• A togetherness meme for the holiday season

          Kohl's 2015 extended family/togetherness ad

    As the autumn season and its "pumpkin spice" meme become less relevant as November ends, the holiday season brings new memes...or at least themes. Kohl's department store is combining an issue already in the Zeitgeist--non-traditional extended families--with a Beatles song: All Together Now

    Marketing decision-makers at Kohl's used only part of the song in order to keep costs down. This should be effective. Robert Goldman, Lewis & Clark sociology professor specializing in advertising in the culture, says:

    "All it requires is having two [musical measures] in your head. And if that holds, from an advertiser's perspective, you've accomplished half the battle."

    Source: "Kohl's invests in Beatles tune for holiday campaign," by Martha C. White, New York Times--Media, November 29, 2015.

    Follow up:

    • Think of some memorable music that you associate with products. Make a list and include a phrase from the lyrics.  Have these been effective in terms of remaining associated with the product?
    • What are the dangers, if any, of using songs from rock groups in advertising?  Do you see any issues with Kohl's selection?


  • Does "Black Friday" need to be regulated?

    Black Friday, 2015, the retail business tradition continues--

      Walmart 2015 indoor riot footage

    This year, Black Friday (the day after Thanksgiving) has generated several business-related protests involving labor relations, public policy, and sales. Walmart workers have protested--and have formed picket lines--demanding to be released from compulsory Thanksgiving day and Black Friday shifts. Also, this year, several retailers have decided to be closed on Thanksgiving day, to buck the trend among competing retailers to expand Black Friday hours to encroach into the national holiday. Some of the retailers closing its doors on Thanksgiving include:

    • Costco
    • Staples
    • TJ Maxx
    • Nordstroms
    • Barnes & Noble
    • Crate & Barrel
    • Neiman Marcus
    • Patagonia

    The issue is now on the table: should there be labor-protection or other regulations regarding this traditional shopping day, including work on Thanksgiving? Ironically, fewer workers on Black Friday might mean more automation of retailing, resulting in fewer jobs, which would harm wage earners. Other objections to regulation of Black Friday stem from the number of employees who have this day off, and are therefore more free to shop than they might be on other days leading up to the winter holiday season.  My personal experience with regulation of shopping days is different. In the 1980's, I worked for a while in Sydney, Australia, where shops were closed every Sunday, on holidays...and every evening except Thursday evenings. This was very different from my U.S. experience at the time, where hours had already expanded.  The result in Sydney, however, was a very festive Thursday evening where "everyone" was on the streets and in the shops.  It also meant that more in-home socializing occurred during the weeknights and on Sunday. However, these limited hours are no longer in force in Australia, and a rollback in open store hours is very unlikely to occur in the United States. 

    On another note, more substantive protests, tied into the Black Friday shopping day, have occurred in Chicago. These protests focus on the police shooting of an innocent teenager, which generated a first-degree murder charge. "Sixteen shots and you can't shop" has been one of the predominate chants. In the long run, these protests may deserve more of our attention, as social unrest and its causes affect the business environment in direct ways. [Additional article in the Wall Street Journal, for those who have access.] 

    Source: "Does the U.S. need to regulate Black Friday?" by Drew Hendricks, Huffington Post, November 27, 2015. 

    Follow up

    • What is the origin of the term "Black Friday"?  What does it mean? Is it an apt name for this day?
    • Does Black Friday boost sales over the entire holiday season? What are the major factors in the level of holiday spending?
    • What do you think about the federal government regulating days and times that stores can be open? Explain your thinking.

                   $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 

  • Sustainability: a challenge for a processed foods conglomerate

        Unilever public relations video about its sustainability efforts

    Unilever produces many processed foods and other household items. In the current business landscape, Unilever is under customer and marketing pressures to ensure that their products are sustainably sourced. Some of their products include:

    • Hellman's mayonnaise (and other Best Foods products)
    • Lipton and PG Tips (tea)
    • Magnum (premium ice cream--certified by the Rainforest Alliance)
    • Ben & Jerry's (premium ice cream)
    • All (detergent)
    • Dove (soaps)

    For such a large producer of food and household products, the sustainability challenges are significant. For example:

    • Defining sustainability is a challenge, both within the corporation and with respect to public expectations. 
    • After a company has reduced its carbon footprint by a certain percentage, additional reductions at the same percentage are impossible to accomplish.
    • Certification of soybeans were non-existent when they started their efforts, and the hurdles to obtain certifications later proved to be difficult but non-substantive, compared to setting high standards themselves, and continually improving them.
    • The Rainforest Alliance, for example, values sustainability issues (for cocoa and vanilla, for example) such as obedience to child labor laws and economic viability, not applicable to U.S. sustainability measures. 

