• Substance vs. form: who you are versus how you look

    image from www.bubblews.com


    Which is more important:

    • Who you ARE? or How you LOOK?
    • What you CAN do? or What other people THINK you can do?
    • Whether personal gain influences the decisions you make for others? or Whether it looks as though you could benefit financially from the decisions you make for others?

    In the current social environment of Twitter and Instagram--where one picture or fewer than 140 characters can communicate information in isolation--without context or the opportunity for rebuttal or additional information, it seems as though "form" may have the upper hand. One bad review on Yelp can unfairly effect the reputation and revenue stream of a restaurant.

    When it comes to making life choices--about where to live, what to own, who to hang out with, and where to work--form and substance can guide your decision-making process in very different ways. Choices based on how things look to others might bring you a different kind of security of satisfaction than choices based on how you feel and what is important to you--regardless of the opinions of others. According to Peter Vadja, "Substance is the inner you. Substance is your true, authentic self. It's the 'you' who shows up with the conscious intention of doing and being the very best you can be in every area of your life... Substance focuses on truth-telling, not elaborate stories, rationalizations and excuses for avoiding the truth. Substance focuses on integrity, not tap-dancing around honesty, sincerity and self-responsibility. Substance focuses on conscious self-management, not on controlling others."

    Peter Vadja is the author of "Becoming a Better You: Who You Are vs. Who You Think You Are."

    The issue of substance vs. form also arises in accounting and auditing relationships and in determining whether certain investments are properly held when political figures are part of decisions that affect the profit margins of companies in which investments may be held.

    Source:  "Substance vs. Form," by Peter Vadja, Management Issues.com, October 21, 2013.

    Follow up:

    • Pick an arena (for example--choosing a person to "date"--but don't pick this one, pick your own). What factors influence your choice of who to "date" in substance? What factors influence your choice in form?  (That is, how does the person look to you and to others.) How do you decide which to value?
    • How do issues of form and substance affect hiring decisions? What about discrimination issue, in various Human Resources decisions?
    • How do issues of form and substance affect performance reviews and management decisions?
  • Upcoming IPOs...and a source to watch for more

    screenshot of "Money Morning" IPO advertised website for IPOs.

    "Money Morning" (above) is an ad site, but the "IPO activity" site linked below is a more neutral source of new public stock offerings for those who are interested in investing in risky but potentially mega-profitable new companies.

    Source:  "IPO activity," Nasdaq.com, February 28, 2013.

    Follow up:

    • Review the IPO activity items for the last 5 months. Do any of the issues interest you? Have any become news items? Could you have predicted the ones that have done well? What were the sources that helped you identify the "winners"?
    • Pick three IPOs from the last year and track their performance to date.
  • Blackfish: whistleblowing ethics and animal welfare

    image from www.examiner.com

    What do the bands Heart, Willie Nelson, and Barenaked Ladies have in common?

    It seems that all of them have dropped out of commitments to play at SeaWorld due to the "Blackfish" scandal.

    Animal welfare is a hot-button topic that can polarize fans and radically influence events. If you aren't up on this particular scandal, here are the particulars:

    • "Blackfish" is a documentary, directed by Gabriela Cowperthwaite, that is critical of the treatment of whales in captivity. It is currently available on Netflix.
    • Controversy surrounding the leaking of documents relating to the 2010 fatal attack by a killer whale named Tilikum on Dawn Brancheau,a SeaWorld trainer, is a major part of the current issue.
    • SeaWorld has pursued an aggressive campaign to deny harm to killer whales in captivity and to block certain OSHA officers from oversight of their facilities while the whole issue is under review.
    • According to the NYT article, "Whether the film and a subsequent debate about the propriety of orca captivity have taken a toll on SeaWorld’s business — a publicly traded company with a stock market value of more than $3 billion — remains an open question."
    • Whether relevant or not..."Blackfish"--once considered a contender for the 2013 Best Documentary Oscar--was not nominated.

