Teri Bernstein, MBA, CPA has been teaching full time in the Business Department of Santa Monica College since 1985. Prior to that, she worked in Internal Audit and Special Financial Projects for the 1984 Los Angeles Olympics, CBS, Inc., and Coopers & Lybrand. She attended the University of Michigan and Wayne State University.
image from eastcoastwineries.blogspot.com
If you are selling a high-end, classy product, it appears that an association with "New Jersey" does not have the same marketing appeal as, say, "France," "Italy," or even "California." The fine-wine industry in New Jersey has learned this lesson, and has taken to marketing its products truthfully--if not transparently--as being from the "Outer Coastal Plain."
Amalthea Cellars is a New Jersey winery owned for the last 30 years by Lou Caracciolo. He makes a $33/bottle cabernet sauvignon blend. But he's had a hard time selling it--both because of New Jersey's reputation (I'm thinking "Snooki") and the reputation of the all-too-syrupy cheaper wines usually produced by vintners from The Garden State.
The above map is provided just in case you have a hankering to go on a wine-tasting expedition and your don't happen to be near more traditionally famous vineyard areas...
At any rate, Lou Caracciolo and other New Jersey fine-wine makers have "branded" their wineries' location as "The Outer Coastal Plain" (think "Napa Valley") rather than "New Jersey." Their Outer Coastal Plain Vineyard Association is "dedicated to the establishment and promotion of sustainable and economically viable viticulture in the Outer Coastal Plain AVA of New Jersey." In addition, Caracciolo has convinced one of the major low-end sweet wine makers, Tomasello Winery,(see the map), to make a $48 bottle of fine, dry cabernet.
Worth a try, if you are a wine drinker? The Outer Coastal Plain Vineyard Association hopes so.
Sources: "The Trick to Selling Fancy Wine From New Jersey: Don't Say It's From New Jersey," audio feed and article by Robert Smith, NPR, Morning Edition, March 29, 2013.
image from National Public Radio
Planet Money is a National Public Radio news-magazine about financial matters. The audio articles are short and interesting tidbits--often focusing on business decisions that don't make headlines, but are important to business practices in both large and entrepreneurial companies. They also do pieces that help the listener put financial headlines into an more understandable context.
For example...The article I've linked to is about a business decision made by Sloan-Kettering Hospital, a top-rated cancer facility that values its cutting-edge reputation. When a new drug became available to treat colon cancer, they evaluated the efficacy of the new drug vis-a-vis an older drug that was available at half the cost ($11,000 per month vs. $5,500 per month). The clinical results of the drug were the same: a 1.4 month increase in lifespan. Sloan Kettering made the decision to NOT USE the newer drug, based on cost.
Because a cost-based decision is very unusual in the arena of top-ranked cancer hospitals, two Sloan-Kettering colleagues teamed up to explain their decision in an New York Times op-ed piece, "In Cancer Care, Cost Matters." If there had been a difference in outcomes that favored the more expensive drug, however, they would have opted to use it, or provide it as an option to patients. In this particular case, they made an unusual business decision, and protected their reputation by being transparent about it in a widely-read newspaper.
At any rate, stories about Amish entrepreneurs, con men and the transportability of money have also run recently in the NPR series. For people interested in business, Planet Money is a great resource.
Sources: Planet Money: the app from iTunes and National Public Radio.
image from www.telegraph.uk.co
The Standard & Poor's-500 stock index closed today (Thursday, March 28) at an all-time high of 1569.19. Analysts consider this high to be more meaningful than the record set earlier this year by the Dow Jones Average, because the S&P-500 is a more broad-based sample of stocks in all sectors of the economy. The previous record as of the close of trading was in October 2007--and the mid-day high set then has still not been surpassed (1,576.09).
As you can see from the graph above, this index has been trending upward for the past few years--in spite of poor labor statistics and global banking problems. This benchmark was applauded on the floor of the New York Stock Exchange.
image from usatoday.com
Source: "Broad-based S & P-500 Stock Index Ends at Record High," by Nathaniel Popper, New York Times, March 28, 2013.
image from mofradtaxsolutions.blogspot.com
For several decades in the United States, marital status has had an impact on tax liability. Transfer of jointly owned property when one spouse dies does not produce a tax liability for a surviving spouse under U.S. estate tax law. For couples with widely differing incomes, "Married filing Jointly" on the annual tax return usually produces a lower overall tax rate than if both parties filed separately. These are instances where Federal tax laws benefit married people.
