• Making employees' personal salaries known company-wide


      from the Australian and British broadcasting systems (channel 4)   

    Episode 550 of Planet Money, "When Salaries Aren't Secret," expands on the human resource experiment that was documented in a British reality television show. The company in question, Pimlico Plumbers, decided to make previously private salary amounts for individuals transparently available within the company.  Disparities became a apparent--in one case a difference of £10,000 per year existed between two individuals working in the garage. Listen to the podcast to see how Pimlico resolved this and other issues that arose. 

    The Planet Money podcast also interviews top management at a real-life New York tech start-up that tried a similar experiment. The difference for them was that they tried it from day one, so they avoided some of the problems that arose at Pimlico. At the tech start-up, everyone who got hired knew what everyone else in the company was making. Although some problems did arise, several positives became apparent:

    • The hiring phenomenon of "asymmetrical information" is avoided--where the Human Resources department has access to a lot more information than the job applicant. HR knows how much everyone is making, and the applicant does not know where he or she stands in terms of salary placement and is hampered in negotiations.
    • Individuals with low self-esteem, or less-than-stellar negotiating skills do not end up being underpaid--especially when compared to aggressive self-promoters with great negotiating skills.
    • They avoided any situation where a woman or any under-represented or often-discriminated-against group member might be making a lower salary than others. If everyone can see the salaries, unfair (and illegal) discrepancies will become obvious to everyone. 
    • Transparency builds trust. 

    Source: "When Salaries Aren't Secret," by Lisa Pollock and Robert Smith, with David Kestenbaum, Podcast Episode 550 of Planet Money, National Public Radio, October 21, 2015.

    Follow up

    • Listen to the podcast: What were the many problems that arose at Pimlico Plumbers and how did they solve them? 
    • Listen to the podcast: What difficult conversation arose as a result of the tech start-up's transparency-in-salary policy? What might be the positives and negatives of this difficult conversation occurring?
    • Why are problems regarding transparency in salaries for public employees--which have always been available to any taxpayer who asks--not subject to the same Human Resource issues?  You might have to research this to come up with the most important reason.  
    • What is your initial reaction to the idea of working in a company where you know what everyone makes? Have you ever been in a position where a pay disparity became well-known and caused a problem? Explain and describe. 

        =======================$$$======================

  • Businesses copy bad behavior (just like middle-schoolers)

    A recent study published this year in the Columbia Business School Research Archive has found, to put it simply, that business peers operate much like cliques of middle school students.  If one of them does something wrong...and gets away with it--others will do the same. But if one member of the group does something wrong--and gets found out and punished or investigated--other  peers are less likely to jump on the bandwagon of wrong-doing. 

    The business action under study was "cooking the books" or "massaging the data" by restating prior earnings after-the-fact. To reach their conclusion, the researchers (Simi Kedia, Kevin Koh, and Shivaram Raigopal), studied over 2,000 restatements of earnings from 1997-2008 in order to document what they termed "Contagion in Earnings Management." (By the way, after-the-fact "earnings management" is a euphemism used by accountants to mean "cooking the books".)

    Anyway, there is no reason that businesses should be modeling their behavior on middle school standards. There are real standards for accountants--called Generally Accepted Accounting Principles (GAAP) and a Code of Professional Conduct (AICPA). Since the Sarbanes-Oxley Act (section 302) (SOX), corporate leaders can no longer deny responsibility for the integrity of their financial reporting. They have to sign statements attesting to their responsibility. In the study, researchers noted that these behavior abated for 3 years immediately after the passage of SOX, but the behaviors returned. To make a lasting change, managers at all levels of the business need to have a commitment to integrity, and a grasp of the way accounting principles are applied in their businesses. 

    This is also very important for entrepreneurs (who aren't covered by SOX if their company is not publicly traded). Entrepreneurs often are busy growing their businesses and therefore delegate not only the accounting functions to others, but also the understanding of the financial reporting. 

    "Especially when business is good, it's tempting to assume that your accountant has everything under control. But many accountants focus primarily on filling out quarterly tax returns without really tracking the performance of the underlying business. Most successful business owners understand that if they really want to manage their business, they need to get comfortable with the fundamentals of accounting. 
                    --  International New York Times

    The "bottom line" for business professionals is: Understand what financial statements require. Prepare statements honestly. Do it right the first time. Be ready to face the realities of the actual numbers.

    Source: "Earnings Misstatements Come in Bunches," Study Says, by Gretchen Mortensen, New York Times, October 23, 2015.

    "Accounting: International New York Times," by editorial staff, NYT, October 20, 2015.

    Follow up:

    • Do you agree or disagree with the quote above from the International New York Times? Why or why not?
    • Do you agree or disagree with the conclusions of the study about financial reporting among business peer groups--that enforcement and punishment make other businesses less likely to make the same mistakes?  Support your answer.

        ____________________________________________________

  • Needed: Preschool skills--sharing and negotiating


      Negotiating a work: Deborah Kohl at "Talks at Google" on YouTube

    Some of you might remember a book called, "All I Really Need To Know I Learned In Kindergarten." This book took the early set of social skills that comprised the core of the old-school kindergarten curriculum, and related them to skills for success as an adult. For example (parentheticals translate the concept to business):

    • share everything
    • play fair
    • don't hit people (this could mean verbally and emotionally as well as physically)
    • put things away
    • clean up your own messes
    • don't take what isn't yours
    • wash your hands before you eat (metaphorically, when you engage in any interaction)
    • don't take what isn't yours
    • say you are sorry when you have messed up
    • warm cookies and cold milk are good for you (i.e. comfort and safety are important)
    • live a balanced life: learn and think..but also paint, sing, dance and play every day
    • nap (take time off) regularly
    • when you go "outside", watch out for each other, hold hands and stick together
    • be aware of wonder: we don't always know why wonderful things happen
    • goldfish, hamsters, plants, chicks...(and people)...die. (or leave, in business situations) Fact of life. 
    • one of the first words to learn to read is "LOOK." That never gets old.

