Hightower is pondering the benefits of co-operatives over corporations in an article for Common Dreams. He believes that co-operatives provide a better way than corporations of organizing economic strength in a capitalistic and democratic society.  His position is that co-operative processes are more aligned with the values of the "99%" of Americans who are not the wealthiest 1%, and provide an alternative to a system that caters to corporations.

Here are some of the issues he raises:

  • Corporation's prime ethical value is amassing wealth for owners; there is no value associated with social good;
  • Co-operative's values are more in line with working people; returning profits to workers rather than absent owners, or re-investing in expansion and job creation.
  • Corporations are currently amassing wealth, sitting on $2 trillion in cash that could be used to create jobs.
  • Co-operatives do not have any reason to sit on cash or amass wealth; co-operatives exist to work, and to provide work.
  • Corporations get all of the press; 
  • Co-operatives in the USA rarely get press, and are growing in numbers.

According to Hightower, there are over 30,000 co-operatively organized businesses in the US, with over 2 million employees and $653 billion in sales. All types of businesses are run as co-operatives--"manufacturing, health care, transportation, banking, farming and food, media, massage, child care, funeral services, interpreting and translating services, advertising, home building, high tech, engineering, energy ... and even a strip club in San Francisco," according to the article. Some examples he cites as co-op businesses are: REI, Ace Hardward, Organic Valley, and Best Western Hotels.  Of course, there are many food co-ops in all parts of the country, both at the wholesale and retail levels. 

Says Hightower, "Co-op businesses do everything that a corporation can do, but with a democratic structure, an equitable sharing of income and a commitment to the common good of the community and future generations."

Follow up:

  • Read up about co-ops and corporations on the web and in your textbook. What kinds of businesses generally thrive as co-operatives? 
  • What is a BEC (this is discussed in the link to co-ops, above)?  
  • What is an NCG (also discussed in the same link, above)?  How can you see NCGs fitting into economic growth?
  • How are co-operatives taxed? What form of business organization do they represent?

Posted by teri.bernstein

"The Daily You": How companies use your advertising persona

02-23-2012 12:18 AM with no comments

Terry Gross interviewed Joseph Turow about his new book, The Daily You: How the New Advertising Industry is Defining Your Identity and Your Worth, this week on American Public Radio. [The link has the audio version as well as the transcript.] In the interview and the book, Turow delineated the ways that corporations track your activity on cell phones, Facebook, Google etc. to target advertisements tailored directly to you. My guess is that everyone knows this, but Turow pointed out that the software in all apps automatically picks up all of the personal linked data--not only the shopping data--from Facebook and Chat and information in other communication channels run through your smartphone and computer. Companies have the ability to use any of the data to target market to individuals. To the extent the companies are refraining from using the personal data at this time, users may be lulled into a feeling of relative safety about the data that is being mined about them on a daily basis.

Search engines and social networking sites make their money through advertising.  Turow explains one way this works: 

"Let's say somebody likes Twinkies on Facebook," he says. "Twinkies will then buy an ad from Facebook. And the ad will say, 'Joe Turow likes Twinkies.' And it will be called a sponsored story, and it will go to all of my friends on the side of their Facebook page."

This friend-to-friend marketing can be very powerful--particularly because it is personal, and it meets the need that most people have to feel seen and heard...to feel special. Nevertheless, Turow warns about companies putting individuals into "reputation silos" and that these categorizations might be used by employers to evaluate potential employees during the hiring process. 

Follow up:

  • I have loaned my sign-ins to my daughters and they have loaned the sign-ins to others to access Netflix and other sites. The profile that Netflix has for me, as evidenced by its recommendations, does not match my actual personal preferences.  (No surprise!) Are there ways in which you thwart or alter the amassing of data about your advertising persona? Please share them.
  • Read the interview highlights at the link, or listen to the whole interview (it is about 50 minutes). Make a list of the kinds of information that can be available to the social networking sites and to other companies. Where do you see dangers for individuals?  Where do you see opportunities for individuals? Where do you see opportunities for corporations?
  • Do you have any ideas about how this information highway can be made safer for individuals?

