Teri Bernstein, MBA, CPA has been teaching full time in the Business Department of Santa Monica College since 1985. Prior to that, she worked in Internal Audit and Special Financial Projects for the 1984 Los Angeles Olympics, CBS, Inc., and Coopers & Lybrand. She attended the University of Michigan and Wayne State University.
audio piece about the book tour
Lena Dunham is no stranger to controversy. Her HBO series "Girls" (about twentysomethings in Brooklyn) has created quite a stir, due to its risqué content and issues raised about body image and feminism.
Now, Ms. Dunham is about to embark on a book tour, to promote her new book, "Not That Kind of Girl...a Young Woman Tells You What She's Learned," for which she received a $3.5 million advance from Random House. She did not want to do a "boring" tour, going from bookstore to bookstore, doing a reading and signing books. Instead, she has re-invented the book tour, by booking "talent" to provide real entertainment at each scheduled stop. She also is selling tickets to these events--at $38 apiece, which includes a signed copy of the ($28) hardcover.
About 600 wanna-be performers for this new kind of tour sent Lena Dunham videos of their acts over the summer (many of which are posted to YouTube). Ms. Dunham had good things to say about all but three of the submissions, but narrowed her selection to seven "lucky" acts. However, Ms. Dunham ran into some bad cyber-press when it became known that she did not intend to pay any of the performers. She has since reconsidered and she will be paying these artists.
Sources: "Turning a Book Tour Into a Literary Circus (and a Hot Ticket)," by Alexandra Alter, the New York Times, September 28, 2014. and other sources linked above.
When it comes to internet-based businesses, things can change quickly. At the beginning of 2014, John Donahoe, eBay President and CEO, told analysts that, "the best way to drive long-term shareholder value is to keep eBay and PayPal together."
But this week, he's saying the opposite. Now the board of eBay thinks that both entities will do better if PayPal is spun off into its open IPO, within the next year.
What changed? It might not have been a business reason--it might have been due to pressure from "activist shareholders like Carl Icahn." Icahn believes that there is a conflict of interest between the two companies that is hampering PayPal.
We'll see what happens.
Sources: "eBay and PayPal Split," by Nancy Marshall-Genser, Marketplace, American Public Media, September 30, 2014.also, the Carl Icahn links above.
"CalPERS," the California Public Employees' Retirement System, is the one of the largest public pension funds in the United States. This means that it is a world-class institutional investor. When it makes at move in the market, it is going to be noticed. And as of September 15, 2014, CalPERS decided that it would sell off its $4.5 billion in hedge funds investments.
The reason given was "to reduce complexity and costs." Hedge funds traditionally have high fees--so that would explain the "cost" reason. But conventional wisdom would suggest that the largest pension fund in the US would have the brain power to understand the complexities of the most sophisticated of investments.
Nevertheless, there is a fundamental difference between investing in a company that is producing a product at a profit...and investing in s hedge fund, which is placing bets on movement of various markets to reduce overall risk...but which has no actual value as a product on its own--only as an instrument betting against other bets as to how the markets will move.
The move is a conservative move--to an investment portfolio with demonstrated real earnings. Hedge funds actually invest in strategies that contradict each other, so that the portfolio overall will always be "winning" somewhere...even if they are likely to be "losing" somewhere else.
Source: "Hedge funds lose Calpers, and more," by James B. Stewart, New York Times, September 26, 2014.
image from http://wineguyworld.blogspot.com/2011/09/fresh-corn-pancetta-risotto-tis-season.html
Lots and lots of corn was grown last year and this year. Record-breaking amounts. This is partly a good thing, since corn has more uses than ever:
But there could be too much of a good thing. When there is a lot of supply, prices fall. This past year they have fallen more than 20 percent. And there are storage and shipping costs for the surplus...
So, farmers' profits are getting squeezed, since their other costs--for land, fertilizer, water and utilities--are either rising or staying the same.