    These principles were updated in a recent NYT article. Since so many jobs have been automated, the importance of having the soft skills that allow an employee to adapt to business situations is important. A machine doesn't have social skills. Check out this chart, which basically shows where the demand for jobs has changed, relative to both social skills and math skills.  The number of jobs in fields that require fewer social skills have declined over the last 30 years (the chart also shows that some math skill jobs have increased and others have decreased): 

    Regardless of where we are employed, we can increase our value by reminding ourselves of the social skills which adults have been trying to instill in children so that they will be more successful and happy adults. 

    Source: "Why What You Learned In PreSchool is Crucial at Work," by Claire Cain Miller, New York Times: The Upshot, October 16, 2015.

    Follow up:  

    • What social skills are part of your personal toolbox?  What social skills do you appreciate in others at school or at work?
    • What business interactions have you experienced that were difficult or annoying? What skills did you bring (or not bring) to the table in those interactions? What would you do differently?
    • Do you see the career you want on the chart above? What are your thoughts about where it appears, vis-a-vis your goals and aspirations?

        _____________________________________________________________

  • Fire Chief: Head of a powerful firefighters' union


      Video of a rally in Michigan by local videographer Bonnie Bucqueroux via YouTube

    For the last 20 years, the power of unions has been declining--so much so that the idea of worker's rights, pensions, and employment security are deemed to be a "bad thing"--even by those in the economic classes for whom union membership used to mean the difference between living at the poverty line or living a middle-class life. Scott Walker, the governor of Wisconsin and presidential hopeful, championed legislation that severely limited unions' rights to collective bargaining and to run a "closed shop"--that is require that all workers who benefit from the union's negotiations be required to pay dues. He demolished public worker rights in 2011, and followed up in 2012 with similar legislation stripping rights from private company workers.

    Nevertheless, the International Association of Fire Fighters Union (IAFF) has had increased success over that period. Its 300,000 members (compared to 1.4 million Teamsters, for example)--comprised of fire-firefighers in far-flung municipalities--have remarkable strength in terms of negotiating salaries, pensions, health care and other working-conditions benefits. Moreover, fire-fighters have a great public persona. People respect them. Stripping them of their benefits is not something you hear being championed in political debates. 

    How do these great outcomes occur? Is the "CEO" of this union responsible--Harold A. Schaitberger?  Maybe.

    On one hand, he has been effective in establishing "clout" for the IAFF:

    • Started a political action committee (PAC) called Firepac that is now worth $18 million
    • Has friends (Joe Biden) and connections (Jeb Bush, Hillary Clinton) in high places 
    • Has improved the public perception of fire-fighters over his 15-year tenure

    On the other hand, he has attracted criticism.  Schaitberger is a mercurial character with charisma, gumption...and big appetites. Some of the union spending that has been channelled his way has included:

    • a $330,000 annual salary
    • travel perks: first-class air fair, $30,000/yr in single hired-car service
    • Lots of big meals. For example, in 2010 he treated a total of 650 people over many meals totaling $110,000.

    These expenditures might seem extravagant by working-class standards, but they pale when compared with corporate perks: private jets, board meetings at resort locations, multi-million dollar executive salaries.  But Schaitberger has had to defend his expenses, which are closer to the executive adage of "You have to spend money to make money" than they are to union leaders of the early 1900's. 

    Still, he certainly hasn't hurt the stakeholders to whom he owes his greatest allegiance--he has improved their lot. He has not put his needs above those of his constituency. Maybe his critics are just trying to undermine him as a way to make a union look bad. 

    Source: "Firefighters' Union Owes Clout to Its Free-Spending Chief," by Noam Scheiber, New York Times, October 17, 2015.

    Follow-up

    • Read the link to the Washington Monthly in the "Scott Walker" highlight above. What exactly were the limitations placed on collective bargaining that Scott Walker was responsible for instituting. Research what the scope of these rights was BEFORE the Walker legislation. Why was this such a setback for unions. Do you agree with Scott Walker's approach? Why or why not? Before you answer, you might also want to watch this YouTube debate about the so-called "Right To Work" laws.  The comments at that link are also thought-provoking. 
    • How does Harold A. Schaitberger's reputation and actions help...and how do they hurt... the image of unions, and the Firefighter's union in particular?  What advice would you give Schaitberger?  What advice would you want to GET from Schaitberger? 

        ==========================================

  • Norway's support for electric car sales


       Norway and the electric car from YouTube

    In Norway, if a resident wants to buy an electric car, they get a substantial subsidy from the government. This subsidy, which has been going on for about a decade, was intended to increase electric vehicle ownership to 50,000 by the year 2017. But it has already exceeded that goal--66,000 all-electric cars are now owned, with another 8000 plug-in electrics with gasoline back-up.

