• Would you pay to have your saliva analyzed for genetic disease markers?

    image from www.23-and-me.com

    Meeting people’s needs is at the heart of product development.  Sometimes that involves “creating a need” such as the need to “fix” what is wrong with potential customer’s hair color or skin appearance. A company called “23andme” has gone deep into this concept…and markets its main product as a way to do an ultimate fix.  They genetically analyze saliva and claim that they can tell customers whether or not they are likely to get any of 250 diseases.


    There is an ethical consideration, however. 23andme has not proven to the satisfaction of the Food and Drug Administration that their product produces reliable results. The unintended consequences of inaccuracies might be that people won’t get medical care that they really need.


    Here is one example of what can go awry:  Let’s say that the test indicates that a customer does not have either the BRCA 1 or BRCA 2 genetic mutations that are correlated with breast cancer.  If the customer mistakenly assumes that this means they are free from the possibility of disease, they might not get the recommended regular mammograms that can spot breast cancers that develop for a variety of reasons.

    Already, almost 500,000 people have taken
    23andme's test, but the FDA is now investigating and regulating 23andme with the stated goal of protecting consumers.  Will regulating this very cost-effective means of obtaining medical information improve or worsen the health outcomes for consumers?

    Source:   "Spit, genes and the FDA," by Lizzie O'Leary, Marketplace Health, American Public Media, November 25, 2013.

    Follow up:

    • Does this genetic test interest you?  What price would you pay for it, compared to the price you would pay for a visit to a physician?
    • What disclosures would you require if you were a regulatory agency, and what disclosures would you want to see as a consumer?
    • If you were to aggressively market this product, how would you do it? How would your techniques change if you were marketing the product for long term company growth versus short term company profits?
  • The new healthcare environment for small businesses: conclusions based on experience


    Paul Downs knows first-hand about dealing with health care as a small manufacturing business owner near Philadelphia. He offers up seven timely pieces of advice about the new health care environment in a recent NYT article. The state in which he operates, Pennsylvania, is a state that does not have its own health care exchange, so he has been forced to deal with the national (and infamous) HealthCare.gov website.  The other parameters that have influenced his experience include:

    • He has used an insurance agent in this process.
    • Health care in his area is an oligopoly that includes Independence Blue Cross, Aetna, and United Healthcare
    • The requirement (this year) to offer a single plan to all employees means that to allow flexibility to employees you have to locate a plan with options within it.

    Here is a summary of what he has learned:

    • The Affordable Care Act (ACA, nicknamed Obamacare) has changed the insurance market in significant ways by offering a better way to shop for coverage, with uniform standards for comparison.
    • Nevertheless, certain information is less than transparent. Still needed?: Comprehensive information about prices for specific services and well-structured flowcharts for decision making.
    • "If it ain't broke, don't fix it."  If your current plan is working and meets the standards of the ACA, then just re-adopt it and change it next year if you need to.
    • If you aren't currently covering your employees, let them get their own insurance on the exchange and advise them to get an account or they will not get good data on pricing for their age and needs using the "quick quotes" available anonymously.
    • The SHOP exchange on the federal government site is currently not functioning adequately. The only reason to attempt to use it is to enable employees to apply for tax credits if they qualify. Online requests are not being processed, and paperwork requests are not being attended to on a timely basis
    • If insurance is currently offered to employees, but few employees buy it, it is better to stop offering insurance, so that lower-income employees can get insurance through the exchanges and might qualify for the subsidies.
    • Offering insurance to part-time employees also no longer makes sense because the exchanges offer more cost-benefit, but employers must be careful to have clear, uniform guidelines--for example, making those who work less than 30 hours per week ineligible.

    Probably everyone who has had to buy health insurance for themselves or others has more advice to offer, and Paul Downs anticipates having more to say as the health care plan continues to be implemented.

    Sources:   "Seven Conclusions About Small-Business Health Insurance," by Paul Downs, New York Times Small Business, November 25, 2013.

    Follow up:

    • Have you shopped for health insurance? Will you need to buy it or are you still covered under your parent's plan? What do you think of the process? What will it cost and what will you get?
    • What do you think are the advantages and disadvantages of a "single payer" plan?
  • Unpaid internships under broad attack

    image from nyulocal.com

    Partly due to a lawsuit in a second industry famous for its use of unpaid internships, the unpaid internship "rite of passage" is becoming risky business for employers. A few months ago, I wrote about a lawsuit against Fox Searchlight Pictures won by two interns working in the Hollywood film industry.  Now it is the publishing industry that is under attack. Lisa Denmark brought suit against Vogue, one of several magazines published by Condé Nast Publications. Some of her complaints included:

    • being "terrorized" for not using sticky tape correctly on bulletin boards
    • being "forced" to load books into an editor's car
    • being "forced" to take items to a resale bookstore
    • being "forced" to pick up dry cleaning
    • being "forced" to buy and serve juice.