This has a trickle effect...since they have no money to invest in more farm equipment...which means fewer workers are needed in factories that make that equipment. So, it is ironic that a surplus can have the effect of causing a loss.
Source: "How too much corn spells trouble far beyond the fields," by Paddy Hirsch, Marketplace Whiteboard, American Public Media, August 6, 2014.
For Discussion: In what other arenas can an abundance create problems?
As employees in the United States, we are automatically "calendar year" cash-basis taxpayers. This means that we are taxed on our cash receipts as employees between January 1 and December 31 of any given year.
But if we form a small business, or if we are part of a larger corporation--any business entity--we are allowed to pick a "tax year" or "business year" that does not line up with the calendar. The formal name for this is a "fiscal year." In the video above, the lecturer suggests that retailers might pick a July 1, 2014 to June 30, 2015 year, for example, because they would want the business activity for a single season (assuming the December holiday season is their big season) to be in one accounting period, rather than being split in two.
In my experience, however, retailers often pick a different fiscal year--one that starts on February 1, 2014 and ends on January 31, 2014. This accomplishes the same goal--all holiday sales are part of one accounting year, and the January "after holiday" sales can bring inventories down to the lowest level of the year as well. Because an annual physical inventory is required for every business that is publicly audited, having inventories at a low level can make this process of counting everything be a little more economical.
Many state and local government entities have a fiscal year end of June 30. Another common fiscal year end is September 30. If it makes business sense to not follow the calendar year, the IRS allows flexibility in establishing a fiscal year, but a business must usually get permission from the IRS to change their fiscal year end.
Source: "Calendar or Fiscal? Which Tax Year is Right for your Small Business?" by Caron Beesley, Sba.gov The Small Business Administration, January 7, 2013
Ethics Quiz from CNN
Deep into the video linked above are 5 basic guidelines, which work in all arenas, not just work:
Source: "Ethics Quiz," CNN, linked above.For Discussion: Comment on this brief quiz with respect to its value in practice.
New Climate Economy Report
The Global Commission on the Economy and Climate has just issued a report that flies in the face of "conventional wisdom": Efforts to reverse the effects of climate change by reducing the use of carbon fuels are not as costly as some observers have suggested. New economic models have shown that predicted costs have not been offset in other studies by costs which would be incurred to maintain current practices. This new study finds that technological advances have made the changes to solar, wind and other renewable energy sources cost effective.
Just to put things in perspective on a personal level...since my household installed solar panels, we have generated 50,000 kilowatts of electricity, while we have used about 58,000. We only had to pay for 13.7% of what we used. And some of those watts have gone into powering my Chevy Volt on electric power (since I almost never drive beyond the 40 mile electric radius). I pay nothing for gas per month, where I used to spend $150-$200. We have already saved enough in electric costs to equal our investment in solar paneling...and the Volt is already costing less per month than a similar car would cost. So my personal experience is that lessening my carbon footprint is also saving me money. What is your experience?
Sources: "Fixing Climate Change May Add No Costs,Report Says," by Justin Gillis, the New York Times, September 14, 2014.
2 hour version, presented at the United Nations, of New Climate Economy Report
written summary version of the report
Food. We all need it. And we've also read and heard about ways in which some of our food today may not be as nutritious--or even as safe--as food 50 years ago was.
One option for food buyers is to have a more personal relationship with food growers and sellers. Good Eggs is a company that attempts to create a food distribution network that enhances the interconnectedness of the food producers and the food consumers. The internet facilitates this. But the development of relationships is also a major factor.
Rob Spiro, the CEO of Good Eggs, is formerly the CEO of Aardvark, so has street cred both as a food consumer and as a information technology start up guru. A part of Rob's philosophy can be summed up in this way:
"There is no doubt in my mind that the issue of our planet's health and our own health are now very important to people all over, it's not a blue-state, red-state thing."