    Norway leads the way in electric-car subsidies, world-wide (amounts are in Euros):


    Data on chart from McKinsey & Company

    Here in the United States, electric vehicle purchases are subsidized by the government, as well. These subsidies, in dollars, include:

    • $7500 tax rebate from the federal government
    • rebates from many states, for example a $2500 rebate in California
    • privileges to ride solo in HOV lanes
    • local municipalities sometimes provide free charging stations or parking meter privileges

    The U.S subsidy program doesn't come close to Norway's commitment to encouraging the purchase of electric vehicles, but it does provide some incentive.

    Source: "Norway is a model for encouraging electric car sales," by David Jolly, New York Times, October 16,  2015.

    Follow up

    • Why would Norway want to subsidize the purchase of electric cars?
    • What would be obstacles to this kind of program in the United States? What are your thoughts about the pros and cons?

        ===========================================

  • Uber has plans to raise $1 billion more in private funding

    Uber is already a "Unicorn"--and has the highest market evaluation among tech companies.  Plus, earlier this year it raised over $1.5 billion and expanded its operations in Asia. Venture capitalists seem eager to invest in this fast growing company. The plans for rapid expansion and the need for additional money have some analysts wondering why Uber does not bypass the venture capitalists and take the company public with their own Initial Public Offering (IPO).

    That would mean that the stock could be traded on a public exchange. But with a public offering, a company's managers lose control over their investors. Any stockholder in a public company can sell their stock to any other entity on a public exchange. There could be hostile takeover bids--if another entity is willing to pay a higher price to buy up the stock...this increase in price would not go to the company owners, it would go to the stockholders who bought the stock earlier.

    The stock market has not been very favorable to IPOs recently, either. Besides, CEO Travis Kalanick does not seem to feel ready for that financial move. Recently, at the WSJDLive Conference in Laguna Beach, CA, he said:

    "We’re like eighth graders. We’re in junior high and someone is telling us that we need to go to the prom, and it’s just a little early. Let us get into high school before we start talking about these sorts of things." 

    Meanwhile, the venture capitalists who are willing to sink money into Uber's expansion plans include:

    Source: "Uber said to plan another 1 billion in fund raising," by Leslie Picker and Mike Isaac,  New York Times, October 23, 2015. 

    Follow up

    • What is the difference between private equity fund raising and an IPO? Compare and contract the advantages and disadvantages for a growing company.
    • What ventures are on the horizon for Uber? Which ones to you think fit best with its vision and market niche? Why?
    • What does the term "unicorn" means when it is applied to tech start-ups? What are other business meanings of the term "unicorn"?

        ===========================================

  • Financial literacy as a high school requirement

    Only five states require that high school students take a course in financial literacy. This may be good news for college business students, who might feel that their knowledge in this area puts them at the top of the heap in terms of getting a job. But it is not a good sign for the economy as a whole--not to mention the individual young adults who lack a basic understanding about money, banking, and credit.

    Students don't even have the basic financial knowledge to understand the implications (for their whole adult life, in many cases) of signing a student loan.

    Can a high school course in financial literacy help solve this problem? According to a FINRA study, the answer is: NOT REALLY. But what does correlate with adult skills in managing personal finance is the number of math courses and the level of math proficiency achieved. 

    This is food for thought as for all of us as we plan make our life-long-learning educational plans.

    Source: "Only five states require high school students to take a class about money," by Jillian Berman, Marketwatch, October 20, 2015. 

    Follow up

    • Did you take a financial literacy course in high school? Even though it may not be a requirement in your state, it may have been an offered class--or it may have even been a requirement for graduation in your school district. 
    • What is your highest level of math? Do feel as though you have competent math skills?
    • What does financial literacy mean? Do you feel as though you are financial literate? If not, in what areas do you feel deficient? What are you planning to do about it?

        ____________________________________________________________

  • Gourmet rice in the global market

    For more than a century, a central product in the economy of Mauritius was sugar. But now that China, Pakistan, and Brazil dominate the global sugar market, Mauritius is turning to tourism and high-end agricultural products--including rice. 

    But rice is not usually a high-end product. It is grown in many places in the world--even by the poor in third world countries. But Mauritius has a special rice that it is branding as a gourmet rice. It is called "Mighty Rice" (the name is trademarked) and it is marketed to health-conscious and upscale consumers in Europe and North America. What (supposedly) makes it special is the volcanic soil in which it is grown, and rain-fed streams that irrigate it. It also has a high yield per acre compared to other crops. This makes the cost/benefit of growing this product attractive. 

    "Mighty Rice" retails in California for $4.99 per 15 ounces. In contrast, the rice at my local co-op goes for 65 cents a pound (16 ounces). Hmmm. 

    Source:  "In Mauritius, gourmet rice points to a brighter future," by Christopher F. Schuetze, New York Times, October 16, 2015.

    Follow up:

    • Do you think this might be another example of "greenwashing" described in a very recent post? Why or why not?
    • What would you pay for rice, if you consume rice? Are there any other "healthy" products for which you are willing to pay a premium? Why or why not?
    • Where is Mauritius, anyway?  What is its history, vis-a-vis its economy and connections with European countries and markets?

        ______________________________________________________________________

  • Greenwashing: Misrepresenting "green"


     video from CBC News via YouTube

    A recent series of news stories has focused on the cheating that Volkswagen engineers did to misrepresent their emissions results. This is an example of "greenwashing" or branding your product as sustainable and "green" when it does not actual help the environment or meet and sustainability standard.