    It seems that SeaWorld's pushback against what may or may not have been unfair ethical complaints has had some influence in at least the small community of Academy voters. It remains to be seen what effects accusations--true or untrue--may have on the SeaWorld business model for years to come.

    Source:  "Seaworld Questions Ethics of Blackfish Investigator," by Michael Cieply, New York Times, February 28, 2014.

    Follow up:

    • What effect do animal rights issues have on you and your business decisions? Do you eat meat? Wear fur? Wear leather shoes or belts? How do these issues affect your peer group? Are there any broader issues that influence your decisions?
    • What are your thoughts about misplaced indignation and the effects it can have on legitimate business operations? What should the penalties, if any, be for this type of breach? What should the standards of proof or business harm be for damages?
    • Have you seen "Blackfish"? What are your thoughts?
  • T-Mobile spurs competition among wireless providers

    Video from cnbc.com

    T-Mobile offered to pay the costs of contract termination for those willing to switch from one of the big carriers. AT&T countered by offering to pay $200 of the costs--but only of T-Mobile users switching to AT&T. This comes on the heels of T-Mobile reporting higher 4th quarter 2013 earnings--a result of an increase of 1,645,000 customers. T-Mobile seems to have zeroed in on the costs of switching providers as being a major factor in customers being unwilling to change. It has taken a marketing risk in covering the costs of this switch...and it could be that the gamble is paying off.

    Source Strategy Analytics, however,  feels that even though T-Mobile is a catalyst for price competition, that they will not prevail moving forward against the bigger providers--primarily AT&T and Verizon.

    The market reaction to T- Mobile's moves has shown that a larger number of companies in the pool can stimulate competition and improve the situation for custormers.

    Sources:  "Comparison: How Does T-Mobile’s New Plans Stack Up Against the Competition?" by Alexander Maxham, Android Headlines, March 27,  2013.

    "T-Mobile to Pay Termination Fees; Reports Customer Growth," by Reuters, cnbc.com, January 8, 2014.

    "LTE Enables US Wireless Price War as Carriers Fight for 60 million New LTE Subs in 2014," by Source Strategy Analytics,  12 NewsNow, February 25, 2014.

    Follow up:

    • What does "LTE" mean?  What are the alternatives, and why does LTE look to be a medium for the future? What is the projected growth according to Source Strategy Analytics?
    • What are the key factors that keep you from switching wireless carriers, even if there is a price advantage? Consider: your level of understanding about the plans, the information sources you trust, the time factor, start-up or termination costs, and any other factors. 
    • What is the industry term for customer defectors? (read all of the linked articles...it is in there somewhere)
  • "Old Economy Steve" meme-- Millenials comment on parental advantages

    This meme started with a picture of a young adult, circa 1970. Economic conditions, business environment, and opportunities were pretty different in the 1970's (although I do remember a pretty profound recession and extreme competition for jobs and grad schools when I graduated from college in 1975...of course, that was a peak baby boomer year). Although it is not "hot" right now, the meme had its "15 minutes of fame" on Reddit.

    So--what is the "New Normal" in terms of skills and life-style opportunities for young adults today? In my own family, it doesn't look as though there is a "normal" set of expectations--everyone seems to be carving out their own lives, in ways that work for them.

    The big difference that I see in general is the disparity between the very rich and the majority of Americans.  The "middle class" lifestyle seems to be more difficult to obtain, and there seems to be less of an interest in sharing the wealth by progressive taxation.

    How are economic conditions affecting you?

    Source:  "Old Economy Steve: a Meme for Frustrated Millenials,"by Daryl Paranada, Marketplace, American Public Media, May 28, 2013.

    Follow up:

    • Search the internet Images of the Old Economy Steve meme. Find one that speaks to you. What about the economic inequity can you change, or work with others to change? Would it be worth it? Explain.
    • What about the meme you picked is totally out of everyone's control?
    • Are there any advantages for people in their 20's in today's economy...compared with conditions in the early 1970's?  What are they?
  • Sweet-to-the-core product launch

    image from article linked below

    Pictured above is one of Ben & Jerry's new "core" ice cream flavors: Hazed and Confused. There is a core of Nutella (chocolate/hazelnut), surrounded by hazelnut ice cream and chocolate ice cream with fudge chips. The products in this launch have multiple ice creams in one yummy container.