Sources: "Good Eggs is scrambling to deliver fresh food," by Marco della Cava, USA Today, September 14, 2014."Good Eggs" the website for the Los Angeles Market."Good Eggs: Food Produced with Integrity" YouTube, September 9, 2014.
Apple's new iPhone 6 Plus--though not even available until this Friday, September 19th--is sold out according to Monday's USA Today. There will still be models available for those who stand in lines at retailers on Friday, and Verizon has some iPhone 6's available...but the 6 Plus version is sold out.
Go figure. Yes--these phones are larger (the Plus is much larger...but not as unwieldy as a Samsung). But--really--how much more do they do?
Regardless of the production issues and cost/benefit of the new models, it is interesting to note some of the marketing decisions related to these phones. For example, Chine, Russia, Spain, Italy and New Zealand are all countries that will not have ANY iPhones available this Friday. They have been totally excluded...at least until September 26th.
Source: "Dial down impatience for iPhone 6 (print) and The iPhone 6 Plus is the Must Have iPhone," by Jefferson Graham, USA Today Money, September 13, 15 (print), 2014.
Jack Ma speaking in Tokyo on July 15, 2014. Photo by Yoshikazu Tsuno AFP/Getty Images
Alibaba looks as though it is going to be the biggest IPO (Initial Public Offering) yet. Here are the largest IPOs on record:
But being big does not mean it is a sure thing for an investor. To buy or not to buy--that is the question...With over 60% of the IPO proceeds going to insiders--and only 40% going to investment in expanding the company, it is a big risk for investors.
Source: "Alibaba IPO: Jack Ma's scrappy start-up takes on U.S.," by Jessica Guynn and Calum MacLeod, USA Today, September 14 & 15, 2014.
image from the website linked below.
WinCo Foods is an Idaho-based grocery store chain that has earned the reputation as “Walmart’s worst nightmare.” Some of the principles that guide the production and operations of WinCo include:
According to grocery store expert Burt Flickinger III, WinCo is “arguably … the best retailer in the western U.S.” Observers may debate that viewpoint, but Winco does serve as an example that it is possible to pay grocery workers decent wages.
Sources: "A win-Winco situation: Grocery chain treats employees well and has low prices," by Claire Thompson, the Grist.org, August 14, 2013. "Trumping Walmart: Win Co Foods shows how to keep employees AND customers happy," by Lorraine Devon Wilke, addictinginfo.org, August 10, 2013.For Discussion:
He has a good point. Some people are afraid of sales, but good salespersonship is a major factor in all business success--even if it is selling yourself to your bosses as a factor in office politics.
I am not suggesting that you go for his (supposedly) free video, but it is great for a business student to analyze the sales techniques Mr. Halpern is actually modelling as he makes his sales pitch. Source: "How To Sell Anything Without Being Salesy," by Derek Halpern, via YouTube, September 2014.
