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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

04-10-2014 6:39 PM


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:

  1. Don't change your password until you are sure the site has fixed its vulnerability problem; and
  2. 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.

Follow 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.

Posted by teri.bernstein

Peeps all year: too much of a "good" thing?

04-09-2014 10:29 PM


photo of the formerly seasonal Marshmallow Peeps; image from the radio article linked below

Just Born, the maker of the polarizing marshmallow snack called "Peeps," recently announced that Peeps will be available all year round beginning May 1, 2014.  Of course (Peeps fans already know this), the Peeps season--springtime: for the festive and secular side of Easter--has already begun.  

A company spokesperson said, "We're making every day into a holiday."
 
I think I'm more aligned with the comment made by Marketplace host Kai Ryssdal: "It is this week's sign that the apocalypse is upon us."

I'm wondering if the marketing people have really thought this through--will Peeps lose its market niche as a seasonal treat if it is always in the candy or treat aisle? Or, like Oreos, are Peeps so beloved by their fan base that sales will increase?

Sources:  "Peeps year-round: Harbinger of apocalypse," by Kai Ryssdal, Marketplace.com, April 9, 2014.

Follow up:

  • What are the risks of the decision to produce Peeps year-round, from a marketing and sales point of view? What are the possible rewards?
  • Very few folks are neutral when it comes to Peeps. Where do you stand?

Posted by teri.bernstein

Managing Up vs. Managing Down: two different skill sets

04-08-2014 7:56 PM


Kim Bowers of CST Brands: image from the New York Times article linked below

Kim Bowers is the CEO of CST Brands, a large "corner store" retailer (they are a spin-off from the gas station company Valero). She was recently featured in the NYT "Corner Office" article area, focusing on her views about management and human resources. Ms. Bowers indicated that over time, she has become "less tolerant of bad attitudes," and is quicker to sense when investing in an employee would be a waste of time and resources. She also has strong views about "managing up" (knowing how to communicate effectively with your boss) versus "managing down" (leading or inspiring the employees who report to you). 

Kim Bowers says:

"I put people into two different categories: people who manage up really well and people who manage down really well, and I love the latter. If I find someone whose team would walk across hot coals for them, that’s the person I want to work with because I know there is authenticity there, and they are supporting their teams and vice versa.
It’s the folks who manage up really well but have this underlying storm all the time who concern me because you don’t know if they’re just trying to charm to cover up.
"

Both skills need to be developed for an employee to be able to adapt to different types of leadership. Here are some guidelines from a different source:


graphic from sochal.wordpress.com

Ms. Bowers also has some advice for college students: "Make sure not to set your expectations too low for what you can do, and recognize that at every twist and turn you’re going to have opportunities to expand your horizons, and you should take those. You shouldn’t be looking just to climb the ladder, but be open to opportunities that let you climb that ladder."

Sources:  "Kim Bowers of CST Brands on Managing Up vs. Managing Down," by Kim Bowers, the New York Times, April 5, 2014.

Follow up:

  • What was Kim Bowers' "CIA story"? Has fate ever intervened for you in a big decision?
  • Do you think Ms. Bowers' early management experience shaped the views she holds today? Do you think her family position (birth order) influenced how she manages? Give examples.
  • Do you do better at Managing Up or Managing Down? Why? What is hardest for you in the area where you are weaker?

Posted by teri.bernstein

"Silicon Valley": business start-up comedy comes to HBO...and YouTube

04-08-2014 12:37 AM

[View:http://community.cengage.com/GECResource/themes/gew/

utility/ :550:0]
from HBO via YouTube

HBO's new comedy "Silicon Valley" premiered this past weekend.  The show portrays young programmers--one of whom has developed a program he calls "Pied Piper." He designed this program to alert aspiring song writers to any copyright infringement problems, by searching all music libraries everywhere for the note sequences entered. 

