• Apple bites Beats: will it get its groove back?

    Image above of The Beats by Dr Dre headphones cradling the Apple logo,
    signifying the new merger

    Jimmy Iovine has agreed to sell Beats Electronics to Apple Inc. for $3 billion. Beats Electronics, the maker of Beats by Dr. Dre premium headphones, currently has a contract with Hewlett Packard to integrate Beats hardware with their machines. (The HP contract will not be renewed when it runs out in 2015.)

    Apple seems to be buying a company that brings to the table some attitudes and features that Apple lacks. "Human curation" (rather than algorithms) drive the music selection of Beats' streaming music services. The Beats headphones couldn't be more unlike the Apple ear buds--they deliver sound quality far superior to what the tiny ear buds even attempt to offer. But Jimmy Iovine does share the key quality of showmanship coupled with "reality distortion" that Steve Jobs used to create a memorable business story.

    One claim that Jimmy Iovine makes about Beats is that it it built its $500 million business over three years while spending "zero dollars" on marketing--just by using their ability to "harness the media."

    They can talk all they want. It will still be a treat to see what products evolve from this partnership.

    Source:  "A New Irreverent Spirit at Apple" by Vindu Goel, the New York Times BITS, May 29, 2014.

    Follow up:

    • Have you listened to music using Beats Electronics headphones? What are the pros and cons, compared to Apple ear buds?
    • Compare and contrast this new acquisition by Apple with Beats Electronics' partnership with Hewlett Packard.
  • Buzzfeeds believe it or not Business Facts!

    image from the "article" linked below...

    Buzzfeed--which often links the social-networker to cute kitten videos--periodically posts various items that will "Blow Your Mind." This business communication technique (hyperbole) is a primitive way to generate excitement and urge viewers to click through to the "article." 

    What is the purpose of this type of article? Buzzfeed makes it money from advertising...so generating clicks is the purpose of a headline like this.

    I clicked through to find article inspiration for this blog...but the whole set up of this was interesting from a business communication point of view. In other words, nothing on the list really did "blow my mind"....

    Source:  "57 Fascinating Business Facts That Will Blow Your Mind" by Jessica Misener, BuzzFeed Business, March 21, 2014.

    Follow up:

    • How many ads did your run into when you viewed Buzzfeed's List of Business Facts? What products were offered?
    • Did you find anything substantive in the list that added to your general knowledge?
    • Did you research any items to find out additional information or see if they were true?
    • Define hyperbole and give other examples of hyperbole
  • Food fight over sausage company

    image from coupon site

    There has been a bidding war on the stock market for a takeover of Hillshire Brands Co., which makes Ball Park hot dogs and Jimmy Dean sausages, among other processed meat products. The bidders? Tyson Foods and Pilgrim's Pride Corp.

    Why would these companies want to own Hillshire Brands? According to the Marketplace article:

    1) Diversification. Because of increasing prices on various meat commodities (beef, pork, chicken), producers want to control more of the market.

    2) Hiring profits: the margins on Hillshire Brands products are higher, since they have more prepared food (for example, croissant sandwiches)

    3) Competitive pressure: Hillshire Brands planned to buy another company--Pinnacle Foods, Inc. Other companies want to get control of Hillshire before that happens.

    4) Possible tax benefits. Some analysts claim that two years after they previous acquisition, the tax penalties on a subsequent acquisition might be less...and it has been two years since the association of Hillshire Brands with Sara Lee.

    Source:  "Why does everyone want Hillshire these days?" by Kate Davidson, Marketplace American Public Media, May 29, 2014.

    Follow up:

    • What is Tyson Foods offering for Hillshire Farms?  What is the current market price?
    • If you are reading this after the takeover is complete, what was the sales price? Who was the successful purchaser?
  • California dream or tragic corruption?

    image from www.senate.ca.gov

    Two widely divergent opinions are expressed in the linked article. Corruption and collusion are alleged by those supporting one side of this issue. Fairness is alleged by those supporting the other side. In any event, the issue--a loan program for California high school graduates without U.S. citizenship--highlights how divergent opinions can be when money is involved.