    Ben & Jerry's is a company that started in 1978. During that time, they have expanded world-wide and have remained profitable. One way that they have continued to thrive has been to adapt their product line on a regular basis. This product launch is one innovation.

    The other products that are a part of this launch are:

    • That's My Jam
    • Chocolate Peanut Butter Fudge
    • Salted Caramel

    I wish I could say I'd already done a product taste test. Which flavor do you think will be most successful?

    Source:  "Ben & Jerry's Nails It With New Core Ice Cream Flavors," Huffington Post, February 25, 2014.

    Follow up:

    • Read about Ben & Jerry's on their website, linked above. What attributes make Ben & Jerry's different from other corporations, and in what way is it similar in terms of structure?
    • What are Ben & Jerry's "core" values? How do they influence the following:
    • marketing campaigns?
    • product manufacture?
    • employee relations?
  • Drugs made in India found to be substandard...and a lot of our Rx are imported from India

    image from "Bad Medicine" American Enterprise Institute

    From the New York Times:

    "India, the second-largest exporter of over-the-counter and prescription drugs to the United States, is coming under increased scrutiny by American regulators for safety lapses, falsified drug test results and selling fake medicines."

    The FDA has recently increased its inspection schedule of Indian drug producers, and has banned the export of several generic version of medicines including Accutane and Cipro, which had been found to be adulterated. Worries about drugs produced in India reached a high point last week, when the Indian drug producer Ranbaxy (which had been found in violation of safety violations "too numerous to count") asked the FDA to please let them continue to ship drugs while they are trying to fix the problems. The FDA said no.

    I would say that Ranbaxy is "unclear on the concept" of the importance of drugs being produced to a high standard of safety. But the problem is not just with that one firm in India. G. N. Singh, India's Drug Controller General, said in an interview with The Business Standard:

    If I have to follow U.S. standards in inspecting facilities supplying to the Indian market, we will have to shut almost all of those.”

    Some of the problems that have occurred include:

    • over 100,000 orders were knowingly shipped of antibiotics with no medicine in them
    • the World Health Organization study estimated that 1 in 5 drugs made in India are fakes
    • counterfeit medicines in a hospital in Kashmir resulted in hundreds of infant deaths
    • drugs shipped to Uganda had counterfeit labels from Cipla, a company which tries to maintain high standards.

    I have started looking at the labels that are on the medicines provided through my health plan. Sure enough--almost all of them are made in India.

    Source:  "Medicines Made in India Set Off Safety Worries," by Gardiner Harris, New York Times, February 14, 2014.

    Follow up:

    • What are the possible remedies for this situation?  What might you do to protect yourself? Would you pay more for drugs manufactured in the United States? Would a private auditing company's seal of approval be better?
    • Who should be in charge of regulation of drugs taken by Americans? The U. S. government? The Health care provider that contracts with the drug companies? Explain your thoughts on this matter.
  • The Lego Empire

    image from Forbes magazine

    This movie has something for everyone--parents, kids, casual moviegoers, erudite film critics, and Warner Brothers investors.  It only cost $60 million to make, and its domestic box office for the first three weeks topped $183 million. My husband and I saw it in 3D on a Saturday afternoon and we didn't know what to expect. But a few minutes in, it was pretty clear that the script was dense with puns and double-entendres. The story itself contained themes about job autonomy and the responsibilities and choices corporations make to improve or harm the world of its employees and customers. Plus, it was a sweet story about overcoming the obstacles of low self expectations...and of inflated self-perceptions.  The song "Everything Is Awesome" has staying power as well.

    The movie is a metaphor for the success of both the Lego Company and Time Warner.  According to Scott Mendelson in Forbes, "...in all likelihood, The Lego Movie will be a big hit that will not only sell countless new Lego sets, but also be the first building block towards reestablishing Warner Bros. as an animation powerhouse." Opportunistic investors have probably missed their best window to buy, but it remains to be seen whether either company can build on this success.

