• Corporations are people, too...Or are they? New legislation introduced

    poster appears without citation on several websites

    Legislation is being introduced to clarify the status of corporate personhood...actually--to forbid it.  Although the exact wording of the complete bill is not available yet, the official legislation website "govtrack" reports that this legislation is:

    "Proposing an amendment to the Constitution of the United States to expressly exclude for-profit corporations from the rights given to natural persons by the Constitution of the United States, prohibit corporate spending in all elections, and affirm the authority of Congress and the States to regulate corporations and to regulate and set limits on all election contributions and expenditures."

    The bill is being introduced by Ted Deutsch (D-Florida), and is further described in the article "Occupy the Constitution..."

    Not many of us think of corporations as though they were people, but corporations are legal entities, so their attributes are defined by the law.  Corporations have had some of the rights as "persons" for more than a hundred years.  For example, the Supreme Court, in 1819 ( Dartmouth College v. Woodward ), granted corporations the right to participate in contracts. 

    In 2010, however, many felt that the Supreme Court's ruling in  Citizens United v. Federal Election Commission went too far.  The ruling held that the free speech component of the First Amendment prohibited government from enforcing certain provisions of the 2002 McCain-Feingold Bipartisan Campaign Reform Act.  This act prohibited a corporate-funded campaign ad critical of, and featuring the likeness of, Hillary Clinton. The corporation sued and eventually won. The decision was split 5-4.  

    The split reflects the division of opinions on this matter.  For further reading on both sides of the issue, and for an understanding of the history of this idea, which is relevant to the business entity concept, you might want to check out:

    Where the corporation-as-person issue becomes problematic for me is when the argument is made that a corporation cannot be sued for lying, because lying is a right under free speech protections.  Where does "truth in advertising" fit in with this concept?

    Follow up:

    1.  Read the articles linked above.  What do you think of corporate personhood?

    2.  What portion of the Constitution supports corporate personhood, according to arguments being made since the 1800's?  What makes sense about this position?  Is there any part of the argument you disagree with? 



  • Why are taxpayers subsidizing pensions for private corporation employees?

    Would you like to retire with a pension? I think everyone would like one.  Beginning in the mid twentieth century, corporations often convinced employees to trade off current salary increases for the future benefit of a defined pension plan. This would provide a loyal worker with the chance to retire with a decent living...a guarantee of not being destitute.

    Still, pensions of public employees seem to be "up for grabs" in the cost-cutting frenzy of 2011. But what about the pensions of the employees of defense contractors?  Gretchen Morgenson suggests that cutting those pensions can save $30 million. It's too late to use her idea to help the "Super-Committee" solve the deficit problem, but she brings to light a practice which has caused considerable hits to the US budget: the cost-plus contract model that is prevalent when government contracts with defense providers. 

    What happens is this: the defense contractors are hugely profitable.  Nevertheless, they have clauses in their contracts requiring that the government pay additional reimbursements to fund pensions when they become underfunded (for example, when there are market downturns). The Government Accounting Office said that, in 2009, the federal government "reimbursed $750 million in contractor pension costs, more than double the amount it had reimbursed the previous year and significantly more than it had budgeted for.” One company, Lockheed Martin, received reimbursements of more than $3 billion from American taxpayers over the last 5 years.

    Yikes. Because of this special government safety net, defense contractors have a financial incentive to deliberately underfund the pension plans, so they will be eligible for the backfill reimbursements.  And these reimbursements cover high-paid executives, as well as engineers and workers. 

    It may be too late to stop these practices in time for the Super Committee, but Congress can still act to correct practices like these...or, maybe better yet, vote to extend guaranteed pension benefits to all...

    Further reading: Sustainable Pension Systems.

    Follow up:

    1. Read Ms. Morgenson's article.  How many employees of private companies are covered under the specially-funded pension contracts subsidized by the federal government?

    2. What do you think about Ms. Morgenson's concluding remark in the final paragraph? Do you support the current trend regarding defined benefit pensions for individuals being hired at corporations today?  What pension practices do you think can be sustainable, both from the standpoint of businesses and citizens? 


  • Swaps: Are they like trading your PB&J for baloney?

    cartoon from indiamicrofinance.com

    The headline on the Business section said, "Slipping Backward on Swaps," an article by Gretchen Morgenson.  I was intrigued by the words "slipping backward," but I was once again baffled by the term "swaps."  When I was in business school, swaps were fairly straightforward trades of investment securities--typically bonds--that had different maturity dates.  My "re-search" reminded me that this traditional arrangement between one corporation and other could also involve stocks, or be done for reasons of different interest rates or other advantages that may be perceived as differently valued by two different companies.  The idea of a "swap" would be a win-win situation for both companies.


    Swaps have become more complicated in recent years. For example, a "credit default swap" has the purpose of transferring risk from one party to another.  The buyer of a credit default swap would get paid the par value of bonds by the seller of the credit default swap, even if the bond was in default. (Read more at the link.)  An even more esoteric vehicle--a derivative--is a "volatility swap." This is a "forward contract" (that is, a bet on the future value) of how volatile (responsive to market conditions) a particular stock might be.  This is an order of magnitude removed from just betting on what the stock's price will be...it is betting on whether it will increase, say 10% when the market goes up 7%...or whether the stock will increase closer to the market average of 7%.

    "change to t-forward measures" math image from opentradingsystem.com 
    [inserted as a joke, as well as to illustrate the complexity...]  

    Ms. Morgenson's article reminds us that transactions that are difficult to understand, as these are, were supposed to be held to a higher standard of transparency under the Dodd-Frank Act. Brokers, who usually trade these instruments over the phone, have access to substantially more information than the customers to whom they are speaking. Increased information means increased ability to profit. 

    In order to implement the substantive aim of the Dodd-Frank Act--transparency--the Commodity Futures Trading Commission [CFTC] proposed a rule that would support it.  The rule would require companies that were applying to oversee and arrange swap transactions (called "swap execution facilities" or "S.E.F.s") to guarantee to post all prices on a "centralized electronic screen" that all parties to the potential transaction could view.  However, financial traders like being able to make deals one-on-one, over the phone, without all of the price transparency. And these financial institutions are putting pressure on Congressional representatives to allow, according to the article, "any means of interstate commerce."  As a result, two representatives have introduced a bill to forbid the SEC or CFTC from making any rule that would hamper the private, one-on-one, trades.  

    If you saw the movie "Margin Call," you could catch a fictionalized version of these one-on-one phone trades taking place near the end of the movie. (Check out the blog entry from 10-21-2011--scroll down...or just see the movie.)