However, because of the 1996 Defense of Marriage Act, DOMA, now being reviewed by the Supreme Court, same-sex couples who are legally married in states that allow it are NOT allowed to file as "married" with respect to Federal income tax. In many cases, this penalizes same sex married couples. (DOMA only recognized opposite sex marriages for the purpose of Federal filing status, or any benefit status--Social Security, Veteran's, Medicare, etc.)
However, there is also the "marriage penalty" in U.S. tax law. The tax rate tables are set up so that married individuals--both working full time at approximately equal or high-bracket salaries--usually pay MORE in taxes as "married" people than they would if they were "Individuals" (unmarried). Married same-sex partners are currently forced to file Federal income tax returns as "individuals." If the Supreme Court were to overturn DOMA, same-sex married couples would also be subject to the "marriage penalty." This would actually make accounting for the businesses who employ them much easier.
image from facesinequality.org
Source: "High Court's Decision on Federal Marriage Law Has Tax Implications," audio link and transcript, by Carrie Johnson, NPR, Morning Edition, March 26, 2013.
image from www.teamelf.com
Digital Domain, Custom Film Effects, Rhythm & Hues, Frantic Films, Lowry Digital--these are all digital effects companies in Los Angeles that have either filed for bankruptcy or been bought up by a foreign competitor recently. The irony is--with high definition and increasingly realistic visual effects on Avatar, Life of Pi, The Avengers, and other films--an observer would think these businesses would be thriving rather than going under.
But foreign competition has driven the business out of the US market. This is partly due to industry subsidies by governments in Canada, Britain, and New Zealand, and partly due to cheaper labor costs in India and other Asian countries.
Source: "Generating Stunning Visual Effects, But Not Enough Revenue,"by Richard Verrier, Los Angeles Times, March 24, 2013.
This is what the Lululemon pants USUALLY look like...
Usually, "transparency" is a quality that investors appreciate from the companies they've invested in. But a different kind of transparency has caused a serious problem for Lululemon Athletica Inc. (LULU), the high-end yoga-wear retailer and manufacturer. The problem? Black Luon pants had quality control problems that made them see-through. The pants were shipped at the beginning of March and pulled from the stores shortly thereafter, but because they constituted 17% of the inventory in women's pants, the effect on sales (and Lululemon's reputation) has been considerable.
First quarter earnings will be even lower than expected. Shares in Lululemon have fallen 16% since the beginning of the year. Over that same period, the Standard & Poor's 500 Index is up 8.6%.
Source: "Lululemon falls as pants deemed too transparent,"by Leslie Patton & Sapna Maheshwari, Bloomberg online, March 19, 2013.
image from caninescorner.org: a Raccoon Dog
What is a company to do if they can't get control of their supply chain? The demand for "faux fur"--high quality synthetic furry material--has been higher than supplies. Some companies have made a surprising substitute: the Real Thing. The retailer Nieman Marcus was recently caught advertising Burberry coats trimmed in "faux fur"...which turned out to be raccoon dog, an East Asian canine that looks like a raccoon.
image from www.niemanmarcus.com
The marketing problem is also a legal problem: some individuals have allergies to real fur, and others just prefer not to wear it for ethical or other reasons. A company can't advertise a product as "fake fur" and just substitute real fur. The Humane Society tested the suspected products, and reported their findings to the Federal Trade Commission (FTC). FTC officials reported that Nieman Marcus and the other retailers agreed to follow the law.
Source: "A Faux Faux Fur Kerfuffle at Nieman Marcus,"by David Weinberg, Marketplace, American Public Media, March 20, 2013.
image from www.guardian.uk.co
The International Monetary Fund and Germany have been putting pressure on Cyprus to take a "tax" on all bank accounts as a condition of a monetary bailout. The justification? Almost one-third of all Cypriot deposits are from Russian entities--many of which are suspected of using the banks in Cyprus for "laundering" funds obtained criminally. Cyprus is trying to raise about $7.5 billion from this levy.
