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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.


  • Nothing is safe: Heartbleed coding flaw breaks encrypted financial transactions

    image from businessinsider.com How much of a problem is the Heartbleed coding mistake that endangered every encrypted financial transaction? According to Bruce Schneier, a cryptographer and security consultant: " I've been saying that on a scale of one to 10, this is an 11 ." There are public policy issues that are arising with respect to Heartbleed ( i.e .the NSA and other security organizations have known about the vulnerability, and have most likely taken advantage of it--without informing citizens and consumers). But, like many business problems--fixing the blame and finding those who abetted the crime does not help the "victims"--which are the millions of us who have been using online banking and retailing sites over the last few years. What do we do about this? The basic advice is: Don't change your password until you are sure the site has fixed its vulnerability problem; and DO change your password for every single institution with which you transact online business. Although it may seem daunting to make a list of all of the sites with which you have done business, and systematically go through them one by one to change the password--that hassle pales in comparison to dealing with identity theft once it has occurred. Make sure you don't forget to change your passwords on Google, Facebook and Yahoo--who have already admitted that they were affected by Heartbleed. They have already fixed the flaw on their side. Some institutions have said that the flaw did not affect them, but others have claimed the issue was "industry-wide" with respect to banking institutions. But if you have used the same password on more than one site--if your password was used on a vulnerable site, it is out there and can be tapped to invade your identity on sites that said they were safe. Sources: " Flaw Calls for Altering Passwords, Experts Say ," by Molly Wood, the New York Times , April 9, 2014. F ollow up: Have you changed your password for Google, Facebook, and/or Yahoo yet? If not, why not? Have any institutions informed you that their site was vulnerable? Have they encouraged (or required) you to change your password? What was the procedure like? How long did it take? Share your experience with others and encourage them to protect their identities as well.
  • Too late for Obamacare?

    image from healthcare.gov website Many individuals who have not been lucky enough to have parent-sponsored or employer-sponsored health care--as well as uninsured individuals--procrastinated when it came to signing up for insurance under the Affordable Care Act (Obamacare). Some of the hesitation was due to the technology failures, but some of it was due to a mis-perception about where one might land in the pie-chart below. The big fear, of course, is that one would be unable to get a good deal on new insurance, and would fall into the 3% "potential losers" category. In any event, the "deadline" for enrollment was March 31, 2014. But there might be ways for those who did not manage to obtain coverage to still be enrolled, according to an Associated Press article. image from offeringhope.org Here are some possibilities to obtain a second chance to sign up, or avoid a fine for being uninsured: TAKE ADVANTAGE OF THE GRACE PERIOD : If you started to enroll by March 31, but couldn't finish, have until April 15th to complete an online application or until April 7th to turn in a paper application. USE A SPECIAL ENROLLMENT PERIOD : Special 60-day enrollment periods are being considered by the federal call center (800) 318-2596 and by the state marketplaces. Some of the special extension are being granted for emergency hardships, for example: bad weather, domestic abuse, illness, errors by advisors and insurance companies. These special enrollment periods also open up throughout the year for life events (job changes, marriage, divorce, parenthood). SIGN UP FOR MEDICAID : There is no deadline for those eligible for Medicaid to sign up--and now Medicaid is open to adults making less than $16,100 per year, as well as families with children. BUY INSURANCE OUTSIDE THE GOVERNMENT MARKETPLACES : Even if you can't get the government subsidies this year, you can still buy insurance privately. Obamacare means you can't be refused for pre-existing conditions, so it will be more "worth it" than it was before. PLAN AHEAD FOR THE NEXT ENROLLMENT PERIOD : It starts November 15, 2014 and it runs for 3 months. Do your research early! Sources: " Putting Rate Shock Into Perspective ," by Joan McCarter, The Daily Kos , October 31, 2013. " It's STILL not too late to sign up for Obamacare ," by The Associated Press via blackamericaweb.com , April 1, 2014. Follow up: What is one of the hurdles that people wanting to take advance of the grace period or special enrollment periods have to jump through? Will proof be required, or is it on the "honor system"? Explain the pros and cons of this. In an ideal world, how would health insurance be handled? Do some research and provide support for your answer.
  • Social media manipulates General Motors' reputation

