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Intro To Business


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About the Author

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.

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

03-28-2014 10:06 PM


[View: :550:0]
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


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" doesn't really address the back-tracking aspect of every success story.

The cartoon below can tell my own story:

image from

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



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

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

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

Borrowing money from your boss...good idea or bad?

03-22-2014 10:56 AM

image from

Let's say you have an sudden financial crisis. Your car needs an unexpected, major repair...or your dog needs a few thousand dollars worth of surgery--and you don't have the cash. If you can't reasonably take on (additional) credit card debt, if you don't have family members to ask, or you don't have a major asset such as a house to borrow against, where can you turn for a loan?

Well, there's the "workplace loan." At first glance, it might seem like a good idea. Get a cash advance from your employer and pay it back as a payroll deduction. The "messy" part of setting up the loan contract can now be handled by middlemen, such as Think Finance's product called "elastic." Through this vehicle, loans of $200 to $1000 can be made...with a fee of 5% of the loan amount, plus interest.

Another company, FairLoan, offers a similar interest rates ranging from 18% to 30% plus a 5% loan origination fee.  This sounds pretty pricey to me.  The set-up is starting to remind me of historical "company towns," where employees seemed to be taken care of by companies that built housing around coal mines or factories and provided stores and short term credit.  But what resulted over time were employees that became so indebted to their employers that they could not move or take any stand against company policy.

Also, the employer controls the interest rate and fees. The only other source of emergency loans for those with limited credit resources is the "payday lender," which often charges up to 300% on an annual basis.

image from

Source:  "Take Out A Loan--From Your Employer," by Gigi Douban, Marketplace American Public Media, March 21, 2014. 

Follow up:

  • What is a "payday loan"? What are the pros and cons of this type of loan?
  • What unforeseen consequences might be the result of an employee owing money to its employer, in terms of workplace events? How can a third-party facilitating the loan mitigate these possible consequences?

Posted by teri.bernstein

Toyota criminal penalties: Are fines a real punishment? Why isn't Toyota in jail?

03-20-2014 11:33 PM

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:  "Toyota 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.

Posted by teri.bernstein

Coffee convenience bad for the environment (and expensive)

03-20-2014 11:31 PM

image from

As a committed coffee enthusiast, I periodically pine for a Keurig single-service brewing machine. The problem is, the little cups that that machine requires are not only expensive--they are bad for the environment. Still--the convenience and the visual artistry of it all does speak to me.

I have to admit that the first time I tried to use this machine--at a motel--I had no idea how to manage it, and I made every mistake, creating a colossal mess. Now, however, I am an expert, and each morning--as I am either making my pot of home brew or walking the 1/2 a block to my neighborhood coffee house--I fantasize about what it would be like to have one of those splendid little single-brew machines.

I'm not alone. In 2008, single-pod coffee sales were $132 million; in 2013, they were $3.1 Billion.

But there are issues.

First, to properly recycle the remains of the pods means separating the aluminum top, from the plastic pod, from the wet coffee. Do users really do that? Probably not. Moreover, the #7 plastic that almost all of the K-cups are made from is not recyclable.

In addition: there are a lot of tiny cups to recycle. To put it in perspective, the 8.3 billion cups produced last year by Green Mountain for Keurig machines would circle the earth more than 10 times.

For now, I'm sticking to home-brewed or my Tall red-eye half-caf dark in a personal cup at my local coffee place.

Source:  "Your Coffee Pods' Dirty Secret," by Maddie Oatman, Mother Jones, March 19, 2014. 

Follow up:

  • Make a chart comparing the cost of a cup of coffee, 5 cups, 10 cups, 20 cups, 100 cups and 365 cups brewed vs. K-cup. What can you conclude from this analysis?
  • What are all of the environmental and health issues of these cups, according to the article?

Posted by teri.bernstein

The "Income Upshot" tool--what does it say about Homer Simpson and one of the Two Broke Girls?

03-16-2014 4:36 PM


the income upshot tool link

This article specifically addresses two fictional incomes--that of Homer Simpson and that of one of the "two broke girls" living in Brooklyn. It is fascinating to adopt several different personas to see what "big data" might say about some basic demographic data.

I input my personal data and found myself to be riding with the majority on all parameters that were reported. Am I deceiving myself to think that I would NOT have been with the majority on other parameters?

Source:  "Income Upshot: Homer Simpson Edition," by Jolie Myers, Marketplace--American Public Media, September 12, 2013. 

Follow up:

  • Did you use the link to fill in your income? Is the assessment of this tool relevant to your personal situation?  What do you think this link is trying to sell or monetize?
  • What information can "big data" analyzers provide? What are the most relevant parameters, in your opinion, to marketers of various products?
  • What other parameters might be important to marketers? Do you think the selected parameters were relevant and appropriate?

Posted by teri.bernstein

How to Sell a Box of Frozen Seafood

03-16-2014 4:31 PM

from article linked below, by Primary Hughes

This is one person's story of his first job in Sales.  The product? Boxes of seafood and steaks. The territory? Cold-call door-to-door sales in the San Francisco Bay area.  The interview and training? Ride around with another salesperson in their truck until you had 6 sales in one day--then you get your own truck and got to work purely on commission. 

