• Gross National Happiness vs. GDP

      image from ingenesist.com 

    bhutan tourism

    The recent wedding in Bhutan of King Jigme Khesar Namgyel Wangchuck to Jetsun Pema on October 15, 2011 has brought the concept of Gross National Happiness vs. Gross Domestic Product (GDP) into the limelight once again.  

    According to the article, "Emulate Bhutan's Way to Gross National Happiness (GNH)" by Soo Ewe Jin (Malaysia Star online), the concept was first developed by the current king's father in 1972. Instead of measuring success and wealth solely on the economic criteria of the GDP, this king also wanted to measure success on the well being of Bhutan's citizens. Over the years, the concept has gained popularity and the concept has spread to economic theory and international rankings (see Gross National Happiness rankings)

    GDP is measured in one of three ways, all of which address economic production: the expenditure method, the production method and the income method. The formula for the expenditure method is:

    private consumption + gross investment + government spending + (exports - imports) = Gross Domestic Product

    A straightforward but comprehensive explanation of all three methods and their components can be found on Wikipedia.

    Gross National Happiness can seem more difficult to measure; the issues are addressed in a policy paper by Med Jones of the International Institute of Management. More simplistically, GNH is measured on four parameters, or "pillars": 

    • economic self-reliance
    • respect for the environment 
    • the preservation and promotion of culture
    • good governance in the form of a democracy

    These national factors are interrelated and build from the bottom up, as delineated in this chart:

    image from document linked below by Pamela Shreiner, page 7

    These concepts have been adapted and incorporated into academic business and economic planning. In a paper entitled "Exploring Gross National Happiness Using Balanced Scorecard and Appreciative Inquiry", submitted to the Second International Conference on GNH, Pamela Schreiner provided a restatement of this chart on page 3, as it would apply to an individual business. You can download the graphic as part of the paper (.pdf, linked above).  The content of the graphic--again, to be read from the bottom up--includes:

    Financial:                                      Be Profitable

    Customers:                                  Increase Customers; Delighted Customers

    Internal Business Processes: Decrease Production Time; Increase Production Quality

    Learning and Growth:                On Time Data for Employees; Happy Employees

    Schreiner also points out that the currently popular decision making models are more holistic than the economics-focused GDP, and are more aligned with the concepts of Gross National Happiness. In the current environment of economic uncertainty, the sustainable models have compelling appeal. This Venn diagram shows everything in balance.

    graphic from 14wbpolicyglossary.wufoo.com

    Follow up:

    1. Access each of the links above until you can answer this question:  What countries rank highest in GNH 2006, according to the article at the MSN Money site? What do these high ranking countries have in common?  How are they the same and different from the United States? 

    2.  Where is Bhutan?  What has been its political structure? What is the philosophy upon which the pillars of progress are built, according to Soo Ewe Jin's article?

    3. If you want to hear a lecture on this topic, access this video  LINK from the GNHUSA conference, June 2010.  The introduction to the speaker is pretty dry, but hang in there.  The speaker, Eric Zencey, directly addresses GDP compared to measures of sustainable well-being. 

    After you watch, answer this question: What are some of the problems with GDP as a measure of economic activity, according to Zencey?

  • Disney Channel expands to Russian TV


       Mickey Mouse in "Mickey's Message From Mars," ...according to YouTube

    I wonder how Donald Duck would sound if he were dubbed in Russian? Would they try to translate "Mickey Mouse"?  I see that some content in Russian is available on YouTube, but those who live in Russia might soon be seeing a substantial increase in what is available.  This week, the Disney Corporation announced that they had finally succeeded in buying 49% of a Russian broadcast TV station that reaches 75% of the Russian TV audience.  This will enable them to establish a Disney Channel in Russia, according to an article in the Media Decoder by Brooke Barnes (NYT). 

    Robert A. Iger, Disney CEO, sees substantial room for growth in this new venture. Moreover, the marketing strategy used by Disney involves using the Disney Channel to market other merchandise and create a desire to travel to Disney theme parks. Disney plans to export entertainment content to Russia and also develop new content, as a part of Russia's desire to grow its own entertainment industry. 

    Follow up:

    1.  Use the internet, if necessary, to understand the difference between broadcast and cable televsion. What has been Disney's experience with respect to Russian cable television, as opposed to this new venture, which is a broadcast television channel? 

    2.  According to the Media Decoder article, what other country's market has Disney tried to penetrate without success, due to bureaucracy and foreign media restrictions?  Use the internet to see if you can find out if any other US television station has penetrated that market yet. 

  • India's ITC company as a role model for long term profitability

    image from sukumar-enterprise.blogspot.com: ITC training farmers

    Is it necessary for a corporation to be greedy to succeed in today's business environment?  S. Sivakumar doesn't think so.  His article, part of the HBR Blog Network, "What Business Should do about Occupy Wall Street," delineates some of the ideas in the case study, ITC eChoupal: Corporate Social Responsibility in Rural India by Saurabh Bhatnagar and Ali Farhoomand.  [Note: if the link to the blog article expires, it can be accessed in this ARCHIVE ] S. Sivakumar is head of the Agri & IT business group, which is part of ITC, a corporation in India, and he also developed ITC's eChoupal business model, which is the subject of the case study.