I ran across this Small Business Quiz posted in a blog called Just Thought You Should Know . Bearing in mind that a small business is defined broadly as “a company with 500 or fewer employees," see how you do. Answers are at the bottom of the page:
1. Small businesses outnumber corporations approximately ____ to ____. a. 110 to 1 b. 550 to 1 c. 950 to 1 d. 1150 to 12. According to the Small Business Administration (SBA) minorities own ____ firms in the U.S. and generate $700 billion a year in revenue. a. 4.1 million b. 2 million c. 1 million d. ½ million3. Small businesses employ ____% of the country’s private workforce. a. 25% b. 36%% c. 57%% d. 62%4. Small businesses create ____ more patents per employee than large patenting companies. a. 5 times b. 7 times c. 10 times d. 13 times5. ____ to ____% of all new jobs come from small businesses. a. 80 to 90% b. 60 to 80% c. 40-60% d. 20 to 40%6. Of the more than 27 million businesses in the United States ___% have fewer than 500 employees. a. 99% b. 89% c. 79% d. 69%7. In fact, according to the SBA, ____% of US business have fewer than 20 employees. a. 69% b. 79% c. 89% d. 99%8. As of 2013, women owned ____% of all privately held business firms in the U.S. a. 20 b. 30 c. 40 d. 509. The state with the largest percentage of female owned business is ____ and the state with the smallest percentage is ____. a. New York/Texas b. Illinois/Georgia c. California/Alaska d. Florida/Ohio10. ____ of small businesses are owned and operated by a single person. a. 70% b. 60% c. 50% d. 40%Sources: "Small Biz Quiz," Just Thought You Should Know, July 10, 2014. Aimee Groth and Kim Bhasin, “18 Amazing Facts about Small Businesses in America,” businessinsider.com, August 24, 2011. “Fast Facts about (and for) Female Entrepreneurs in 2014,” Do More Business, dbsquaredinc.com, January 24, 2014. “Minority Business Enterprise,” wikipedia.org, 7/10/14.“Statistics about Business Size (including Small Business) from the U.S. Census Bureau, census.gov, 7/10/14.For Discussion: Here are the answers; review them against your own and check out some of the sources listed above:1) d 2) a 3) c 4) d 5) d 6. a 7) c 8) b 9) c 10) aWhat are the implications of these realities?
As the U.S. population ages, and as income inequality becomes more disparate, the management of emergency health care in urban hospitals will become more challenging. The documentary Code Black is an inside look at how County USC's emergency medicine department actually operates. County USC provides medical care to approximately 3 million uninsured Los Angeleans.
The interview linked above (as well as the film) provides several insights into the business of emergency medicine.
Sources: "CODE BLACK Documentary With Trailer and Dir. Ryan McGarry," an interview with the MD director, Lip Service via YouTube, June 17, 2014.Code Black movie trailer
RSA Animate via YouTube
If "time is money," then our relationship with time is an important factor in business. Philip Zimbardo frames the discussion about human differences in terms of our primary orientations to time over a couple of parameters. First, he describes six different "time zones" for framing experience -- two ways that are oriented to the past, two to the present, and two ways that are future oriented.
Experiencing time in terms of pacing can also be very different from one person to another. Time duration, in terms of life being fast-paced or slow-paced, can be influenced by culture or geography as well.
Generational differences also exist, and can create management challenges in the workplace. Awareness of one's own predispositions as well as knowledge about how other peoples' experience may be different can help managers be more effective.
Source: "The Secret Power of Time," by Philip Zimbardo via RSA Animate, YouTube, May 24, 2010.Extended lecture
image from Uber's blog
Uber and Lyft are transportation services that provide rides in private cars for a fee. Connections between driver and rider are made through an app. At first, many drivers and riders assumed that these services would be operating outside of the kind of regulations that exist for regular taxicab drivers.Recent traffic accidents, however--including a fatality--have brought legislative attention to the insurance situation regarding Uber and Lyft. When these services first started up, most drivers were not insured to use their vehicles as fee-for-hire taxis. Insurance companies exclude this use from private, personal auto insurance policies. Some drivers may have rationalized that they would lie if they were ever in an accident. They may have even thought that Uber or Lyft expected them to do this, since neither company required drivers to show evidence of special coverage. (Uber denies they ever encouraged drivers to lie...and Lyft did not return the inquiry on this matter to the author of the NYT article.)
The situation has evolved, and the graphic above illustrates the insurance situation as it properly exists now. I wonder if Airbnb and other casual hotel-like services will soon be as clearly compliant with regulations as Uber is becoming.
Source: "The question of coverage for ride service drivers," by Ron Lieber, the New York Times, September 5, 2014.
Image from article linked below
The Chinese building company Landsea is planning to invest $1 billion to build developments in Simi Valley, in Dublin, CA (near San Francisco) and in Manhattan. The housing market in China has been building 12,000 homes per year, but show signs of "cooling off," so Landsea is expanding globally to the U.S. They anticipate selling about 30% of their units to Chinese buyers, and the remaining 70% of the units to American buyers. Landsea says it plans to expand its U.S. real estate investment in the future.