    Hurdles notwithstanding, Unilever's sustainability efforts have increased profits by $430 million since 2008, so there are financial incentives to continue the efforts, as well as ethical incentives.

    Source: "Unilever finds that shrinking its footprint is a giant task," by David Gelles, New York Times, November 21, 2015.

    Follow up

    • Is sustainability a value for you? What actions do you take on a personal level in support of this value, if any? Do you know of any actions taken by your colleagues?
    • Many business are hiring sustainability consultants, or in-house sustainability experts. Other businesses are making sustainability awareness part of managerial responsibilities--for cost-cutting purposes, if not idealism. Are you taking any measures to make sustainability certification a part of your resume? Describe.


  • Big Pharma consolidates to avoid U.S. taxes

       Merger as covered by WTHN News 8

    Pfizer and Allergan announced their merger today (worth somewhere between $150 and $160 billion), forming the largest of the Big Pharma international conglomerates, as measured by Sales dollars. These companies are already big, and have products that appeal to a growing older market--Pfizer makes Viagra; Allergan makes Botox.

    One motivation for this merger, making the merged company Ireland-based, is to avoid U.S. taxes. Some analysts say that this is the result of high U.S. corporate tax rates compared to other countries.  Ireland is a particularly attractive country to "migrate" to, since its tax rate for corporate income is 12%...and only 10% for some manufacturing operations. The "Double Irish Arrangement" means that international income is also not taxed.  The maximum statutory U.S. tax rate is 39.1%, so the U.S. is saving a lot based on income tax alone--in addition to the fact that international income is taxed to a limited extent under U.S. tax laws. This statutory rate can be misleading, however, because it does not include all the deductions that apply to U.S corporations that do not exist in other countries. To outsiders (including stockholders), however, the comparison of the statutory tax rates, without additional analysis, looks favorable and receives support.

    Because most European and other countries have a VAT tax applied to all stages of production as well as higher social services taxes--in addition to its income taxes--actual tax rates for many industrialized nations are higher than U.S. tax rates.  Understanding this, however, requires complex analysis and research--nothing that will fit into a sound bite or a headline. 

    Nevertheless, tax shifting strategies to Ireland are substantive. There has been much political outcry against moving U.S. based companies to Ireland and similar tax havens. Some political leaders are putting pressure on Congress to change the tax laws to make this practice less likely.

    It would, however, be more equitable if the U.S. could get IRELAND to change ITS laws...

    Sources: "Pfizer and Allergan to merge in $160 billion deal," by Chad Bray, New York Times, November 23, 2015.

    "Another big corporation is flagrantly dodging tax. This must be outlawed," by Simon Jenkins, The Guardian, November 24, 2015.

    Follow up:

    • Define "inversions" as linked in the NYT article above. Why are they a benefit to the company(ies) involved? How do these help or hurt the United States?
    • Should corporate payroll taxes and corporate social service benefit payments as well as income taxes be included in the international tax comparisons? Should the rate also be adjusted for income deductions allowed in some countries but not others?  Explain your position.


  • Depressed by a "do nothing" dream job

      Groupon's contest to pay $100,000 to an employee to do nothing:
            Easiest job in the world ?

    For some people, a "do nothing" job might seem ideal:

    • no pressure
    • no overtime: in at 8:30; out at 5:30
    • a no-work lunch hour every day
    • plenty of time to post to FaceBook, text friends or do some shopping during business hours
    • no need to think about work in the evenings or on the weekends.

    However, such a job may not be all it seems. Ted Geltner went from a high-pressure, deadline-dependent job as a newspaper editor to a job where he was supposed to assist businesses in producing in-house publications. When he was hired, he had zero clients, and he had to wait until others lined up companies that could use his help. The salespeople had strict quotas to meet in terms of cold-calling potential clients, or their jobs were on the line (high pressure). But Mr. Geltner's job did not include sales, or even outreach to potential clients.

    He had nothing to do all day. But this proved to be more challenging than one might think, and it led him to spending his time in other ways. Maybe "doing nothing" was not in his skill set. 