    [View:http://community.cengage.com/GECResource/themes/gew/ utility/ :550:0] Mary Barra, CEO of General Motors talking to her employees about the vehicle recall in a recent video If video does not appear above, see link to video here . "Damage control" looks different in the modern age of social networking. General Motors' recent problems with the ignition switches of several of its vehicles has created a public relations problem. GM's response has utilized social media on at least three fronts. First, a video--supposedly a speech to GM employees--is available in the public domain. Second--the Facebook page of GM is responding to customer issues--maybe not always successfully: image from www.nytimes.com Third, GM is at least listening in to Twitter complaints...and responding. One Alaskan mother, Lauren Munhoven, tweeted a complaint. GM listened and helped her with her Saturn Ion by paying the ferry cost to get her car fixed, and getting her a rental car. Munhoven posted her thanks on Twitter. GM is also using old school methods of snail-mail notices of recalls, and call centers to help with customer problems. I found it quite compelling that part of the message was that the cars were safe to drive IF there were no other items attached to the keys--like no key ring. These apparently could be bumped or could weight the ignition switch in a way that the problems ensued. The mixed message--that there is an ignition problem but that the customer might be partly to blame because they use a key ring--might not be the best message to be putting out to the public. In this modern age of social media, customers who are outraged can "flame" GM's service--that is, negatively report their experience to as many others as might be tantalized by the customer message. It remains to be seen how this plays out in GM sales. By the way, there is another Facebook page called GM Recall Survivors . From what I've read on it, it seems more to be about those who have not survived. Source: " G.M. Uses Social Media to Manage Customers and Its Reputation ," by Vindu Goel, New York Times , March 23, 2013. Follow up: What effect would a text message from GM Customer Care have on your confidence level if you were a Cobalt owner? Evaluate Mary Barra's video as a communication vehicle to GM employees, and as as public relations piece "spinning" the defective part debacle.
  • Long-term care insurance hikes rates 90%

    image from www.planaheadny.com The above chart represents nursing home costs increases, which are probably at the root of the rate hikes charged by private insurers. If you are a student, you are probably more interested in the health-care options of Obamacare than in long term care insurance. But because your parents are more likely to be drawing on long term health insurance, its cost and viability might be of some concern to you. The main "bright line" of sustainability and fairness separates the positions on long term care along the same line as it does on general health care: Does the private insurance marketplace provide better coverage per dollar, or would a government-sponsored "single payer" plan be better? One couple with private long-term insurance, provided by John Hancock, was recently informed that their premiums would almost double from last year to this year: Up to $3,714.38 for the husband and $4,642.97 for the wife. On a percentage basis, this represents a 90% rate increase. Nothing has changed about the couple themselves, but the marketplace of nursing care costs and the possibility of future claims has caused the insurance company to hike the rates. To put it more clearly: this couple, the Holtzmans, have been paying premiums for 10 years. They have never made a claim. Still, their premiums have increased this much. " This seems unconcionable ," Holtzman said. Would this happen with single-payer, government-sponsored insurance? Probably not. We have not seen these kinds of spikes in Medicare insurance payments, and that is the currently operative single-payer plan that is in place in the U.S. What does this mean in terms of risk management on an individual level? Source: " Feeling ill effects of private long-term care insurance ," by David Lazarus, The Los Angeles Times , March 25, 2014. Follow up: Would you buy long term care insurance? Do you want your parents to be covered by this insurance, or are you willing to take over their care if they become disabled for a long period of time?
  • Toyota criminal penalties: Are fines a real punishment? Why isn't Toyota in jail?