    There are YouTube videos about this phenomenon from 7 years ago. According to the NYT article linked below, it appears that this trend is accelerating as sustainability becomes more important to consumers.The NYT also cited a research study form 2010:

    "TerraChoice, a consulting firm that studied the phenomenon, reported that 95 percent of the products marketed as eco-friendly had committed at least one of what it called the “seven sins” of greenwashing. Those sins include relatively benign offenses like using weak data to more deliberate deceptions like inventing bogus certifications."

    The Federal Trade Commission issued guidelines for companies to set a benchmark for whether a product was "green" or not. These guidelines have been ignored by many companies. Some of the companies that have made false claims include:

    • LuluLemon
    • LG
    • Samsung
    • Kimberly-Clark (class action suit filed)

    To help companies even more to identify problematic practices, Mark Spaulding has promulgated "The Seven Deadly Sins of Greenwashing." Nevertheless, it seems as though many companies will say anything to market its products.

    Is there any way that consumers can be protected from these false claims?

    Follow up:  Research other "greenwashing" situations. List and describe each violation. Then, comment on your perceptions of each of the products, and whether the "greenwashing label is fair. 

  • Gaining by losing: Weight Watchers helps Oprah make $70 million in one day.

     


       Weight Watchers/Oprah story on CNN via YouTube

    Earlier this week, Oprah Winfrey announced that she was buying a 10% share in Weight Watchers. The stock price doubled to $13.92/share within a day--meaning that Oprah's investment jumped $70 million in value. She bought 6.4 million shares along with stock options to buy 3.5 million more.  

    USA Today noted:

    "The massive jump is a tangible sign of the weight Winfrey still carries with investors and consumers."

    A 10% share of a company seems like a lot, but it is not enough to be considered by accountants to be a "significant influence" percentage--which requires ownership of  20% or more. And it is not even close to the largest shareholder in Weight Watchers

    At any rate, the Price/Earnings ratio for the stock changed in just one day. Weight Watchers has been in an earnings slump, but the price of the stock is way up, pushing this important analysis ratio higher. By the way, the price was even higher 3 days later...

    Source: "Oprah makes $70M in one day from Weight Watchers deal" by Matt Krantz , USA Today, October 19, 2015.

    Follow up:

    • Read the article. What entity owns much more stock in Weight Watchers than Oprah does? How much does it own? Is this a "significant influence" ownership position or a "controlling interest"? 
    • What difference does the percentage ownership make between those two levels? (do some internet research)
    • What are investors betting on when they buy a stock with a high P/E ratio?

        _______________________________________________________________

  • Nathan Fielder: Business consultant for you

    Warning: this video is a Comedy Central show... 


      Nathan for You on YouTube: Souvenir Shop


    Many small business owners are in need of the advice of a business consultant, but often cannot afford it.  Comedy Central is now airing a show, "Nathan For You," which mines the comic side of this dilemma. 

    Real business problems are solved on this show using absurd solutions. The show is partly a reality show, but partly a parody--a "docu-reality comedy." It does make fun of consultants--even from the basic premise. Nathan Fielder's character is a graduate of a Canadian business school who is devoting his life to helping small business owners. The product development and marketing plans do not seem to make sense at the beginning, but in the scope of the comic show, whatever Nathan implements tends to work out. Real business owners are involved, but the business advice is given a comic twist. 

    Some of the topics that the semi-fictional Nathan has addressed on his show include:

    • An interview at a law firm, by way of a seven year old boy
    • "Dumb" Starbucks and a real pop-up store in Los Angeles
    • A liquor store that needs to increase sales (and Nathan recommends selling to minors in an unusual way)
    • Pizza delivery in 8 minutes or less
    • A Frozen Yogurt store that needs a new product (could be offensive to some viewers)
    • A gas station that wants to charge less than $2 per gallon and still being successful

    Nathan's relationships with these small businesses actually highlight real problems. But because the situations are laced with humor, the solutions are accessible to a wider audience.  

    If you want to see excerpts from any of the shows above and more, just log onto YouTube and search for "Comedy Central Nathan For You".

    Sources: "'Nathan for you' on Comedy Central mixes absurdity and economics," by Neil Genzlinger,  New York Times, October 13, 2015.

    ...and several YouTube videos

    Follow up:

    • Watch some of the videos above or others (the interview with the 7 year old is G-rated, if that is an issue for you). Comment on the product development, sales strategies, or marketing results.
    • Comment on the reaction of the public to the Dumb Starbucks pop-up. First describe what a pop-up is. How would you have reacted if you had seen this store?
  • Why women are under-represented in tech industries


        from the U.S Bureau of Labor Statistics

    Women are under-represented in tech industries. Part of this discrepancy is related to college majors, but part of it is related to peer-to-peer interactions that recently have been the subject of specific research. Recent studies have shown that women are more likely to take a science class where the department is decorated with nature posters, rather than sporting a Star Wars motif.  At the risk of giving credence to gender stereotypes, here is a quote from the article about the research done by college professor Sapna Cheryan: 

    "In another experiment, Cheryan and her colleagues arranged for female undergraduates to talk to an actor pretending to be a computer science major. If the actor wore a T-shirt that said “I code therefore I am” and claimed to enjoy video games, the students expressed less interest in studying computer science than if the actor wore a solid shirt and claimed to enjoy hanging out with friends — even if the T-shirt-clad actor was another woman. 