    Source: "Bored to Tears by a Do-Nothing Dream Job," by Ted Geltner, New York Times, November 21, 2015.

    Follow up:

    • Watch this YouTube video, Ten Easiest Jobs, before you answer this question: Would you like to have a job where you did nothing?
    • List some of the activities the article author Ted Geltner undertook during work hours. How many days in a row could you spend in a job where you did these tasks?  What is the amount of money or money+benefits that would make it worthwhile? Or not?

                     :-(     :-(     :-(     :-(     :-(     :-(     :-(     :-(     :-(     :-(     :-(     :-(     

  • "The Big Short": analysts' ethical journeys before the bubble burst

        trailer for The Big Short, which aired beginning September, 2015

    Sometimes business history is easier to absorb in a two hour movie than it is to settle in with a book for 14 hours, or research the events on the internet or in a library. 

    The true story, based on the 2010 book by Michael Lewis, of financial analysts and their thought processes just before and during the mortgage financial crisis is depicted in a movie, "The Big Short," which opens in theaters on December 11, 2015. Here is a description from one person who saw the movie:

    "The film's narrative is driven by four cynical, fringe Wall Street entities disgusted with the large banking institutions' overriding greed for profits. They make the decision to capitalize on the ensuing housing market calamity and the financial meltdown of 2008 upon discovering the market frenzy is being driven by worthless collateral debt obligations. McKay (the director) chooses to inject a significant dose of humor in the early scenes to condition the audience receptors for what they are about to experience."

    I had a chance to see this at a special screening, and I highly recommend it. It is gripping and funny, as well as being thought-provoking. The movie stars Brad Pitt, Christian Bale, Ryan Gosling, Finn Wittrock, and Steve Carell--in case you needed another reason to see it.

    Sources: "The Big Short" (the book) by Michael Lewis, discussed in a NYT book review by Michiko Kakutani, March 14, 2010.

    "The Big Short" (movie), directed by Adam McKay, to be in theaters December 11, 2015.

    Follow up:

    • See the movie and give it a review.
    • What ethical dilemma decision points are experienced by each of the main characters? How do they respond to them?
    • What effect on the economy in general did these decisions have? Who ultimately was affected, and in what way?


  • Why would a company "spin off" a division?

       How a spin-off works.

    Many companies sell off revenue-generating divisions, tightening up their operations. Hewlett Packard and Google are examples of two companies that have recently created separate entities by splitting up their corporation. 

    The Marketplace video above describes why this might happen. Paddy Hirsch begins with an analogy that if there is a playground roundabout, spinning fast, someone may jump off.  They may go very far. Or they might fall.

    The video explores the possibilities. 

    Source: "What goes into the decision to create a spin-off," by Paddy Hirsch, Marketplace Whiteboard, American Public Media, October 7, 2015.

    Follow up

    • What may be the positive outcomes of a spin-off?
    • What might the corporation do that can make a spin-off problematic? What might be the negative outcomes of this, for the company and for an investor?
    • Why are Hewlett Packard and Google each separating into two companies?

                         - - - - - - - - - - - - - - - - - - - - - - - - -

  • What is "materiality"?

    Both the Financial Accounting Standards Board (FASB) and the IASB (the international standards-setting board) have recently addressed the issue of 
    materiality in financial statements. Because financial statement auditors do not guarantee that everything on the financial statements is correct, materiality is a major issue. CPAs only express an opinion on whether financial statements, taken as a whole, are fairly presented. This may not be what the average investor or reader of the business section of a newspaper might expect of audited financial statements. 

    Applying materiality means that certain errors--if they are small enough--can be ignored. The problem arises when a significant level of financial activity  is excluded from financial statements just because they are not presented down to the nearest dollar. They are summarized in multiples of a dollar (check out the financial statements of a real publicly-traded company by clicking on the "investor relations" tab to see the annual report, which contains the financial statements, to see an illustration of that). 

    One simple example of materiality application is this. There is an accounting rule that depreciation expenses have to be spread out over the years of use of an asset. This means that if one buys a truck in one year, the company does not count the whole price of the truck in the year purchased, they spread the cost over the useful life of the truck by using depreciation expense. 

    But--a $5.00 wastebasket might last 20 years. The cost/benefit of spreading the costs over the 20 years would tell an accountant that even though it was theoretically "wrong" to show the $5.00 as a expense in the year of the purchase, it doesn't matter much. It is said to be "under the materiality threshold." 