    image (of a Prius that had accelerated to 90 mph on a mountain road) from the Colorado State Patrol, published in the Los Angeles Times Toyota recently entered into an agreement to pay a multi-billion dollar settlement as a result of a known problem that caused deaths. The documented problem was that of sudden, unexplained acceleration. Last week, Toyota settled a criminal case brought against it by the Justice Department. Various lawsuits remain, but costs to this point include: $1.6 billion settlement of civil claims in a class-action lawsuit on this issue a $1.2 billion payment to the Justice Department, a criminal penalty, relating to wire fraud issues National Highway Traffic Safety Administration fine, which is capped by law at $35 million an agreement that Toyota will not be allowed to deduct its criminal penalty on its tax returns, which means that the American taxpayer will not lose out because of this settlement Part of the Justice Department agreement also stated that no individual executives will be prosecuted for these injuries and deaths related to the sudden acceleration problem. “The rules of evidence sometimes do not allow you to use certain kinds of evidence and certain documents against individuals, although they might be admissible against the company itself. Although there is an admission that they were individuals who engaged in conduct which provides for a basis to bring a case against the company, they are not charged here,” explained Preet Bharara, the U.S. attorney for the southern district of New York. Toyota can afford these penalties, as its current year profits total about $19 billion. If an individual person had committed these crimes, it is unlikely that they would get off without any jail time. Here are some mandatory minimum sentencing guidelines for individuals: Mandatory sentencing guidelines, Federal, from Wikipedia But Toyota is still allowed to operate. Toyota's stockholders continue to make money. According to the doctrine of " Corporate Personhood ," corporations have many of the rights as individuals. But if a corporation has the benefits of a person, should it also not be subject to the same criminal penalties? Source: "T oyota sudden-acceleration suit is ratified ," by Tina Susman and David Hirsch, The Los Angeles Times , March 20, 2014. " Toyota admits deceiving consumers; $1.2-billion penalty is record, " by Jerry Hirsch, The Los Angeles , Times, March 19, 2014. Follow up: What do you think? Is manufacturing a car when you know a defective part will cause deaths a punishable crime? Is it better to charge money penalties or to give the corporation the same penalty a "person" would receive: inability to work for a time period. What are the pros and cons of shutting down a corporation the same way an individual would have his or her business life shut down by incarceration? Should individual executives be prosecuted? Discuss the pros and cons. Comment on the agreement that Toyota cannot deduct its penalties from its taxes. Can individuals deduct fines such as parking tickets on their tax returns? Discuss the reasons for tax deductions and how criminal penalties fit into that logic.
  • GM auto defects ignored for years; deaths mounted

    Kelly Ruddy's Chevy Cobalt from the NYT article linked below Here is the problem with several low-to-mid-priced General Motors (GM) cars: suddenly--even at freeway speeds--the car stalls out, totally losing power to the engine, steering, power-assisted brakes, and air bags. When did GM first become aware of these problems? Since 2003 an average of two complaints per month have been filed with the National Highway Traffic Safety Agency (NHTSA) about these random "shut-downs." Who knows how many complaints were lodged with GM, but didn't make it as far as the NHTSA? What was done? Even when former Congressman Barney Frank intervened on consumers' behalf in 2010, the NHSA responded: “ At this time, there is insufficient evidence to warrant opening a safety defect investigation .” By this time, there had been at least 78 deaths and over 1500 injuries due to the sudden ignition failure problem. The NYT analysis shows that the NHTSA as well as General Motors seemed to ignore data relating to this problem. The vehicle recall now in place involves 1.6 million vehicles. Source: " Auto Regulators Dismissed defect tied to 13 Deaths " by Hilary Stout, Danielle Ivory and Matthew L Wald, New York Times, March 8, 2014. Follow up: With whom does the responsibility for car defects lie? The manufacturer? Government regulators? The consumer who buys the less-than-top-of-the-line car? Who should "pay" for damages and why? Do you think that government regulation takes the responsibility off the shoulders of the manufacturer? When a manufacturer becomes aware of a defect, what communication, financial, production, and legal procedures should kick into place? Are the issues only "civil" or are they possibly "criminal"?
  • Corporations push 401(k) benefit toward a slippery slope