      S. Sivakumar

    Sivakumar notes that capitalism, as it has evolved in practice, lacks the ability to address issues of economic and social inequity.  Capitalism, unchecked and unexamined, has evolved into a vast majority of "have-nots" surrounding a few "haves."  He believes that this situation has created the growing global unrest that is exemplified by the Occupy protests, and has produced the slogan, "No Bulls No Bears Only Pigs."   The eChoupal model addresses both sustainable social values and long term stockholder profits.  For 15 years, ITC has had multiple business goals: 

    • "societal value creation" through environmental improvements
    • "societal value creation" through improvement of people's lives
    • shareholder value creation

    One example of how this works, as described in the Case Study links, is in the creation of pricing transparency for food products.  Previously, (poor) farmers were unaware of the market conditions involving the products they brought to market to sell, and were at the mercy of middlemen who manipulated the prices. ITC set up internet kiosks in villages, so that the farmers would know the true value of their products, and be able to maximize their revenue.  ITC, the ultimate purchaser, still paid a fair price for the goods, but middlemen could no longer make unfair profits.

    This balanced approach, which created a better business environment for the producers of the goods while not harming corporate profits of the ultimate buyer, circumvented a pocket of unfairness and profit-taking.  This approach mitigates against the sense of unfairness and hopelessness that has let to the Occupy protests. It would be interesting to brainstorm how the five lessons that are delineated in Sivakumar's article could be applied to large financial and manufacturing multinational corporations elsewhere. 

    Follow up:

    After reading Sivakumar's article linked to the blog or the archive, answer the following:

    1. What environmental successes has ITC experienced over the last 9 years, specifically with respect to water, carbon-footprint, and recycling?

    2. What shareholder and related analytic successes has ITC experienced over the same time period?

    3. What are the 5 lessons that ITC has learned from implementing the eChoupal business model?

  • Aim for great products...or just care about the profits?

    clip art from columbianews.com

    Should a CEO aim for great products or focus on maximizing profits? James Allworth writes about this quandary on the HBS Blog Network: "Steve Jobs Solved the Innovator's Dilemma." Business school education tends to focus on ways to maximize profits--because true product innovation can be "disruptive."  This thesis was addressed in the book, The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail, by Clayton M. Christensen...and it was one of Steve Jobs' favorite books.

    image from dnewsglobal.com

    After Steve Jobs was fired from Apple, John Sculley and other professional managers focused on maximizing profits. When Jobs returned in 1997, he shifted the focus to product development.  This, according to an executive who was interviewed by Allworth, was in contrast to Microsoft, which would analyze where revenue was not being maximized, and create a product to fill that niche. Most businesses function more like Microsoft.

    The "Innovator's Dilemma" is analogous to a "Student's Dilemma":  Should a student focus on getting the highest grade possible? Or should the student focus on learning the material as well as possible?  A lot of mental energy--and occasionally even some cheating--is involved when the student holds the "A" grade as the highest value.  The end justifies the means.  A student devoting all of their energy toward mastery of the subject matter will have a different experience, and will probably retain the information and the competencies better than the student focusing on the short term goal of the grade. 

    So, how do you solve this dilemma? Do you aim for mastery of the subject matter...or just care about the grade?

    Grade Grubber: read definition at urbandictionary.com

    Note:  The HBS Blog Network can be accessed online for free, but articles are available only for a limited time. If the article linked above has expired, I have it archived  HERE
    The HBR Blog Network is also available when you have a paid online subscription to the Harvard Business Review

    Follow up:

    1.  What does the "Innovator's Dilemma" article say about "disruption," and what causes it, in Allworth's words, to "melt away"?

    2.  What Apple product is currently "disrupting" an older Apple product?  Name both products.

    3.  What approach do you take toward your courses and your grades?  Why does that approach work for you?  

    4.  If you are employed, analyze the approach taken by the company that you work for. Is management more interested in providing a great product and/or great service?  Or is it more interested in the "bottom line"?  What evidence supports your position?

  • Managing your receipts with an app

    image from ehow.com

    Nowadays, entrepreneurs aren't "building a better mousetrap." They are building a better "app." A new app called "Lemon" aims to solve a problem that many people find annoying: PAPERWORK. Who likes to file receipts? When pundits make fun of the agony of filing one's income taxes, a classic image is that of a weary taxpayer dealing with a shopping bag full of un-organized receipts. 

    The app and the current and future business model is discussed in an article by Ann Carrns on the NYT Bucks Blog:  "Lemon Makes Digital Copies of Paper Receipts." 

    image from androidheadlines.com

    Here is what this Lemon app can do:


    • copy your receipts in the store
    • file them digitally by category
    • give you an account to which emailed receipts can be sent (Apple and Best Buy are doing this now)
    • provide printed copies of receipts from your account, if you need them for returns or a tax audit
    • save you the trouble of finding and sorting receipts, many of which become less readable over time
    • be a more sustainable alternative to paper receipts


    What else might this app do in the future?  Carrns ponders that the account you set up to avoid giving out your email address to a spam-generating retailer might provide data to be aggregated and sold to marketers in the future. 