    Hearst Publications has also been sued by interns. Unpaid internships are sought by many students and unemployed college graduates as a way to "get a foot in the door" or to boost a resumé--particularly in hard-to-break-into creative fields, as well as business and finance. But there is a fine line in federal labor law between enforced servitude without compensation, and what constitutes an internship that is educational and beneficial to the person doing the work. Some businesses have routinely crossed that line, but recent litigation seems to make that gamble less cost-effective. Women's Wear Daily and Condé Nast have recently cancelled their internship programs due to this risk.

    This doesn't help anyone.

    One media corporation, Atlantic Media, has taken a different approach.  They did away with unpaid internships a few years ago, and has replaced them with 45 highly competitive, paid "fellowships." One major advantage of this approach is that its pool of applicants can be more diverse. (Unpaid internships have been a luxury that only those with wealthy family support could afford.) “We were looking for ambitious, creative, original journalists, and we did not want income to be a barrier,” said James Bennet, editor in chief of The Atlantic. “Publishing that includes the web means we need to reach a national audience, and that requires a diverse mix of class, region, race and, yes, generations to do our job.

    Is the following a consequence or coincidence?: The Atlantic has grown 34% in the first two quarters of 2013.

    What tasks make a great internship? I think the following pie chart was meant as a joke...but, like most humor, probably has a grain of truth:

    image from www.fullstop.net  [ joke..?.]

    Sources:   "How Washington Abandoned America's Unpaid Interns" by Stephen Lurie, the Atlantic,  November 4, 2013.

    "Overlook the Value of Interns at Great Peril," by David Carr, New York Times: the Media Equation, November 25, 2013.

    Follow up:

    • The author of one of these source articles cites his own experience as producing results similar to those experienced by the Atlantic. Describe that experience and why it was significant.
  • Tax Fraud scammer gets prison

    image of Miles J. Julison from www.oregonlive.com

    Sometimes even "white collar" criminals are prosecuted and sentenced. Four years in prison, post-prison supervision, and restitution of illegally obtained profits will be the price that Miles J. Julison of Clackamas, Oregon will have to pay for his various scams.

    Julison made some rather bold moves. He filed fictitious tax returns in 2007 and 2008, claiming that he was due refunds due to an overpayment of taxes of almost two million dollars.

    He also managed to defraud individuals (his friends and neighbors) of over $400,000 by promoting a tax scam based on an (erroneous) claim that there is $1,000,000 set aside by the federal government for each citizen the day they are born.

    Spending the money he'd obtained from this illegal consulting made him an obvious prosecution target.  His spending spree included:

    • over $100,000 payment on a home loan
    • a $50,000+ Mercedes Benz
    • almost $60,000 paid on credit card bills
    • a ski boat
    • a Toyota SUV
    • two Kawasaki wave runners
    • two Polaris snowmobiles

    He must have thought--for a while at least--that "crime DOES pay." But, at least in his case, not for long.

    Source:   "Clackamas man who perpetuated bizarre IRS fraud, bought himself a Benz, gets federal prison," by Bryan Denson, The Oregonian, November 21, 2013.

    Follow up:

    • Are you familiar with the adage, "Crime doesn't pay" ? From where does it originate?  Do you agree? Why or why not?
    • How and why do you think that Julison was effective in convincing the people in his community that they should follow this scheme?
    • What is the difference between tax avoidance, tax aggressiveness, and tax resistance?
  • Peanut Butter Business Opportunity

    Image from usnews.com

    Notice AG-DPPD-S-14-0026 was issued on November 20, 2013, by the federal government to solicit "Peanut Butter Products for use in Domestic Food Assistance Programs." The notice came from the USDA'S Kansas Commodity Office (KCCO). Responses are due by December 3, 2013. The requirements to apply to be the supplier include:

    • product must be produced in the US
    • Packaging must be subject to the World Trade Organization Government Procurement Agreement and Free Trade Agreements, pursuant to FAR clause 52.225-5.
    • KCCO will specify the pack sizes, quantities and delivery schedules.
    • Vendors must meet FAR Subpart 9.2, per
    • questions can be addressed to Betty.Kunkel@kcc.usda.gov 
    • Bids must be submitted vis WBSCM (whatever that is), and "Submission of the above by any means other than WBSCM will be determined nonresponsive."