    The communication techniques on both sides of the issue can be identified and analyzed by a critically-thinking reader.

    • What arguments are emotional? What arguments are fact-based?
    • How are hyperbole used by each side?
    • Identify, for each side, the selection of only those facts that support their position.

    Demographic predictions for the state of California--and their implications for business--seem to have been ignored by both sides. Nevertheless, demographics are usually a major factor in the business economy.

    Source:  "Senator Lara Announces the California Dream Loan Program–College Loans for Illegal Aliens" by Stephen Frank, California Political News and Views, April 4, 2014.

    Follow up:

    • Putting your personal feelings aside, analyze the positions taken in the linked article with respect to principles of business communication.
    • What effect might SB 1210 have on small business in California? Read the demographic data on Report P-1(Race) as you form your thesis.
    • Comment on the communication techniques used by those posting comments to the linked article.
  • How much would a Made-In-America iPhone cost?

    Ironically, the image above is from the Moto X, which can be made in America for
    approximately the cost of making it overseas.

    "How much would an iPhone cost if it were entirely made in the U.S.?"

    This question was posed on a recent Marketplace radio-cast. The supporting data had already been analyzed by IHS Technology. The bottom line? A 100% American-made iPhone would cost around $2,000...compared to the $650 - $850 retail cost of the iPhone on the market today.

    It turns out the the increased price is partly due to labor costs and partly due to supply-chain issues for component parts. Labor in the U.S. is two to three times the cost of labor in China, where the phones are currently manufactured. But access to the needed parts is a larger factor. Whole "villages" have evolved around iPhone manufacture in China
    (for example, Shenzen). Component parts are nearby and few logistics problems exist to keep the assembly lines for iPhones moving. In addition, labor costs for the manufacture of component parts--the most expensive of which is the display--are also a factor.

    Source:  "How much would an all-American iPhone cost?" by Stacey Vanek Smith, Marketplace, American Public Media, May 20, 2014.

    Follow up:

    • Does it matter to you where the iPhone is made? Is maintaining production facilities and production jobs in the USA a value to you? List your reasons.
    • Read the link regarding the Moto X as well. One point in that article is that customization is possible with the Moto X.  What do the authors of that article see as the pros and cons of American production for that phone?
    • What percentage mark-up, from cost to retail, is IHS assuming in arriving at the $2,000 retail estimate?
  • Brainstorm: harnessing the amazing and wonderful adolescent brain

    Full length video via YouTube

    If you are between the ages of 12 and 24--this book can empower you and help you become more effective in your business life and in your personal life. If you are an educator or a manager, it can provide guidelines about motivating students or employees. If you a public policy wonk, it can provide you with the template for an incubator that could solve the world's problems.

    But if you are an entrepreneur looking to make a fast buck, there is no magic bullet here. A classic way to make money is to create a problem or a need and sell a product or a service that will fix that problem or assuage that need. Demonizing "the teenage brain" and naming diseases and syndromes to identify as a "problem" what may in fact be a natural evolutionary necessity creates business opportunities. Therapists, counselors, pharmaceutical companies, testing laboratories and departments in institutions of higher learning can all profit. 

    If the characteristics of the adolescent brain are hard-wired as part of human growth--making this a problem to be solved is, from a marketing perspective, a huge and unending potential source of revenue.

    The author of this book takes a different perspective. He argues that the human brain is infinitely "programmable," and that each individual is the best programmer for their own brain. He also argues that the years between 12 and 24 are like a Silicon Valley incubator (or "start-up accelerator")Any effort during this time period can bring greater life-time rewards. And some of the most effective tools are totally free.

    The investment requires a small amount of time daily, and the willingness to be in charge of one's own personal brain development.

    Source:  "Brainstorm" by Dan Siegel, M.D.,  published by Tarcher, 2014.