    I was baffled by the name.  But one of the co-founders, Wences Casares, said that "Lemon" was a digital domain he had purchased several years ago, and he likened his product to "making lemonade from lemons." A summarized digital record is the better outcome made from a mess of paper receipts. 

    Follow up:

    1.  Are you interested in this app? Do you have any worries about privacy?  Do you worry that retailers won't accept your receipts?  How does Mr. Casares respond to questions about the acceptability of a digital receipt?

    2.  How do you handle your receipts now? Do you file a tax return and take any tax deductions? If not, have you watched others in your family deal with receipts in a way you might see yourself adopting?


  • Dream Job or Nightmare? Moving from Plan B to Plan C

    Here is Rona Economou, lawyer turned Greek food stall operator. Photo by Evan Sung in the NYT

    Do you have a fantasy about quitting your job--or not entering the rat race in the first place?  Do you ponder starting your own business instead? Have you always wanted to run a restaurant or a bakery?  Grow food on an organic farm?  Make artisanal cheeses? Do you think about foregoing a Type A lifestyle and living a more fulfilled life in career Plan B? It turns out that it probably isn't as glamorous as it seems.

    In a recent article in the New York Times, Alex Williams puts forth this possibility: "Maybe it's time for Plan C".  He follows the career change made by Rona Economou.  She was working as a Manhattan attorney when she was laid off.  She decided it was time to pursue her fantasy career and live a better life.  She opened Boubouki, a food stall that serves Greek food.  

    Unfortunately, instead of living a healthier life-style, she is getting up at 5:30 am to bake baklava and other treats.  She spends her day off, Monday, doing paperwork. She doesn't have benefits or perks.  Several other young professionals-turned-entrepreneurs have had similar experiences.

    As Williams puts it: "The dream job is a 'job' as much as it is a 'dream.'

    Follow up:

    1.  Williams also writes about the experiences of Mary Lee Herrington, Matthew Kang, Charan Sachar and others.  What were their Plan B careers?  How did things work out for them?

    2.  What is your Plan A career path?  Do you have a Plan B?  Have you taken a job or an internship in either of these areas?  Have you considered getting an internship in a "fantasy career," knowing it is probably easier to try things out as a student that it might be to quit a job after you've adjusted to the perks of working life? What have you learned from your experiences, or what do you hope to learn before you graduate? 

    3.  How does Ms. Economou feel about Boubouki at this point? Does she want to return to her old job?  What about the others?

  • "Margin Call": a movie about risk (mis)management

    poster from "Margin Call"

    David Denby says in his New Yorker review of "Margin Call" that it is "easily the best movie about Wall Street ever made." It tells the story of one 24-hour period in 2008, when a hierarchy of brokers, analysts and managers at a financial corporation parallel to Lehman Brothers confronts an inconvenient truth. As of this day, they realize without a doubt that Investments that they have packaged and sold and repackaged and re-sold now have no underlying value.  The inflated market price of these financial instruments are about to tumble, and they find themselves developing ethically questionable strategies to try to curb losses to themselves and to their investors and stay alive as a business.  

    The compelling relationships depicted in the film dramatize the way that human beings, working as part of an organization, can fool themselves about reality.  The players reinforce the incremental actions of their colleagues--or try to compete with them. In forming a team that focuses on the details of sustaining their business model, they miss the big picture: the portfolios of derivative and other other investment instruments they have packaged are based on faulty assumptions and are nearly worthless.



    this trailer and the film was produced by a consortium of independent production companies, (see IMDb) via YouTube

    The movie opened October 21, 2011.  Read or listen to other reviews at:

    Follow up:

    1.  Research the real-life Lehman Brothers situation on the internet.  What was the actual date that paralleled the movie events?  Who were the key players?

    2. Read the reviews and/or see the movie.  Who is/are the villain(s) in this situation?  Or is it something in the business environment that you can pinpoint?

  • Starbucks wants you and me to help create jobs

    photo by Paul J. Richards, AFP, Getty Images, on www.scpr.org 

    Howard Schultz, CEO of Starbucks, has another good idea: Americans can "micro-lend" to other Americans, thereby providing the funding for small businesses that financial institutions are shying away from in today's economy. This is what small businesses need to create new jobs. In an op-ed piece in the NYT, "We Can All Become Job Creators," Joe Nocera delineates the plan that will be seeded by a $5 million donation by the Starbucks Foundation.

    On November 1, 2011, Starbucks and the Starbucks Foundation will roll out a process where they will be the middlemen between customers that are willing to donate money, and Community Development Financial Institutions (CDFIs) that are set up to make small business loans.  Typically, CDFIs make loans to "underserved" populations, so they are in the habit of making loans that big banks generally find too risky or too small to bother with.  To facilitate this plan, Starbucks got connected to an umbrella organization of CDFIs, called the Opportunity Finance Network, run by Mark Pinsky. Customers will make donations to "Create Jobs For USA," a non-profit, and the donated funds will be used as collateral to make 7 times as much money available to lend through the CDFIs. Customers making donations of $5 or more will get a wristband, courtesy of Starbucks.



    Maybe that wristband will turn into "the" accessory of the season...or the perfect holiday gift for "someone who has everything." 