    Such superficial stereotypes might seem laughably outdated. And yet, studies show that the public’s image of a scientist hasn’t changed since the 1950s. And such stereotypes do have a basis in reality. Who could fail to notice that only one of the eight people awarded Nobel Prizes in science or medicine last week was a woman?"

    Men interviewed argued that women should not be discouraged by superficialities, and that they should be tough enough to take the science classes anyway. But article author Eileen Pollack Makes poses this situation:

    "I wonder how many young men would choose to major in computer science if they suspected they might need to carry out their coding while sitting in a pink cubicle decorated with posters of “Sex and the City,” with copies of Vogue and Cosmo scattered around the lunchroom. Cheryan’s research shows that young men tend not to major in English for the same reasons women don’t pick computer science: They compare their notions of who they are to their stereotypes of English majors and decide they won’t fit in."

    There may be a multitude of reasons why women with math and science aptitudes do not end up majoring in STEM fields (Science, Technology, Engineering, Math)...or become managers in tech industries. But a person must feel comfortable and safe in an environment to do their best--otherwise their energies can be funneled away from the serious tasks at hand. This is a human resource issue for the foreseeable future. 

     
     
    Image from sunkissedlondon.wordpress.com

    Source: "What Really Keeps Women Out of Tech," by Eileen Pollack, New York Times--Editorial, via the Deccan Herald, October 10, 2015.

    Follow up:

    • How is the tech industry "branded"? What effect does this have on the recruitment of women?
    • Do you think this article makes a good point? Or do you think there are other root causes for the low percentage of women employed by the tech industry? Explain. 

  • Cross-country moving company scams


       Image from article linked below

    Moving companies are important logistics (distribution) service companies that are built on integrity and trust. Any time that businesses or individuals ship valuable goods--be they inventory or long term assets--it is important that the goods not get stolen, lost, or waylaid for extended periods of time. The price that is paid for these shipping services reflects the risks and benefits that the moving or distribution service assumes. If that company is operating legitimately...

    David Segal, the NYT Haggler, investigated situations reported to him of egregious business practices with moving companies. In this instance, he zeroed in on one company, Classic Moving Services. Meanwhile, he uncovered systemic moving-industry fraud and other criminal activity. By the way, Classic Moving Services also has a reputation on Yelp. With the help of sleuth "Masked Reader" Segal found out that Classic Moving Services was connected to several other moving companies. How did the Masked Reader find this trail, which he forwarded to Segal? By Googling one of the Classic Moving Services website promises: "We also feel that consistent communication with our clients is essential to their peace of mind and satisfaction." Some of the related companies and a central individual that turned up in the search included:

    • Uber Movers
    • Yakov Moroz (who is being investigating by the Federal Motor Carrier Safety Administration, which oversees interstate commerce)
    • Plymouth Rock
    • Blueline Van Lines
    • Priority 1
    • Direct Van Lines

    Segal found that other "chameleon" movers exist only for a year or two--all the while exhibiting sub-standard business behaviors. Then they disappear. Because each individual contract is not for millions of dollars, these transactions do not lead to major investigations and prosecutions--even though Senate leaders have recognized the problem and have tried to address them.

    The Haggler did find one way to get to Classic Moving Services--by contacting their only payment conduit, PayPal. After informing PayPal of the criminal investigations, PayPay shut down the payment site. 

    Since the perpetrators may create another "pop-up" moving business, this fix is perhaps only temporary, but it is something. 

    On a personal note, last year I had my daughter's car shipped from Los Angeles to Providence, Rhode Island by an auto-moving company. Both federal interstate commerce laws and their contract indicated that the car would arrive within 10 days. I waited patiently. But when the car did not arrive by the end of this period, I made some calls. Curiously, my contact was with an auto-shipping broker--but my contract was not with the broker, it was with the shipping company. I eventually tracked down the company. I mentioned the words "grand theft auto" in my communication with one of the dispatchers, who located the car in the Deep South after a few days. She also informed me of "mechanical problems" with the shipping vehicle, and estimated the additional delays. After three weeks the situation was resolved, but it serves as another example of sketchy practices in the shipping business. 

    Source: "Connecting the Dots to Catch the Rogue Movers," by David Segal, New York Times--The Haggler, October 10, 2015.

    Follow up:

    • What has been your experience with cross-country movers, if any?
    • Do you think PayPal has an obligation to investigate the sellers for whom it supplies a money conduit? Should PayPal be liable? Give reasons for your position.

        _______________________________________________________________

  • Tax loophole: $25,000 write-off for some Tesla owners


      edited version from the WSJ of Elon Musk's introduction to the Tesla SUV

    It really pays to be a high-income small business owner who has just bought a $100,000 Tesla SUV. First of all, there are the sustainability tax credits for all electric cars. In California, that means a $2500 state rebate. The federal government also provides a $7,500 tax credit. 

    The tax loophole (IRS code section 179) that provides the big bucks was intended to encourage small business owners to buy heavy equipment--for example to make it worthwhile for a contractor to buy a new truck. But the Tesla SUV--contrary to its energy conscious intentions--weighs in at the "heavy equipment" level--over 6,000 pounds. So owners are also eligible for this special tax treatment for their Tesla.

    Ironically, another luxury vehicle that was eligible for this tax treatment was the Hummer--a vehicle with a decidedly different owner demographic. 

    The tax loophole is one example of "corporate welfare," but it can be used by entrepreneur-run S-corporations rather than only by Big Pharma or a huge corporate agribusiness. 