    Anyway, managers sometime manipulate account balances by breaking transactions into dollar amounts that are lower than the auditor's "materiality threshold" for testing transactions for accuracy. For example, if auditors never test any samples below $5,000, a $12,000 transaction might be broken into three $4,000 transactions. These would never be chosen to for such a test, and would be inappropriately "under the radar." 

    Also, the "allowance" accounts, which reduce the value of receivables, for instance, to what can reasonably be expected to be  collectible, are subject to manipulation. So are derivative investment instruments, which are difficult to evaluate, but which may be material with respect to the company's total assets. The FASB originally thought the concept of materiality was so important that it addressed it in a very early standard: FASB Statement no. 8. 

    Nevertheless, the new FASB exposure draft passes the buck on materiality to the federal government. Laws about risk assessment and fair presentation have been addressed in federal laws (Sarbanes-Oxley Act and Dodd-Frank Act). Now the FASB is claiming it does not define materially, and that it is now a legal concept. 

    Materiality is still a factor in audits, but it is disappointing that the FASB--which could ADD requirements for stricter materiality threshold to the federal standards--has instead backed away to go with the "letter of the law."

    Source: "How should materiality be applied? The FASB weighs in," by Ken Tysiac, The Journal of Accountancy, September 24, 2015. 

    Follow up:

    • What is YOUR personal threshold of materiality with respect to how much CASH you can misplace and still not worry about it or think about it much?
    • Do you think the general public understands the issues of materiality with respect to how auditors apply the issue in financial statement representation? Have you looked at a published 10K or the financial statements in an annual report? What does it say at the top of the balance sheet, income statement, and statement of cash flows about the numbers on the page? What effect does this have on the materiality threshold?


  • Japan in recession...again

       Japan slips deeper into a recession--reported 11 months ago on CNN

    Japan's economy slid into a serious recession 7 years ago (when just about every other country was experiencing a downturn). The difference for Japan has been that things have been difficult ever since. Most recently, the economy in Japan did not reach its third quarter 2015 projections. In fact, the economic output shrank slightly. 

    Prime minister Shinzo Abe's "Abenomics" has helped somewhat. Using some of the same economic stimuli as the United States, it has used its central bank, which has resulted in a stock market upsurge and a favorable exchange rate. This has helped international companies. The government may increase their spending through the central bank to buy up its government bonds (at a time when the United States is looking to roll back its influence).

    There are longer-term problems which need to be addressed if Japan's economy is to turn around. 

    Source: "Japan Economy Contracts 0.8%, Returning ot Recession," by Jonathan Sobel, New York Times, November 15, 2015. 

    Follow up

    • When did Japan first have economic problems? Why did they occur? Describe the recent history of Japan's economy.
    • What is the primary reason cited by the article's author for the Japanese recession? Do you agree? Why has the U.S. experience been different?
    • What is a recession? 


  • Money and Mizzou

       University of Missouri President Tim Wolfe's resignation speech

    Money talks.

    That is one explanation being offered as the "substantive reason" that President Tim Wolfe resigned as President of the University of Missouri this week. Ostensibly, the resignation was in response to student protests regarding racism.  When the football team got involved, saying that they would not play until the president resigned, the stakes were raised.

    It is difficult to ascertain the "real" reason or reasons that Wolfe resigned. Nevertheless, there are several monetary facts that could have been factors. First, a game forfeit fee of $1 million would have been owed to Brigham Young University for the cancellation of this week's game. Other factors may have included the $84 million football budget, the popularity of football in the region, and the discrepancies between the president's and the football coach's salaries.

    Source: "Here's how much money Mizzou would have lost if its football team sat out one game," by Abby Jackson, the Business Insider, November 10, 2015.

    Follow up:

    • On what does President Wolfe's resignation speech focus? Why do you think he made the decision to focus on this?
    • What would have been the response if Wolfe had focused on the monetary issues raised in the linked article? List the pros (if any) and the cons (if any).
    • Do you think the monetary factors were significant in this decision? Why or why not?


  • Netflix's "Master of None": Aziz Ansari discusses racial quotas in hiring

      from one of the episodes of "Master of None," Ansari's new Netflix series.