    It sounds as though there are a lot of hoops to jump through to qualify to sell or give peanut butter to hungry people. Maybe it is a profit-making business venture, endorsed by the government.  I wonder who makes money on these deals?

    Source:   "Peanut Butter for use in Domestic Food Assistance Programs," by FedBizOpps.Gov, November 20, 2013.

    Follow up:

    • What other business opportunities should the government promote, if any? Why or why not?
  • Why Expanding Social Security Makes Sense

    image from beardog321.blogspot.com

    Social Security is often "spun" as a divisive topic. But it looks as though the majority of Americans are in favor of it. At the same time, most Americans also like "cutting taxes." "Cutting taxes" and "expanding Social Security" seem to be at odds for with respect to sound fiscal planning. Nevertheless, it may be what many Americans want and expect.

    There has been a lot of anti-Social Security talk lately.  One argument asserts that the Social Security age should be raised to 67 (currently it is 66). The arguments for this are the rise in life expectancy, but according to a NYT editorial by Paul Krugman, the lower-income and more poorly educated citizens (who need Social Security the most) have experienced a decline in life expectancy over recent years. A second argument asserts that seniors don't really need Social Security, because their poverty rate is "only 9%."

    But the Census Bureau (as opposed to the official poverty measure) says that the poverty rate is really 14.8 percent.

    Moreover, this rate is likely to increase--affecting vast numbers of senior citizens--because:

    • fewer companies are offering defined benefit pension plans, which have allowed middle class Americans to live decently in their retirement years since they became a feature of compensation plans in the 1960's;
    • people coming to retirement age who have personally funded their own plans have suffered two major mid-life stock market crashes that have negatively impacted their private retirement savings;
    • not all individuals who have been forced into 401K's and out of their defined benefit pensions have invested enough money, or have made smart investments. 

     "We’re looking at a looming retirement crisis, with tens of millions of Americans facing a sharp decline in living standards at the end of their working lives," says Paul Krugman.  "So there’s a strong case for expanding, not contracting, Social Security. Yes, this would cost money, and it would require additional taxes — a suggestion that will horrify the fiscal scolds, who have been insisting that if we raise taxes at all, the proceeds must go to deficit reduction, not to making our lives better. But the fiscal scolds have been wrong about everything, and it’s time to start thinking outside their box."

    Sources: "Expanding Social Security," by Paul Krugman, New York Times, November 22, 2013.

    "Americans Support Expanding Social Security Not Cutting it", by Wyoming Beardog, The Panglossian Curmudgeon, November 9, 2013.

    Follow up:

    • Businesses match the employee's contribution to Social Security. So if Social Security taxes go up, businesses will also have to pay more.  What do you think the reaction of large corporations would be to legislation to expand Social Security?
    • What marketing campaign could you devise to sell the idea of expanded taxes to go along with expanded Social Security benefits?
    • What other solutions would you impose to avoid this crisis for people entering the workforce now? Do you think basic income protection for retired people should exist? If so, how should it be funded? Is it a corporation responsibility? National responsibility? Every human for himself?
  • Permanent economic slump is the new business as usual


    image from www.pressdemocrat.com

    Is the depressed economy the new normal? So it seems.

    The new term used to describe this depressed economy is: "secular stagnation".  It is being used to describe "a persistent state in which a depressed economy is the norm, with episodes of full employment few and far between," Lawrence Summers spoke at a the International Monetary Fund's (IMF) most recent research conference, and he made the point that the markers that created the financial crisis of 2008 are in the past...but our economy has not yet recovered.  Summers made the point that mild depression is the new normal. He suggested that there was not significant pressure to move beyond this lukewarm state.

    Paul Krugman has some additional tidbits that reinforce this point:

    • Household debt relative to income:  While it was stable from 1960 to 1985, it rose a lot through 2007 (when the financial crisis hit). Nevertheless, this rise in debt did not boost the economy.
    • brief periods of prosperity occur only due to bubbles and rampant but unsustainable borrowing.
    • underlying this might be slowed population growth, but even the baby boomer secondary boom did little to spur the kind of growth the initial boom seemed to trigger. Fewer kids mean fewer new households, which inhibits housing growth, a major driver of our economy.
    • trade deficits with other countries make things worse.