    These swaps will never be as clear as the trading of sandwiches in a lunchroom cafeteria--where you could see what you were getting, and you knew what everyone else was having for lunch as well. The Dodd-Frank Act and the CFTC want to bring as much of that transparency as possible to the swap transactions.  A House of Representatives subcommittee, on November 15th, passed the bill forbidding rules requiring transparency--which is why the headline says the country is "slipping backward."  Let's hope that the full House and the Senate have more respect for the customers and the principle behind business deals where essential information is made available. 

    Follow up:

    1. Read the article.  Who were the sponsors of the bill to thwart transparency?  Why was one of the sponsors baffling to Ms. Morgenson?

    2. What did Gary Gensler of the CFTC have to say about the proposed CFTC rule to require electronic boards disclosing essential information to potential customers?  What does the non-profit "Better Markets" have to say about this rule? 


  • How to Ask for a Raise in a Tough Economy...

    Even if times are tough, and a lot of your friends are unemployed, you still might deserve a raise. But how do you ask for one? Tara Siegel Bernard, in an article in the New York Times, offers some advice...starting with these general "reality checks": 

    • Your company might have over-reacted to economic conditions by downsizing as a precautionary measure, to maintain a certain profit level--so, they might actually have funds available for raises.
    • Only about 9% of companies have instituted pay freezes in the last 18 months, which is a historical norm. This is a large decrease from 2010.
    • Expert Mike Zwell says that, if your performance is good, your risk of asking "poses zero danger.  The worst that will happen is that they will say 'no,' and give you a reason for it."
    • Your increase might only be 1%-2%, since even top performers are only getting an average of 4% raises, according to Buck Consultants.

    The point is, even though we sometimes think the worst when we have to face a difficult situation, things are not really this bad:

    Ms. Bernard also offers these specific tips, mined from several sources:

    • Get a sense of how you are perceived within the company.
    • Ask your supervisor how you are doing.  If you are doing well: proceed.
    • Build your reputation, inside and outside of the company--keep a file of letters praising your performance.
    • Make a list of additional responsibilities you have taken on due to layoffs or personal growth.
    • Frame your contributions with measurements, if possible.
    • Write down what you do and have done--responsibilities in one column, accomplishments in another.
    • Remember that your supervisor will probably have to make your case to another higher-up, so give him or her the ammunition to support your case.
    • Do research regarding your appropriate salary, and be specific about your request.
    • Convince yourself fully that you deserve this raise, then pick a day to ask.

    Here are some behaviors that Ms. Bernard suggests being mindful about:

    • Don't make any threats or ultimatums
    • Don't be unhappy with the company--show you are happy to be part of the team
    • Do express understanding of the company's financial situation...while still making a case for your own increased compensation
    • If you are femaie, be especially careful to frame the request with the company's interests at heart. Stereotypes and prejudice can be more of an issue during periods of scarcity.
    • Don't take it personally if your request is denied; it may be impossible at this time, but be ready to suggest a non-monetary job improvement that might be considered.

    Generally, the advice is: do your homework, have realistic expectations, make your request, and be ready to accept the outcome. 

    mage from innovationcu.onyourway.com

    Follow up:

    1.  Check out this interactive video training on how to ask for a raise. You can replay the scenario if you like.  Did your first responses produce the results you anticipated? What did you learn about what techniques might be effective? 

    2. What job do you have, or are you training for? Use a source from Ms. Bernard's article to research the "going rate" for a person in your profession. Think about doing some of the footwork that is suggested in the article, in order to either ask for a raise, or negotiate the salary for your first career-track job. 

    3. For further reading, check out the article in this Sunday's NYT Magazine, "The Dwindling Power of a College Degree," by Adam Davidson.  Several very wide salary ranges for various professions are discussed. Summarize the article's thesis.


  • Black Friday

    mage from blog.ridgewine.com

    Not only do retailers want to catch your attention for their "Black Friday" deals...blogsters want to be the go-to advisor for the best deals, too.  Or do they?  Are these sites objective, or do they have a marketing agenda tied to the recommended retailers?

    I don't know the algorithm for search results for "Black Friday 2011," so I can't evaluate the results with any objectivity. I checked out this site: BlackFriday2011 which claimed to be a compendium of all of the best deals for the Friday after Thanksgiving. Hmmm...it was fully populated with ads, and it required that I input my email information so that they could send me the list...I've been down this road before, I'm sorry to say.  I decided not to go that route, and I moved on to another search choice...

    MSN Money is getting into the act...but article author Melinda Fuller says that deals this year will be harder to come by.  She suggest doing research beforehand, and checking out several other sites that compile deal information:

    She also suggests checking out the MSM Money Smart Spending blog for deals from major retailers such as Sears, Best Buy, KMart, Target and others.

    Black Friday, according to Wikipedia, is traditionally the day after Thanksgiving, and is often the biggest shopping day of the year, starting off the Christmas season.  Still, even though there are supposed to be great deals on this day, it is essential for the savvy consumer to have a plan.  See MSN's 10 Rules for Black Friday.

    Follow up:

    1.  Do you do holiday shopping on the day after Thanksgiving?  What is your approach?

    2.  How has 2011's Black Friday been different from previous years? Check out this link for a hint:  RADIO LINK.

  • Lessons from the "Pepper Spray Cop" Meme

    If only product marketers could harness the speed and energy of a viral meme!  The image of the Pepper Spray Cop, blithely spraying seated college kids, has popped up on the internet, inserted comically or ironically into classic art and personal photos. The juxtaposition of the pepper-spraying policeman with impressionist art and other non-violent images has reinforced the ridiculousness of the University's decision to pepper spray its own students. [Check out my blog on the original new story: "Communicating with Pepper Spray" 11-18-11]

    It has become a "meme", which is defined by Wikipedia as:

    "...an idea that is propagated through the World Wide Web...[It] may stay the same or may evolve over time, by chance or through commentary, imitations, parody, or by incorporating news accounts about itself.  Internet memes can evolve and spread extremely rapidly, sometimes reaching world-wide popularity and vanishing within a few days.  Their rapid growth and impact has caught the attention of both researchers and industry [ Kemp & Kleinberg ]. Academically, researchers model how they evolve and predict which memes will survive and spread throughout the Web. Commercially, they are used in viral marketing where they are an inexpensive form of mass advertising.

    The Week pondered the meaning and reach of this particular meme, noting:

    • "Humor is helping Occupy reach new audiences": a Tumblr viewer may click on a related news article, and read it favorably
    • "It's a form of rebellion": ridiculing the cop makes the internet viewer feel like he or she is participating in the protest.
    • "It may be humorous, but it is horrifying, too": "the meme is mirroring the way Pepper Spray Cop vandalized our very notions of liberty and what this country stands for."
    • "This will be a defining point for the movement": the Occupy movement is now a call "loud and clear" for "simply, justice."