    Source: "Tesla SUV buyers can tap loophole for hefty tax break" by Charles Fleming and Jerry Hirsch, Los Angeles Times via presstime online, October 13, 2015.

    Follow up:

    • What do you think of tax loopholes in general? What about this particular loophole? Explain your answers.
    • Investigate other tax loopholes for corporations. List them, and try to get estimates of the tax reductions in total that they provide for corporations (and therefore are absorbed by other taxpayers).

        _____________________________________________________________

  • From Gilt to Glamsquad: Alexandra Wilkis Wilson talks about entrepreneurship


     Video is available--embedded in the NYT article linked below. It is an 
      interview by COLIN ARCHDEACON and BLAINE NOVAK  

    Alexandra Wilkis Wilson was one of several founders who started the online high-end, membership-only retailing company Gilt in 2007. She has now started a new company, which provides tailor-made beauty services in (so far) New York City, Los Angeles and Miami:  Glamsquad. There, Alexandra Wilkis Wilson is the CEO.

    Gilt was once a trendy website and a thriving company. It had a lot of cache, and much talk (between 2009 and 2012) of a pending IPO (initial public offering, where stock in a previously private corporate is offered to the public). But over the last few years, Gilt has condensed its operating locations down from three to one, and has laid off workers. These actions have been in an effort to consolidate resources, regroup and regrow its business. Meanwhile, in August, 2014, Alexandra Wilkis Wilson left to form her own company, Glamsquad, with a different product focus and a different service and distribution model. 

    Alexandra Wilkis Williams also wrote the book, "By Invitation Only: How We Built Gilt and Changed the Way Millions Shop" with another Gilt founding member, Alexis Maybank. Prior to starting up Gilt, she worked as investment banker and Merrill Lynch, as well as holding executive positions at Bulgari and Louis Vuitton. She has both a BA and an MBA from Harvard, and it seems as though she is putting her education to good use. 

    Source: "Alexandra Wilkis Wilson on the Art of Recovering From a Wrong Note," by Adam Bryant, New York Times-Corner Office, October 8, 2015.

    Follow up:

    • Have you heard of the Gilt Groupe? Describe and comment on its marketing model (see Wikipedia)? Has it worked for you as a customer? What other online clothing, accessory or beauty product URLs do you use, if any?
    • See the movie The Intern if you want a fictionalized parallel to the initial start-up of a company similar to Gilt. Describe the similarities and differences. How is Glamsquad different in terms of its marketing model? 
    • What is the "little secret" from the early days of Gilt? Did it affect the company long term?

        _________________________________________________________

  • Niche streaming services


        some Mubi animation choices

    People who are paying the increasingly high cost of cable services complain that they are paying for programming they have no interest in watching. New products are stepping in to help viewers "cut the cable cord" by offering viewing options that are tailoring to individual preferences. These fall into the marketing category of "niche streaming services"--they only sell you want you want to buy.

    Some of these services include:

    • Feeln: offering "feel good" movies for as little as $1.99 per month
    • Screambox: offering horror movies for $3.99 per month
    • Mubi: "curated" classic, cult and indie movies: $4.99 per month or $34.99/year
    • Fandor: award-winning, hand-picked great cinema: $7.50/month
    • Viki: Singapore-based service that features Asian films: free with ads, or $3.99/month
    • Spuul: Bollywood films: free with ads, or $4.99/mo

    Even those who subscribe to multiple services will probably not end up paying the costs that cable services charge.

    Source: "The rise of niche streaming services," by Adrienne Hill, Marketplace Morning Report, American Public Media, July 10, 2015. 

    Follow up

    • Create a mix of niche services that might appeal to you and price out your total expenditure for customized viewing.
    • What does your local cable service cost? What would you have to pay to get everything you are currently using on that service? What would not be available? This is a good exercise in budgeting and decision-making on a personal level. The process can also be applied to business operations. 
    • What are some other products that are examples of niche marketing?
  • Decision-making, production and car value: VW in Chattanooga, TN


       VW owners file lawsuit

    The scandal involving Volkswagen's (VW's) faking of emissions tests on its diesel engines has focused on the business ethics issue of engineers and top executives. But the brunt of the poor decisions that led to this scandal are being felt in the operations and production divisions of VW--especially those in the fairly new site in Chattanooga, Tennessee, where many of the cars with the deceptively defective emissions systems were built. The state of Tennessee offered many incentives to VW to build the Chattanooga plant. Workers there are concerned about future production and public perception.The state of Tennessee is also a major stakeholder in this scandal, and may implement "clawback" provisions in state law that will ask for money back from the executives who benefitted from this deception. 

    In addition, VW owners are upset, and have filed a lawsuit--also in Tennessee. They assert (rightfully so) that the resale value of their cars has plummeted due to a pervasive decline in the brand image of Volkswagen. Some individuals who have been loyal to the brand for decades suddenly are condemning the brand and have joined the lawsuit. 

    This whole debacle highlights the importance of decision-makers to give credence to factors such as ALL of the stakeholders (including workers and the product-owning public). They also have a fiduciary responsibility to the long-term interests of their stockholders and public benefactors. It seems as though the decisions to fake the emissions tests reflects focusing on short term goals that only made things better for themselves. 

    Sources: "For Chattanooga, Volkswagen emmission [sic] news is local,"  by Blake Farmer, Marketplace, American Public Media, October 9, 2015. 
    YouTube video linked above. 