    Without compelling evidence indicating otherwise, it seems that this slump is the new normal.

    Source:   "A Permanent Slump?," by Paul Krugman, New York Times, November 18, 2013.

    Follow up:

    • What do you think? Is economic stagnation the new normal? What are the pros and cons?
  • Facebook uses YOUR posts as ad copy

    image from www.socialmouths. com

    Facebook recently changed its privacy policies. It now "allows" the businesses that Facebook's 1.2 global users might "like" to use the "likes" in advertising copy. The default provision, as a Facebook user, is that this is the allowed position. Here is an example of what that might mean:

    image from Facebook.com...once Natalie liked this site,
    the "like" was HootSuite's to use as they wished and here is one possibility

    of how that looked.

    Facebook's terms regarding privacy are becoming more clear: "By having an account on the service, its 1.2 billion global users are allowing the company to use their postings and other personal data for advertising."

    If you are over 13 years old, your "like" can be used by Facebook without your consent...or any compensation.

    Every day, people post billions of pieces of content and connections into the graph and in doing this, they’re helping to build the clearest model of everything there is to know in the world,” Facebook’s chief executive, Mark Zuckerberg, told Wall Street analysts in a conference call last month. “This has the potential to be really powerful, but right now, we actually do very little to utilize the knowledge that people have shared to benefit everyone in our community.”

    It remains to be seen what the assumptions about privacy held by an individual vs. the assumptions help by a corporation like Facebook might mean for the practicalities of privacy in the near future.

    Source:   "Facebook Reasserts Posts Can Be Used to Advertise," by Vindu Goel, New York Times, November 15, 2013.

    Follow up:

    • If you are a Facebook user, do you think your "likes" should be used to promote ad copy? If not, how could this be mitigated?
  • Entrepreneur's product is OTHER entrepreneurs

    image from www.spreecast.com

    The Founder Institute was started by Adeo Ressi in 2009--partly to combat the statistic that 90% of entrepreneurial businesses fail. Because he thought the "wrong people" were starting their own businesses, he had a unique admissions requirement:  A personality test. Applicants pay from $0 to $1,000 to learn skills through workshops and "entrepreneurial immersion." The Institute also takes a 3.5% stake in any of the companies that are started by its graduates--and claims to have an 89.5% success rate among graduates. If this claim is true, it completely reverses the usual statistics.

    The personality test looks for several traits, primarily open-mindedness, which Ressi sees as the ability to see the world as it really is. Ressi also finds that successful entrepreneurs are hard-working, smart, and "do not suffer fools gladly." Often they are impatient and not very friendly or easy to deal with. They can do many things well: "
    emails, strategy, code, design." Nevertheless, about 65% of those accepted into the program drop out because they find that they are really not suited for the 100% commitment required of an entrepreneur.

    The Founder Institute training is structured to avoid the "formative mistakes" which often cause businesses to fail within 18-24 months. It aims to "condition" entrepreneurs to shed their employee selves and take on increasingly challenging and effective entrepreneurial traits. Trainees are formed into working groups the replicate the mini think-tank atmosphere that prevails in successful small companies.

    The Founder Institute operates in 59 cities world-wide.

    Sources:   "An Entrepreneur Who Manufactures Entrepreneurs" by Ian Mount, New York Times Conversations, November 13, 2013.

    Adeo Ressi on This Week in Start Ups, via YouTube.

    Follow up:

    • Do you think that the drop out rate for the program should be figured into the statistics? Can you find evidence on the Founder Institute website of the chances of an accepted enrollee completing the program? Do you think the communication about the program on the website matches the description in the article? Why or why not?
    • Do you think this is a good way to train entrepreneurs? Why or why not? Would it appeal to you?
    • What other businesses are set up to train entrepreneurs? How do they differ from and how are they the same as the Founder Institute?
  • Major credit rating agencies charged with fraud

    clip-art from blog

    Standard & Poor’s
    Fitch Ratings
    Moody’s Investors Service

    These were the three credit ratings agencies that were charged with fraud in a New York State court last week. Their alleged wrong-doing?: Inflating the value of mortgage bonds in two Bear Stearns hedge funds. When those funds collapsed in 2007, over $1 billion in investor losses resulted. These ratings agencies allegedly misled those investors to appease Bear Stearns, their corporate client. 

    The only reason that a credit ratings agency exists is to provide objective and reliable information to third parties. These agencies are being charged with not only doing a bad job of that...but doing a bad job on purpose.