    Follow up:

    • Are the approaches suggested by Dr. Siegel low-risk or high-risk investments?
    • If you were managing a department with individuals in their first jobs out of college, how could you apply some of these principles in a practical way?
  • Wanna make $21 per hour at McDonald's? Move to Denmark

     image from reuters

    In Denmark, there are two McDonald's wage levels: $21 per hour applies to adults 18 years of age and over. $15 per hour is the minimum wage for workers under 18 years old. Even the lower wage level is more than double the minimum wage for adults in the U.S.--and it exists in a public policy environment where health care is universal.

    These wage levels were not McDonald's idea. They were bargained for by a union--and putting that union in place required years of work. Sometimes the discussion in the U.S. media around the minimum wage ignores the profits being made by large corporations. The talking points center on the hurdles all costs are for small businesses just starting up.

    An additional argument for a higher minimum wage is that boosting wages for the lowest paid workers also boosts the salaries of entry-level professionals. This might mean less profit for stockholders of corporations like McDonalds--or fewer bonuses at the highest levels of management. Nevertheless, it also might mean that the social service costs of low-income wage earners are shifted away from middle class taxpayers and onto the corporations who are profiting from the labor provided at these low wages.

    What do you think?

    Source:  "I’m making $21 an hour at McDonald’s. Why aren’t you?," by Louise Marie Rantzau, Reuters: The Great Debate, May 15, 2014.

    Follow up:

    • One definition of the "minimum wage" is a "living wage": the wage level that, with full-time work, can support a four person family at a lowest-rung middle class level.  What do you think would be the living expenses at this level?
    • What are the pros and cons of raising the minimum wage in the U.S.? What would be your definition of "minimum wage"? Is the concept of a "living wage" relevant? Would one wage work for the entire country?
    • Research the wages paid at Chipotle, Costco and Walmart. How do minimum wage laws affect large corporations and small businesses differently?
    • Have you ever supported yourself while being paid a minimum wage? Explain how that worked or didn't work. Read the article to find out how working for the current U.S. minimum wage affects others, if you do not have experience of your own.
  • Success: structure trumps overwhelm and struggle

    Image from tompooleymarketing.com

    Have a goal? Almost every business situation and every career path is about setting goals and achieving them.

    But what does research show us makes the difference between someone who meets their goals and someone who doesn't? According to Tony Stubblebine, the CEO of Lift (a goal-setting app), here are some results:

    • "The number one driver of whether a habit change is a success or not is how big the initial goal is. Everyone, if they're consistent, will eventually achieve something massive. But the people that end up failing are the people trying to achieve overnight success."  In other words: set small goals to get to your ultimate aim step-by-step.
    • "The structure matters. People put all of this effort into optimization and research, but honestly everything we see about success rate says that the most important thing is to structure your goals so you can be consistent."

    In other words, only pick intermediate goal steps that you KNOW you can achieve on a schedule.  One example cited is setting the goal "Go to the gym" rather than "Work out for 60 minutes on the elliptical machine."

    Getting a four-year college degree is an example of institutionalized structure that creates opportunities for success.  One reason that it works is that a 120 semester-unit degree is broken down into semesters containing 3-5 classes. Still challenging, of course--but manageable. No one is expecting anyone to complete all 120 units at once.

    The goal-achieving system described by Stubblebine highlights programming reminders into your phone or creating some other unavoidable trigger that will inspire consistency.  This is where the app comes in handy.

    By the way, the tagline of Lift is "Succeed at Everything."

    Source:  "WHY SUCCESSFUL HABITS ARE ABOUT STRUCTURE, NOT EFFORT," by Drake Baer, fastcompany.com, May, 2014.