    The Know Your Meme website traced the "contagion" of this meme, as reported by Tech Flash. It began with the photo taken on November 19th by Louise Macabitas to a posting on Reddit (inserted into a John Turnbull painting), then to Tumblr (A Sunday Afternoon on the Island of La Grande Jatte by Georges Seurat).  From there it took on a life of its own, as others posted to Tumblr and images appeared on gawker, Facebook, ABC news and other sites. It is fascinating that this has spread so fast. 

    Follow up:

    1. Search the internet for examples of this meme. Which is your favorite? Why? [Note: I found the ones posted above on Tumblr]

    2. Check out the website for Know Your Meme. If you are interested in marketing by means of social networking, tracing the history of the meme phenomenon might help you understand how these things work. Can you draw any conclusions about how these work?  It is a fairly new phenomenon, so this is original research...you might have to study it for a while.

  • Marketing problem: "Range anxiety" with electric cars

    Maybe we're seeing what really "killed the electric car": Range anxiety.  This is the term used to describe the reticence of potential car buyers to commit to a car that might run out of power far from a charging station...but not near enough to one's destination.  Cars with a range of 40-65 miles theoretically work for the vast majority of errands that Americans run.  But most of us are used to cars with a 200-400 mile range between gasoline fill-ups--and a vast network of gas stations. We aren't used to planning on refueling or re-charging after far fewer miles.  

    We'll have to change the way we think about our trips.  We'll have to plan for emergencies in a different way.  Some pretty serious marketing strategies will have to be employed to get between Americans and the way they rely on their cars.  These issues were addressed in NPR piece this week, "Can Electric Cars Help Automakers Reach 55 MPG?"

    American carmakers are relying on electric cars to help meet the 54.5 MPG required by 2025.  But, it is a struggle to sell these cars to Americans.  Nissan has only sold about 8,000 Leafs (100% electric).  And Chevy is also having trouble meeting its goal of 10,000 sales of its Volt--and the Volt has a back-up gas tank that can power its electric battery for longer trips. 

    Brian Moody of Auto Trader nailed the feeling that wary customers anticipate: "'Oh, no. What if I can't make it?'" But the marketing problem goes beyond that. According to research done by Craig Giffi of Deloitte, people want to like electric cars, but the closer they get to making a purchase, the less they understand the cars, and the less they like them.  People don't like the "trade offs."  The cars don't drive the same. They are too quiet. The only way to make them convenient is to have an expensive in-house charger.  

    It is hard to sell a product when people feel as though they have to give something up when they purchase it.

    Follow up:

    1. What would make you buy an electric car?  What do you drive now?  What kind of mileage do you get?

    2. How many miles do you drive a week? What is your daily commute?  If you had an electric car, how would you do things differently? Where and when would you charge it?

    3.  Do you like the idea of a Volt?  Read up on it. What are the pros and cons of a Volt vis a vis the car you currently drive?  Make a two column chart.

  • The Super-committee will fail...and that's a good thing?



    The Super Committee that was charged with solving the country's deficit crisis has a deadline: Wednesday, November 23rd. Last Friday, Paul Krugman, in the New York Times, said that the committee was doomed to fail.  And that "Failure is Good," not bad. He felt that any resolution would produce additional spending cuts. ..and that these cuts would have had an immediate and negative effect on the US economy.

    The original purpose of the committee was to rise above partisanship to solve a $1.2 trillion debt problem.  Some hoped this committee could suggest a compromise combining tax increases and budget cuts that no one would have been 100% happy with, but that everyone could live with as the best possible outcome in a tough situation. It wasn't possible, given "non-negotiable" stances adopted early on.

    Krugman delineates the profound differences in the values and world views of the committee members, and remarks that it is difficult to imagine why anyone thought the committee would succeed.  He's right--these individuals do not have much common ground.

    Super Committee membership (link has biographies of the members): 


    Rep. Xavier Becerra (D-CA)
    Rep. James Clyburn (D-SC)
    Rep. Chris Van Hollen (D-MD)
    Sen. Max Baucus (D-MT)
    Sen. John Kerry (D-MA)
    Sen. Patty Murray (D-WA), co-chair


    Rep. Dave Camp (R-MI)
    Rep. Jeb Hensarling (R-TX), co-chair
    Rep. Fred Upton (R-MI)
    Sen. Jon Kyl (R-AZ)
    Sen. Rob Portman (R-OH)
    Sen. Pat Toomey (R-PA)

    Some commentators claim that the "13th member" of the committee was lobbyist Grover Norquist, author of the "No Taxes" pledge.  Idealists hoped that the "13th member" would be the American citizen.   

    But no "13th member" is going to help this committee. If we take a step back, and think of the country's deficit problem as a huge business problem...is a Super Committee the way a CEO trained in planning and decision-making techniques would solve it?

    • Does it make sense to create a committee of people who do not work well together?
    • Can a committee "succeed" if success means they will lose face with their constituencies if they compromise?
    • Does an impasse with a union or a lawsuit by a creditor get resolved without a mediator? Would you resolve any problem without expert help?
    • Does a deadline without intermediate progress checks make sense for a long term project?
    • Would employees working on a risky project do their best work if there was no reward?

    Krugman seems to think that the decisions underlying resolution of the deficit are about fundamental values...that should be decided by the voters. He thinks that eventually it will be resolved by a popular mandate.  On the other hand, maybe the right work group, with the right support and motivation has yet to be set up.

    He's certainly right about one thing--we can't ignore it forever. 

    Follow up:

    1. Read the biographies of the Super Committee membership.  With whom do you feel most aligned and why?

    2. What were the "non-negotiable" stances adopted by committee members that made resolution difficult?

    3. Read further.  What might happen now that there is no Super Committee resolution to the $1.2 trillion deficit? 



  • Republicans recommend tax increases to balance budget

    The eight Republican presidential candidates sitting at the table listen as a video
    of former President Ronald Reagan is played during a debate at Dartmouth College
    in Hanover, N.H., on Oct. 11. photo by Jim Cole/AP  [NPR website]

    OK...I confess: that headline does not reflect the Tea Party stance in 2011--but it does reflect historical Republican fiscal conservatism.  On Wednesday of this week, Terry Gross interviewed Tim Dickinson about his article in the current issue of Rolling Stone magazine: "How the GOP Became the Party of the Rich."  The GOP was once the party for more than one economic class.  From Dickinson's article:

    "Cloaking himself in the language of class warfare, [the President] calls on a hostile Congress to end wasteful tax breaks for the rich. 'We're going to close the unproductive tax loopholes that allow some of the truly wealthy to avoid paying their fair share,' he thunders to a crowd in Georgia. Such tax loopholes, he adds, 'sometimes made it possible for millionaires to pay nothing, while a bus driver was paying 10 percent of his salary – and that's crazy.'