    Anyway, do the math.  If there are 10 million Starbucks customers, and they each give $5, that's $50 million.  Once that's leveraged at 7 times its value, that's $350 million of funds available for small business loans. Neighbor to neighbor. American to American. 

    Sounds like a win-win.

    Follow up:

    1.  Read up about Microlending at HowStuffWorks.  [The good information is not in the first page of article, but in the numbered articles 1-6 linked from that page.] Also check out Microcredit at Wikipedia.  Who are typical recipients of microlending funds?  Do an internet search to find out the names of the global organizations that support microlending. What person from Bangladesh was a microlending pioneer?

    2.  When big banks are involved in making certain small loans (called "banking on bicycles"), what has sometimes gone wrong? 

    3.  Can you think of an argument against Howard Schultz's plan?  Has he thought of everything? Has he missed something? Consider what you may have read in one of the supporting articles before you answer this:  What is the absolutely best possible outcome of Howard Schultz's plan? Read the article at scpr.org if you need some help thinking of things that Schultz hasn't considered.

    4. Howard Schultz's "big idea" from August was not very well received.  What was it? 

  • A "53% guy" gets a response: Opposing viewpoints about "Occupy Wall Street"

    In response to the Occupy Wall Street (OWS) protest movement, a young man recently posted the photo above as part of a "53 percent" website.  This website was set up be parallel to but offer a different viewpoint from the "We are the 99%" stories that complement the OWS movement.

    An open internet letter in response to the posting by this particular "53% guy" was featured recently in The Daily Kos.  The letter was written by Max Udargo.  It is remarkable as a "back at you" letter in that it is full of compassion. Because it is written without rancor or judgment, the letter demonstrates tools that we can use in the business world to communicate disagreement without making enemies.  

    The points made in the original post by the "53% guy": 

    • he is a former Marine and works two jobs now
    • he worked 60-70 hours per week to put himself through college
    • he hasn't had more than 4 days in a row off in over 4 years
    • he doesn't blame Wall Street for his situation
    • he doesn't think anyone else should blame Wall Street

    The points made by Max Udargo, in his response:

    • he has honor and respect for how hard 53% guy works, and for his service as a Marine
    • he doesn't think that the workload assumed by this young man can be maintained when he is 50
    • he thinks that the American dream is closer to the 40 hour workweek
    • sickness or family responsibilities would be difficult to accommodate under the current conditions of the 53% guy's life
    • the 53% guy and all people everywhere deserve better

    The letter writer disagrees with the young ex-Marine in a fundamental way, but he has chosen to communicate his disagreement first by acknowledging and honoring the 53% guy's awesome qualities of self-discipline and commitment. Udargo takes the time to explain the ways in which he is on the 53% guy's side. He then explains the principles underlying the OWS movement, and how those principles might overlap with the 53% guy's own values. Udargo steers away from judging the 53% guy in any negative or possibly mis-understandable way. When his tone shows any emotion or judgment, it is directed at the historical actions of financial corporations. Udargo uses the words "we" and " strong ally" to convey where his sympathies lie--with the 53% guy.

    Follow up:

    1.  What is the fundamental point upon which the 53% guy and Udargo disagree?

    2.  What techniques does the 53% guy use to convey his point of view?  How do they differ from the techniques used by Udargo?

    3. Think about a recent disagreement that you had with someone at work, at school, or in your personal life. What techniques did you use to convey that you disagreed?  What techniques did the other person or people involved use? How did it play out? 

  • Entrepreneurial mindset vis-a-vis investments

    Drawing and article referenced are by Carl Richards, a certified financial planner in Park City, Utah.
    His sketches are archived on his personal Web site, BehaviorGap.com
     and appear on 
    the NYT Bucks Blog.  

    In a recent NYT Bucks post, "The Surprising Money Habits of Successful Entrepreneurs," Carl Richards addressed the value to entrepreneurs of human capital and financial capital. He defines "human capital" as the ability to earn money, and he defines "financial capital" as our savings and investments. Richards theorizes that rational investors have different goals for these two types of capital:

    • One's own human capital should be concentrated, educated, and compounded. 
    • One's financial capital should be diversified and protected.

    Richards has observed that entrepreneurs are very good at managing human capital in creative and focused ways.  This, he thinks, is because personal human capital is an arena that is under the control of the entrepreneur.  In contrast, the stock market is not an arena where an individual can exercise any control.  This does not appeal to the personality type that usually succeeds as an entrepreneur. Therefore, Richards finds that entrepreneurs tend to invest more conservatively, compared to the risk tolerance they exhibit in their primary businesses.

    Follow up:

    1.  What does Richards call his theory regarding human and financial capital?

    2.  What does Richards suggest as ways to improve one's personal human capital?

  • Can you live on $1000 a month?

    A few days ago, there was a review in the NYT Bucks Blog of an online game called "Spent."  [Try the link for yourself if you like, but see my note at the end of the article]  The game challenges participants to see if they can live on $1000 per month. Janet Northern, director of communications for the advertising agency McKinney, says that the game has been played more than 1.7 million times. It was developed by McKinney to raise awareness for a group called "Urban Ministries of Durham," which helps people in need.