    Internal communications, according to the complaint, clearly illustrate that the analysts at these credit ratings agencies knew that their firms were misleading the investors:

    • "It could be structured by cows and we would rate it," said one Standard & Poor's employee text.
    • "We sold our soul to the devil for revenue" said a Moody's employee in a memo.
    • The firm's rating practices are a "scam," said a Standard & Poor's email.

    These ratings agencies made millions during the housing boom, by rating collateralized debt obligations...which were highly over-valued and collapsed in the mortgage crisis. The Financial Crisis Inquiry Commission found that these firms were "key enablers of the financial meltdown."

    Nevertheless, all three of the accused credit agencies have said that the charges are "without merit."

    Source:   "Suit Charges 3 Credit Ratings Agencies With Fraud in Bear Stearns Case" by Peter Lattman, New York Times DealBook, November 11, 2013.

    Follow up:

    • Do you think that the ratings agencies should be held accountable for the part they played in the mortgage financial crisis?  Why or why not? To what extent?
    • How do you think regulatory and ratings agencies should work with respect to overseeing financial transactions and monetary policy?
  • A labor of love becomes a sustainable beef-farming business

    image taken by Jim Wilson for the New York Times: TomKat Ranch cattle

    The husband-wife team of Tom Steyer and Kat Taylor, of "TomKat Ranch," did not have the same vision and desires. Tom Steyer was a retired investment banker--the founder of Farallon Capital--and his wife Kathryn was a chief executive of One PacificCoast Bank. What did these two know about cattle farming and beef sales? But the business evolved and succeeded, in spite of the original intentions.

    Leftcoast Grassfed is the company through which TomKat Ranch sells its beef...and Leftcoast Grassfed has exceeded the projections and expectations of the investment specialist part of this team. “We could sell 10 times the amount we raise, in 10 minutes,” said Tom Steyer.

    When they bought the property, they had no intention of being in the beef business.  They intended to create an area to demonstrate best practices for soil, water and energy conservation. Cows were part of the system for maintaining the land, so sustainable agriculture evolved as part of what was becoming a "huge science experiment." Steyer had devoted himself to environmental preservation as his retirement focus, so the project evolved as a labor of love more than a business proposition.

    One of the goals became to put into practice the theories described in Julius Ruechel's book, "Grass-Fed Cattle: How to Produce and Market Natural Beef.” If large herds of cattle, with their weight and sharp hooves, were churning up (cultivating) the ground, forcing dead plant materials deep so it could be broken down by bacteria, then that could fertilize the earth, allowing better, healthier grasses to re-grow there. In addition, the cultivation would allow rain to penetrate better and reduce water run-off. The article did not mention the manure, but I imagine that would be a factor in fertilization as well, since the cattle were not being fed harmful antibiotics.

    According to Wendy Millet (formerly of the Nature Conservancy), conservationists--once opposed to cattle on the grounds of methane production harming the atmosphere--now believe that migrating herds of grass-fed ruminants might be part of a cycle of replenishment. TomKat is trying to reproduce the cycles of migration, and are alternating types of farm animals (including birds and pigs), to maximize conservation of resources.

    Meanwhile, they are selling sustainable beef at a profit--partly because of co-operative arrangements with nearby farms.

    Source:   "An Accidental Cattle Ranch Points The Way in Sustainable Farming" by Stephanie Strom, New York Times, November 11, 2013.

    Follow up:

    • Have you ever started out on one path, and found yourself doing something that you have never imagined because of it?  Maybe it has been travel to another part of the world, or learning to play an instrument, or having an avid interest in astronomy or baseball. Have opportunities for a new career path become apparent?  If this hasn't happened to you, do you know of anyone who followed an interest that led to a unique career?
    • According to the article, what other environmental issues does Steyer feel strongly about?  How might these interests have related to his former career in investing with Farallon Capital? How are investment vehicles with an environmental bias performing in the marketplace currently? Is the TomKat experience typical or unusual?
    • Describe the system of co-operative arrangements with nearby farms that makes the sustainable beef operation work well.
  • "Pumpkin-flavor" is a marketing hit

    video from the New York Times 

    Is it OK to market something as "pumpkin" if it doesn't really contain any pumpkin? I guess that is a moot point, since sales of "pumpkin-flavor" products are soaring this season. For those fond of details and chemistry, the video above explains the elements of pumpkin flavoring quite clearly. For those fond of pumpkin flavoring, you are in luck this season.