    Preacherlike, the president draws the crowd into a call-and-response. 'Do you think the millionaire ought to pay more in taxes than the bus driver,' he demands, 'or less?'

    The crowd, sounding every bit like the protesters from Occupy Wall Street, roars back: 'MORE!'

    The year was 1985. The president was Ronald Wilson Reagan."

    Dickinson's thorough history reminds us that Republicans in the 1950's and 1960's insisted on tax levels that would ensure a balanced budget.  The ideological battles were fought over the spending programs, but once the expenditures were decided, taxes were adjusted to make sure the country remained fiscally sustainable. When Reagan lowered taxes on earned income (salaries and wages), he mitigated that cut by raising the capital gains tax to 28%.  This meant that those who made their money from investments were paying taxes that were in the ballpark of those who earned their money from salary or wages.

    Today, the capital gains rate, at 15%, is far below the 35% earned income rate--and many capital gains are not taxed at all.  This benefits the richest Americans. Republicans have been on a tax-cutting "jihad" for the wealthy since 1997. Dickinson notes that since that time, "the average annual income of the 400 richest Americans has more than tripled, to $345 million – while their share of the tax burden has plunged by 40 percent."

    image from the Rolling Stone article

    Old school Republicans have expressed dismay at their party's current support of the extremely wealthy at the expense of the middle class. Even Glenn Hubbard, an economist who devised some of Bush's tax cut plans, said there should have been a  "revenue contribution to the debt-ceiling deal, structured to fall mainly on the well-to-do." (Rolling Stone)

    By November 23rd, the bi-partisan special committee that was formed when the debt-ceiling deal was made this past summer is supposed to come up with a trillion dollar + resolution.  I wonder which set of values will prevail?

    Follow up:

    1.  Over the next week, keep current with the resolution of the trillion dollar remaining budget problem triggered by the debt ceiling.  What did the special committee decide?  On what underlying principles or positions were their decisions made?

    2.  Read the Rolling Stone article linked above. What Republican insisted on tax increases in 1982 to reverse the deficits that occurred during the Reagan administration?  What was Reagan's response at that point, and for the remainder of his term in office?  On what underlying principle did he base his decision?

    3.  Who were the architects of tax policy that created the biggest benefits for the top 1% toward the end of the 1990's? On what principles or positions were their actions based, according to Dickinson?  What policies do you support and why?

  • Communicating with pepper spray

    photo by Louise Macabitas

    Universities have been setting a pretty poor example on the business communication front lately. First, Penn State, then, on Friday, November 18th: the University of California at Davis. Chancellor Linda Katehi called in riot police to remove students from the Quad area in the middle of campus, where they were protesting tuition hikes, brutality at UC Berkeley, and showing solidarity with the Occupy Wall Street movement.  While students were peacefully sitting down with their arms locked, police in riot gear sprayed them with pepper spray, as demonstrated in the photo above, and the video below.


    video link to youtube

    Neither the UC Davis police chief, Annette Spicuzza, nor the Chancellor have responded with honesty or transparency. On the contrary, their responses are examples of how NOT to communicate in the era of ubiquitous video cameras.

    According to an online NYT article by Brian Stelter:

    "Annette Spicuzza, the U.C. Davis police chief, told The Sacramento Bee that the officers used pepper spray on Friday because the police were surrounded by students. “There was no way out of that circle,” she told the newspaper. “They were cutting the officers off from their support. It’s a very volatile situation.”

    The videos, however, show officers freely moving about and show students behaving peacefully. The university reported no instances of violence by any protesters."

    The New York Times version is corroborated by videos linked at the Davis Wiki.

    Separately, according to the Davis Enterprise, Chancellor Katehi refused to meet with students. Instead, she issued a prepared statement to reporters in the Surge II building, calling for a task force to study the situation. Even though students made a path for her to exit, and promised to be orderly, Katehi refused to leave without an escorting entourage.  Minister Kristin Stoneking helped escort Chancellor Katehi and wrote about the process on her blog.  Katehi did not take the opportunity to speak to students who stood silently (as they had agreed) while she walked to her car (see video).  Katehi said she would talk to students on Monday.

    Oh, by the way--the student with the maroon jacket and hood, seated at the far left of the lead picture, is my daughter...a junior at UC Davis. She is studying Sustainable Agriculture.  She is also the young woman playing the guitar in the picture below (taken an hour before the pepper spraying).  

    Music is another way to communicate...

     another way to communicate...(photo downloaded from Facebook)

    Follow up:

    1.  Review the response by the UC Davis police chief. Have you ever lied when you have done something that you regret, for the purpose of not looking bad in the eyes of others? How did that play out? What were you inner thoughts while you were misrepresenting the truth?  Did you get away with it? If you got found out, were the consequences worse or better as the result of your misrepresentation?

    2. Have you ever used physical force to get your way? Has physical force ever been used against you? Is it acceptable when the other person is not using violence?  What does the use of physical force communicate? Please give specific examples.

    3. If you were Chancellor Katehi, how would you have handled the situation involving the pepper spraying, after the fact?  Would you have met with students?  Would you have apologized?  Would you have increased the police presence? 

    4.  What have been the unintended consequences of the pepper spraying on the Occupy movement at UC Davis?

  • Warren Buffett trades in secret...with a special nod from the SEC


    Warren Buffet recently disclosed that he had purchased a 5.5% share of IBM--International Business Machines--according to a Dealbook post by Andrew Ross Sorkin.  This announcement may seem like a typical, Securities and Exchange Commission (SEC)-required disclosure, but it isn't.  Buffett got special permission from the SEC to secretly buy the shares over eight months.  The reason he asked for special permission, and the reason that the SEC granted it, was that, if it had been disclosed earlier, there would have been many stockholders who would have wanted to emulate Buffett, and the price would have escalated with demand.  This would have made it harder for Buffett to actualize his strategy...that is to say--it would have cost him more money.

    Hmmm....I thought that was why there were disclosure laws in the first place--to put the marketplace on notice when a savvy insider was taking a significant position in a stock. And get this: there may be OTHER stocks that Buffett is secretly buying.  We don't know. According to the article, the SEC gets about 60 requests per quarter to keep disclosable trades secret. 