    Source:  "Lego Builds an Empire, Brick by Brick," by Gregory Schmidt, New York Times, February 15, 2014.
    "Review: Everything About The Lego Movie Is Awesome," by Scott Mendelson, Forbes, February 4, 2014.

    Follow up:

    • Are you familiar with the Lego brand name? Have you owned Lego block kits? Visited LegoLand? Played the Lego video game? What are the first words that come to your mind with respect to this product?
    • What does Gregory Schmidt think about Lego's business plan?
  • Corporations push 401(k) benefit toward a slippery slope

    image from Vanguard

    The slippery slope of pension benefit "norms"...here we go again. Forty, thirty, twenty--even ten years ago in many industries, the standard for pension benefits was a "Defined Benefit" plan. Corporations would set up plans to fund retirement benefits that were usually based on a formula valuing time-on-the-job and salary. For example, a typical benefit might be 2% of final salary x the number of years employed. Someone who had worked at one company for 30 years, and who retired with a salary of $100,000 would get 100,000 x 2% x 30 or $60,000 per year as a defined benefit pension.

    Now the standard has moved to the "Defined Contribution" plan, exemplified by the 401(k).  In a typical scenario with a 401(k), the employee contributes a a pre-determined "defined" amount out of each paycheck and the employer matches that amount, or a percentage of that amount.  The contributions are invested until the employee retires, and the benefit received in retirement is dependent on the success of the investments over time. (No guarantee.) But with all pension plans, a key factor is "the time value of money."

    Most employers contribute their portion at the same time the employee contributes: at each payday:

    However, lately, big employers have been shifting their policy to a "lump-sum" contribution. AOL was making this this shift during its recent privacy kerfuffle. As you can see from the graph above, waiting till the end of the year to make the payments means that the company has the use of the money for longer...and employees lose out on investment earnings. In addition, if employees change jobs mid-year, they lose the employer side of the contribution entirely--again saving the employer money. 

    Employee compensation is a combination of salary, paid time off, reimbursed expenses, health benefits, retirement benefits, and other factors. Although it may be easiest to focus only on salary, all factors must be evaluated over the long term to really know what an individual employee is being paid.

    Sources:  "Beware the End-of-Year 401(k) Match," by Ron Lieber, New York Times, February 14, 2014.

    "Making Retirements Less Secure," by the NYT Editorial Board, New York Times, February 14, 2014

    Follow up:

    • Read the article. What is the lifetime differential mentioned in the Vanguard analysis presented therein, based on typical job-changing events that would be likely to occur over an individual's working life?
    • If you were looking for a job, what type of pension benefit would you look for? Would this be a major or minor factor in your job decision, assuming you had multiple offers? How might your decision change if you were in your 40's or 50's?
  • We hear another apology coming: Business swag for women in computer science

    1. What did Goldman Sachs decide to put in its "swag" bags when it sponsored a WEcode event for women in computer science at Harvard last week?  

    a. a read/write CD?
    b. a 32-gigabyte thumb-drive keychain?
    c. a copy of Multivariate Analysis in Management, Engineering and the Sciences?
    d. 1 share of Netflix stock?
    e. a nail file and a cosmetic mirror?


                                                 image from the Marketplace website.

    2. Were the nail files and cosmetic mirrors:

    a. Classy?
    b. A great idea?
    Out of touch?
    Just plain sexist?
    e. Just another opportunity for a corporate apology?

    Maybe Goldman Sachs should have taken a hint from Google:

    Source:  "In Which Goldman Sachs Screws Up," by Kai Ryssdal, Marketplace, American Public Media, February 12, 2014.

    "Goldman Handed Out Cosmetic Mirrors and Nail Files at Women's Coding Event," by William Alden, New York Times Dealbook, February 11, 2014.