    USA Today reports: "Pumpkin is everywhere these days," says Andrea Riberi, senior vice president at Nielsen. "And, seemingly earlier than last year." Sales of pumpkin-flavored items were $290 million last year; about 70% of pumpkin related product sales occur between September and November.

    Here are some of the places "pumpkin flavor" shows up this year:

    • Starbucks, of course, with its "Pumpkin Spice Latte"
    • Dunkin' Donuts--with pumpkin pie flavored buttercream in its pumpkin doughnuts
    • Bruegger's Bagels
    • M&M's--sold exclusively by Target: "Pumpkin Spice M&M's"
    • Pop-Tarts
    • Pringles..."Pumpkin Pie Spice Pringles"
    • Baskin-Robbins Pumpkin Ice Cream
    • Marshmallows: Kraft's "Jet-Puffed Pumpkin Spice Mallows"
    • Vodka: Crop Organic pumpkin-spice flavored vodka
    • Beer. New Belgium's "Pumpkick Ale"
    • Room deodorizer by Glade

    What will they think of next? Pumpkin is associated with Thanksgiving, and cozy fall gatherings, but its pervasive appeal is a little baffling...perhaps a marketing miracle if you take one expert's perspective:

    "Since when does a squash-flavored beverage sound good?"
                                     --Richard Bernstein, blogger's husband

    image from blogs.scientificamerican.com

       "What's In It: Pumpkin Flavor," by Aaron Bird, with Michael Moss, New York Times, November 12, 2013.

    "Pumpkin Flavored Everything Comes Early, Often," by Bruce Horovitz, USA Today, October 9, 2013.

    Follow up:

    • Does the image of "pumpkin" suggest anything to you? Does it get you in the mood for the holidays?
    • What pumpkin products might appeal to you?  Have you seen any other ways pumpkin flavoring has been used?
  • Cooking the books, management-style

    image: Comtech GAAP net income vs management restatement,
    ...courtesy of www.whitecollarfraud.blogspot.com

    Forget about GAAP (generally accepted accounting principles). Prepare those financial statements the way that management wants you to. To no surprise, the management-spun financial statements show company financial position in a much rosier light...without all those "pesky costs of doing business," according to columnist Gretchen Morgenson of the New York Times. To put this in perspective, showing "earnings without the bad stuff" helped Internet stocks look good in the 1990's before the bubble burst.

    One example of the kinds of costs that managers think they should exclude are stock-based compensation, since they are not cash costs. Long term, however, stock compensation does deprive the company of cash they could have raised by selling the stock at market rates.

    Twitter provides a real-life current example in their IPO prospectus. For the first nine months of 2013, Twitter shows a loss (according to GAAP) of $134 million.  Management says the loss is "really" only $44 million. Management doesn't want to include $79 million in stock compensation or $11 million in write-offs of intangible assets (amortization).

    Jack T. Ciesielski, publisher of The Analyst's Accounting Observer and an accounting expert at R.G. Associates, has a different opinion. "When they back out stock-based compensation they're basically saying that management is working for free," he said. Further, "To back out those intangibles is bogus."

    The rationalization for restating the earnings follows from application of the Securities and Exchange Commission's "Regulation G." This rule allows companies to show income in "non-traditional ways," if they also report income according to GAAP. The 2002 rule may not have had the effect intended by the SEC, however. Ciesielski's research found that out of 69 technology companies in Standard & Poor's 500-stock index, 56 (81%) used non-GAAP presentations. And in among health care companies, 83% (45 out of 54) used non-GAAP earnings presentation.

    To no surprise, the non-GAAP methods produced earnings that were higher than GAAP--in 2011 earnings were 19.5% higher and in 2012 earnings were 36% higher than earnings calculated using GAAP.

    Here are some details from several technology companies:

    from Forbes article cited below

    I wonder if the managers are also persuading their Boards of Directors to base management bonuses on the non-GAAP measures as well...

    Sources:   "Earnings, but Without the Bad Stuff" by Gretchen Morgenson, New York Times, November 7, 2013.

    "These 20 Tech Firms Report The Most Fictionalized Earnings," by Jeff Bercovici, Forbes, November 11, 2013.

    Follow up:

    • What message do you think the SEC is sending with Regulation G? Do you think it is useful or harmful for financial analysis?
  • Surprise! 4-year-old Credit card law has helped consumers

    image from www.tightwadblog.com

    In 2009 the Credit Card Accountability Responsibility and Disclosure Act — the "Card Act" was passed by the U.S. Congress. The conventional business wisdom, shared by Neale Mahoney, an economist at the University of Chicago’s Booth School of Business, was that the law wouldn't work. He thought that fees and charges would increase in response to the regulatory requirements, but what he found instead was that costs for credit cards decreased, especially for those with bad credit.