    Follow up:

    • Check out this app: Lift. What will be your first goal and what are the steps you will take to achieve it?
    • List three long range goals that someone you know aspires to. Act as a consultant to that person. What small-step actions would you recommend that will lead to success in each of those goals?
  • The Income Gap: How to fix it

    image from therealsingapore.com

    Robert Reich, U-C Berkeley professor and noted economist, is a huge fan of the middle class. Therefore, income equality is an issue that he has a lot to say about. And--unlike Thomas Piketty--Reich does not believe we are doomed. Some major factors which influence his position include the following actions which need to be taken to counteract the income gap:

    • Make work pay. If a minimum wage of $15 per hour were attached to the fast-growing fields of hospitality, restauranteurism, and tourism, this would make a huge difference. According to Reich, "No American who works full time should be in poverty."
    • Unionize Low Wage Workers.  Unions gave the middle class clout, and unions are now the only way that low-wage workers can face off against global competiion.
    • Invest in eduation. This might seem like a no-brainer, but education costs money and the uneducated sometime do not have a voice in policy decisions. According to Reich, "Education should not be thought of as a privae investiment; it is a public good that helps both individuals and the economy."
    • Invest in infrastructure.  This means road, public transportation, decent rents in places near to work, affordable utilities, education from age 3-23. Everything. America is behind on investing in these basic, business-supporting needs.
    • Pay for these investments with higher taxes on the wealthy. According to Reich, "Between the end of World War II and 1981 (when the wealthiest were getting paid a far lower share of toalt nation income), the highest marginal federal income tax rate never fell below 70 percent, and the effective rate (including tax deductions and credits) hovered around 50%. But with Ronal Regan's tax cut of 1981, followed by George W. Bush's tax cuts of 2001 and 2003, the taxes on top incomes wer slashed, and tax loopholes favoring the wealthy were widened."
    • Make the payroll tax progressive. Since payroll taxes are 40% of government revenues, shouldn't they be progressive, if that is an American value?  Government could exempt the first $15,000 of income from these taxes for a start.
    • Raise the estate tax and eliminate the “stepped-up basis” for determining capital gains at death. OUCH. This one would personally hurt me, but I have to admit that inherited wealth is not really fair. Taxing wealth that has not been personally earned is actually a very good idea--especially as far as adjusting for income inequality is concerned.  Fist step : reduce the taxable threshold on inherited wealth from $5.34 million down to $1 million. How many people is that going to hurt?  And those that it does "hurt"--can they afford it?
    • Stepped up basis inequality: Here is how the current rule works: If my parents sell their house before they die, they are subject to tax on the increase in its worth since they bought it. But...if it is in their estate, it passes to their heirs at the value it had the day they died.  The increase in capital worth that occurred while they were alive is NEVER TAXED. Is that fair?
    • Constrain Wall Street:  Resurrect the Glass-Steagall Act in full and restrict the size of banks--back to the 1975 level ideally. (Fat chance).
    • Give all Americans a share in future economic gains. According to Reich, one thing that aggravates the inequality is that, "The richest 10 percent of Americans own roughly 80 percent of the value of the nation’s capital stock; the richest 1 percent own about 35 percent."  He advises that,"As the returns to capital continue to outpace the returns to labor, this allocation of ownership further aggravates inequality. Ownership should be broadened through a plan that would give every newborn American an “opportunity share” worth, say, $5,000 in a diversified index of stocks and bonds—which, compounded over time, would be worth considerably more. The share could be cashed in gradually starting at the age of 18."  RADICAL.
    • Get big money out of politics. If corporations, with multi-thousand...and now multi-million dollar contributions to lawmakers allowed didn't control our political representatives, average Americans might have a voice. the Supreme Court's Citizens United decision made that impossilbe. But a Constitutional Amendment (according to Elizabeth Warren) or at least full disclosure (still possible under current Supreme Court direction, but not yet mandated by law) would be a step in the right direction.

    Is there a chance to reign in income equality? What are we willing to do to make that a reality?

    Source:  "Robert Reich: 10 ways to close the inequality gap: The former secretary of labor on American society's single greatest obstacle -- and what we can do about it," by Robert Reich, the Salon, May 13, 2014.