    Follow up

    • What should the Volkswagen board of directors do, if anything, to address the problems of the car owners and the state of Tennessee that supported the VW plant with incentives? What if production decreases at the Chattanooga plant and workers, too, become the victims of management decision making?
    • How should the VW board deal with the managers at all levels that were involved in the emissions deception? Should "claw-back" provisions be supported? Why or why not?

        ________________________________________________________________________

  • Bad decisions and cognitive bias

    What is an important factor in business success? The ability to make good decisions. Here are some of the things that can get in the way, according to Business Insider:


      chart linked to Business Insider article for easier reading


    In my managerial decision-making units, one of the issues we address are the differences between QUANTITATIVE and QUALITATIVE factors in decision making. The Quantitative Factors have to do with the dollars involved, and the Qualitative Factors have to do with the feelings about the decision. Surprisingly, both areas can be influenced by cognitive bias. 

    When assessing the numbers that should be used in a Quantitative analysis, there is a "garbage in--garbage out" (GIGO) factor. For example, if one is estimating future revenues from an investment, the estimates can be highly conservative (low) or extremely optimistic (high).  The choice can distort the outcome of the number-crunching. Expense estimates can also vary greatly. Sometimes analysts run several "what if" scenarios, with different numbers. This is often euphemistically referred to as "massaging the data." From the biases delineated in the chart, the following biases are common in Quantitative analysis:

    • Anchoring bias
    • Availability heuristic
    • Blind-spot bias
    • Information bias
    • Outcome bias (this is an extremely common one--especially if the analyst knows the boss's preference and wants to please him or her)
    • Pro-innovation bias

    Of course, since Qualitative Analysis is based on feelings, biases of all sorts can influence the decision--actually any and all of the above.

    Sources: "Cognitive biases that affect decisions," by Samantha Lee and Shana Liebowitz, Business Insider, August 28, 2015. 
    "Twenty Cognitive Biases that Could be Helping You Make Bad Decisions,j" by Tom Hale, IFLScience.com, October 8, 2015.

    Follow-up:

    • What decisions have you made today? What are you wearing? What have you eaten? Whom have you called or texted? What money have you spent? Which of these were Quantitative decisions? Which were Qualitative? Which of the biases delineated above influenced your decisions?
    • If you own a car and took part in the decision-making process to buy it, list the Quantitative and Qualitative factors that influenced your decision, as well as your biases in each area.
    • If you have additional interest in this topic, research the contributory articles that were used to come up with the chart above. They are listed at the bottom of the chart.

        _____________________________________________________________________
        _____________________________________________________________________

  • Is the "Black Lives Matter" movement misunderstood--even by well meaning members of the business community?

      J

       Graphic from the New York Times editorial linked below.

    The 28 minute version of the Elizabeth Warren speech on the history of racial injustice and the current problem (shorter tidbit linked below):

    I received some feedback, arising from a previous blog, regarding my assertion that even many liberals do not understand the "black lives matter" movement. I made this statement based on my observations and my personal experience, as well as on research and reading. 

    I am a liberal (white) American, and I have been all my life—lived in co-ops, taught in Detroit public middle schools in the era of cross-district busing, been an activist for liberal issues, given lots of money to liberal causes. And I live in a very liberal community. I consider myself an open-minded person. I've worked in integrated environments for 35 years. I've had African American bosses. I am opposed to racism.  Nevertheless, until I started getting deeply educated about the topic of white privilege as a result of recent events, I STILL DIDN’T GET IT.  I was in denial about white privilege. I was one of those folks (as in the follow up surveys linked below) that thought I had experienced personal hardships. These hurdles, however, pale in comparison to the subtle and overt discrimination that black Americans (and other people of color) think about and experience MANY TIMES A DAY.

    White privilege is experienced as an issue by many (not all) black people who:

    • walk into classrooms in which they are a minority;
    • go into a restaurant (as a minority);
    • experience a job rejection (wondering if it had to do with their race);
    • are rejected for a loan;
    • drive in a white neighborhood, or are followed by a police car; and
    • stifle their language or exuberance in front of white people.

    Those are just a few experiences--and these are ones that that are experienced by middle and upper class black Americans. The institutionalized discrimination of people of color who are poor is worse, regarding:

    • imprisonment,
    • opportunities to achieve,
    • dangerous living environments,
    • police harassment
    • and on and on and on.

     Rather than worrying about these issues, white people (in general...not all white people) just take white privilege for granted--almost never thinking or talking about it.

     I have attached several additional sources at the end of this blog that address this issue (including videos of Chris Rock and Selena Williams, as well as surveys and essays). 

    Anyway, if liberals have a hard time understanding the problem, more conservative members of the business community might also be struggling with the concept.

    Two articles appeared in early September 2015 that took opposing views with respect to the legitimacy and meaningfulness of the "Black Lives Matter" movement. One was an editorial in the New York Times. The other, which followed a few days later, was in the Wall Street Journal.

    The New York Times article supported the movement, but pointed out that it was difficult to grasp. It acknowledged that the leadership was not always likable, and that the message seemed angry and un-compassionate. The main message of the movement has so many subtleties that many establishment people (white) have been inclined to cringe at and disavow the accusation that they have not been aware that their surface stance against racism belies levels of not recognizing the real discrimination that is still taking place.  The arena of focus--life and death actions of police and the realities of inequitable incarcerations--are particularly hard to face.