 

Posted by teri.bernstein

Extreme Interviewing: how to handle weird techniques

02-22-2012 11:35 PM with no comments


 
from beautyriot.com  interview disasters

To get the job, you have to get through the interview. Tiffany Hsu writes about the out-of-the-box techniques that some interviewers are using to hire the individuals the company thinks they want. The article: "Extreme Interviewing," in the Sunday Los Angeles Times.  According to Ms. Hsu:

"Firms increasingly want a real-time look at how prospects tackle problems, gin up new ideas, handle change and work as part of a team. To assess these amorphous qualities, interviewers at some firms have adopted aspects of reality shows, quiz programs or Broadway auditions."

All kinds of unusual questions might be asked, such as:

  • Name five uses for a stapler, without the staples
  • Would Gandhi have made a good software engineer?
  • Does life fascinate you?
  • Room, desk, or car--which do you clean first?

"Companies are being more innovative not just in finding people who fit the work but also those who fit the culture," said Charles Purdy, a career analyst for the Monster job listing website. "As the workplace changes because of society norms and technology, the classic job interview is going to change as well."

Follow up:

  • Check out the "Top Mistakes Made by Applicants" sidebar in the article linked above. Which of these mistakes have you made during interviews? What other mistakes have you made?
  • Check out the Glassdoor site to sample some brain teasers and baffling questions that interviewers might use. If confronted with some of these questions during an interview, and no way to answer them, how might you otherwise demonstrate your critical thinking skills during an interview?
  • How would you answer Tony Hsieh's (CEO of Zappos.com) interview question that was mentioned in the article?

Posted by teri.bernstein

"Integrity in Action"? What do GRC consultants do?

02-22-2012 1:25 AM with no comments


image from grc-pink.com

Deborah Bailey and Edward Hida, professionals from Deloitte & Touche LLP, wrote in Corporate Compliance Insights about the six "GRC" priorities for financial companies this year. "GRC" stands for "Governance, Risk, and Compliance" and has become a growth speciality for consultants as more and more regulations are enacted--for example SOX (Sarbanes-Oxley) and Dodd-Frank legislation.  It seems that corporations are willing to pay big money to consulting firms to avoid trouble.

This particular article focused on these growing needs of financial institutions:

  • understanding the new risk management requirements
  • meeting their required debt-to-equity ratios and other capitalization requirements
  • having enough cash-on-hand to meet liquidity requirements
  • limiting the amount of money owed to any one entity
  • being able to meet requirements that might exist in unusually adverse conditions
  • establishing internal controls to flag potential problems early on

These appear to be common-sense, pro-active goals, and are appropriate remedies for avoiding another banking crisis.

GRC consultants also cast a wide net to unearth future problems, or to satisfy Boards of Directors that their corporations are aggressively pursuing any potential wrong-doing.  I was surprised to learn today that the community college where I teach has hired a GRC consultant to gather information of this type. My employer has a contract with The Network, Inc., to provide, according to their brochure, "Integrity in Action," the opportunity for employees to report on other employees. This is a 24/7 online or phone system by which employees can anonymously report any perceived wrong-doing (rule-breaking, unethical behavior, or illegal behavior) by other employees.  Then they can go back online and track the investigation that follows. 

I can imagine that, at best, this system would allow an underling to report hard-to-detect misstatements of accounts or requests to perform actions which are not part of company policy.  On the other hand, I can imagine that a vindictive co-worker could impulsively make a complaint that could unfairly injure someone's career.   Since the actions are outsourced, the privacy issues surrounding the investigation seem non-existent.  And the rights of criminals to face their accusers seems to be eliminated within the bounds of corporate culture. 

Follow up:

  • Have you ever heard of GRC consulting? What factors would cause this type of consulting work to expand?  What factors would cause this type of consulting to be less in demand?
  • What do you think about the reporting system described in "integrity in Action"? What kinds of normal daily activities in your workplace could be misinterpreted by a third party?  What are the plusses and minuses of a system of reporting like this?
  • Could TNI be gathering TMI

 

Posted by teri.bernstein

Social media and the business of health care

02-16-2012 12:08 PM with no comments


image from navigator.cision.com

Social media usage has affected all types of businesses--including health care. Chris Foster, of Booz Allen Hamilton, writes in Government Health IT News about 3 ways in which social media are influencing the business of providing health care to patients:

  • Patient empowerment: access to information to diseases on the internet, as well as treatment options help patients feel more informed.  Also, many use social media to access personal support as they navigate actual treatments.  One website, PatientsLikeMe.com  is set up to be a social media clearinghouse for information. 
  • Real time information and instantaneous feedback: Doctors now tweet step-by-step instructions and information during surgeries, getting and giving support that could not be possible without social media.  Also, Foster's company has developed a program to treat psychological problems that arise in battlefield situations, 24/7.
  • Improved doctor/patient relationships: Doctors who are willing to connect with patients get and give more accurate information, on a more timely basis, and establish better long term relationships.
A strep throat story by April Sage illustrates all three of these points, from a personal perspective. One of her points is that social media can return health care to the more personal level of a house-call-making general practitioner.
On a more global level, social media have been used successfully to track a cholera epidemic in Haiti, reports Katherine Rowland in Nature, an International Weekly Journal of Science. Challenges exist in terms of information accuracy, but timeliness of reporting can mean quicker containment of disease outbreaks, and lower costs associated with disease management.
 
This could mean lower health care costs for businesses providing health care benefits for their employees.  Improved value at a lower cost is a promise of using social media in health care, once all the information technology bugs get worked out in terms of privacy and IT competence. 

Follow up
:
  • How have you used the internet to solve a personal health care problem? Have you used social media as well? Do any of your health care providers actively use social media, as described in April Sage's piece, linked above?
  • How can social media be used to reduce health care costs?


Posted by teri.bernstein

Westminster pooh-poohs "shelter dog" connection; dumps sponsor

02-15-2012 11:42 AM with no comments


 image from the Marketplace website linked below.  Listen to the radio program on that link as well

Westminster Kennel Club (for years!) has been sponsored by Pedigree, a dog food company.  But Sally Herships reports in Marketplace Morning Report that Westminster has dumped Pedigree because its ads feature shelter dogs--which does not fit the Westminster purebred image.  Purina is the new sponsor of choice. 

The reaction among some dog-lovers has been a perception that Westminster's position is "snooty," according to Ron Goodstein, a Georgetown marketing instructor. He also said that any brand aligned with the Westminster Dog Show would be aligned with this message: 

We know more about dogs than anybody else in the world. We judge dogs and take care of dogs and we believe in this brand.

Nevertheless, savvy and caring consumers are not influenced just by the superficial message.  In today's socially networked world, customers and potential customers are interested in what corporations, whose products they buy, support.  For example, consumers will boycott products and companies that make FALSE "green" clams, according to Jonathan Bardeline of greennews.org. "Image" might not just reflect the superficial--it might also reflect values. Companies need to be cognizant of what they are communicating to their customers at all levels.

Follow up:

  • Do you buy any products because of their practices in arenas that do not directly affect you (such as who the company invests with, or what causes they support or political affiliations they have)?
  • Do you think that being "organic" or "green" reflects values that influence consumer choices? What other categories may or may not affect consumer choices or brand loyalty?
  • Are you a dog owner? Do you watch the Westminster Dog Show (or did you see the movie, Best in Show ?)  Does Westminster Kennel Club's decision to drop Pedigree as a brand influence either your dog food choices or your decision to watch the show again? Are you influenced to try the Purina Dog Food brand? What brand of dog food do you feed your dog and why?

Posted by teri.bernstein

What does the Volcker rule mean and why does one "bank" oppose it?

02-15-2012 1:46 AM with no comments


 image from forbes.com

The Volcker rule arose in the development of the Dodd Frank Act.  It was a reaction to the near-worthless bundles of mortgage securities that banks had kept as investments...only to be forced to restate them at the much diminished value during the mortgage crisis.  This led to the government bail-out of banks.  The Volcker rule was put into place to protect taxpayers from future bailouts of "too-big-to-fail" banks. 

This week, however, according to Bloomberg News, Goldman Sachs has teamed up with other financial entities to request an exemption from this rule. Goldman Sachs claims that "mezzanine fund" portfolios they wish to invest in require that investors have at least a 5% share.  The Volcker rule limits any bank's investment to a maximum of 3% in any hedge fund or similar business that deals with derivative investments.