    Here's how the game works:  First, you accept the challenge.  Then you apply for various jobs--none of which is going to generate much money.  It costs a certain amount to live and to get to and from your job, and the game keeps track of what is in your virtual account.  You are given opportunities to make several personal and ethical decisions along the way--decisions which impact your cash flow and the well-being of you and your family. 

    The person who had the original idea for the game, Jenny Nicholson, wanted people to confront what they themselves might do if they found themselves in a situation where no choice looked good.  (Ms. Nicholson grew up in poverty, but now works for McKinney.)

    I wanted to try this game,  so I used my Mac and clicked on this link: SPENT    It loaded a page that said "$1000", followed a minute later by a page that said "$0", and then a page asking me to accept a challenge. "Prove it" was the button I was to push.  I tried this several times, but I was unable to make it past this page. Since the link was OK, it may have been that I did not have the correct software installed on my laptop to run the program. I persevered...on different equipment.

    On my (ancient) PC-compatible desktop I found that the program ran extremely well.  I failed on my first try to make it through the month without overdrawing my account.  I spent that attempt making decisions in the way I am accustomed to making them in real life.  On my second try, however, I "succeeded"--but I didn't get my toothache fixed and I turned down several opportunities to do the right thing.

    Follow up:

    1.  Try to link to the program at  SPENT .  Take my advice and try it on a PC.  Are some of the choices ones which you have faced? All things being the same, could you make it through a second month...or did you use up some of the $1000 cushion you were granted to start the game?

    2. If you are interested in personal finance, check out the New York Times "Bucks" Blog on a regular basis.  What is the most recent post about?

  • Insider trader gets 11 year prison sentence


    [View: :550:0]

    WSJ's Law editor Ashby Jones explains Raj Rajaratnam's sentence
    (after a 15 second ad...)  WSJ Full Article LINK

    Raj Rajaratnam, once the head of a multi-billion dollar hedge fund called the Galleon Group, was sentenced yesterday to 11 years in prison for insider trading. He also has to pay a fine or $10 million and return $53.8 million in ill-gotten gains. Prosecutors had sought a longer term of over 20 years, but the judge was lenient, partly due to Rajaratnam's health problems, which include diabetes and failing kidneys.  He is 54 years old. 

    What is "insider trading" and why is it wrong? Basically, insider trading involves obtaining information that, if made public, would influence the movement of stock or other investments that are publicly traded. The person with the information can make investment decisions that are a "sure thing" based on a prior knowledge of events or financial circumstances. This prior knowledge is unfair to other investors.  The insider trader (and his or her clients) can then make money based on this secret knowledge.  Others don't have that chance. 

    Rajaratnam built up many relationships over time, and "wined and dined" his contacts and clients extensively.  This diagram of his contacts, titled "Galleon's Web," was published in the Wall Street Journal article:


    An interactive version of this graphic is available at this link:  WSJ Galleons Web

    For the fascinating story of how the insider trading relationships evolved, and how the case was investigated, read "A Dirty Business" by George Packer from the June 27, 2011 New Yorker.

    Follow up:

    1. Read the articles to get a sense of Rajaratnam's career path. Where did Rajaratnam get his master's degree?  Who were his employers before he set up his own business?

    2. What was the "corporate culture" like at the Galleon Group? Does it suggest anything about top management's ideas concerning business ethics?

    3. When did the insider trading investigation begin? What other individuals were initially involved?  Do you think they knew, at the time, that what they were doing may have been illegal?

  • ObamaCare benefit? Blue Shield of CA to return $283 million in excess profits

    Partially as a result of the recently passed federal health care bill, Blue Shield of California is again returning excess profits to subscribers, according to stories at Bloomberg and the Los Angeles Times. ObamaCare was written with this provision: insurers must spend 80% or more of their premiums on medical care for subscribers--so that no more than 20% of premiums can go to administration or profit.  Blue Shield, whose premiums skyrocketed last year, made a commitment to return any profits that exceeded 2% of its revenue.  If you do the math, this means that a maximum of 18% of the premiums paid to Blue Shield could go to administrative salaries and other costs this year. This is why they are paying back $283 million dollars, on top of the $167 million they announced in June and paid back this month.

    For Blue Shield subscribers, this means that they will see another credit on their December bills, and their payments will be reduced for that month.

    Blue Shield CEO Bruce Bodaken claims that the profits came about because subscribers are postponing surgeries. Ironically, according to the LA Times article, these excess profits come in a year when subscribers have also seen an increase in benefits due to ObamaCare.  Mandated now are free services for vaccinations, mammograms and cancer screenings.  In addition, subscribers now have the privilege of keeping their otherwise un-insured adult children on the parents' plan until the kids turn 26. 

    Still, ObamaCare has a lot of detractors:


    read about the latest push to undo Obamacare at this LINK 


    Follow up:

    1.  Do you have health insurance?  Do you pay for it privately?  Get it through your own employer?  Are you on your parents' plan? Are you aware that if you are over 18, prior to ObamaCare, you would lose your insurance under a parents' plan in the month your college enrollment fell below 12 units a semester?  Or if your parents did not send in your schedule of classes and transcripts each semester?