    Follow up:

    • What are some of the highlights of Robert Reich's resume? Are you inclined to listen to his ideas because of this resume, or reject them? Please explain your rationale.
    • Does the Income Gap bother you? Why or why not?
  • "Chef": social media meets career path crossroads

    trailer of the movie "CHEF" from YouTube

    By most accounts, "Chef" is not a profound film, but it is an engaging story that coincidentally highlights several aspects relevant to business and career realities. Here are some of the highlights (spoiler alert):

    • a chef is at odds with his boss: the boss wants a conservative menu; the chef wants to be creative
    • the boss gives the chef an ultimatum
    • a food critic uses Twitter to soundly criticize the chef
    • the chef learns about Twitter from his son, but responds to a tweet in what he thinks is a personal environment, but what is in fact, the Twitter universe
    • emotional outburst gets viral attention, leading to the end of the chef's employment
    • career path crossroads: chef starts a food truck
    • the best-of-all-possible outcomes evolves

    For business students, this stream of events produces some obvious questions:

    • Can being fired be the best of all possible events?
    • Is Twitter a profound and effective marketing medium for a restaurant?
    • What are the regulatory requirements for setting up a food truck in various states or other jurisdictions?
    • Is being an entrepreneur the answer to every worker's dreams of real fulfillment and financial success?
    • Can financial backing realistically materialize in the way it does in this movie?

    However these questions are answered, "Chef" remains an engaging and inspirational advocate for the entrepreneurial spirit.

    Sources:  "‘Chef’ movie review: Jon Favreau makes a satisfying return to his indie roots," by Michael O'Sullivan, Washington Post, May 15, 2014.

    Follow up:

    • What would you do if you were in a job where you felt your best qualities were not appreciated by your boss? What are the pros and cons of taking action--either for the character in the movie, or as you would imagine in your own situation?
    • Are you a Twitter user?  Have you ever been a part of a communication situation that has spiraled out of control?
    • What examples from fairly current events can you cite where Twitter users did not understand the way that Twitter works...with unfortunate and unforeseen consequences?
  • Twitter stock plunges...for a good reason

     image from sigalonit.soup.io

    Twitter stock is in "free fall" according to the New York Times. Stock prices fell 17.8% in one day last week. What happened?

    Here are some of the reasons stock prices might fall:

    • the entire stock market is falling, due to outside economic data
    • earnings reports for the company in question could be lower than projected
    • a competitor company might have come out with a better, competing, product
    • a derogatory news event involving company personnel could be trending
    • the stock may have "split"
    • the laws of "supply and demand" may have their expected effect.

    In the case of Twitter, "supply and demand" is the culprit.

    from Reuters via the New York Times article linked below

    Here is what happened: Twitter IPO purchasers were not allowed to sell their shares until last week...when several Twitter stockholders' dumped their shares on the market. The excess supply drove the price down.

    Meanwhile, the buzz about Twitter's ability to make money didn't help. Revenue is up, but user growth is almost flat. This bodes ill for the future.

    "User engagement" is also down by 3% domestically and 10% internationally (this is the screen-refreshing rate of Twitter users).

    Nevertheless, business consultants are all about "getting on to Twitter." Go figure.

    Source:  "Twitter stock plunges as more shares hit the market," by Nicole Perlroth and Vindu Goel, the New York Times, May 6, 2014.

    Follow up:

    • Can you think of other factors that may cause a stock price to fall? What factors might cause a stock price to increase?
    • What is a stock split? Is it good for investors or bad? Explain.
    • How do Twitter executives explain the recent stock problems?
  • Alibaba: Who will be making millions from its messy IPO?

    image from investorplace.com

    Check out the investorplace Alibaba IPO VIDEO STORY

    Alibaba is a huge Chinese online retailer that was started by a non-tech-savvy English teacher named Jack Ma. It is making news because of its proposed IPO...and the mysteries that its recently-released financial statements are revealing:

    • Alibaba runs two websites, but its financial statements combine the revenue in one line.
    • Revenue grew 60% from 2012 to 2013, but there is no detail provided to support how this happened.
    • Alibaba claims that mobile-device net revenue has increased 19.7%, but shows no detailed breakout of mobile revenue and expenses in its financial statements.
    • Alibaba restricta searches of its site by Baidu, a popular Chinese search engine and information provider. Alibaba's financial statements do not disclose how this artificial means of protecting profits might change if access is opened after the IPO. In addition, Alibaba might need the internet hits that Baidu could provide. 
    • Alibaba is extremely profitable, but questions arise as to whether that profitability can be sustained.
    • Its business model is not inventory-based, but is a service that links buyers and sellers. This is much more difficult to evaluate and audit.