    The article points out that much of the public today is asking for more "transparency." Nevertheless, this special-permission-secrecy shows the SEC tipping the scales in the direction of more profit for the big investor (part of the "1%") and away from the public (the "99%"). The U.S. Office of the Inspector General found, in 2010, that there was not much oversight over these requests for secrecy--nor was there much oversight over the completeness of the "13F" filing documents themselves.  In addition, the disclosures that are required are the "long positions" and material increases in holdings--not the derivative and options holdings that can also be significant to other traders. 

    It seems that the public has a long way to go before there is truly full disclosure from the SEC and the SEC's favorite mega-investors.


    1.  What is a "long position"?  Try this LINK if you are stumped.

    2.  What is a "selling a stock short"? Try this LINK if you are stumped.

    3.  Bill Gates recently (October 2011) sold a significant number of shares in a single American company.  Use the Web to find out what company  it was.

    4.  Does this information make you want to buy or sell any particular stock?

  • STOCK act: Stop Trading On Congressional Knowledge


    Is insider trading by Congressional representatives legal? According to a recent report on CBS's 60 minutes (video above), there is a technicality that allows members of Congress to trade on information that is part of Congressional hearings.  According to 60 Minutes, these non-public pieces of information are not technically confidential, so they do not meet the confidentiality test of criminal insider trading. But, in substance, the information provided in Congressional briefings does provide members of Congress with juicy stock tips that they can use to become rich.

    Yesterday, according to  cbs.news, Scott Brown (R-Mass) introduced the STOCK act in the Senate.  Senator Kirsten Gillibrand is offering up another version of the bill on Wednesday. Each of these bills is meant to stop the trading on the insider knowledge members of Congress have access to.  According to cheatingculture.com, an act by the same name was introduced in 2007, but went no where due to lack of support.

    We'll see what happens in 2011.

    Follow up:

    1.  Watch the video from 60 minutes. What stock did Congressperson Spencer Bachus (R-Alabama) make a large profit on, shortly after receiving briefings about   What kind of stock did John Boehner (R-Speaker of the House) make a significant profit buying, and what legislation helped him benefit?

    2. What is the Congressional scam described involving IPO stocks? How does it work? What Democratic Congressperson benefited from a large IPO involving Visa? 

    3. What do you think about the ability of members of Congress to make investments in areas that relate to legislation? What is one of the ways suggested in the 60 minutes piece to avoid these problems? 

  • Paterno: ethical decision-making in hindsight

    image from photobucket

    It is with great sadness that I have read the media reports about the devastating breach of trust involving the coaches at Penn State University.  With all of the media attention to similar situations of child abuse involving the Catholic Church, it is baffling that anyone imagined that what they observed could be ignored. 

    • Harm had been done. 
    • Immediate attention to those harmed was required.  
    • It didn't happen. 

    In doing research for this post, I came across a syllabus for a course at Penn State from 2008: "Joe Paterno, Communications, and the Media."  The course was intended to be "an examination of the shifting relationship between Penn State football coach Joe Paterno and the media, and the resulting communication goals, methods and avenues of both parties over the past half-century," according to instructor Mike Poorman. In addition, he intended to "examine the often-incongruent goals and potential conflicting relationship between the traditional media and the public relations arm of a national figure."  

    I would really like to take this course next semester. I would imagine that the public relations arm of the University and its relationship to the media was a major factor in the decision to hush things up.  Paterno would probably have done things differently if he had the perspective he seems to have today.  Paterno said in a recent statement:  "This is a tragedy. It is one of the great sorrows of my life. With the benefit of hindsight, I wish I had done more." (from CBS Sports video)

    How can a person be more likely to make an ethical decision under the pressures of the moment?  A framework for ethical decision-making can help.  I have my students do an ethics paper to practice one such technique. It is best done with bullet points, after the first descriptive paragraph:

    1. Recall a situation, preferably at work, where you had an ethical dilemma. Write a paragraph describing the situation, clearly stating the dilemma. Here is an example: you are an employee at a family-owned bakery, and you are working with another employee on a Sunday afternoon, when no owners are present.  Your co-worker gives away several baked goods to a group of his friends who come in, in violation of company policy.  This makes you uncomfortable, clearly a sign of an ethical dilemma.
    2. List at least three courses of action which you might take, and the Pros and Cons of each.  Sometimes an ethical dilemma makes us feel as though we are forced to do one thing.  This assignment is an opportunity to think out of the box. You are not going to actually do any one of these things...you don't even have to tell me which one you chose in retrospect.  Also, please note that there are positive and negative outcome possibilities in each case.  If there weren't, it wouldn't be a dilemma. To continue my example:

      1.  Confront the co-worker and tell him you feel uncomfortable; remind him of the rules
      .....Pro:  Your conscience will be clear, at least with respect to dealing with the co-worker
      .....Con: It is difficult and uncomfortable to confront someone; there may be "blow-back"

      2.  Tell the boss.
      .....Pro:  Your conscience will be clear, and you will avoid the possibility that the boss notices
                     a discrepancy...and blames it on you...
      .....Con: You might feel uncomfortable ratting out your co-worker; there could be retaliation

      3.  Do "nothing." 
      .....Pro:  You will avoid a confrontation.
      .....Con: The co-worker might blame the shortage on you, if asked.  Also, you will always
                      feel uncomfortable around this co-worker, and the behavior might escalate.  
    3. Optional:  describe what you actually did in the situation, and then describe what you might have done, with the benefit of hindsight.

    This type of analysis can be a tool to reduce stress in an ethically challenging situation.  You will be able to see that you have more than one option, and that you do not have to be afraid of brainstorming to arrive at the best alternative in what is a tough situation.  

    These types of dilemmas occur in every job!

    Please check out the blog posts regarding the Penn State debacle under the "Business Communication" heading. 

    Follow up:

    1. Read about Lawrence Kohlberg's framework for analyzing moral behavior on my 9/15/11 blog, "No Such Thing As Right Or Wrong?".  Scroll down or go to the next page if necessary; blogs are in reverse date order. What stage of moral development do you think a football program operates under, in the best situation?

    2. Write an ethics paper based on a personal experience at work, at school or in your personal life, using the parameters I have delineated above. If you really can't think of anything in your own life, add three more courses of action, with their associated pros and cons, to my bakery example.

    3. Read several internet articles as this story unfolds.  Write one of these ethics papers from the standpoint of Joe Paterno, and explore all of the courses of action he might have taken, and the pros and cons of each.

    4. Feel free to share this assignment with others.

  • Water: businesses can sink or swim

    image from linked article

    Now that the Supreme Court has decided that corporations are people, too--does that mean that businesses will have a higher priority when it comes to water allocations?