The proposed tax has had an effect on the share prices for major world banks such as Barclays, Deutschebank, Citigroup and Morgan-Stanley. Demonstrations have taken place in Nicosia, Cyprus. Depositors in other countries struggling financially--Spain and Italy--are considering pulling their funds out of local banks and investing them in other countries.
According to Global Financial Integrity, a US-based oversight organization specializing in money-laundering, significant transactions between Cyprus and Russia in 2011 point to an institutionalized money-laundering operation. Ties with Russian businesses form at least 40% of the Cypriot economy. The IMF, Germany and other members of the European Union want Cypress to break its Russian ties in order to sustainably and legally proceed--especially since European Union bondholders will bear the brunt of the losses if Cyprus does not "clean up its act." Meanwhile, to raise the capital demanded, innocent bank depositors would also be assessed.
image from www.washingtonsblog.com
Moving forward, rules will require that companies can only operate if accredited by the Cyprus Securities and Exchange Commission. The practices of never having to show up in Cyprus to run a business, and of depositing suitcases full of cash will have to stop.
Source: "Cyprus Bailout Puts New Pressure on Europe's Banks," by Mark Scott, New York Times DealBook, March 19, 2013.
"Cyprus fights doubts over Russian Money," by Kerin Hope, in Nicosia, with additional reporting by Agnieszka Rakoczy, Financial Times online, March 14, 2013.
image from futuristspeaker.com
Businesses rely on an educated workforce. But there are problems in America's schools. According to a US Department of Education report quoted in the Harvard Political Review, "more than a quarter of high school seniors cannot read at a proficient level." Deficits in basic literacy and math skills mean increasing issues for American businesses in terms of hiring educated, number-savvy and creative people to respond to the constantly changing business and technological environment.
The current trend in education in California has been to restrict funding for public institutions, while at the same time requiring increased "production," defined as successful students completing programs and heading for more education or into full time employment. The institutions' ability to meet "Student Learning Outcomes" and increase excellence are paramount. More recently, there has been a trend toward online education to solve the financial problems and increase standardization, but online education isn't for every type of learner.
What research in Finland found was at odds with what education analysts in the US today are promulgating. The PISA survey has found that Finland's 15-year-olds rank #1 or close to it in reading, math and science. How did Finland get there? They adopted an educational model that included less homework, more creative play, and an absolute commitment to 100% public education: no private schools. That way everyone was committed to making the system work. In addition, they had no standardized tests except the National Matriculation Exam taken at the end of high school.
In Finland, individual teachers are given considerable responsibility for the success of their students, but education is not competitive, it is based on co-operation. Since the 1980's, the primary "driver" of education "production" has been equity. The motivation came from a need to be economically competitive. According to Anu Partenen, "When Finnish policymakers decided to reform the country's education system in the 1970s, they did so because they realized that to be competitive, Finland couldn't rely on manufacturing or its scant natural resources and instead had to invest in a knowledge-based economy."
With manufacturing already moving primarily overseas, a "knowledge-based economy" is also needed in the USA. Will the desire of politicians to contain education's costs through online classes be more equitable, or will it create a bigger divide between the educated and the under-performing work force? The changes in the textbook industry, flipped classrooms, and MOOCs may all be a piece of the evolving education management model. Business opportunities abound in this new arena.
Sources: "What Americans Keep Ignoring about Finland's School Success," by Anu Partenen, The Atlantic, December 29, 2011.
"The Business of Education," by Sarah Suskind, Harvard Political Review, August 20, 2011.
"Jerry Brown continues to push for more online classes," by Anthony York, latimesblogs.latimes.com, January 15, 2013.
"The PISA Survey": Organization for Economic Co-operation and Development.
The Canada-based multinational Scotiabank published its Global Auto Report earlier this month. Some of the news it reported included:
According to another source, Wards Auto/Automotive Compass, these rates of increase are not forecasted to continue over the next three years.
Source: "Global Vehicle Sales and Production Surge in Early 2013: Scotiabank" from Joe Konecny, Scotiabank Media Productions, reported in the online Wall Street Journal, March 6, 2013.
Scotiabank Global Auto Report [this is a .pdf file]
Wards Auto/Automotive Compass data reported in the International Business Times, January 2013.