    Initial Public Offerings can be full of surprises. We will see how this one plays out.

    Source:  "Big Profits at Alibaba, but Filing Has Gaps," by Peter Eavis, the New York Times, May 6, 2014.

    Follow up:

    • What is an IPO? Why would a Chinese company want to launch an IPO on an American stock exchange?
    • How does restricting access to Baidu help Alibaba?  How does it hurt Baidu? What are the pros and cons of this policy?
  • Have a lot of followers? ZAP: In Russia, you're now a regulated media outlet

    cartoon from The Moscow Times article (in translation)

    Censorship is alive and well in Russia.  Putin just signed a law that requires bloggers with more than 3,000 daily readers to register with the government as a "media outlet". But the bloggers are caught between Scylla and Charibdis. The law means that they have to abide by the same requirements legally to substantiate what they are saying on their blogs.  However, because they are not "journalists," they are not allowed to make the official inquiries that could actually grant them the resources to provide the required documentation.

    Bloggers are stuck--not being able to write about the issues and situations that they find egregious if they cannot document them fully.

    Putin viewed the internet as a "special CIA project" in justifying this law. And he is not alone in tightening censorship of the internet. Crackdowns in China, Turkey, Venezuela and Pakistan have also occurred recently. 

    Even in the United States, the recent controversy over "net neutrality" and broadband access has implications for free speech and censorship. The internet is a powerful platform for the dissemination of ideas...and where there is power, there is often a fight for control.

    Source:  "Russia Quietly Tightens Reins on Web With ‘Bloggers Law’," by Neil MacFarquhar, the New York Times, May 6, 2014.

    Follow up:

    • What does "between Scylla and Charybdis" mean? What is another idiom that means the same thing? What other reference (from the article" refers to the same predicament? Why do you think there are so many cultural references to this situation?
    • Think about the blogs that you read.  What would be the pros and cons of these requirements being placed on the blogs with which you are familiar? Give specific examples.


  • Berkshire Hathaway: TRUST is everything...no matter what others say

    video from WSJ: Woodstock for Capitalists

    Charlie Munger, vice chairperson of Berkshire Hathaway,was at "Woodstock for Capitalists" recently. Munger is a long-time friend of Warren Buffet. Munger's take-away quote: “By the standards of the rest of the world, we overtrust. So far it has worked very well for us. Some would see it as weakness.”

    The statement was a response to the overwhelming trend in businesses and educational institutions to "lawyer up." In addition, businesses are now spending millions on consultants that specialize in (minimum-possible) compliance with regulations. Munger's point was that a better use of business energy is to hire those you trust...and to skip creating an environment of distrust and policing.

    Rock Center for Corporate Governance (Stanford University) is studying Munger's thesis with respect to its validity and efficacy as corporate policy.

    Source:  "Berkshire Hathaway Promotes Trust," by Andrew Ross Sorkin, the New York Times, May 5, 2014.

    Follow up:

    • How much does Berkshire Hathaway spend on corporate counsel?  Why is this unusual, and what other policy is unusual with respect to other corporations' behavior? Could it constitute "negligence," as suggested in this article?
    • Munger has said (regarding the policy in Roman times), "If you build a bridge, you stood under the arch when the scaffolding was removed.”  What do you think this means, in terms of being a metaphor for modern corporate behavior?
    • In what other (major) ways is trust important to business transactions?
  • Dealflicks: selling seats nobody wants is a valuable business

    image from wefunder.com

    Dealflicks is like Priceline: it tries to match moviegoers with seats that are not otherwise going to be used --and offers big discounts.  According to Sean Wycliffe, CEO of Dealflicks, the statistics show that 88% of movie theater seats go empty. This is a marketing niche that was crying to be filled!