    I'm joking, but water management isn't a laughing matter.  An article by William Sarni posted on today's Deloitte Debates page focuses on the importance of water to businesses in terms of strategic planning. Water is often taken for granted. But because there is a finite and fixed amount of water in the world, water management and recycling is essential.

    Sarni points out that developing countries, as they aspire to a higher standard of living, are increasing their per capita water requirements.  He suggests that business managers be mindful of water needs, and think of water in relation to energy. Water is required to produce energy, and energy is required to move water.  Where they differ is that, while oil is a global resource, water is strictly a local resource. It is subject to weather, politics and the needs of other water users--and citizens and farmers are often prioritized.  "Imported" water--from other counties, states or countries--leaves businesses vulnerable to shortages and surcharges.  And shortages can mean business shutdowns.

    According to Sarni, a long-term sustainable plan for ensuring adequate water supply is an important part of a business plan and an essential factor in risk management analysis.

    Follow up:

    1.  Sarni mentions a beer truck in his article on the importance of water.  In what context does he mention it, and what is the downside risk he is addressing?

    2.  According to the article, what percentage of the human body is water?  How many days can a human being survive without food?  How many days can a human being survive without water?

    3.  Where does the water in your faucet come from? What are your regional or state water issues?

    4.  Are you conscious of water conservation?  What do you do?  What does your school or place of work do?


  • "The iPod of Thermostats"

    image from L A Times article linked below

    A thermostat might not seem like a very hot product, but this new item--the NEST thermostat is back-ordered until 2012...and it isn't even on the shelves yet.  The online store has been shut down because the demand is higher than current production facilities can handle.  And get this: the Nest thermostat is retailing for $249!  For those of you who haven't been shopping for thermostats lately, you can buy other thermostats at your local hardware store for about $35-$70.

    Of course, a run-of-the-mill thermostat comes with a complicated manual and a lot of fine print.  According to an L A Times article, even though consumers pay an average of $2200 a year in heating costs, only 1 out of 10 consumers takes the time to figure out how to program the run-of-the-mill thermostats to maximize efficiency and save on fuel.  The Nest "learning thermostat" contains artificial intelligence software that will do that for you, once you set the temperatures you like.  The device also displays a little green leaf to reward you if you make choices that are energy-efficient. 

    Nest was designed by Tony Fadell, a former Apple executive who was intimately involved in the design of the iPod and iPad.  He started his own company in 2010 to develop this product. 

    Follow up:

    1.  Visit the Nest website.  What kind of existing thermostat would be incompatible with the installation of a Nest thermostat? If you were projecting potential Sales of the Nest product, how would this information influence your projections?

    2.  Evaluate the market potential for the Nest thermostat.  Who is the "target market"?  How would you reach that market?  Is this a product that you or your friends would buy?  Do some internet research to evaluate the social media "buzz" (if any) for this product. 

  • Gap between young and old is larger than ever

          image from newser.com

    "The wealth gap between younger and older Americans has stretched to the widest on record, worsened by a prolonged economic downturn that has wiped out job opportunities for young adults and saddled them with housing and college debt," Hope Yen reported in an article this week in the Huffington Post. Her comment arose from a study recently published by The Pew Research Center on the impact of the current economy.

    The headline represents the data that is visually represented on the above graphic. This means that the older group has a net worth more than 47 times higher than the younger people. Part of this is the natural process of wealth accumulation that occurs over a lifetime.  But a much lower 10:1 ratio existed in 1984, adjusted for inflation. The discrepancy has been exacerbated by higher college debt, "upside down" mortgages on houses bought during the bubble, and corporate downsizing.  Many young people have been laid off, and can't find jobs, or have had difficulty obtaining jobs that can support a lower-middle class lifestyle.


    image from Huffington Post

    The bigger questions brought to the forefront by this research include:  Can this trend be stopped?  What actions can we as a society take to ameliorate this discrepancy? How do these conditions affect the financial planning of young people? 

    Follow up:

    1.  Do you feel as though you will be able to afford the lifestyle that your parents provided for you?  Why or why not?  Will you be able to do better financially than your parents?

    2.  Get a piece of paper and make three columns.  Label the first column "Earnings," the second column "Assets," and the third column "Debt."  label two large-space rows with a plus (+) sign and a minus (-) sign.  In the Earnings column, write the money you expect to get from your job or jobs for a year.   In the minus area of that column, list your expenses, including rent, phone, gas, insurance, food, books and supplies, personal care, interest on credit cards, etc.  In the Assets column, put any sales of long term assets you intend to make over the next year as a plus (e.g. stocks, a car, furniture).  If you expect a regular or one-time infusion of cash from your parents also list those gifts as a plus in the Assets section.  In the minus row, list any big purchases you intend to make--like a computer or furniture.  In the third column, as a plus, list any student loans, or any increases you expect in your credit card balances.  The minus area of this column should show any repayments of principal or outstanding balances.

    Add and subtract these balances and figure out the overall increase or decrease to your cash you expect in the upcoming year.  You have just prepared a personal, pro forma Statement of Cash Flows!  If the number is negative, I hope you are starting off with a current bank balance that will cover the deficit.  Otherwise, you will either have to borrow more money, get a cash infusion,  or earn more.  Is your current financial plan sustainable?

    3.  Are you in the job market for a summer job or career-oriented employment?  What has your job search entailed? Look at the way unemployment statistics are computed at this US Bureau of Labor Statistics link.  Would you be counted as an unemployed job seeker, or would you be outside of the purview of those statistics?  What information might you gather differently to mine all of the relevant data?

  • Is it urgent or is it important?

    napkin drawing by Carl Richards, who blogs at NYT Bucks, where drawings are archived

    Everyone has a different time of year when they make resolutions or try to jump-start their personal goals.  For many, the start of the school year in September reminds them of new beginnings.  Others get motivated by Spring cleaning.  Many use the clean slate of the new calendar year to prioritize their goals.  Whenever you start...if you are like many of us... what seemed important enough to resolve to change often falls by the wayside after a few weeks or months. 

    Carl Richards writes, in "Don't Confuse the Urgent with the Important," that we get distracted from the goals we see as important.  Day to day issues that seem more pressing cause us to put our long term goals on the back burner.  His napkin graphic illustrates some top-priority financial goals for adults: estate planning and emergency funds. Almost anything might seem more urgent than those priorities--an expensive dinner out with friends, a new sweater, tickets to see your favorite band...even that daily latte at the local coffee place.

    But Richards makes an important point:  "Once time passes, the important eventually becomes urgent.  But by then it might be too late to do much about it."