    This conclusion was the result of a study by Mahoney, along with Sumit Agarwal (National University of Singapore), Souphala Chomsisengphet (Office of the Comptroller of the Currency), and Johannes Stroebel (New York University’s Stern School of Business). The study concluded that the Card Act saves Americans $20.8 billion a year.

    Here are some of the abuses that occurred before the Card Act was in place:

    • The stated interest rate, which consumers often used to compare cards when choosing a card, was often changed without warning, and for any or no reason.
    • The payment "due date" was often changed--and sometimes in the middle of the day, so that a late afternoon payment would be "late" and assessed a "late fee."
    • Over-limit fees were often maximized using this trick: the largest dollar item was put on the bill first, so that several smaller ticket items could each be charged a separate over-limit fee.
    • Fees were charged for internet or phone payments.
    • Mailed payments would be forced into the "late payment" category by glacially slow processing.
    • "Inactivity" fees were sometimes charged for cards not used...and if those fees were not paid, then late fees could be charged on top of that fee.
    • Bills could legally be sent out only 14 days before the due date.

    The Card Act required:

    • banks to send bills at least 21 days before payment was due;
    • monthly due date to be consistent;
    • payments due on the weekend would not be considered late if they arrived on the next business day;
    • interest could only be increased with 45 days notice;
    • balances accrued before the notice of increased interest could not be charged the higher rate;
    • all fees must be clearly disclosed;
    • only one late fee could be applied per month;
    • internet payments could not be charged fees.

    Things still aren't ideal...and banks are making record profits. But at least we can know what some of the costs of doing business with bank cards might be....For example:

    image from www.pcworld.com


    Source:   "Card Act Cleared Up Credit Cards’ Hidden Costs," by Floyd Norris, New York Times, November 7, 2013.

    Follow up:

    • According to the article, how was the $20.8 billion in consumer savings arrived at?
    • Think about your own credit cards.  What is the interest rate? What are the annual fees and other fees? What percentage of your amount charged in the last year were your interest + fees?
    • Consider these general principles for credit card use: Pay off your balance at the end of each billing cycle. If you do hold a balance from month to month, make sure that the items charged on the card are "long term assets" not monthly expenses. Never buy something with a credit card that you would not have bought if you had to pay cash. Monitor all the costs of your credit cards, and evaluate these costs as you would any expense.
  • $10.10 national minimum wage a possibility

    image from thinkprogress.org

    Representative George Miller and Senator Tom Harkin introduced a bill earlier this year to increase the federal minimum wage $10.10 per hour. (This works out to $20,200 annually for full time work.)  Currently the national minimum wage is $7.25 ($14,500 a year). The news at this point is that the White House is now making the passage of this bill a priority.

    Small businesses often oppose increases to the minimum wage, so a coalition of politicians has made the bill more palatable by phasing in the increase over two years, and allowing a special break of up to $500,000 in expansion investments to be fully deductible.

    Ironically, it is the largest employers (e.g. Walmart) that benefit most from a lower minimum wage. And it is the U.S. taxpayer that foots the bill in support services to families of the working poor. A minimum wage of $14,500 per year for full time work still leaves families under the poverty level. (The national poverty level for a family of four is $23,550 in 2013...and the new minimum wage would still generate less).

    Representative George Miller, left, and Senator Tom Harkin
    Image taken by Bill Clark, CQ Roll Call for Getty Images

    Source:   "$10 Minimum Wage Proposal Has Growing Support From White House" by Catherine Campell and Steven Greenhouse, New York Times, November 6, 2013.

    Follow up:

    • What is your current wage or salary rate? What is the minimum hourly wage you'd imagine would support a decent lifestyle in your city or town?
    • What effect does the minimum wage have on the economy? List the positives and negatives.
  • Boost your resume: learn to code

    Those attending the DevBeat Conference in San Francisco this week (November 12-13, 2013) are big fans of learning to write computer programs. Coding is easier to learn than it was in the past, as there are many resources online (some of them free), and better modes of training. Some of these resources include:

    • Codeacademy: Learn the basics of HTML and CSS if you are a real beginner, and take tutorials in Python and Ruby if you want some heavier-duty skills.
    • Open Courseware Consortium: Pioneered by educational institutions like MIT, this contains links to courses and educational support materials at various skill levels...and free.
    • Coursera:  For computer science courses that are not part of the OCC (above), try Coursera. Many courses are free, but proctored exams and certifications are also offered at a cost.
    • The Khan Academy: This started out as a math site, but there are now several computer science modules to learn from--primarily in short video format.
    • Treehouse: Primarily focused on website building and app development, these courses are offered for a monthly subscription fee at two levels of service.
    • Local accelerated trainings, such as Dev Boot Camp (9 weeks to becoming a web developer); AppAcademy (become a software developer), or General Assembly. These are pricey ($10,000 +) but serious. 
    • Local university courses--offered at all levels, and less expensive than the accelerated training courses.