    image from Vanguard The slippery slope of pension benefit "norms"...here we go again. Forty, thirty, twenty--even ten years ago in many industries, the standard for pension benefits was a "Defined Benefit" plan. Corporations would set up plans to fund retirement benefits that were usually based on a formula valuing time-on-the-job and salary. For example, a typical benefit might be 2% of final salary x the number of years employed. Someone who had worked at one company for 30 years, and who retired with a salary of $100,000 would get 100,000 x 2% x 30 or $60,000 per year as a defined benefit pension. Now the standard has moved to the "Defined Contribution" plan, exemplified by the 401(k). In a typical scenario with a 401(k), the employee contributes a a pre-determined "defined" amount out of each paycheck and the employer matches that amount, or a percentage of that amount. The contributions are invested until the employee retires, and the benefit received in retirement is dependent on the success of the investments over time. (No guarantee.) But with all pension plans, a key factor is "the time value of money." Most employers contribute their portion at the same time the employee contributes: at each payday: However, lately, big employers have been shifting their policy to a "lump-sum" contribution. AOL was making this this shift during its recent privacy kerfuffle. As you can see from the graph above, waiting till the end of the year to make the payments means that the company has the use of the money for longer...and employees lose out on investment earnings. In addition, if employees change jobs mid-year, they lose the employer side of the contribution entirely--again saving the employer money. Employee compensation is a combination of salary, paid time off, reimbursed expenses, health benefits, retirement benefits, and other factors. Although it may be easiest to focus only on salary, all factors must be evaluated over the long term to really know what an individual employee is being paid. Sources: " Beware the End-of-Year 401(k) Match ," by Ron Lieber, New York Times, February 14, 2014. " Making Retirements Less Secure ," by the NYT Editorial Board, New York Times, February 14, 2014 Follow up: Read the article. What is the lifetime differential mentioned in the Vanguard analysis presented therein, based on typical job-changing events that would be likely to occur over an individual's working life? If you were looking for a job, what type of pension benefit would you look for? Would this be a major or minor factor in your job decision, assuming you had multiple offers? How might your decision change if you were in your 40's or 50's?
  • Privacy: If it were MONETIZED we'd have a benchmark for collecting damages

    AOL 's CEO Tim Armstrong clearly has not internalized the importance of privacy to individuals...particularly privacy when it involves health matters or one's children or other family members. He may have even violated HIPAA laws when he publicly aired confidential health care information about AOL employees, as usually only human resource professionals are authorized to have access to health insurance information. . [View:http://community.cengage.com/GECResource/themes/gew/ utility/ :550:0] Video from Wall Street Journal online interview and commentary But according to the NYT article linked below: "... patient and work force experts say the gaffe could have a lasting impact on how comfortable — or discomfited — Americans feel about bosses’ data-mining their personal lives ." Indeed. All evidence seems to indicate that AOL managers scrutinized private health care records and drew damaging conclusions about individuals--then Tim Armstrong made these damaging revelations public. The data--although it did involve a corporate cost--was not at all connected to or influenced by the expenses involving the defined-contribution retirement benefits that AOL was seeking to truncate. Trying to establish a cause-and-effect relationship between a sick baby and AOL's desire to save money by delaying its matching contributions for 401K accounts just seemed to be a vicious attack intended to evoke an emotional response that would embarrass or shame the users of health care benefits. Nevertheless--the shame factor may have been an intentional attempt on AOL's part to induce fear in employees regarding future revelations of private matters that were now revealed to be not only possible, but apparently not in violation of AOL's ethical policies. Maybe money would talk in these situations. If there were federal fines established for violations of privacy, or if there were amendments to the Affordable Care Act to mandate monetary penalties for corporate violations of health care privacy--that escalated exponentially for subsequent violations--maybe corporations would think twice before disregarding privacy concerns. Sources: " Revelations by AOL Boss Raise Fears Over Privacy ," by Natasha Singer, the New York Times Business Day, February 10, 2014. Wall Street Journal Video . Follow up: Read up about the benefit that AOL was eliminating when Tim Armstrong held the town hall cyber meeting in which he discussed the health problems of the infants of two AOL employees...and the cost of those health problems. What link do you see between the benefit being discussed and the point he was trying to make by bringing up the the expense of the infant health care? What might have been a better example? Why do you think he picked the example he picked? Once a private matter has been aired in public, there is no way to "put the genie back in the bottle." What monetary "fine" would be adequate to compensate a person for corporate disclosure of: Financial information due to a security breach that was accidentally made public? Personal health information that was intentionally researched and made public? Information about the health or characteristic of one's children or family members that was intentionally made public without the consent of parents and individuals involved?
  • Bull Market's 5th Birthday