    Parents can "forget" to save for their kids' college educations...or for their own retirement.  A person dying without a will can make dealing with their estate a financial and emotional ordeal for their family. Trying to get legal work done in anticipation of a big vacation might be a common tactic...but not one that successfully deals with an important issue like an estate plan. 

    Richards' advice is to set aside a time every month to plan for your own financial security. Tackle one issue at a time, and do all of the footwork to get it in place to make it happen. This is a blueprint for reaching not only your financial goals, but your life goals as well. 

    Follow up

    1.  You don't have to draw on a napkin--but get a few sheets of white paper.  Label the first one "Daily" and draw the x and y axis, labeling them as Richards did:  Urgent and Important.  Write a few things in the top two sections of the graph--things that are important and urgent for you to do every day. ..and things that are important but not urgent. For a few days, get out this sheet of paper and write down what you did, in the appropriate quadrant of the grid.  You might find yourself filling up the lower quadrants with all kinds of unplanned activities. Think about how you are spending your time.  Think about how you want to spend your time.

    2.  Draw another grid on another sheet of paper for financial goals.  These will be very different for everybody, and very different over time for each individual.  You just need to draw one for the next 5 years.  What are your important financial goals? What is urgent? Again, follow up by keeping track--for a month--of how you are spending your money. How much are you spending in each quadrant of the Urgent/Important grid?   Can you make an incremental change toward what you'd like to be doing next month?  Write down your goals.


  • Economists with wisdom and vision: please advise

    cartoon by Ingram Pinn, representing Adam Smith, Karl Marx,
    Joseph Schumpeter and John Maynard Keynes 

    There has been widespread criticism of the "Occupy" movement's lack of understanding of economic realities and lack of vision in providing solutions. But are the experts doing any better?

    "Economists, to whom we might expect to turn for such vision, have long since given up thinking in terms of economic systems--and we are all the worse for it." say Roger E. Backhouse and Bradley W. Bateman in "Wanted: Worldly Philosophers" (NYT, op-ed).  It seems as though even those whose job it is to see the big picture and make sense of it are having a tough time grasping what is going on in today's economy.

    According to the Backhouse/Bateman article, the comparative economics courses that were prevalent during the cold war are no longer relevant to economists, who currently seem to view the entire planet as one global capitalist system.  But, how is this illusive concept of capitalism defined?

    There's the rub.  I'll get back to the NYT piece in a minute, but first I want to explore a few sources who do attempt to define the central tenet of modern economics.  According to David Z's piece, "'Free Markets' Are Not 'Capitalism'" the word "capitalism" was coined by socialists, and held a negative connotation.  And yet, he says, we often hear the term "free market capitalism,"  which gives capitalism a positive spin.  "Free market" indicates a voluntary exchange, where there is transparency in the equally-valued exchange of goods and services.  "Capitalism," on the other hand, might be:

    • an economic system that grew out of feudalism (Wikipedia);
    • a "system in which business and coercive state forces collude to serve whatever arbitrary interest may be lobbied for." (David Z, quoting from Bill Wurst's blog);
    • "an economic system characterized by private or corporate ownership of capital goods," which are defined as accumulated goods used to produce more income or goods (Merriam-Webster);
    • "the only system that could create prosperity, but...also inherently unstable and so in need of constant reform" (John Maynard Keynes, as paraphrased by Backhouse and Bateman in the NYT piece). 

    Doh Jung-Il, author of a 2009 book reviewed in the KoreaTimes, defines today's global capitalism as "totalitarian capitalism." Says reviewer Chung Ah-Young, "He (Doh) criticizes the totalitarian approach to the market system, which excludes any values aside from profits and capital." Doh views capitalism as "barbaric" because of "the fierce competition, which drives people to harbor a strong desire to win by all means, making them destroy nature and ecology to raise their productivity." 

    Doh makes his point rather melodramatically. Still, he zeroes in on the central theme of all the definitions: capitalism holds acquisition as its only value. Metaphorically, capitalism is a hungry beast. Perhaps only a centralized, totalitarian government has the power to tame it. 

    The NYT piece asserts that modern economists don't even try. Backhouse and Bateman use a Keynesian analogy to describe how modern economists think. Like dentists focused on filling a tooth, economists may only look at a small part of the big picture, but they ameliorate a lot of pain...or so Keynes hoped. But a focus on fixing an isolated problem can mean losing the big-picture vision of how an economic system should function. 

    Backhouse and Bateman might find common ground with Doh Jung-Il with respect to what gets ignored in the modern economy. From the NYT piece:

    "We clearly need a new, alternative vision of capitalism. But thanks to decades of academic training in the 'dentistry' approach to economics, today’s Keynes or Friedman is nowhere to be found...Another downside to the 'dentistry' approach to economics is that important pieces of human experience can easily fall from sight. The government does not cut an abstract entity called 'government spending' but numerous spending programs, from veterans’ benefits and homeland security to Medicare and Medicaid. To refuse to discuss ideas such as types of capitalism deprives us of language with which to think about these problems. It makes it easier to stop thinking about what the economic system is for and in whose interests it is working." 

    In other words, economists can't seem to see the forest for the trees...

    from the New Yorker; cartoon by S. Gross

    Follow up:

    1. Which of the above definitions of capitalism comes closest to being accurate in terms of today's political realities and business environment, in your opinion? Why? Do you have a better one?

    2. Read the Wikipedia or Investopedia entries for the four economists in the cartoon at the beginning of this post. Write a few sentences summarizing the basic views of each one. With whom do you most agree and why?

  • Tower Heist fraud: Can pension funds be embezzled?

    one-sheet image posted to IMDb; film released by Universal Pictures

    This weekend, the action comedy, "Tower Heist" opened, starring Ben Stiller and Eddie Murphy.  According to the NYT review, "Crime Doesn't Pay. Oh, Wait," by A.O. Scott, the movie contains plot holes galore. Here's the basic story: A business magnate in a luxury high-rise building--a character named Arthur Shaw--has, among other crimes, embezzled retirement funds from the building's workers.  He is arrested by the FBI.  The building's workers, led by the character played by Ben Stiller, plot and act to steal the money back.  The Ben Stiller character believes there is cash hidden in a safe, but of course there are complications and hi-jinks.

    A.O. Scott points out plot flaws that occur in the revenge caper.  I am, however, more interested in the basic premise:  Is it possible for an employer to embezzle retirement funds from employees? What are the safeguards in place to prevent that kind of fraud?  Retirement security probably represents the most important arena of risk management that most of us who work as employees have to deal with over our lifetime.  The movie's premise makes it seem as though retirement funds can easily be tapped by an unscrupulous manager.