Others realize that the main feature of this program is its ability to instantaneously search through compressed files and deliver sound quality that isn't distorted...and that there are limitless business applications of this rapid and high-quality search algorithm.

In addition to the comic interactions portrayed in the series, there are business partnerships, business decisions to make, business entities to consider, and business values to ponder. By the end of the first episode, we learn the importance of a good business plan. The show is its own "Introduction to Business."

Interestingly, HBO has decided to let the first episode air on YouTube, so everyone can take a look.

Sources:  "Watch the first episode of HBO's 'Silicon Valley' on YouTube," by Chris Velasco, engadget.com, April 7, 2014.

Follow up:

  • What are the pros and cons of HBO's decision to let the first episode air on YouTube? What entities stand to benefit?
  • Can you identify with any of the characters? What business advice would you give the main character?

Posted by teri.bernstein

SAT scores wanted by employers in hiring process

04-05-2014 4:27 PM


chart published in the Wall Street Journal

Did you think that once you got into the college of your choice that you could forget about your SAT scores? As it turns out, they might follow you from job search to job search. 

What employers are looking at these scores?  McKinsey & Company, Bain & Company, Goldman Sachs. Even though performance on ACHIEVEMENT tests rather than APTITUDE tests (like the SAT) is a better predictor of success, the differences aren't enough to make employers develop their own tests. It is easier for employers getting thousands of applications to use the usually-available SAT test score to weed out candidates from these large applicant pools.

And according to the NYT article, the SAT "measures what psychologists call 'g,' or general mental ability — how well a person might respond to an unspecified challenge. In this age of rapidly changing technology and constantly upgraded skills, 'g' may be a better predictor of success than expertise in a specific software package."

Sources:  "How Businesses Use Your SATs," by Shaila Dewan, the New York Times, March 29, 2014.

Follow up:

  • What do you think about the pros and cons of using SAT scores to weed out candidates for employment?
  • What did the article say were reasons that some employers do NOT use SAT scores in their hiring decisions?

Posted by teri.bernstein

Oculus: what I don't understand might make a fortune for others

04-03-2014 5:59 PM


This image of "The Rift" by Oculus was taken by Christina Ascani for Mashable (linked below)

When I read the news that Facebook had purchased Oculus VR, a "virtual reality" start-up, my first thought was, "Huh? What does this have to do with Facebook?"

The Oculus "Rift" device lets a user experience a video game as though they were inside it. Moving your head can result in dodging a virtual bullet, and turning your head gives a different view of your video game environment, as though you were really inside that environment. This device is still what I like to refer to as "vaporware"--it doesn't exist yet. Oculus developers were trying to raise enough money through Kickstarter to continue development (they'd already raised $2.4 million). Then Facebook came along...and for $2 billion bought the whole operation.

While this solved the Oculus developer's cash problem, it didn't make some of the Kickstarter supporters very happy. David Prosser writes about those concerns in an online Forbes article.

[View:http://community.cengage.com/GECResource/themes/gew/utility/:550:0]
from vimeo


Still--what is in this for Facebook? Do they just want a piece of the video game action?  Or do they foresee the Rift device as a way that Facebook friends can also interact? We'll see...

Source:  "What is Oculus Rift--And Why You Should Care," by Samantha Murphy Reilly, Mashable online, March 26, 2014. 

Follow up:

  • What is "virtual reality" and what makes it different from other media experiences?
  • How do the potential users of Rift use Facebook now? Who might eventually be the users? What potential might this product have as an educational tool?
  • Read the Forbes article written by David Prosser.  What might be the issues for the original Kickstarter supporters, and what bigger concerns might that mean for Kickstarter?

Posted by teri.bernstein

Too late for Obamacare?

04-01-2014 9:38 PM

 


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.

Posted by teri.bernstein

City airport bulldozed by angry activists

04-01-2014 11:37 AM


image--AN APRIL FOOL JOKE--from article linked below

Today--April Fool's Day--the headline in the local paper used humor to discuss a very divisive and high-stakes local issue--the pros and cons of an increasingly more active airport in the middle of a residential community.