    image from STAN HONDA/AFP/Getty Images: on Wall Street The stock market has been doing well for almost 5 years now. What a surprise! The Dow Jones Average is three times what it was in March 2009 (6,447). As usual, observers are predicting a decline...or a "correction"--which would mean a drop of 10% or more. Since the Dow usually has a correction about every 18 months, and we haven't had one since 2011...some think that we are 2 years overdue. Part of the reason that the market has done well, is that Federal monetary policy has reinvested in the bond market and kept investment money in circulation. When the Fed pulls back on its stimulus policy, observers will be able to analyze whether it has been public policy or the business entities themselves keeping value in the market. Nevertheless, Gary Thayer, Chief Macro Strategist, Wells Fargo Advisors, feels that the correction would not be a "crash," and would be only temporary. Source: " Happy 5th anniversary, bull market? " by Stacey Vanek Smith, Marketplace, American Public Media , January 22, 2014. Follow up: If you have current stock investments, do you plan to hold them over the long term, or sell in anticipation of a stock correction? Explain your rationale. What is a stock market correction? When, historically, have they occurred?
  • What to ask before starting your own business

    image from momstownblog Toward the end of the year, many people resolve to do in the upcoming year what they have put off before. For the entrepreneurial person, that might mean deciding to start a new business. Forbes Magazine's Entrepreneurs Group recently published an article listing seven questions any would-be entrepreneur should ask themselves before starting up: Why am I doing this? It is important to know what is motivating you...no matter what the motivation is. The need to be your own boss? To do what you are doing better than its being done at your current job? Because you have a new idea? Is this a good time? Timing is very important with respect to outside economic forces. Is a competitor going out of business, creating an opportunity, for example? What about the time constraints of your personal life? The best business idea launched at the wrong time will have difficulty succeeding. How much money will I need? Under-capitalization (not enough money) is a big factor in business failures. You need to make projections of cash inflows and outflows under a range of scenarios--especially "worst-case." Where will I get the money? Most entrepreneurs need to tap various sources to fund their new business. Make sure you have firm commitments and solid money sources. What other people do I need? Even if you intend to be a one-person operation, you will still need contacts and consultants--for legal help, marketing and website help, and accounting and financial advice. Cover all the bases in your business plan. How do I handle setbacks? Know your own personality--can you handle setbacks? Entrepreneurs need to have tenacity and resilience. If these aren't part of your personality profile, how will you weather any problems? What's my endgame? Know your exit strategy...What would make you leave the business? Do you intend to run it for your lifetime? Are you starting it up with the intention of being bought out? Many of the decisions you make on a day-to-day basis will be influenced by whether you are intending to be part of the business for the short term or the long term. Read the linked article for more details on these topics. Source: " 7 Questions To Ask Before Starting Your Own Business ," by Entrepreneurs group, Forbes, December 9, 2013. Follow up: Have you every tried something (whether it was a business or another activity) that was attempted at the wrong time? (Even a visit to an amusement park is influenced by weather and who is available to go with you.)...Did you attempt your activity again, when the timing was "right"? Describe your experiences. How can you apply these questions to your own career goals? Do you have a business plan for yourself?
  • The new healthcare environment for small businesses: conclusions based on experience

    Paul Downs knows first-hand about dealing with health care as a small manufacturing business owner near Philadelphia. He offers up seven timely pieces of advice about the new health care environment in a recent NYT article. The state in which he operates, Pennsylvania, is a state that does not have its own health care exchange, so he has been forced to deal with the national (and infamous) HealthCare.gov website. The other parameters that have influenced his experience include: He has used an insurance agent in this process. Health care in his area is an oligopoly that includes Independence Blue Cross, Aetna, and United Healthcare The requirement (this year) to offer a single plan to all employees means that to allow flexibility to employees you have to locate a plan with options within it. Here is a summary of what he has learned: The Affordable Care Act (ACA, nicknamed Obamacare) has changed the insurance market in significant ways by offering a better way to shop for coverage, with uniform standards for comparison. Nevertheless, certain information is less than transparent. Still needed?: Comprehensive information about prices for specific services and well-structured flowcharts for decision making. "If it ain't broke, don't fix it." If your current plan is working and meets the standards of the ACA, then just re-adopt it and change it next year if you need to. If you aren't currently covering your employees, let them get their own insurance on the exchange and advise them to get an account or they will not get good data on pricing for their age and needs using the "quick quotes" available anonymously. The SHOP exchange on the federal government site is currently not functioning adequately. The only reason to attempt to use it is to enable employees to apply for tax credits if they qualify. Online requests are not being processed, and paperwork requests are not being attended to on a timely basis If insurance is currently offered to employees, but few employees buy it, it is better to stop offering insurance, so that lower-income employees can get insurance through the exchanges and might qualify for the subsidies. Offering insurance to part-time employees also no longer makes sense because the exchanges offer more cost-benefit, but employers must be careful to have clear, uniform guidelines--for example, making those who work less than 30 hours per week ineligible. Probably everyone who has had to buy health insurance for themselves or others has more advice to offer, and Paul Downs anticipates having more to say as the health care plan continues to be implemented. Sources: " Seven Conclusions About Small-Business Health Insurance ," by Paul Downs, New York Times Small Business, November 25, 2013. Follow up: Have you shopped for health insurance? Will you need to buy it or are you still covered under your parent's plan? What do you think of the process? What will it cost and what will you get? What do you think are the advantages and disadvantages of a " single payer " plan?
  • Why Expanding Social Security Makes Sense