    2.  How much does your insurance cost per month?  To be more specific: If it is paid by an employer--how much does your employer pay?  What percentage of your monthly income is this cost? What is your insurance deductible per year? If you are from another country that has government-provided health insurance, how is that paid for? 

    3.  Have you or anyone you know ever been hospitalized with a major illness?  What was the total cost of that illness?  What would be the financial impact of a major illness or accident if there were no medical insurance?  Would it affect the quality and type of care received, or the outcome of the treatment?

    4.  How do employers feel about offering medical coverage as a benefit? What are the short and long term financial issues for employers regarding offering medical insurance as a benefit?

  • Banking deregulation, the middle class and Wall Street

    image from fastcreditcardmerchant.com 

    How much money to you think banks made last year from credit card penalty fees alone?  

    I'm not asking about interest charges.  I'm asking about the $35 for a payment that is posted a day late. Or another $35 for going two dollars over a $500 spending limit. Sometimes these fees are disclosed only in the fine print that was on the thin sheets of paper that arrived with the first bill...or were part of the box on the computer that had to be checked "I agree" before a person could proceed.  

    According to the article, "The Woman Who Knew Too Much," in the November 2011 Vanity Fair, banks made over 22.5 billion dollars in penalty fees alone last year.  And they spent some of those revenues lobbying against bills that would grant additional transparency in financial documents.  In particular, banking institutions have opposed the creation of the Consumer Financial Protection Bureau (CFPB), which was organized under the direction of Elizabeth Warren.  Warren, a Harvard professor, became a champion of the middle class after a "conversion" experience in 1979. The Vanity Fair article, by Suzanna Andrews, tells how Warren set out to prove that Americans who were filing for bankruptcies "were a bunch of cheaters," but found, after an exhaustive study with two other writers, that random misfortune in a life of hard work and sacrifice was the most likely causal factor of middle class bankruptcy. 

    Decades of research have put Elizabeth Warren into a position where she is as knowledgable about financial markets and undisclosed practices as the executives at the highest level of the banking and financial markets.  Yet, she does not see herself as a stakeholder in that circle, but rather as a stakeholder in the middle class.  Her special knowledge leads her to believe that markets need to be regulated: 



    Markets need to be regulated from YouTube

    Of course, not everyone agrees with her. Glenn Beck responded negatively to her comments to an audience in Massachusetts.  Community banks were wary of legislation during the CFPB work Warren did. Warren clarified that she saw community banks as different entities from multi-national banking institutional and investment banks on wall street, in an interview uploaded by GOPFinancialServices.com . It is clear that the financial establishment resists the disclosures and simplifications that Elizabeth Warren is calling for.

    Follow up:

    1. For those of you who are film buffs, the title of the Vanity Fair article alludes to the Hitchcock film, "The Man Who Knew Too Much," in which a regular family on vacation in Morocco stumble upon an assassination plot. Read the synopsis of the film at IMDb. com, if you have not seen the film.  How might the plot of this film be analagous to the subject matter of the article with a similar title?

    2.  According to the article linked above, when did banking deregulation begin to occur?  Has this had any effect on your personal financial situation?

    3.  Also according to this article, what is the reality of the banks' financial position since the TARP bailout a few years ago?  And how do the banks "feel" that they are being treated by Congress? Please comment on the reality and the reaction. 

  • Netflix drops Qwikster split-off plan


            listen to CNBC interview (after ad); transcript included

    Will Netlix make up its mind about its business strategy?  In this week's announcement, it looks as though Netflix now intends not to separate out its DVD operations after all. CNBC's interview with Tony Wible of Janney Montgomery Scott Capital Markets highlights many of the comments observers have made in recent weeks regarding Netflix.  Wible was interviewed because he had made a change in his company's recommendation regarding the purchase of stock before the announcement by Netflix that, in response to customer reaction, they had reconsidered their decision to split their streaming operations from their DVD rentals. 

    Netflix stock increased 7% on Monday, when the announcement was made, but was down 2.96% on Tuesday, according to the Motley Fool website.  It is hard for investors to trust a company that has seemed so fickle.  Reed Hastings, the CEO, has seemed particularly mercurial in his announcement videos.  Netflix also posted a recent ad for a Consumer Media Relations PR Manager.  The ad requested that the applicant be "a mature, fully formed adult with a happy, well balanced life."  Wishful thinking, maybe?

    photo of Netflix CEO Reed Hastings from timesunion.com

    Follow up:

    1.  What was Tony Wible's recommendation regarding Netflix stock?

    2.  What is the Motley Fool's recommendation regarding Netflix stock?

    3.  What do you pay per month in movie rentals from any source?

  • Bad Apple? A grim legacy in Chinese factories


    photo from telegraph.co.uk depicting Apple product assembly by Foxconn workers

    In a New York Times piece this weekend, playwright and performer Mike Daisey wrote about the realities of Apple's business practices as they have evolved in the global economy. Many Apple products--notably iPads and iPhones--are manufactured in southern China, by Foxconn.  Foxconn has gained notoriety in recent years because of the grim working conditions of its workers: low pay, overtime shifts lasting over 30 hours, worker injuries, workers being beaten, and on-site worker suicides.