Original of graphic above, from National Low Income Housing CoalitionNote: link is a .pdf and does not open well using Firefox on a Mac]
The National Low Income Housing Coalition has some bad news: in order to afford a modest two-bedroom apartment in California, it is necessary to work 129 hours per week, 52 weeks per year, if you are making minimum wage. And the minimum wage is higher in California than it is in the rest of the country: $8.00 per hour instead of $7.25.
The worse news is that the situation is not much better in the rest of the country. The map above (the text is much more clear on the linked page) indicates how many hours of work per week, 52 weeks per year, it takes in each state to afford a two-bedroom apartment. The legend reads:
When someone working full time cannot afford modest housing, there are implications for small and large businesses, and for public policy.
Source: "The 129-hour Workweek: How to Afford a Two-Bedroom Apartment in California",by Lisa Brenner, KPCC, Southern California Public Radio, March 13, 2013.
Amanda Palmer and her Kickstarter campaign, from YouTube, linked in Sources, below.
Kickstarter, a crowdfunding site, is populated with creative types trying to raise sufficient funds for a school film project, or to finish research on a novel. But sometimes Kickstarter is the indie path to millions...as was the case with Amanda Palmer last summer, and, more recently, the Veronica Mars movie.
promotional image from the Veronica Mars television show
Amanda Palmer ran into some criticism from outside observers, since she raised more money than was needed to lmake her album: she needed $100,000, but she raised $1.2 million! She was the first Kickstarter Millionaire. Ms. Palmer claimed that she would funnel the money back into the business to create more product for her fan base. "This is the future of music," she said.
The Veronica Mars campaign, managed by star Kristin Bell and creator Rob Thomas, raised all $2 million of the money they needed within 24 hours...and then some, for a total of $2.7 million. I wish I'd known about it. I am a serious fan of the former television show, and am pretty curious about the movie. But I wonder...is this the type of venture that Kickstarter was really set up to promote?
Sources: "Veronica Mars movie is a go after successful Kickstarter campaign",by Alex Cohen and A Martinez, Take Two, KPCC, Southern California Public Radio, March 14, 2013. [Kickstarter campaign video is at this link]
"Amanda Palmer tells us about becoming 'a Kickstarter millionaire'," by Jen Carlson, the gothamist, June 4, 2012.
Amanda Palmer on YouTube.
image from thechronicleherald.ca
The environment is not great for honeybees lately. That might not seem to mean anything to many of us, who don't care for insects, or think bees are only about honey. But bees and other "pollinators" have a huge impact on agricultural business operations, on food prices, on wildlife, on nature, and on all business operations relating to the environment. Without pollinators, many crops can't grow, there's less food for wild animals, and eco-systems fail.
In case you haven't been following the stories, here is what has been happening with bees lately: From coast to coast, bee colonies have been dying off. Beekeepers are "lucky" if their losses are only at 30-50%. Some of the causes include a "drought in the Midwest, parasitic mites that feed on bee blood, and an unusually cold snap earlier this winter in California." In addition, the trend by some farms to plant more corn (because of the demand for high fructose corn syrup), which doesn't flower, means that bees that used to thrive during part of the year on other flowering crops, no longer have food to maintain and increase their hive size.
The shortage of honeybees is a critical problem for almond growers in California. Honeybees are needed to transfer pollen from male almond trees to female trees, or nuts do not form. One grower, Paramount Farms, rents 92,000 bees to pollinate 46,000 acres of almond trees. It has to scramble to get its bees from 15 different states. There are not enough bees, due to the problems with bee colonies, for all of the almond growers in California to fully pollinate all of their trees. California produces 80% of the world's almond crop...and almond demand is growing world-wide.
almond orchard from agsi.psu.edu. The trees are in bloom, but are there enough bees?
Gordon Wardell, a bee biologist, thinks that the almond industry needs to solve the bee population problem if the industry is to thrive and grow. "It's our responsibility as stewards of the bees to figure out about what's going on and bring them back into balance," he said.
Sources: "Honeybee Shortage Could Harm World's Supply of Almonds"
(includes slideshow),by Wendy Lee, Take Two, KPCC, Southern California Public Radio, March 13, 2013.
"Colony Collapse Disorder" Wikipedia.