    The real-life situation involves ERISA, or the Employee Retirement Income Security Act of 1974, as amended.  This Act delineates the laws affecting employee retirement funds.  Basically this law is in place to protect employees by:

    • requiring disclosures and periodic audits and reporting be done
    • setting standards for what the retirement fund managers, or fiduciaries, can and cannot do
    • establishing legal remedies for non-compliance with the rules

    In addition, the Pension Benefit Guaranty Corporation was established by ERISA, to provide partial recompense for employees when their pensions went "belly up" and were discontinued due to mismanagement or malfeasance.

    So, the workers in the movie actually had some legal protections, even if their pensions were illegally embezzled.  Thank goodness.  Nevertheless, it is important for people who have pensions to carefully monitor the disclosure documents on a periodic basis, and follow up to get any questions answered, or investigated by authorities.

    I haven't seen this movie...and I probably won't.  I get the general idea of what happened from the trailer.  But the subject matter of the movie did move me to carefully check out the status of my retirement fund.  And I am pleased that it brought into public consciousness how much value employees place on having a retirement plan in place. 

    Follow up:

    1.  Read the Wikipedia link to  ERISA.  What does "vesting" mean?  How did ERISA address this issue, and what problem was ERISA trying to correct?

    2. What is the difference between a defined benefit plan and a defined contribution plan?   What are the advantages and disadvantages of each to the employee?  What are the advantages and disadvantages to the employer?

    3.  Do a web search for "pension fraud."  What allegedly occurred in the NY Long Island Railroad pension fraud scheme, based on stories from October, 2011?  Could ERISA laws have prevented this type of crime?  Were they intended to?

    4.  Do a web search for "pension mismanagement."  Read one story.  How do ERISA laws relate in the case you picked?


  • Luxury problem: the NBA-union negotiations continue

    Last week, the NBA negotiations missed a deadline...and another one is coming up this Wednesday.  While the team owners and the union leaders are negotiating, the 2011-2012 basketball season keeps getting delayed. What is at stake?

    According to an article by Mike Brenahan of the Los Angeles Times (via the the Christian Science Monitor website), the basic "sticking point" in the negotiations is the split of basketball-related revenues.  The players, represented in negotiations by Billy Hunter, executive director of the players' union, want 52% of the revenues, down from the 57% they received last year. The team owners want a 50-50 split.  Who knows what is going on behind closed doors in negotiations?

    But not only are the fans getting impatient, some of the players are starting to talk about taking drastic action as well. Some are proposing to "decertify" the union. This is a complicated process, overseen by the National Labor Relations Board (NLRB).  It would take several months and, based on experience in prior negotiations, it might wipe out the whole season. First, 30% of the players would have to formally request a decertification vote, which would be overseen by the NLRB. Over 50% of the players would have to vote in favor of decertifying the union.  

    Players are also discussing filing anti-trust lawsuits against the owners.

    Are the players just using scare tactics? These tactics worked for football players. When the NFL decertified their union last spring, the players re-certified the union after a settlement was reached for a 10-year contract.  It took time, but it was well before the start of the football season. Losing the entire season is a more imminent threat with the NBA now. Maybe the possibility of losing an entire year of income will motivate the owners to compromise. 

    Follow up:

    1.  Look back through the blog archive to find postings that dealt with the union negotiations of grocery workers. What was the "sticking point" in that labor dispute?  How was it resolved?

    2.  If basketball fans could be the mediators for these negotiations, what might they suggest as a solution to this negotiations impasse?

  • Groupon's high IPO price doesn't stop even higher trading

    image from dealbook.newyorktimes.com 

    Groupon's long-anticipated IPO hit the market on November 4th.  The offering price of $20 per share was higher than most analysts had predicted, according to several media sources, including the Wall Street Journal.  It debuted on NASDAQ, with the ticker trading symbol: $GRPN.   Techcrunch.com reported that the first trades came in higher than the offering price--40% higher--at $28/share, which should produce $17.8 billion in capital for Groupon. This is considerably more money than the $6 billion that Google offered Groupon earlier this year. 

    According to analyst Martin Dale, Groupon has been called the fastest growing company ever.  But this doesn't mean he supports Groupon without reservation. Far from it. His information graphic on Groupon notes the following:

    • Groupon lost $413 million in 2010
    • Groupon may have already "peaked" in terms of saturation in their older markets
    • Studies show that Groupon customers are purchasing fewer and fewer deals
    • On the plus side, Groupon created a business by making coupons "cool" and connecting new buyers with sellers 

    You can view the graphic in detail at the link above, if you have trouble reading it here:


    Follow up:

    1. If you had $10,000 to invest, would you invest it in the Groupon IPO?  Why or why not?  If you would invest, would your intention be to hold it for a while, or sell it soon?

    2. Read what others have to say at the following links.  Summarize their opinions in a two-column chart, with their name and company on the left, and their recommendation and reasoning on the right.




  • I am a job-creator, via Starbucks

    phone photo of blog author, wearing a wristband signifying 
    a contribution to the Create Jobs for USA Fund 

    Starbucks launched its micro-lending program for job creation this week.  I've made my contribution and I am now proudly wearing my wristband as an official job-creator.   According to a story by Wendy Kaufman on NPR, I am part of a lineage of community lenders in the Opportunity Finance Network that was first funded by Catholic nuns 25 years ago. [Listen to the story and read the transcript at this LINK ]

    The Opportunity Finance Network is a consortium of lenders that make loans in communities where banks are unwilling to loan money.  In today's economy, banks have been reluctant to make many of the small business loans that would have been made five or ten years ago. According to the U.S. Small Business Administration, small businesses have created 65% of the net new jobs in the USA over the last 17 years (item #2 on the link).  These small businesses need loans to continue job creation, and the Starbucks Foundation, in cooperation with existing organizations has begun a drive to get its customers to contribute seed money that will make more loans possible. 

    As noted in the NPR piece, two Fresh Grocer stores were opened in inner city Philadelphia, using funds from a similar Community Development Financial Institution.  This is the kind of initiative that the Starbucks program intends to support.  Read about other micro-lending successes in the US in a NYT article from earlier this year.

    If you want to see an example of marketing to appeal to a sense of patriotism, view the video that Starbucks uploaded to YouTube to introduce this program:


    Follow up:

    1. Listen to, or read, Wendy Kaufmann's piece.  Who described the Starbucks program as "a solid single"?  What did he mean by that?

    2. How many jobs were created in inner city Philadelphia by the opening of the two Fresh Grocer stores?

    3. Read the NYT article linked above about other successful micro-lending programs.  (Be patient: it takes a full minute to load). Describe some of the businesses that were helped.

    4. Do you feel inspired to make a contribution?  Why or why not?