    Follow up:

    • What is "swag"? From where did the term originate?
    • What do you think of this addition to the swag bag?  If you are male, have you ever received a grooming item as part of a corporate gift at a technical conference? Just sayin'.
  • Rakuten? Viber? Maybe we need to be paying attention

    image from thenextweb.com

    We know what Skype and Facebook can do...but Rakuten? Viber? As it turns out, Rakuten--formerly known as Buy.com--is a huge Japanese eRetailing company. It just spent $900 million to buy Viber--a messaging app company.  A free texting and voice calling company, really. Viber and other similar service companies--WeChat for example--may not be a household name here in the U.S., but the services those communication services companies provide are a big deal in China.

    They could become a big deal here, too. It only takes a little time to get hooked on the rich menu of services that one of these messaging apps provides. I have an iPhone, and I really enjoy sending my older daughter visual "stories" using the icon menus built into the iPhone. Hearts...an airplane...the statue of Liberty...a taxi.  What a nice way to tell my daughter I am excited about visiting her in New York City! But my husband and my other daughter have an Android and a Windows phone. My icons look like swear-word symbols when they show up in texts to them...which is not my intention at all.

    But we all could download Viber and use its features across phone platforms. This could be fun. Plus the voice calls, according to the reviews, are super-clear; no distortion or feedback. According the the Marketplace piece, a messaging app like Viber could replace "your voice plan, your texting plan, and half of Facebook." And Rakuten--a retailer that's bigger than Amazon--just bought it.

    It could be big.

    Source:  "Messaging apps: Skype has competition. Facebook too.," by Dan Weissman, Marketplace, American Public Media, February 14, 2014.

    Follow up:

    • Download Viber or WeChat and have 4 or 5 of your main contacts do the same. Play with the app for a week or so...then comment on what your experience was like.
  • I'm sorry, I'm sorry, I'm so sorry

    image from www.desicomments.com

    What is an apology, really?  This was the topic inspired by AOL's CEO Tim Armstrong's recent apology (for his egregious violation of employee privacy with respect to the health care costs of "distressed babies").  Of course, this apology came on the heels of Chris Christie's apologies--and several other public apologies by individuals who may or may not have been sincere.

    Here was Armstrong's apology, sent in an email to his staff:

    “I made a mistake. I apologize for my comments last week at the town hall when I mentioned specific health care examples in trying to explain our decision-making process around our employee benefit programs.”

    Armstrong added some action behind his apology--he reversed AOL's proposed changes in its 401(k) contribution policy, which had been the topic of the town hall conference call in which he made his original gaffe. For me, this action raises even more questions about whether his apology was appropriate, since the "amends" were made to a different group than those that were harmed by the privacy violation. 

    In my mind, a meaningful apology includes the following:

    • an expression of regret for one's actions,
    • listening with patience to the person who was harmed, and hearing how the actions harmed that person (if they wish to express their feelings)--without contradicting them or making excuses,
    • making "amends" where possible to rectify the mistake, or compensate the individual in some way for the harm done, and
    • taking action not to repeat the mistake again.

    The Armstrong apology seems to miss the mark by trying to tackle a public relations problem by reversing the 401(k) pull-back--which is not a direct amends to the individuals he harmed with his careless airing of private health care information. Armstrong also made no mention of changing the "data-mining" policies that brought the health care issues to his attention in the first place.

    Apologies can often go awry. Here are some apologies that often offered, but which probably do not make the situation any better:

    • "I'm sorry you're such an idiot."
    • "I'm sorry you have feelings."
    • "I'm sorry you feel bad but I feel worse."
    • "I'm sorry you found out about that."

    But sometimes a sorry beast really does seem to be sincere about his apology:

    image from koolbeenz.blogspot.com

    Source:  "AOL Chief's Words Lead to a Study In 'I'm Sorry'," by Andrew Ross Sorkin, the New York Times Dealbook, February 10, 2014.