    image from beardog321.blogspot.com Social Security is often "spun" as a divisive topic. But it looks as though the majority of Americans are in favor of it. At the same time, most Americans also like "cutting taxes." "Cutting taxes" and "expanding Social Security" seem to be at odds for with respect to sound fiscal planning. Nevertheless, it may be what many Americans want and expect. There has been a lot of anti-Social Security talk lately. One argument asserts that the Social Security age should be raised to 67 (currently it is 66). The arguments for this are the rise in life expectancy, but according to a NYT editorial by Paul Krugman, the lower-income and more poorly educated citizens (who need Social Security the most) have experienced a decline in life expectancy over recent years. A second argument asserts that seniors don't really need Social Security, because their poverty rate is "only 9%." But the Census Bureau (as opposed to the official poverty measure) says that the poverty rate is really 14.8 percent. Moreover, this rate is likely to increase--affecting vast numbers of senior citizens--because: fewer companies are offering defined benefit pension plans, which have allowed middle class Americans to live decently in their retirement years since they became a feature of compensation plans in the 1960's; people coming to retirement age who have personally funded their own plans have suffered two major mid-life stock market crashes that have negatively impacted their private retirement savings; not all individuals who have been forced into 401K's and out of their defined benefit pensions have invested enough money, or have made smart investments. " We’re looking at a looming retirement crisis, with tens of millions of Americans facing a sharp decline in living standards at the end of their working lives ," says Paul Krugman . " So there’s a strong case for expanding, not contracting, Social Security. Yes, this would cost money, and it would require additional taxes — a suggestion that will horrify the fiscal scolds, who have been insisting that if we raise taxes at all, the proceeds must go to deficit reduction, not to making our lives better. But the fiscal scolds have been wrong about everything, and it’s time to start thinking outside their box. " Sources: " Expanding Social Security ," by Paul Krugman, New York Times , November 22, 2013. " Americans Support Expanding Social Security Not Cutting it ", by Wyoming Beardog, The Panglossian Curmudgeon , November 9, 2013. Follow up: Businesses match the employee's contribution to Social Security. So if Social Security taxes go up, businesses will also have to pay more. What do you think the reaction of large corporations would be to legislation to expand Social Security? What marketing campaign could you devise to sell the idea of expanded taxes to go along with expanded Social Security benefits? What other solutions would you impose to avoid this crisis for people entering the workforce now? Do you think basic income protection for retired people should exist? If so, how should it be funded? Is it a corporation responsibility? National responsibility? Every human for himself?
  • Twitter starts revival of a seedy San Francisco neighborhood

    The 37-story Crescent Heights apartment tower in San Francisco. New apartments are to be tailored to tech industry workers. image taken by Peter DaSilva for the New York Times A Renaissance has taken place in one San Francisco neighborhood. Here is how it was in one area: " Studded with check-cashing joints, strip clubs and dollar stores, the seven-block strip known as the Mid-Market had resisted cleanup efforts and resolutely remained the same: a seedy place to visit day or night ." Even some of the most beautiful old buildings had remained vacant for years. But in April, 2011, Twitter signed a lease through 2021 on 295,000 square feet in an Art Deco building right in the middle of the Mid Market area. The company that owns the building, Shorenstein Properties , had taken a big risk when they invested in the building...and so did Twitter when it signed the lease. But it was an investment made with long term vision, in a city where rents in good neighborhoods were among the most expensive in the country. The investment has already begun to pay off--as many other tech companies (including Spotify , Yammer and Square ) have moved in as well. The area is starting to turn around, as local service businesses have also begun to pop up. More importantly--new construction is being undertaken--not only of office space, but also of residential space, such at the apartment building pictured above. One incentive that has helped businesses to commit to this blighted area was created by a public policy change: payroll tax incentives were created. Source: " Twitter helps revive a seedy San Francisco neighborhood " by Kristina Shevory, New York Times, November 1, 2013. Follow up: What changes have occurred in terms of the kinds of businesses that have located or re-located to San Francisco in the last few years? Why would a city offer a payroll tax break to attract new businesses? How much, according to the article, can Twitter expect to save due to these tax incentives?
  • 13,000+ enrolled in personal finance MOOC from Stanford professor