Recently, a company in New Mexico filed an application to slaughter horses for meat. Slaughtering horses for meat has been banned in the USA since 2007, but the law expired in 2011. Valley Meat's application to begin this practice again was newsworthy...as well as being a jumping off point for various jokes...as well as outrage. Reading the articles about the application reminded me of a sight from an Italian grocery store, in the baby food section. It seemed unusual enough to my American sensibilities to warrant a photo:
photo by Teri Bernstein
It shouldn't have surprised me to read today's update to the article. Valley Meat, who has been operating a cattle slaughtering business to this point, has had several health and production violations over the last few years. According to the Federal Meat Inspection Act, the property of any slaughterhouse or meat processing plant “must be maintained to prevent conditions that could lead to insanitary conditions, adulteration of product, or interfere with inspection.”
Unfortunately, there have been violations documented by the New Mexico environmental department that Valley Meat has not filed an application to be a "composter" and has not properly disposed of animal waste and the by-products of the cattle slaughtering operation. Dealing with waste is always a component of an adequate production process.
Read the article if you are interested in the grim details.
Source: "Horse Meat Applicant's Food Safety is Questioned"
by Stephanie Strom, The New York Times, March 13, 2013.
On a Marketplace Quiz, Stephan Richter asked this question:
How many of the world's 3.1 billion workers live on just $1.25 per day -- the global poverty line as defined by the World Bank?a. 50 percentb. 25 percentc. 10 percentd. 3 percentWhat is your answer? Please note, before you answer--the answer is different from the chart above, because the Quiz question is about the percent of "workers," whereas the chart tracks the goals for the number of total persons--including children--living at the extreme poverty level. Note the differences in the rate of improvement among the countries listed in the chart.
Sources: "Quiz: How Many Workers Live on $1.25 per day"
Interview with Stephan Richter, Marketplace, American Public Media, March 12, 2013.
The Globalist, a daily online magazine about "how the world really hangs together."
Just this afternoon, I was visiting the Video-graphics department at the college where I work, and had this conversation with a classified worker:
CW: "How much do you know about Word?"me: "Less than I used to. What's up?"CW: "I haven't really been able to use it since the 2007 version got replaced."me: "Join the club! Do you know a fast way to change your header?"CW: "Nope. Do you know how to put in a watermark?"me: "Try INSERT."CW: "That's where I am. No INSERT. And HELP is opening the Internet..."me: "PAGE LAYOUT? VIEW?"
"elucidation" of the Microsoft Menu found at www.jenpowell.com
Trial and Error seems to be a typical Word 2010 user process. And users are stuck with whatever version Microsoft is currently supporting. But there is only so much that a word processor can do. So, to generate new Sales, Microsoft has to "upgrade" its version. All they can do is mix up the functions and tuck them into different menus and more complicated toolbars. That way they can justify having a new version of their program to sell.
Maybe that will change. The bad news is: there is a new version--Office 2013. The good news: Microsoft has a new Sales model that might decrease their need to make annoying cosmetic changes. Here's the new plan--not just for Word, but for the whole Suite of Microsoft Office programs--Excel, PowerPoint, Access, One-Note, and Publisher:
Of course, your subscription would include any upgrades, but maybe Microsoft wouldn't have the incentive to make annoying cosmetic changes if the new Sales model--an operating lease--ends up improving their revenue stream.
Meanwhile...does anyone know how to turn off "automatic formatting"?
Source: "Subscribing to Office, Now and Forever"
by David Pogue, New York Times, March 6, 2013.
image of the Jawbone Jambox published in the NYT
The bluetooth speaker pictured above does things that your iPhone or other smartphone can't do. But think of all the things that you used to tote around--or wear--that have become redundant for the savvy owners of a smartphone with apps. Watches? General-use digital cameras? What has happened to the usage and the market penetration of those "must-haves" in decades past?
Still, because a smartphone can't do everything, there are new business and marketing opportunities for add-on gadgets. Anyone who has tried to listen to music on their iPhone without earbuds knows that "Speakerphone" just doesn't come close to decent audio quality. The speaker pictured above (and several competitors) offer a bluetooth (wireless) connection to laptops, iPods or smartphones. Other useful add-ons include:
Of course, these are the suggestions for this month. The product mix at this time next year is likely to be quite different.