    Follow up:

    • Describe an experience where you have apologized for something. What did your apology sound like? Was it successful? Why or why not?
    • Describe another experience where you have been on the receiving end of an apology. Was it satisfactory? Why or why not?
    • What are the elements of a sincere apology from a public figure, as you see it?
    • The author of the NYT article has a different take on Tim Armstrong's apology than I have: why does he see it more favorably?
  • Privacy: If it were MONETIZED we'd have a benchmark for collecting damages

    AOL's CEO Tim Armstrong clearly has not internalized the importance of privacy to individuals...particularly privacy when it involves health matters or one's children or other family members. He may have even violated HIPAA laws when he publicly aired confidential health care information about AOL employees, as usually only human resource professionals are authorized to have access to health insurance information. .

    Video from Wall Street Journal online interview and commentary

    But according to the NYT article linked below: "...patient and work force experts say the gaffe could have a lasting impact on how comfortable — or discomfited — Americans feel about bosses’ data-mining their personal lives."

    Indeed. All evidence seems to indicate that AOL managers scrutinized private health care records and drew damaging conclusions about individuals--then Tim Armstrong made these damaging revelations public. The data--although it did involve a corporate cost--was not at all connected to or influenced by the expenses involving the defined-contribution retirement benefits that AOL was seeking to truncate. Trying to establish a cause-and-effect relationship between a sick baby and AOL's desire to save money by delaying its matching contributions for 401K accounts just seemed to be a vicious attack intended to evoke an emotional response that would embarrass or shame the users of health care benefits.

    Nevertheless--the shame factor may have been an intentional attempt on AOL's part to induce fear in employees regarding future revelations of private matters that were now revealed to be not only possible, but apparently not in violation of AOL's ethical policies.

    Maybe money would talk in these situations. If there were federal fines established for violations of privacy, or if there were amendments to the Affordable Care Act to mandate monetary penalties for corporate violations of health care privacy--that escalated exponentially for subsequent violations--maybe corporations would think twice before disregarding privacy concerns.

    Sources:  "Revelations by AOL Boss Raise Fears Over Privacy," by Natasha Singer, the New York Times Business Day, February 10, 2014.

    Wall Street Journal Video

    Follow up:

    • Read up about the benefit that AOL was eliminating when Tim Armstrong held the town hall cyber meeting in which he discussed the health problems of the infants of two AOL employees...and the cost of those health problems. What link do you see between the benefit being discussed and the point he was trying to make by bringing up the the expense of the infant health care? What might have been a better example? Why do you think he picked the example he picked?
    • Once a private matter has been aired in public, there is no way to "put the genie back in the bottle." What monetary "fine" would be adequate to compensate a person for corporate disclosure of:
      • Financial information due to a security breach that was accidentally made public?
      • Personal health information that was intentionally researched and made public?
      • Information about the health or characteristic of one's children or family members that was intentionally made public without the consent of parents and individuals involved?
  • How 1040 tax-return filing could be a "game" gone viral

    image drawn by Glynis Sweeny, and published with the article linked below

    An ad campaign from Jackson Hewitt, a tax preparing firm, claims, “Taxes are Fun!” The Jackson Hewitt folks might be onto something if they combine forces with the folks like Gabe Zicherman, who understand how to "gamify" processes.

    Some aspects of gamification include:

    • Introducing competition into the process so there is a way to "win."
    • Rewarding folks for participating when times are slack, but charging more ("surge pricing"), when times are slow.
    • Creating marketing events to encourage participation.

    Zicherman doesn't think the I.R.S. is currently a good "game" at all. "If you file your taxes on time, every single year you don’t get anything from that.” he said. Some of Zicherman's suggestions include:

    • Lower taxes for those who file and pay close to January 1.
    • Create luxury services and conveniences to help people file (don't call them higher taxes!)...and charge them more for them. Let market forces set the higher rates.
    • Add interim deadlines to build "adrenaline-pumping addictiveness."
    • Create surge pricing for returns filed on the deadline of April 15, to pay for the work crunches experienced by the post office and the IRS employees.
    • Big random prizes--1 in 10,000 gets a big discount or even let winners pay no taxes.
    • Tax lottery tickets.

    I also think a good prize would be a "get out of audit free" card.

    Source:  "Try Your Luck, at the I.R.S. Wheel," by John Schwartz, the New York Times, February 7, 2014.