    Aziz Ansari has a new series airing on Netflix--"Master of None."  Parts of the series screened recently at EW Fest, and there was a Q&A session afterwards, which featured Ansari. As reported by Vulture, he made some pointed observations about racial quotas during that session:

    "When they cast these shows, they’re like, 'We already have our minority guy or our minority girl.' There would never be two Indian people in one show. With Asian people, there can be one, but there can't be two. Black people, there can be two, but there can't be three because then it becomes a black show. Gay people, there can be two; women, there can be two; but Asian people, Indian people, there can be one but there can't be two."

    The topic most likely arose in the Q&A because Episode 4, "Indians on TV" addresses this issue. Ansari's character, Dev, gave almost exactly the same speech within the show.

    Of course, the whole series could be described as ironically "meta" vis-a-vis this issue: there are several Asian actors in every episode, and neither race nor stereotyping play a role in the conflicts. Rather, the episodes center on universal human experiences, such as feeling "out of one's element" when relating to young children or when dealing with one's own parents as a young adult. 

    Observers may note that there are several shows with predominantly-Asian or predominantly-African American casts ("Fresh Off the Boat"; "Empire"). And a few shows do feature mixed-race workplaces. But, when integrated workplaces or ensemble casts are featured, stereotypes are not uncommon...and there are typically a limited number of roles for minorities. 

    This same phenomenon may be playing out in an unconscious way in hirings in businesses other than entertainment. On a hiring committee, even if it is not mentioned aloud, is there a tendency to steer the committee away from minority candidates that are already represented in the department? Or, as in Episode 4 of Ansari's series, would two people belonging to the same minority group be forwarded to the next round of interviews? Are the talking points raised by Ansari also talking points in your workplace? 

    Source: "'Parks and Recreation' star Aziz Ansari claims this is the exact formula TV shows use to to cast minorities in order to reach a racial quota," by Jethro Nededog, the Business Insider, October 26, 2015.

    Follow up:

    • Consider the questions addressed in the last paragraph above. Comment on how they might apply to your workplace or, if you are still in school, to your fraternity or club.
    • Do some internet research on the topic of ethnic or other "discrepancies" in casting for movies (where the actor does not match the character). List the instances and the ethnicities or other discrepancy involved (e.g. differently able, sexual orientation).
    • Name eight of your favorite TV shows or cable series. List at least five recurring characters in each of them, then the ethnicities, gender and sexual orientation of each. Can you see any patterns? Describe. 
    • Watch "Master of None" on Netflix. Can you relate to any of the situations in which the Ansari character, Dev, finds himself? Why or why not?


  • Product adaptation and Campbell's soup

    Campbell's soup is making some changes in one of its signature soups: Chicken Noodle. It is changing the recipe for its broth--by eliminating several ingredients. Gone are:

    • Potassium chloride
    • Monosodium glutamate
    • Chicken flavor
    • Maltodextrin
    • Celery  (really?? I always picture chicken soup with celery in it)
    • Onions (why eliminate these?)
    • Vegetable oil
    • Cornstarch 
    • Disodium inosinate
    • Disodium guanylate
    • Spice
    • Flavoring (soybean oil, soy lecithin)

    Not only is Campbell's changing the recipe for Chicken Noodle, it is also changing its marketing strategy, by integrating at least one new alliance--which Stephen Colbert refers to as a "non traditional marriage"--between Star Wars and Campbell soups:

      a recent Campbell's Soup ad

    The global soup market, which peaked in 2012, has been in a decline...falling 1.2% last year, and expected to fall another 6.25% this year. Will these changes have an impact on the soup-buying public?

    Source: "Campbell rethinks its recipe as consumer tastes change," by Stephanie Strom, New York Times, November 9, 2015.

    Follow up

    • When was the last time you had a Campbell's soup?  Do you consume any other brand of canned soup? Do you consume take-out soup or make it yourself? What influences your decision? Do either the new marketing or the new recipes change your likelihood of buying Campbell's soups?
    • What are your reactions to the video of the ad, above? How do you think it will be perceived by the frequent-soup-buying demographic?


  • One reason bosses can be so...difficult

    Most of us have experienced a difficult, demanding and/or unreasonable boss--one with seemingly non-existent management skills. Or at least we have seen one operating as memorable characters in the media:

    Dr. Tomas Chamorro-Premuzic, a human resource consultant and CEO of Hogan Assessments, notes that research supports the view that certain (negative) personality traits are common in managers:

    "If you look at these traits such as being Machiavellian, narcissistic, you will find that most of these traits have short-term advantages. Some of these attributes help people get to positions of power and navigate their careers upwards, but at the same time they don’t really contribute to leadership effectiveness or management effectiveness...which is why you find so many bosses that are jerks."