Here is a brief account of the young salesperson's experience:

  • His first "trainer" was "high on confidence" even though he did not look the part of a successful salesman.
  • He got to witness some failed attempts by his trainer; he had some failed attempts on his own.
  • He witnessed his trainer's success when the trainer was smiling, relaxed and assertive.
  • The trainer had sold everything in his truck, but the new salesperson had sold nothing. The trainer said, "You're a real college boy."
  • Trainer #2 was charming, British, and got traction with customers by lying. The new salesperson managed to get qualified for his own truck with this trainer.
  • Things went well for a few weeks, but in the subsequent weeks: 1)$250 of merchandise (taken home over the weekend) spoiled; 2) The British salesperson sold the new salesperson a list of "sure things" for $300; and 3) the new salesperson brought home some shrimp and started an electrical fire in his landlady's kitchen when frying it.
  • The new salesperson quit...turned in the truck and was $300 short of enough money to pay for the damage for the fire. He hit up his father for the damage.
  • The young salesperson met up with Trainer #1 after he quit, and took a "big picture" view: Trainer #1 was having a good time...but the young salesperson had been dreading to go to work.

What does this all mean?

My guess is that "cold call" Sales are tough to finalize. Still--cold-call sales are where-it's-at in terms of drumming up new business, one of the keys to success. Would you have the grit to do this job?

Source:  "A Man, a Truck and a Load of Stuffed Shrimp," by Matthew Sharpe, New York Times, March 15, 2013. 

Follow up:

  • What did "high on confidence" really mean in terms of the sales day?  How did this work out? What was the most successful technique?
  • What do you think the "takeaway" is from this tale, regarding the Sales profession? Does the price of these goods compared to the price that could be obtained in a storefront impact your opinion?
  • Comment on the story-form delivery system of this tale vis a vis a talk about Sales that might typically be held at a Sales convention.
  • What does "cold call" mean?

Posted by teri.bernstein

China wants U.S. milk

03-16-2014 4:23 PM

image from powdered milk produced by Fonterra, and were part of a bribery scandal.

Above is a picture of a shopping aisle in China--fully stocked with powdered milk. In the above photo, however, the milk is being removed because of a bribery scandal involving a foreign company that paid to have its product stocked on these shelves.  The market for non-domestic milk product in China is particularly high for two reasons--breastfeeding is unpopular, and the 2008 melamine-tainted Chinese milk that poisoned over 100,000 infants is still on the minds of parents.

Responding to this demand are tiny farming towns in the United States.  The town of Fallon, Nevada, has built huge processing plants to convert milk into powdered milk for shipping overseas--since shipping to nearby California has been thwarted by "Real Milk from Real California Cows" advertising campaigns.

image from Fallon, NV production plant from the article linked below

Because U.S. milk consumption has plateaued, the new Chinese market represents a growth opportunity.

Source:  "China's thirst for milk gives dairy farmers a boost," by David Pierson, The Los Angeles Times, March 15, 2014. 

Follow up:

  • What might happen to domestic milk availability and prices as a result of factories being built to process powdered milk for overseas shipment?
  • Is this production and sales system sustainable? Why or why not?

Posted by teri.bernstein

"How to Rob A Bank" sung by Willy Porter

03-10-2014 3:15 AM


/gew/utility/ :550:0]

I was at a concert this past weekend at my local guitar shop. What a surprise it was to hear this song about the benefits of white collar crime over the "driver, a Nixon mask and a gun" version of bank robbery. Some of the song's narrator's suggestions for success:

  • Secure a seat on the Board of Directors
  • Run with the country club set
  • Get a foundation to donate to his schemes
  • Get Congress to subsidize any failing business
  • Blackmail government by threatening layoffs
  • Unchecked greed

The benefits:

  • Respect from family, who love receiving gifts
  • Bonuses even when you've been accused of wrongdoing
  • Lawyers to bail you out of trouble

Of course the song is done for humor, but there is certainly truth in the message that "white collar crime" often does pay.

Source:  "How To Rob A Bank" by Willy Porter, YouTube, and live at McCabe's, March 8, 2013. 

Follow up:

  • What is "white collar crime"?
  • What recent legislation has tried to increase penalties for financial crimes? How successful has it been? What has been the response of the business community to this legislation?

Posted by teri.bernstein

Whistleblower gets shafted by agency shift

03-10-2014 3:12 AM

from Chris Slane's cartoon portfolio

In 2010, the Dodd-Frank law created 10% to 30% rewards for whistleblowers who filed complaints with the Securities and Exchange Commission (SEC). Under this law, a former mortgage underwriter filed a complaint against SunTrust, alleging that SunTrust did not disclose that "tens of billions" worth of loans sold to Fannie Mae and Freddie Mac "had fallen outside of the buyers’ quality guidelines."

The complaint was filed in 2012, and the SEC did not take direct action on it.  Instead, it passed the complaint on to the Justice Department. Under Dodd-Frank, the whistleblower can't collect if the complaint is not resolved within the SEC.
Congress probably did not anticipate this loophole when they passed the law. The attorney for the whistleblower is arguing that the Justice Department action is based on the evidence in the original complaint filed with the SEC, but it remains to be seen whether the substance of the whistleblower's actions will be rewarded at all.

The intent of the Dodd-Frank legislation was to uncover and prevent events that led up to the financial collapse triggered by over-valued mortgage instruments in 2008, and it seems as though the government got the benefit of the inside knowledge, but has proceeded in a way that will probably side-step the anticipated compensation. 

Source:  "A Whistle That's Lost in the Crowd" by Gretchen Morgenson, New York Times, March 8, 2014.

Follow up:

  • Have you ever been in a situation where you witnessed wrongdoing by those who ranked above you at work? Describe the situation and the courses of action you considered.
  • What are the risks associated with being a whistleblower? Are there any rewards other than monetary rewards? Would you bring a complaint to the SEC, knowing what happened in this case? Should Congress take action to amend the law?

Posted by teri.bernstein

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