Humor is a communication tool that has both rewards and risks--it can take an extreme position (as this photo-shopped picture does)--and thereby put what some people might be thinking "on the table" so that it can be viewed in a less emotionally-charged way.  Humor can also be misunderstood--and it may offend people.  Someone who reacts to the article, believing it to be true, might feel as though they had been made a fool of.  Making others feel foolish is not usually a good business communication strategy over the long term.

Nevertheless, humor can be used gently and effectively to increase people's level of comfort in discussing difficult topics.

Source:  "Santa Monica Airport gets bulldozed by angry activists," by Loco Crazy Simpson, Santa Monica Daily Press, April 1, 2014. 

Follow up:

  • What are the risks of using humor--especially parody--to make a point?
  • Check out the other articles in this issue of the Santa Monica Daily Press.  Which do you think are the most successful? Are there any articles that, on first glance, you thought were NOT parodies?

Posted by teri.bernstein

IRS says Bitcoin is not currency, it is "property"

03-28-2014 10:06 PM

 

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video from BizJournals Bloomberg

Even though Bitcoin has an internet presence as a currency, the Internal Revenue Service sees it differently. This means that transactions in Bitcoin have to be reported on tax returns in a way similar to a stock investment. The plus side is that the ruling by the IRS gives Bitcoin more legitimacy. The downside is that tax consequences have to be a consideration in all Bitcoin transactions.

The rationale used by the IRS in its determination was that Bitcoin "does not have legal tender status in any jurisdiction."

What this means to an individual possessing Bitcoin is that a gain or loss between the date acquired and the date spent now has tax consequences...and there are vastly different consequences for short term transactions (taxed at "ordinary rates"--up to 39.6%) and long term transactions (taxed at "capital gains" rates, which are far less--20%). This may cause a slowdown on transactions in Bitcoin, as holders might "hoard" the currency to achieve "capital gains" rate status.

The ruling by the IRS has shifted Bitcoin from an unregulated status to a traditional investment asset, at least for US taxpayers. For some Bitcoin enthusiasts, this is definitely unfavorable.

Source:  "I.R.S. Takes A Position On Bitcoin: It's Property," by Rachel Abrams, New York Times, March 26, 2014. 

Follow up:

  • What do you think the IRS ruling will have on the use of Bitcoin as an intermediate or virtual currency?  Do you see the ruling as a positive or negative event for Bitcoin?
  • If you were (or are) a Bitcoin enthusiast, what actions would you take with respect to the status of your investment as it now stands?

Posted by teri.bernstein

SUCCESS

03-28-2014 6:46 PM


 

Doesn't everyone want to be successful? However one measures success in one's own terms, the idea of achieving one's goals feels good.

I like Winston Churchill's spin on things. Actually, I think it is the best advice ever. So many biographies of great leaders have been stories of failure upon failure, until success was achieved. Sometimes, even then--it is not the success imagined...but the results are a substantial improvement from the starting point.

The article linked below has advice that can apply to everyone, but it is more in the mode of the "do this and you will succeed" model...it doesn't really address the back-tracking aspect of every success story.

The cartoon below can tell my own story:


image from mpmhspharmacystudents.blogspot.com

Source:  "9 Soft Skills for Success," by Sean Hewitt, Ask Men

Follow up:

  • Actually, Winston Churchill is not quoted accurately in the image above. What did he really say? Does the paraphrasing mean the same thing?
  • Describe a failure from your own life that led to a later success. 

 


Posted by teri.bernstein

Reasonable compensation or crazy windfall?