    Was this level of worker treatment necessary for Apple to stay in business? Mike Daisey thinks not.  He also thinks that Steve Jobs might have held himself and Apple to a higher standard for worker treatment, just as he held himself to a higher standard for design.  From Daisey's NYT piece:

    "We can admire the design perfection and business acumen while acknowledging the truth: with Apple’s immense resources at his command he could have revolutionized the industry to make devices more humanely and more openly, and chose not to. If we view him unsparingly, without nostalgia, we would see a great man whose genius in design, showmanship and stewardship of the tech world will not be seen again in our lifetime. We would also see a man who in the end failed to “think different,” in the deepest way, about the human needs of both his users and his workers.

    It’s a high bar, but Mr. Jobs always believed passionately in brutal honesty, and the truth is rarely kind. With his death, the serious work to do the things he has failed to do will fall to all of us: the rebels, the misfits, the crazy ones who think they can change the world."

    Follow up:

    1.  Comment on the quote from Daisey's article, excerpted above.

    2.  Read the New York Times article linked above.  How does Daisey think that Steve Jobs would assess his own life?

  • Subsidies to Chinese manufacturers unfair to US businesses?


    image from whatsonsanya.com 

    This week, the Obama administration notified the World Trade Organization that almost 200 Chinese subsidy programs violate free trade rules. [ LINK: New York Times, October 7, 2011]  The industries most affected by these subsidies have been solar and wind power companies.  An example of one such subsidy was the payment of $6.7 million to $22.5 million to each manufacturer of wind turbine equipment that used Chinese parts instead of parts imported from other countries.   The subsidies took other forms as well.

    from energydigital.com 

    Several American companies have faltered or failed as a result of the surge in Chinese clean energy product production over the last five years..  The Chinese production and sale of these "green" energy products undercuts the prices that must be charged by American companies that operate without the equivalent government support. These subsidies have also hurt European companies.  "Pervasive and all-encompassing Chinese subsidies are decimating our industry," claimed Ben Santarris, speaking for SolarWorld, a German-based company with American operations.

    All member countries in the WTO are expected to report subsidies of this sort at least once every two years.  However, the subsidies addressed in this complaint became public only after a year-long investigation by American auditors.    China has filed a subsidy report only once since it became a member in 2001.  

    Follow up:

    1.  Read the article linked above.  What are three American solar energy companies that filed for bankruptcy in August, 2011?

    2.  What other country does the American trade representative's office think has granted subsidies that violate WTO rules?

    3.  How do subsidies by governments undermine competition?

  • Steve Jobs.1955-2011


    from YouTube; narrated by Steve Jobs--an un-aired version of a commercial. 

    Steve Jobs embodied the archetype of the Entrepreneur.  "Think Different," the theme of this commercial from 1997, and of Apple's ad campaign, doesn't even begin to tell the story. He was a visionary and a businessman.  And probably one of the "crazy ones" he refers to.  As he says in the narration:  "You can't ignore them."

    It would be difficult to ignore the impact Steve Jobs has had on American culture and American business. The high points of his career with Apple, as chronicled at foxnews.com, included:

    • started the company with Steve Wozniak, in a garage in 1976
    • was forced out in 1985
    • returned in 1997
    • invested in Pixar
    • introduced the iPod in 2001
    • introduced the touch-screen iPhone in 2007
    • introduced the iPad in 2010
    • grew the company to the second-largest company in the US in 2011

    His attention to detail and commitment to excellence set the standard for the entire company. The money he and Apple earned was a by-product, not his goal. He was one of the richest people in the United States, yet he lived in a regular neighborhood (Bloomberg).  He battled his illness, pancreatic cancer, privately and with dignity for seven years. He died on October 5, 2011.

    Steve Jobs. 

    from laptopmag.com


    Follow up:

    1.  Have any Apple products influenced your life or work?  How?

    2.  What was Steve Jobs' reaction to being fired in 1985?

  • "Occupy Wall Street" protesters gain more support

    "Occupy Wall Street" protesters--photo from NYT

    What some observers initially viewed as New York City performance art is looking more and more like a movement. Even some off duty Marines have gotten involved. And now some unions.

    "Occupy Wall Street"  started out as a small group of people who were united against corporate greed and Wall Street "criminals" going unpunished.  These were activists who wanted to start a discussion about what they saw as the elephant-in-the-room:  class warfare: "the 99% against the 1%," according to the group's website.  The protesters seemed to arise from many groups.  The protest activities, which began on September 17th, seemed leaderless but growing.  The crowds in Zuccotti Park, where the group encamped, grew larger and attracted more participants.  Protests also began in other cities like Los Angeles, San Francisco, Boston and Chicago.  

    On October 1, several members of the armed forces--off-duty but dressed in uniform--joined the protesters primarily to protect them from aggressive actions by the NYPD.  One Marine, Ward Reilly (according to the article linked above at "Marines"), said: “I’m heading up there tonight in my dress blues. So far, 15 of my fellow marine buddies are meeting me there, also in Uniform. I want to send the following message to Wall St and Congress: 'I didn’t fight for Wall St. I fought for America. Now it's Congress's turn.'"

    On October 5th, more than a thousand labor union activists joined the protests.  The groups together want to balance out the influence of the Tea Party, and urge Congress and the President to unite to focus on job creation and other middle-class priorities. The protests are urging more government action, focused on the interests of the under-employed rather than corporations, banks, and the rich.