This is part of a wave of Chinese investment in U.S. real estate; the Rhodium Group recently reported that Chinese investments from April to June of 2014 totaled $400 million.
Source: "Chinese builder Landsea to invest $1 billion in U.S. housing market," by Tim Logan, Los Angeles Times, September 4, 2014.
For Discussion: Should the U.S. limit foreign investment in U.S. land? Why or why not?
The recent data breach that allowed private celebrity photos on iCloud to be downloaded by hackers is a giant heads up regarding security related to cloud storage. Businesses (particularly businesses with private client data) as well as individuals are vulnerable.
Of even more concern to many of us, health records will all soon be housed in the cloud--posted by health care providers and us as individuals (via Apple's Health Kit app and other programs). Do we want this data in the hands of strangers?
The problem is, the password that we use to access that health information is the most vulnerable link in the security chain. Expert observers of the recent photo breach surmise that it was not really a generalized hack, but rather unsophisticated passwords that were guessed and connected to Apple ID email accounts.
This news, coupled with the story about the Russian hackers' claim to have gotten access to 1.2 billion usernames and passwords, MIGHT suggest that it is time to take internet password hygiene seriously.
Source: "In the cloud, you are the weakest link," by Paddy Hirsch, Marketplace; American Public Media, September 4, 2014.
"Russian hackers claim to have 1.2 billion usernames and passwords," by The Verge, via YouTube, August 6, 2014.
image from iStock Photo via the article linked below
Is the t-shirt with the label "Made in the USA" really made in America? What about the lamp that was assembled in the USA from parts manufactured partly in the USA and partly in China? What qualifies for the label?
As it turns out, the rules are very strict. According to Julia Ensor, a Federal Trade Commission attorney, “If a marketer wants to make an unqualified ‘Made in the USA’ or other U.S. origin claim, the marketer needs to have substantiation that product was all or virtually all made in the USA."The document listing all of the parameters of the standard is linked here: 37-page FTC document. And, by the way, the lamp would NOT be allowed to label itself an unqualified "Made in USA" product.
I guess the following label is trying to stretch the limits of "full disclosure":
image from Wikipedia
Source: "What, exactly, does 'Made in the USA' mean?" by Adriene Hill, Marketplace, American Public Media, September 1, 2014--Labor Day.
For Discussion: Is it important to you to buy American-made products? Why or why not?
Last year, New York City fast food workers went on strike to get a $15 pay rate and the right to join a union. It was disruptive, but it was short lived and only marginally successful. The big chain fast food restaurants, such as McDonald's and KFC, were not moved to change their policies.
Organizers are planning another event for this Thursday, September 4, 2014. In addition to fast food workers, home health-care workers are also asked to join what is being called a "protest." This will involve work stoppages at fast food restaurants in more than 100 cities and sit-in demonstrations in more than in more than a dozen cities. At a July convention, 1,300 fast food workers voted to stage this action, and participants say that they are willing to face being arrested. They appear to be modeling their current protests on the protests of the civil rights movement.
The Service Employees International Union (SEIU) has spent millions of dollars in support of this effort. The SEIU usually represents janitors and home health-care workers, but in addition to the financial support, they are encouraging their members in Atlanta, Boston, Chicago, Cleveland, Detroit and Seattle to participate in the non-violent protests.Fast-food operators and the parent companies say that they cannot afford higher wages and dismiss the need for unions. They also say that one-day strikes where only a few workers participate don't really hurt their businesses. Some SEIU members complain about their union's support of the fast food workers, but union leaders tell them that higher wages for fast food workers will mean higher wages for everyone over time. "A rising tide lifts all boats."
Source: "Fast-Food Workers Seeking $15 Wage Are Planning Civil Disobedience," by Steven Greenhouse, New York Times, September 1, 2014.