    Joshua Rauh, finance professor in the Stanford Graduate School of Business Joshua Rauh has taken steps to bring education about pension and retirement financing to a broad audience. He has morphed his graduate-level Stanford University course into a MOOC (Massive Open Online Class). Over 13,000 students had enrolled as of last weekend, and the course starts today (Monday, October 14, 2013). The course contains a series of 10 well-produced 45 minute lectures. These lectures are available anytime after their release date (like a TV show on your DVR, or offered "on demand" from your cable provider). They are complete with animations and other visuals. Professor Rauh says that the course is particularly valuable for a mid-career individual (about 40 years old), but that people of all ages can benefit. The financial perspective is one of conservatism and caution--emphasizing that significant gains only arise when there is significant risk. One piece of advice that Professor Rauh offers is that people anticipating retirement should consider a simple immediate annuity , or the cheaper alternative " longevity insurance ." These choices require an up-front payment of cash that will result produce income for the remainder of life (the immediate annuity beginning now and the longevity option beginning at some later point). But coming up with the cash to invest at retirement time requires a lifetime of sensible investing habits--tools that might be available in this course. Source: " Finance class on the web, for students of all ages " by Tara Siegel Bernard , New York Times, October 11, 2013. Follow up: Did your college finance classes teach you much about personal investing? Where have you learned about investing and where do you hope to get more information? What do you think of taking a course by way of a MOOC? What might be the advantages and disadvantages? In case you are interested in an undergraduate personal investing course offered online, check out the Schedule of Classes at Santa Monica College .
  • The "sharing" economy: Google underwrites websites for new business model

    image from Rick Torben's blog The internet has brought many changes to our lives, and a new change is well underway: the "sharing economy." Using internet sites, those without the wherewithal or desire to own a car, for example, can still borrow a car when they need a set of wheels. Homeowners or renters hit hard by the recession have taken to offering rooms for rent to travelers through sites like Airbnb . James Surowiecki writes in The New Yorker about the opportunities and the hurdles of this new business model. From the buyer's side, the benefits to using assets without owning them are great--no upfront costs, no storage issues, a lot more variety. The downside might be the availability of the asset you want when you need it...and there also may be issues about the quality of what you are getting, sight-unseen. Safety might also be a factor. From the seller's side, sharing assets can generate a revenue stream, for the small commission paid to the internet website. The downsides to the seller might be all of the usual hurdles to running a business--risk of asset damage or loss, unsavory customers, increased costs of insurance and maintenance. The upside to the economy as a whole, from a sustainability standpoint, is the much more efficient use of assets. Cars might only be used an hour or two in any given day. Those assets can be income-producing in what would usually be their down-time. But when private property is used for business purposes, municipalities need to be involved to regulate the businesses--for the protection of the neighborhoods. Also, sharing-economy entrepreneurs probably need some training on the basics of running a business--meeting tax obligations, getting the right insurance, etc. The real winners here, so far, seem to be the internet websites that have revenue coming in both from providers of assets, and from other advertisers on their websites. This revenue potential has spurred venture capital investment by the likes of Google--recently in Uber . I wonder who will be making most of the money in this new "sharing economy," and who will be doing most of the work... Source: " Uber Alles " by James Surowiecki, The New Yorker, September 16, 2013. Follow up: Have you ever used Airbnb, Lyft, Sidecar or UberX? Any other sharing-economy product? What was your experience? Do you think most of the providers of assets on the sharing networks think of themselves as "real" entrepreneurs? Do they deal with business licenses, insurance and other matters as a retail entrepreneur might, for example? Are there city ordinances where you live that prohibit or limit these internet businesses?
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