Goldman Sachs has years of experience in putting together mezzanine fund investments--Goldman Sachs was a primary player in hedge funds for most of its business life. Only in 2008 did it choose to become a "bank."

The Naked capitalism blog reports the Financial Times' take on this situation:  Goldman Sachs has an easy choice.  If it wants to make these kinds of investments, it can give up its designation as a "bank." 

In other words, they can't "have their cake and eat it, too."

Follow up:

  • What is a "bank"?  What distinguishes a bank from a credit union?  What distinguishes a bank from a hedge fund? What advantage might Goldman Sachs see in being a bank? Use other web resources, if necessary, to answer this question.
  • Check out the link to "mezzanine fund," above.  Google it yourself and read more about this business model.  If you fully understand it, please explain it to me!  Just kidding.  What do you think are the benefits and possible pitfalls of this type of fund?
  • Do you agree with Goldman Sachs?  Should they get an exemption from the Volcker Rule?

Posted by teri.bernstein

You're Fired! ... Don't be one of these types of workers

02-11-2012 8:21 PM with no comments

 
 
image from memegenerator.com

"Three Types of People to Fire Immediately" caught my attention as I perused articles in Bloomberg Businessweek online. I am not in danger of being fired, but I thought that maybe my business students or blog readers might want to know the kind of advice that business managers might be reading and heeding with respect to their workforce.  Future entrepreneurs might also be interested in the types of hires to avoid when building a workforce. 

Authors G. Michael Maddock and Raphael Louis Viton warn against these types of employees:

  1. The Victims:  Nothing is ever their fault--they are always suffering at the hands of others--and therefore not willing to take personable responsibility for making the business better
  2. The Non-Believers: Every idea they hear is a bad idea--these "nay-sayer" would have rejected every important innovation of our lifetimes...
  3. The Know-It-Alls:  Innovative companies need people with their feelers out--willing to learn from others and able to respond to new inputs...not people who already know everything there is to know about everything.   Or think they do.

Note: G. Michael Maddock has written a book that features these concepts--check out Andy Kruger's Making the Hippo Dance blog post for details.

Other sources also have advice to help people keep their jobs--or at least avoid "bad behaviors" that might make them a target for downsizing:

Enjoy these links!  And be honest and humble as you evaluate your own behaviors in light of the advice in these articles...

Follow up:

  • Have you every been fired?  Have you been around people who have been fired?  What was the proximate cause?  Why did (or didn't) you get "the axe"?
  • Think of one behavior that you can change that would improve your behavior at work.  Are you willing to change it?  Keep a little diary for a week or two about this change.  What are the pay-offs?  What unforeseen consequences of the change make things more difficult?
  • What student behaviors correlate with some of the poor employee behaviors that are mentioned above?

Posted by teri.bernstein

Could public libraries be "Business incubators"? Opportunity missed

02-10-2012 7:22 PM with no comments

 

What does California's decision to stop state-funding for libraries have to do with an Introduction to Business curriculum?

Plenty.

It is an example of short-sighted business planning and poor decision making. It is a missed opportunity to use the digital connectedness and community connections of libraries as "business incubators" according to Phil Shapiro, writing for PC World.  And it is a missed opportunity by librarians in terms of business planning.

The January 2012 revision of the California state budget came out and made it official: Good-bye state funding for California libraries

What is going on?  It looks like the state of California is cutting any costs for any entity that don't have an effective enough lobby protecting it.  Therefore, libraries are on the chopping block...as expected. Whatever happened to the idea that democracies need an educated populace to thrive and endure? Where are the unemployed going to hang out if libraries lose their funding and close?  Where are unemployed kids going to get free internet access and books for learning about their world? 

Libraries have been built with community rooms and internet access, which make them great locations for small business organizations to meet and share information. Under the auspice of the Small Business Administration, a federal agency, libraries can provide free meeting space for entrepreneur empowerment. Although "business incubators" have traditionally been housed with venture capitalist organizations, in these tough times, libraries--with their built-in resources--seem to be a good place to grow business ideas.  According to Phil Shapiro's article, libraries where built to "promote wondering," and that is the ideal medium for business brainstorming. 


 
image from swarthmore.edu

In addition--libraries are great at cataloguing information.  They could easily catalog business talents and make the information available in an accessible way to other businesses. Maybe libraries have missed that opportunity...but maybe they can still take advantage of opportunities to help businesses grow.  To do this, they will have to find a way to "monetize" that value--if they are to continue to survive.