    American observers in the media--and in American living rooms--cheered on protesters when the protests were abroad, during the "Arab Spring." Uprisings in Egypt, Tunisia and elsewhere provoked dramatic governmental changes. Americans do not seem to be as excited about these parallel protests on their own soil. Foreigners seem to show more interest and support. A Dealbook article cited Evan Osnos' comment in the New Yorker that Chinese nationalists are in support of the American protesters.  They see the U.S. activism as a warning to the Chinese government that China needs to stop its intense march toward privatization. Anne Marie Slaughter notes in the piece, "Occupied Wall Street, Seen From Abroad," that Occupy Wall Street has received attention from Al Jazeera from day one.

    "Is it Effective to Occupy Wall Street?" asks an Nathan Schneider in a "Room For Debate" NYT piece.  He notes also that: "The main thing that Occupy Wall Street is doing right also happens to be the main thing these protesters are doing in the first place: sticking around. Merciless persistence is a large part of what made the Arab Spring work."

    We'll see how long the protesters will continue to persist. 

    Follow up:

    1.  Read some of the stories at "We are the 99 percent."  Do any of the career or job track stories sound familiar to you or your family members?  What kind of opportunities do you see for yourself?

    2.  Pretend that you are on a reality show management competition.  Business is being increasingly disrupted by the protests outside of your places of business and it is even hard to get to work. Your team has been dispatched to organize some of the protestors to stop the Occupy Wall Street movement.  What arguments and incentives would you use to win the competition?

    3.  What are you pursuing with "merciless persistence"?

  • Private companies to get their own "GAAP"

    Not all corporations are alike.  There are public corporations, whose stocks are traded on a stock exchange and who are regulated by the Security and Exchange Commission (SEC).  There are also "private corporations," whose stock might be owned by only one person, or a group of investors who get in on the ground floor.  These private corporations that choose to have their accounting records audited are currently subject to the same accounting rules as the huge multi-national companies.  These rules are set by the Financial Accounting Standards Board (FASB--pronounced "fazz-bee"), and are called "Generally Accepted Accounting Principles," commonly abbreviated as "GAAP" and pronounced "gap."

    This week, the FASB announced that they are proposing to form a new entity, the Small Company Standards Improvement Council, to develop changes to GAAP that would help small businesses with their financial reporting. The changes this new group might propose would still have to be approved by the FASB. The proposed change had been initiated by the American Institute of Certified Public Accountants (AICPA), a professional organization.

    If instituted, differences may arise in areas such as valuation of certain types of assets and accounting for stock options.  Some observers, according to the NYT article, are not enthusiastic about the proposal. SEC accountant, James Kroeker, urged additional research before moving forward. Also, Teri Yohn, a professor at Indiana University and an appointee to the panel that proposed the new Council, dissented from the majority, saying that differing rules would add confusion and cost.

    No changes would be adopted until after the public comment period ends on January 4, 2012. 

    Follow up:

    1.  Read a related article at Accounting News Today.  How did the AICPA react to the proposal announced by the FASB to form this new entity?

    2.  Read the Wikipedia article about GAAP.  That article mentions that GAAP is being phased out due to the growth of interrelated global economies.  A new system is replacing it. What is that system called and what problems will it solve? 

  • The direct-to-the-fans approach to marketing a band

    CEO  Ian Rogers of Topspin Media, an internet service company for media marketing

    Have you ever sat poised online to buy tickets to hear your favorite band, but were unable to purchase tickets due to overwhelming demand and a jammed internet site?  Did you later see tickets for sale at many times the face price, having been purchased in bulk by ticket sales companies?

    Bands can also feel frustrated that tickets aren't going to their most loyal fans...and that ticket brokers are making profits that really arise from the demand to see the band members themselves perform. 

    Last week, a company called Topspin Media handled the ticket sales for an upcoming Los Angeles performance by the band the Pixies.  They did so in a way that avoided this type of frustration on both sides.  Topspin arranged to send over 8,000 emails out to Pixies fans, saying in the email that tickets were "on sale RIGHT NOW."  All 1,200 tickets for the venue were sold within an hour. 

    According to the NYT article, Ian Rogers, Topspin CEO, feels that bands who can control the production of their music with ProTools, and the direct sales of their music via iTunes, are now in need of a company that can market their other products--including their performances--in a direct way.  The internet provides the medium for collecting data about who is a likely consumer, and it also provides a medium for direct communication of product availability. Topspin is one of several new companies organized around this opportunity.

    Topspin encourages clients to give away freebies such as songs.  This leads to future sales of albums and T-shirts.  Also, it helped to build the database of 8,000+ Pixies fans to whom Topspin marketed those concert tickets. 

    Topspin's revenue stream is based on an annual fee plus a 15% commission on sales. They have recently branched out into independent film marketing as well.

    Follow up:

    1.  Go to the Pixies website, linked above.  What message do you see at the very top, in the upper left hand corner? Is this something that you might act on, if you were a Pixies fan?

    2.  According to the New York Times article, what is the amount of the average sale on the Topspin Media website?  What is the average sale if concert tickets are involved?