    Entrepreneur Kevin Hong teamed up with Wycliff and website whiz Zachary Cancio to start the business with venture capital funding. Wong and his sales teams have traveled the U.S. in their minivan trying to woo theaters across America into signing up with their service.

    image from article linked below

    Dealflicks is very flexible--letting the theaters set prices and determine which shows get discounted. Moviegoers access the deals via phone apps or the Dealflicks website. Dealflicks makes its money by taking 10% to 20% of the ticket price. Last year, sales were $245,000...but they are projected to be more than $2 million this year.

    Source:  "Dealflicks aims to put movie fans in cheaper seats," by Richard Verrier, the Los Angeles Times, May 6, 2014.

    Follow up:

    • According to the article, when do discounted tickets really work for the theater owners? What are the downsides?
    • Who funded Dealflicks? What was their motivation?
    • Why does Wong make sales calls by minivan rather than by phone?
  • Millennials trash privacy rights...and so do those controlling "big data"


    from blog.insideview.com

    "Your personal information is yours."

    According to the LA Times, "A new report, written by a group led by White House counselor John Podesta, says that big data — the various entities that benefit from knowing all there is to know about you — is growing out of control."

    What does this mean? It means that sensors are everywhere:

    • in our homes
    • on city streets
    • on wearable devices
    • embedded in credit cards
    • on our computers
    • on our phones
    • in our doctors' offices
    • with our insurance companies
    • at our places of business

    Business and government agencies are not going to be restrained from using this data if only "voluntary codes of conduct" are in place. Regulations and audited compliance will be the only things that protect us. "Consumer data" is personal data. NSA monitoring and widespread (but withheld) knowledge of the Heartbleed Virus means that businesses are not acknowledging personal rights.

    The business perspective might be: WE NEED this data to efficiently MARKET to our target demographics. But if Verizon is selling to third parties information about websites you are visiting and purchases you are making online, shouldn't you have a say?  Or at least get a financial piece of the action?

    "We are concerned," says Jeff Chester, executive director of the Center for Digital Democracy, "that the principle is collect first and worry about privacy and consumer protection later."

    Maybe we should take the lead from Europe, where they set the line of scrimmage with this principle:  "all people have a right to privacy."  In U.S. law that right is only implied.  Moreover, the EU has taken the following step:

    "In response to the NSA spying revelations, the European Parliament passed even stricter privacy rules in March. They still have to be approved by the European Union's 28 member countries, but represent the region's commitment to individual rights. The new rules wouldn't just give people more control over who can obtain their personal info but also grant a right to have online data erased — a so-called right to be forgotten."

    Wouldn't that be a right we could appreciate.

    Source:  "Ownership of personal data still appears up for grabs," by David Lazarus, the Los Angeles Times, May 6, 2014.

    Follow up:

    • Do you read the privacy disclosures before you agree to them? Why or why not?
    • Reminder: have you changed your passwords in response to the Heartbleed virus?  Remember: the passwords you have "out there" may be a ticking time-bomb.
    • Would you value the European protections with respect to privacy? Would you like to be able to have your online data erased?
    • Why do businesses support the loss of personal privacy? What are the pros and cons of this from a business perspective?
  • Lying with statistics: how to read the labor graphs

    Note: You can't really play the video, it is a screenshot [due to an embed FAIL].
    The Video is linked at NYT

    On the first Friday of the month, the labor report comes out. The airwaves, business print, and internet sites are full of conclusions and spin. But what does it all mean? In fact, the statistics--and the way they are presented--can be very misleading. The "margin of error" in the reports could mean that EITHER one of the following two graphs would be accurate, based on the exact same set of data:

    OR..using the SAME data, the jobs report could look like this!