Follow up:

  • Visit your local public library...first online, to check out their calendar of events.  Then, visit the library to see what it has to offer you, personally, and your business.  What services does your local library offer that might help you meet your business or career goals?
  • Talk to your local head librarian (ask the staff at the front desk if he or she is available, and if not, what time would be better. Make an appointment if you can.). Ask the librarian what connections the library has to local businesses, in terms of services and personnel. 

 

Posted by teri.bernstein

DEBT by David Graeber: an essential Economics lesson

02-10-2012 1:38 PM with no comments


 image from uprisingradio.org

DEBT: The First 5,000 Years is a visionary book--covering history, economics, philosophy, anthropology, and public policy.  The book itself is daunting side-reading for a student in the middle of a semester, but the review by Aaron Bady, "David Graeber's Debt: My First 5,000 words" gives the reader a robust introduction to Graeber's definitive text on a topic which affects not only all of our business lives, but also our short and long-term interpersonal relationships.

The thesis of the book up-ends a few axioms that are rarely questioned:  

  • ...that indebtedness is a bad thing, and creates an absolute moral obligation to repay any debt
  • ...that money began its existence as the remedy to the problem of barter economies (which Graeber refers to as a "Just-So Story" promulgated by Adam Smith)

Graeber uses as an example of debt the obligation that children owe to their parents.  It is an obligation that can never be repaid, and that keeps families bound in complicated relationships. If a dollar value were to be assigned to the obligation, then the obligation to repay a specific amount--irrespective of any other relationship--would be paramount, dischargable by payment, and enforceable. Graeber traces much of the violence associated with debt-collecting activities to the unquestioned moral imperative that debts create a hierarchical relationship with a good guy and a bad guy. The lenders must, unquestioningly, be repaid. Otherwise, they can exact penalties against those who owe money.

Another illustration that Graeber uses to break apart our preconceived notions about repayment as a moral priority involves debt between nations.  Say a violent dictator borrows money from another country, and oppresses his own people to pay the interest on the debt.  Long after the dictator is gone, the unborn grandchildren in the borrowing country remain repaying additional interest and debt principal to the grandchildren in the country that did the lending. Where is the obvious moral imperative in this scenario? Nevertheless, this is how the indebtedness conventions play out in our modern world. 

Graeber also looks at the logical fallacy asserted by Adam Smith--that money was the solution to the barter problem.  [Check out the transcript of an interview with Graeber at Naked Capitalism] It presumes that the current reality of the money economy was the only possible outcome.  But there are several alternatives to dealing with barter economies as they grow, and Graeber cites these alternatives across many different cultures in his book.  

Also, here is a link to student YouTube video on the Invention of Money --a perspective with a lot more insight than many of today's economics commentators in the media. 

barter-economy image from adamsmithlives.blogs.com

From personal experience, I have some regard for workable alternatives to a strictly money economy.  I can appreciate the synergistic value-added that can occur when the "currency" is the integrity of the relationship, rather than cold, hard, cash. My recent experience living as part of a barter economy was working as a WWOOFer at a few farm locations in New Zealand. The deal was: I worked about 30 hours per week doing farm labor and other necessary chores, in exchange for room and board and as much information exchange as could be comfortably managed around the work schedule.  It may have seemed like a pretty clean trade, but the relationships formed created bonds that do not continue to exist between me and the hotels I paid for with money. 

WWOOF host with mandel beet and 19 year old co-WWOOFer

In addition, as a college instructor, I get paid the same regardless of whether I write 50 letters of recommendation for students or I write 0 letters. There is no pay change for sitting on a committee, or counseling students in an office hour, or reading current articles on a lecture topic. It is all part of a body of non-money transactions that add value to my life and the lives of those around me. 

For me, an essential component in non-money transactions (including the parent-child example cited by Graeber), is the concept of "Pay It Forward." 