03-27-2014 9:26 PM

Coca-Cola recently sent out its annual report...and it seems that its executive compensation is excessive--much like the compensation of many U.S. corporations.



image from the New York Times

Coca-Cola disclosed that it planned to pay $13 billion over the next year to its top executives. This represents 14.2% of the value of the company.  David Winters, an analyst at Wintergreen Adviser (and Coca Cola stockholder), who "wants to own Coca Cola stock forever," took exception to this proposed payment, and was surprised that Warren Buffett, who owns a 9.1% stake in Coca Cola, would tolerate this. Coca-Cola's response was inconclusive, but since the compensation package needs to be approved by the shareholders, it remains to be seen whether it flies.

According to the article, "Mr. Winters’s analysis 'is misinformed and does not reflect the facts.'"

The reality is that there are contingencies. Still, the upside is huge. What, really, is fair compensation?

Source:  "A Question of What’s a Reasonable Reward," by Andrew Ross Sorkin, New York Times, March 24, 2013. 

Follow up:

  • Research the ratio between lowest worker's compensation and the highest executive compensation as norms. Check out Japanese business norms, as well as historical (1970's) norms. How does this relate to the current levels Coca Cola is proposing?

Posted by teri.bernstein

Social media manipulates General Motors' reputation

03-27-2014 9:23 PM

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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.

Posted by teri.bernstein

Long-term care insurance hikes rates 90%

03-27-2014 9:15 PM


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? 

Posted by teri.bernstein

Walmart's tax subsidies hurt taxpayers

03-27-2014 9:09 PM

When a corporation publishes its annual financial report, they include income statements, balance sheets, statements of cash flow, other financial statement data, and footnotes to the financial statements. The footnotes are part of what used to be called "full disclosure," but is now referred to as "adequate disclosure."

Wal-Mart's annual report for 2013 was forced to disclose factors beyond their control that could "materially affect financial performance." These included, "changes in the amount of payment made under the Supplemental Nutrition Assistance Plan (SNAP) and other public assistance plans (and) changes in the eligibility requirements of public assistance plans."

In other words, if public assistance plans to its employees were to be eliminated, Wal-Mart would either lose those employees, or have to pay them more to be able to afford food and housing without government assistance. This would decrease Wal-Mart profits.

In other words, the American taxpayer is subsidizing Wal-Mart stockholders.

"SNAP" is known in casual language as "food stamps," and the program has recently been reduced by Congress. $90 per month per family was cut in January...and $29 per month had already been cut in November 2013.

Not only are many Wal-Mart employees subsidized by food stamp programs, many Wal-Mart shoppers get food stamps, so this cut in food stamps could mean a cut in revenue from this population.

It is interesting to note that these cuts are so large that they might "materially" affect net revenues for Wal-Mart. How much has the American taxpayer been subsidizing Wal-Mart?/

Source:  "How Walmart Exploits Taxpayers," by Michael Hiltzik, Los Angeles Times, March 26, 2014. 

Follow up:

  • Research what income levels make an individual, and a family of four, eligible for food stamps. 

Posted by teri.bernstein

Unpaid Internships cartoon: Not Funny

03-23-2014 10:46 AM


part of a graphic story by Matt Bors, published by Upworthy

Here is another story about unpaid internships. It seems as though unpaid internships have gotten out of hand. In 1992, 17% of post-college positions were unpaid; now it is 50%. Many interns do work that for-profit businesses usually need to pay people to do.  They are profiting from unpaid labor.

The argument made by corporations (and sometimes college counselors) is that an unpaid internship can lead to a job.  But, check out these statistics:

worked an unpaid internship....and got a job: 37%
did NO internship....and got a job: 35%
worked a PAID internship...and got a job: 63%

So, it looks as though the employers willing to pay are more willing to employ.
An organization now working to end unpaid internships is FairPay Campaign

Source:  "Half Of Interns Are Victims Of This Illegal Act After College. It's Really Not OK.," by Matt Bors, edited by Joseph Lamour, Upworthy, posted on Facebook, March, 2014. 

Follow up:

  • What is the elephant in the room regarding economic class and unpaid internships? What are the far-reaching consequences of the increase in unpaid internships related to this issue?

Posted by teri.bernstein

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