    Follow up:

    • Read the essay linked above. Do you think it is a satiric essay, much like an article in The Onion? Or do you think it proposes a business idea whose time has come? [suggestion: Do a search for a "modest proposal."]
    • What is "surge" pricing? What are the pros and cons of using surge pricing?
  • Making the post office $ profitable $

    image from delawareonline.com

    The United States Postal Service (USPS) could be a money-maker. As in $$ Very Profitable $$.

    The problem is: banks don't want to see it happen.

    The USPS could offer bank-like services to the 68 million Americans who are "underbanked" now. "Underbanked" means that they do not live in areas that have decent branch banking services, or they fall so far below the median of easier-to-serve banking customers that they cannot get services from branches in their areas. Now, these potential customers are using paycheck-cashing services and draining up to $2500 a year from their meager earnings.

    Here are some of the services that a "bank-like" USPS could provide:

    • check-cashing services
    • bill-paying services
    • small loan services
    • re-loadable pre-paid credit cards

    According to the linked article, "of the nation's 35,000 post offices, more than half are in zip codes with one or no banks." This means that there would be a trustable institution with real estate already in place that could provide these banking services, with no additional investment. And the percentage fees charges would go to support the US Postal Service, rather than paying the almost usurious fees of the paycheck-lenders.

    As it turns out, going to the post office to cash a check was more of a "norm" for our great-grandparents. In the presidential campaign of 1908, post office banking helped the campaign of William Howard Taft.

    Source:  "Post Office Could Rack Up Billions By Offering Money Services," by Brian Naylor, National Public Radio, February 7, 2014.

    Follow up:

    • List several of the attributes of the "underbanked" American.
    • Why do banks disapprove of the post office adding these services? What is the monetary impact to banks, if any?
  • Trying to escape a 7-day work-week...

    image from empireflippers.com

    Entrepreneurs often have a difficult time setting a work-life balance...particularly if they are running a business open 7 days a week to the public. Carlos Vega bought Father and Son Pizzeria in 2007, and successfully doubled sales over the next few years. Besides serving prepared pizzas, he also sold Italian "gravy"--his popular red marinara sauce. But he was working seven days a week, to save on labor costs.

    This was not a sustainable business model, so he brainstormed possible alternatives.  There were certain constraints, which had to be faced honestly, in developing his alternatives. The constraints included:

    • the restaurant was small and land-locked on the main street of a "blue-collar" town
    • there was no parking
    • maximum gross revenue had hit a plateau of $10,000 per week

    Mr. Vega considered these possibilities:

    • Adding on to the building that he was in so that there would be a real dining room...but a complication was that he could not afford the quarter-of-a-million dollars needed for a liquor license...nor would the addition bring him any parking spaces
    • Losing the pizza place and switching to the manufacture of "gravy"--which would require a lot of learning and the hiring of a third-party manufacturer. The plus of this option would be more-time-with-the family.  The minuses include many unknowns of being in a food manufacturing business rather than a restaurant.

    Business observers were impressed by Mr. Vega's success so far, and hoped that he would transition slowly into the manufacturing business, which seemed to be the more sustainable alternative from a personal standpoint.

    Source:  "A Business Owner Seeks an Alternative to Seven-Day Workweeks," by John Grossman, The New York Times Small Business, January 1, 2014.

    Follow up:

    • What is the difference between "gross revenue" and "profit"? What does the "margins were higher for the red sauce than for his menu items" mean in terms of product mix and future planning?
    • Delineate the ways in which Mr. Vega maximized profits for his restaurant before reached this decision point.
    • How much profit would you need to receive in order to make 7-day work-weeks worthwhile? What kind of work could you sustain for, say, 5-8 years at that rate?
  • A social network just for college students...sound familiar?

    image of Evan Rosenbaum, Akash Nigam and Matt Geige of Blend.

    It's "deja vu all over again." Blend is a social networking site that is for college students only. This might sound familiar because that is how Facebook started, on Harvard's campus.  I remember my students telling me...back in 2006...that they could "get me onto Facebook" because I had an email address that ended in .edu, but that most "grown-ups" were excluded.