BTW--I have relied on Aaron Bady's review to write this blog...I will download Graeber's book this weekend and get started reading the real thing.

Follow up:

  • Read what Bloomsburg Businessweek has to say about David Graeber.   What is Graeber's relationship to the Occupy movement?
  • What is meant by the reference to "Just So Stories"? How does it relate to Adam Smith?  Check out portions of Wealth of Nations if you want to see Smith's argument, in the original, regarding barter and the division of labor. 
  • Give an example of when someone has done something for you without expecting anything in return.  Also, think of an example where you have been inspired to want to "pay forward" a kindness or more tangible gift. If you saw the movie linked above, what do you think is being "paid forward" by the characters in that movie?
  • Life-long follow up:  If you are a "big thinker" or imagine yourself in graduate school, this book and others like it will open your mind to ways of thinking that are transformative and out-of-the-box.  If you are even the tiniest bit tempted: explore the big (and baffling) ideas that float into your universe.

Posted by teri.bernstein

Foreclosure numbers sound good...but what is the reality?

02-09-2012 3:04 AM with no comments

Why do foreclosure numbers sound good?  Kai Ryssdal of Marketplace interviewed Adrienne Hill about the 25% decline in foreclosures that was recently reported by CoreLogic.  It seems that the numbers are down because banks and other financial institutions are waiting for a settlement regarding mortgage fraud to be announced.  Once this is announced, the pending foreclosures will resurface, and foreclosure numbers will be back up to the levels they were in 2010 (according to the CoreLogic report).

Fox News reports that there is considerable controversy surrounding what are presumed to be inadequate penalties applied to banks involved in the mortgage foreclosure crisis. The final parameters of the settlement should be available within a few weeks.  

FEBRUARY 10th BLOG UPDATE:  The settlement parameters were released during the day on February 9th.  The $26 billion settlement does not come close to fixing the gap between home values and outstanding mortgages that is probably more than 10 times that.  The NYT article by Nelson D. Schwartz and Julie Creswell delineates many of the disappointments that consumers will have to face.  Most of the settlement is going to help people who remain in their homes--their rates are being reduced. In some cases the balances owed are being reduced. In addition, the settlement provides payments of $1500 to $2000 to people who have already lost their homes.  The Obama administration's position is that relief needs to come from other areas as well--principal reductions on Fannie Mae and Freddie Mac loans, for example.

Follow up:

  • What is a foreclosure? What brings them about?  Why have foreclosures been in the news over the last few years?
  • What does being "under water" mean with respect to a mortgage?
  • What was the "robo-signing scandal"?

 

Posted by teri.bernstein

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Do Plumbers Need Social Media?

02-07-2012 11:54 PM with no comments


image from plumberseo.net

Do Small Businesses Need Social Media?  This is basically the question posed by David H. Freedman in an article about how tradespeople might use Google+ as a business tool.  At first glance, Google+ just seems like Facebook with another name for "groups" ("circles").  But there are several ways that Google+ works better for small businesses.

The article cites entrepreneur Ryan Negri's experience with "circles."  Circles allow Negri to manage his client base and create VIP.clients, as well as keep track of clients who are problematic.  Small business owners do not have the luxury of spending unpaid time with clients who are difficult to satisfy.  Also, grouping clients allows him to directly and specifically market to certain groups.


 image from digitaltrends.com

On the other hand, Freedman notes that small businesses, in particular, may be slow to move away from Facebook, and that Twitter might "win" the social media wars in the long run.

Follow up:

  • Is there an app for that?  Imagine you are a plumber who nets an average of about $150 for each one-hour job, where the variable costs are about $30. Project how much money you want to make each year. Using cost-volume-profit analysis, project the break-even point in the number of jobs to create the target profit you imagine.  Can you find an app that will do this calculation for you?  How could a social networking site like Google+ help you see where you are with respect to your goal? 
  • Read a further comparison of Google+ and Facebook .  Make a chart of the various features of each and analyze the two choices from the standpoint of a small business that is invested in neither. Which product looks better for a small business starting out? How would you weight the qualitative factor of being already knowledgable and connected to one platform (presumably Facebook) in terms of making a business decision looking forward?

 

Posted by teri.bernstein

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