Source: "Gadgets You Need, Even If You Have A Smartphone"
by Brian X. Chen, New York Times, March 6, 2013.
image from abcnews.go.com
---- OR ----
The Federal Communications Commission (FCC) testified in Congress this week in favor of legislation that would require phones to be "unlockable" and therefore portable from one carrier to another. These phones could also be used internationally.
Unlocking phones would likely lead to more competition: better prices and features for consumers. The restriction against locking phones was put into place by the Copyright Office of the Library of Congress. Its purpose was to protect the "intellectual property" of the manufacturer: the software inside the phone. The penalties for violation of this rule could be pretty steep under the Digital Millenium Copyright Act: a $500,000 fine and 5 years in prison.
Nevertheless, after the initial period of contract service obligations, there are arguments to be made for the freedom to move to another carrier. The contract period allows service providers "selling" an iPhone with a real retail price of $649 to be sold for $199 with a two year contract. During that two year period is when the service provider makes back its money, and then its profit.
photo by Michael Nagle for the NYT: Julius Genachowski, Chairman of the FCC
After that period, trade organizations--and now the FCC--feel that unlocking the phone is feasible and fair.
Source: "FCC Backs Consumers In Unlocking of Cell Phones"
by Edward Wyatt, New York Times, March 4, 2013.
As you watch this video, pause it and make your own estimations about how the US population ranks, divided into fifths (the bottom 20%, the next 20%, the middle 20%, the second to the top 20%, and the top 20%). Do this before you see what the survey respondents said.
video from YouTube
The animated graphic in the video illustrates that there is a perception gap among the following:
Draw your own conclusions about what this might mean in terms of how the perceptions may have been formed, and what it means for business.
Source: "Wealth Inequality in America" by politizane, from sources http://www.motherjones.com, http://danariety.com, http://thinkprogress.org, http://money.cnn.com, published on YouTube, 2012.
banner image from thinkprogress.org
Several businesses filed "amicus briefs" with the US Supreme Court recently, in the DOMA case. DOMA, the "Defense Of Marriage Act," is a federal law signed during the Clinton administration. It prevents the federal government from recognizing as marriage anything besides "a legal union involving one man and one woman." It is being challenged, and several businesses have signed a brief requesting that the Supreme Court overturn DOMA. The brief does not address the sociological or religious issues that often surround discussions of this issue--it's all about maintaining profits and
keeping down costs of compliance with federal regulations.
In states where gay marriage has been legalized, legally married couples who do not fall under the DOMA definition have to be treated differently with respect to federal and state laws regarding health care, retirement and taxes, for example. Businesses cite that this "impairs employer/employee relations and other business interests."Those "other business interests" include the costs of maintaining separate records and deduction systems to comply with state laws that differ from federal laws. The different treatment also exposes businesses to possible allegations of discrimination, as well as "unnecessary cost and administrative complexity."Some of the businesses that signed on to the brief appear in the graphic below.
Source: "Federal Gay Marriage Ban Hurts the Bottom Line, Businesses Argue" by Erica Ryan, National Public Radio, February 28, 2013.
From Robert Mankoff, cartoon editor of the New Yorker,"Here’s a great Kim Warp cartoon that Mayer could have used to get her point across a lot more effectively than that clunky memo":
Marissa Mayer, the CEO of Yahoo, surprised her employees (as well as the broader community of office workers) when she announced last week that Yahoo employees would no longer be allowed to work from home. The importance of "workplace collaboration" was seen as essential to increasing productivity.
The announcement was particularly baffling because Mayer is a new mother, and as such was assumed to be a champion of schedule flexibility.
Nevertheless, some research has shown that many important conversations arise out of unplanned casual interactions, or "serendipity." Jerry Davis, a business professor at the University of Michigan, noticed that the most productive day of the week was "Free Food Fridays," where "lunch is the bait, and shoptalk the byproduct."
It remains to be seen what effect, if any, the change in Yahoo policy has on employee productivity, retention and morale.
Sources: "Experts Boil Telecommuting Decisions Down To Flexibility Vs. Serendipity" by Yuki Noguchi, Morning Edition, National Public Radio, February 28, 2013.
Cartoon by Kim Warp from the March 4, 2013 issue of the New Yorker.