    Now the demographics of Facebook have shifted. According to iStrategyBlabs, 3 million young people (under 25) have left Facebook within the last three years...while the number of users over 55 years old have increased by 80%.  Does this sound like a "party" you'd like to be at as a college student?

    Here is how Blend works:

    • A theme is posted each day, such as "Tailgate Saturday, Library Shenanigans or My Pet Is Better Than Yours."
    • Users post photos relevant to the themes.
    • Other users can "snap" the photos they "like."
    • Photo-posters can earn points based on the number of snaps received to be redeemed as gift cards for Blend advertisers.
    • Ads are inserted between every six photos.
    • Blend has set up 4 seasonal campaigns a benchmarks for advertisers.
    • Student "influencers" approve potential advertisers, and act as their representatives on each campus.

    Observers have tracked steady growth for Blend. Where will it be 3 years from now?

    Source:  "A Social Network That’s Just for College Students," by Eileen Zimmerman, the New York Times--You're the Boss, February 6, 2014.

    Follow up:

    • How much do you use Facebook? How about other social networking sites? Make a pie chart showing the relative amounts of time you spend on various sites.
    • What is your reaction to Blend? What do you think of its motto: "Share, snap, score"? Evaluate its business and monetization strategies. What are some indicators of Blend's future success or failure?
    • To whom is the phrase "it's deja vu all over again" attributed, and why is it funny?
  • "Bull Market's 5th Birthday" may be its last...

    It seems as though the celebration of five years of a Bull Market, which I wrote about last week, was the last bit of stock market cheer we might be hearing for a while. Investors seem to be responding to several negative economic factors, and the Standard & Poor's 500 stock index is down 5.8% since January 15th.The S&P 500 index was at 1741.89 at the end of trading on Monday, February 3rd.

    Some of the negative economic factors include:

    • the pullback of "quantitative easing" by the Fed, which stimulated the money supply
    • the global response to the change in U.S. monetary policy
    • a manufacturing industry survey released on February 3rd (whose "bad" numbers were a result of this winter's bad weather)

    Observers are now awaiting the market's response to the employment numbers which will be released later this week, on Friday, February 7th.

    Source:  "As Recovery Looks Weak, Stocks Take a Deep Dive," by Nathaniel Popper, The New York Times Dealbook, February 4, 2014.

    Follow up:

    • What is the annualized percentage decrease, based on the 5.8% number noted above, that might be projected if the current bear trend goes unchecked?  [Hint: it is an appallingly large number, and it is unlikely that the market will continue to plunge at the rate it has been falling over the last 2 weeks. Nevertheless, it is an interesting number to compute, to put the percentage in an annualized perspective.]
  • Businesses track and respond to the erosion of the middle class


    Image from money.cnn.com

    Even if politicians and media celebrities debate whether the middle class is struggling in these economic times...the debate means little if corporations are already reacting to their conclusion about this matter. Business entities, in preparing sales and production budgets, have already noted and responded to the current state of affairs: the upper class is buying and the middle class is not.

    In the Chelsea district of Manhattan, the Loehmann's discount store is closing and the upscale Barneys store is taking its place. Red Lobster and Olive Garden flounder but the Capital Grille thrives. Only demand for the high end appliances is soaring; mid-range appliance demand is faltering.

    According to Steven Fazzari (Washington University) and Barry Cynamon (Federal Reserve Bank of St. Louis), in 2012 the top 5% of earners consumed 38% of the domestic product. This was up from 28% in 1995. They also noted that top earners' purchases have been driving the current economic recovery.

    Sources:  "The Middle Class Is Steadily Eroding. Just Ask the Business World," by Nelson D. Schwartz, The New York Times, February 3, 2014.

    "The Middle Class Falls Further Behind," by Aaron Smith, money.cnn.com, August 22, 2012.

    Follow up:

    • What DID go wrong for Olive Garden and Red Lobster? Read the article that is linked to those chains above.
    • Do you consider yourself middle class? What does that mean to you in terms of your current and future financial life?