    The Wall Street Journal attacked the protestors of the movement for capitalizing on police violence. The WSJ asserted that this was a misrepresentation, as the people that were victims of the violence were criminals. The WSJ also asserted that the leaders of the movement were just using emotional arguments for political motives. Note this: Attacking the people who are making an argument, or attacking their way of arguing--without acknowledging the substance of the issue they are trying to raise--is called an ad hominem argument. Educated adults and businesspeople who are aware of discrimination laws should avoid attacking the person making the argument in order to dismiss the argument. One example of a businessperson making this mistake occurred on Bill O'Reilly's show on Fox News, where Donald Trump assessed the "black lives matter" movement in this way: "I think they're trouble. I think they're looking for trouble." Trump's assertions become more extreme after that point (YouTube video linked). This is a good example of an ad hominem argument. 

    Trump's position is just one businessperson's opinion. Whether or not workplace leaders share that opinion, federal laws prevent managers from discrimination. Businesses don't have people of color arrested or beaten up. But the subtle and not-so subtle policies of the business environment may be exacerbating the problems felt by people of color in the USA. Being aware and mindful in every meeting, classroom, elevator ride, restaurant visit, and travel experience, white observers may notice that there are many instances where they have previously been clueless about how people of color may have been struggling. 

    Managers, in particular, might benefit from increasing their awareness of how a person of color might perceive each situation. This could facilitate fair and impartial business environments and transactions, as well as avoid assertions of illegal discrimination. Becoming educated about the subtleties of the "black lives matter" movement and the concept of white privilege is a first step. 

    Sources: "The Truth of 'Black Lives Matter'," by the New York Times editorial board, September 3, 2015.

    "'Black Lives Matter"--But Reality Not So Much,"  by Jason L. Reilly,  The Wall Street Journal, September 8, 2015. 

    "Elizabeth Warren just gave the speech that Black Lives Matter activists have been waiting for," by Wesley Lowery, Washington Post, September 27, 2015.

    Follow up:  First, listen to the entire speech given by Elizabeth Warren, and read the online print articles linked above. Then answer these questions:

    • What is your perspective on the recent events and rhetoric surrounding racism and white privilege? (Be wary of making ad hominem statements).How does your race or ethnicity influence your position, if at all?
    • What is your experience with personal racism? What is your personal experience and understanding of "white privilege"? How are these  concepts different? 
    • Give several situational opportunity examples of how the world is experienced differently by black people in the U.S. and white people.
    • Why is the slogan "All lives matter" viewed as a sign of a lack of understanding of the slogan "Black Lives Matter"?
    • What has changed in terms of racial inequality over the last 40 or 50 years? What is still the same?

    Additional follow up: More articles that explain the nuances of white privilege, as well as some skeptical perspectives:

    • Article from Salon : Liberals have a white privilege problem, too.
    • Article from The American Thinker: White privilege...another liberal distraction
    • Survey: White Americans who deny white privilege...and emphasize their own hardships when arguing that white privilege does not apply to them.
    • Stanford Survey: After being primed to self affirm their luck and status, white Americans less inclined to emphasize their personal hardships.
    • Chris Rock on YouTube: One comment: Most white people--including liberal white people--think that white privilege is not a factor when the workplace is integrated.
    • Serena Williams on YouTube: feeling of being in Africa vis a vis being in white cultures.
    • Tim Wise (cultural observer) on YouTube: Obliviousness of white people (including those who would not consider themselves racist);"The perfect storm for white anxiety"; CNN interview

      _____________________________________________________________________

  • Problems with the Trans Pacific Partnership are emerging


       image source

       linked below as well

    The Trans Pacific Partnership (TPP) agreement was signed by the participating nations last week. It still must be approved by Congress, however. As it becomes closer to becoming a reality, a few problems are coming into public consciousness:

    • How effective will this partnership be if it does not include China?
    • What sense does it make to form a coalition that actively is trying to oppose China's international business?
    • Why is the U.S. supporting yet another policy that will hurt "Mom & Pop" U.S. businesses, to the benefit of global big business?

    As the Congressional vote nears, representatives from both Republican and Democratic ranks are questioning what it really means. From the Republican side:

    • government interference with the free market
    • deep cuts to the manufacturing industry

    From the Democratic side (Global Trade Watch):

    • unions oppose the "export" of jobs it will cause
    • the only reason for this partnership is to help big multinational corporations, particularly Big Pharma--the pharmaceutical industry, which have upward pressure on the cost of drugs for working and retired Americans
    • downward pressure on U.S. wages
    • environmental disregard
    • developed in secret negotiations: public still has not seen all the wording in the document

    Meanwhile, the proponents of the TPP claim that the accord will:

    • Cut down on tariffs that limit inter-company commerce among signing nations
    • U.S. exports are predicted to increase by over $123 billion by 2025.

    The TPP was meant to be a legacy for President Obama...but it may end up being the can of worms that deregulation has become for the legacy of former President Reagan. 

    Sources: "The Trans-Pacific-Partnership explained," by Kevin Granville, New York Times, October 5, 2015.

    "ALERT: TPP Media Blackout" with commentator Robert Weissman of Public Citizen, via Global Trade Watch, October 7, 2015.

    "Trade Deal Puts a U.S. Stamp on Asian Economy," by Don Lee, Los Angeles Times, October 5, 2015.

    Follow up

    • What nations are participating in the TPP? Why were these particular nations involved? (requires internet research)
    • This is primarily a big-business, conservative-supported partnership; why would a left-leaning President support it?
    • What are the dangers of excluding China? Are there any pluses? Do you think the participating countries tried to include China? Why or why not?