    Coding requires study and practice, but as computers infiltrate more and more areas of our lives, the need for coding skills will continue to expand.

    Source:   "The 7 best ways to learn how to code," by Devindra Hardawar, Venturebeat, October 31, 2013.

    Follow up:

    • Can you code? What computer languages do you know? When did you learn them? What kind of programming most appeals to you?
    • If you were to add programming skills to your current resume, what new opportunities might it open up for you? Would you enjoy those opportunities? What are the pros and cons?
  • Twitter starts revival of a seedy San Francisco neighborhood

    The 37-story Crescent Heights apartment tower in San Francisco.
    New apartments are to be tailored to tech industry workers.

    image taken by Peter DaSilva for the New York Times

    A Renaissance has taken place in one San Francisco neighborhood.  Here is how it was in one area: "Studded with check-cashing joints, strip clubs and dollar stores, the seven-block strip known as the Mid-Market had resisted cleanup efforts and resolutely remained the same: a seedy place to visit day or night."

    Even some of the most beautiful old buildings had remained vacant for years. But in April, 2011, Twitter signed a lease through 2021 on 295,000 square feet in an Art Deco building right in the middle of the Mid Market area. The company that owns the building, Shorenstein Properties, had taken a big risk when they invested in the building...and so did Twitter when it signed the lease. But it was an investment made with long term vision, in a city where rents in good neighborhoods were among the most expensive in the country.

    The investment has already begun to pay off--as many other tech companies (including Spotify, Yammer and Square) have moved in as well. The area is starting to turn around, as local service businesses have also begun to pop up. More importantly--new construction is being undertaken--not only of office space, but also of residential space, such at the apartment building pictured above.

    One incentive that has helped businesses to commit to this blighted area was created by a public policy change: payroll tax incentives were created. 

    Source:   "Twitter helps revive a seedy San Francisco neighborhood" by Kristina Shevory, New York Times, November 1, 2013.

    Follow up:

    • What changes have occurred in terms of the kinds of businesses that have located or re-located to San Francisco in the last few years?
    • Why would a city offer a payroll tax break to attract new businesses? How much, according to the article, can Twitter expect to save due to these tax incentives?
  • iGoogle is Dead...

    image from www.makeuseof.com

    So...they've been warning us about this for 18 months..but today was the day: iGoogle is dead. In my Pollyanna-ish thinking, I'd hoped it would be extended the way that Google Reader had life beyond the expiration date.

    But: NO.  It is gone. All my little widgets, all the habits that were part of my daily "hello" to my computer: GONE. Google's suggested replacements are more like using a mobile phone.

    I don't want my laptop to act like my phone. It has made me re-think my whole "relationship" with Google. I am moving my mail to my Apple Mail id, and I am re-creating all of my favorite widgets in "Startme" but there are many, many alternatives to iGoogle. I'm free.

    Moreover, I am tired of writing emails to friends about upcoming trips and then magically seeing ads for hotels in those places appear in my right margin seconds after I type.

    Here is my message to Google: If you hook us on a product: don't abandon us. The only piece of my iGoogle that was an uber-convenience were the widgets that connected me to the blogs of my friends. Google: when you abandoned me, I found that others could deliver them just as well.

    Also: you can do better at both protecting our privacy and keeping us connected with those whom we care about. Get some programmers who can write algorithms that actually address our needs! That new mail segregation system you imposed really wasn't working for me.

    So: goodbye, Google... Hello: doing things my way.

    Sources:   "iGoogle died today" by Liz Gannes, All Things D, November 1, 2013.
    "How to stop using Google for search, email, video, maps, and more," by Charles Arthur, the Guardian, May 2, 2013.

    Follow up:

    • Think about the discontinued products that you "mourn." A restaurant? Website? App? A favorite item now discontinued by Trader Joe's? What part does marketing play in discontinued products? Consider the short term and long term effects.