    What is the difference? The statistical swing is partly the result of the unknowns and seasonal fluctuations.  Is the job increase or decrease the result of holiday hirings or layoffs? Are people slow to start looking for work again? Or... has there been a sampling error in the data presented? [Note: the sampling error of a few hundred thousand jobs in question is a small percentage of the 130 million jobs in the economy, but the sampling error is extrapolated as though it represents the economy as a whole.]

    In addition, one month of data can't really tell you what the trend is.

    The problem is: the Labor Report and the analysts who read the report influence stock traders. Traders influence the market...So misleading labor statistics can really skew the real-life results of financial trading based on the labor analysis. Also, the voting public can be influenced by "trends" that don't really have a basis in reality.

    One reason for this is that each one of us, as a human being, has a brain that is wired to make sense of whatever data we get...so we are more comfortable coming to a wrong conclusion than we are with hanging out with random, meaningless data.

    All we can do is be aware of the problem, and try not to take action on data that we don't really understand.

    Sources:  "How Not to be Misled by the Jobs Report," by Neil Irwin and Kevin Quealy, the New York Times, May 2, 2014.

    Follow up:

    • According to the article, what conclusions CAN be drawn from the latest Bureau of Labor Statistics Report?
  • "Giffen goods": Apple bonds violate law of supply and demand

    image from lightandlife.org

    Giffen Goods -- when the rules of supply and demand go awry. When the price goes up, consumers buy MORE instead of less. The name comes from the individual who identified the aberration--a 19th century Scottish statistician/economist named Robert Giffen.

    The iconic example of this phenomenon was the consumption of potatoes in Ireland by the poor. When potato prices went down, the peasants could afford to buy meat as well as potatoes...so they consumed fewer potatoes. When potato prices were high, the poor in Ireland could not afford to buy meat, so they had to buy the more expensive (but still cheaper than meat) potatoes--so they bought more potatoes. "Supply and demand" usually predicts that prices decrease when demand is low, and prices increase when demand is high relative to supply.

    Here is what happened with Apple:  Last year, they issued $17 billion in bonds. A bond issue in lieu of the issuance of additional stock means that current stock value is not diluted and the the return on stockholders' equity is improved, so this is a popular move with stockholders.

    Anyway, when they announced last week that they would be issuing $13 billion in new bonds, the price of the old bonds on the secondary market dipped a little, which would be the expected result according to supply and demand. But when they actually went on sale, the price was HIGHER than it had been before the additional bonds became available. Go figure.

    Because bond investors tend to be the same people that invest in packaged mortgage bundles, analysts are looking to that market to make sense of this development. What those analysts are seeing is that mortgage lending is getting "looser" again, so the bundled mortgages are becoming more risky. 

    This pushes the return rate higher. So...lower quality or longer term investments (Apple's bonds are 30 year) become more appealing to investors.

    One analyst,
    Martin Fridson, writing for S&P Capital IQ LCD, predicted that these low-quality investments will begin pushing up the default rate in 2016--and the defaults will continue until 2020. “During that period, we project that on a global basis, approximately 700 bond issuers and 1,150 debt issuers in total will default. The face amount of bonds and loans going into default should approximate $1.5 trillion, with the U.S. accounting for $1 trillion of the total.”

    This doesn't say anything about what will happen specifically with the Apple bonds, but since Apple's solvency and liquidity is very good, this dire prediction is unlikely to affect the Apple bondholders.

    Source:  "Searching for Yield, At Almost Any Price," by Floyd Norris, the New York Times, May 2, 2014.

    Follow up:

    • Look up the bond issue on the internet. What is the interest rate being paid on the old bonds?  What is the interest rate on the new bonds? Can you think of any financial reason--market driven--for the popularity of these bonds? Hint: check out the rate your local banks are paying on their Certificates of Deposit.
    • If you bought Apple's bonds last year, and sold them this week, the author of the NYT article notes that you would experience a net loss. Why is this?