    The Marketplace article presented his views in this graphic:

    from the article linked below

    According to the Marketplace podcast linked below, most "bad bosses" are narcissists. Although this is a term that describes a real mental illness, with a list of symptoms, in common vernacular narcissists can be described as people who "are super egocentric and usually insecure at the same time." This means that they think themselves to be good and talented people, destined for leadership...but they are hyper-sensitive to criticism. This leads to being super-demanding of their underlings. This, they hope, will enhance the possibility that a perfect (uncriticizable) product can be presented to those in a position to judge them. 

    This type of boss is a problem for business, as well as the economy in general: managers with these personality traits may have short term success, but are not good for the company in the long term. Fred Kiel, the author of The Return on Character, developed these characteristics for managers with "high character" in his book:

    • telling the truth
    • keeping promises
    • owning up to your own mistakes
    • forgiving people who make well-intentioned mistakes

    In a study that compared "high character" managers with those that did not exhibit those traits ("low character") he found that:

    "High-character leaders  and their teams brought in nearly five times the return on assets to the bottom line as did the low-character CEOs."

    Because people usually are more productive in positive environments, this makes sense.

    Source: "Why so many bosses are jerks," by Sabri Ben-Achour, Marketplace--American Public Media, November 9, 2015. This is the link to the print version as well as the podcast. 

    Follow up:

    • Read the article and then make a three-column chart. In the first column, list the expert cited (there are many). In the second column, list the insight the expert expressed. In the third column, describe your reaction to the information presented.
    • Take these tests to check out your own character: from Time magazine and from Kiel's book.


  • Short term profit-taking and long term investments

      image from www.urbantree.com

    Which is a better investment for a significant active trader--short term profit-taking, or keeping her money in a company for the long term? Which is better for the economy? 

    If you ask a long-term trader (decades or longer) like Warren Buffett, he says: 

    "The bulk of activism just wants a quick hit. They want the stock to go up next week."

    Hillary Clinton is disparaging of short term investors as well:

    "We need a new generation of committed, long-term investors to provide a counterweight to the hit-and-run activists."

    But the "short term activists" to which they are referring are not making big investments they hold for less than six months...they hold investments for an average of one and a half to three years.

    Who are some of the big short-term traders?:

    Maybe short term traders have gotten a bad reputation because they have engaged in some "disruptive" behavior--

    • bought comparatively large amounts of stock in over 200 companies in 2014
    • fired nineteen CEOs

    But the short term investors with real impact are big mutual fund managers, who turn over their portfolios in an average of 1.45 years. So much for the standard financial advisor's recommendation to buy-and-hold.

    Source: "The Long and Short of It: Activists May Be Less Myopic Than Their Reputation Suggests," by Andrew Ross Sorkin, New York Times, November 4, 2014.

    Follow up:

    • What are the two "revenue streams"--different ways of making money--from stock investments? Which has the potential to produce the higher return on investment?
    • What are some other reasons that short term traders ("activists" in the title to the linked article) have a reputation for being "myopic" or near-sighted? What are the dangers--even for small investors managing a personal portfolio--of having a short term rather than a long term strategy?


  • Facebook revenue up 41%; expenses up 62%

       Facebook growth explained by Bloomberg Business

    The latest quarterly report shows Facebook's revenue has risen by 41% over the third quarter earnings in 2014. Much of it revenue (78%) comes from mobile ad revenue, which has increased even more in the last year--by 66%.

    The increase in mobile ad revenue, which is greater than their increase in expenses of 61%, indicates to Facebook insiders, as well as many observers, that their strategy of spending money--reinvesting in their business, is paying off. 

    Some of these investments make Facebook's outlook for the future also look good. None of the following high-potential investments are producing significant (or not producing ANY) revenue...yet:

    • WhatsApp: a mobile messaging service whose revenue potential has not yet been tapped
    • Oculus VR: goggle technology that is not yet in production
    • a drone technology that could deliver internet service to more parts of the world, increasing user base
    • Instagram: a photo-sharing service that has not been fully "monetized" yet

    Source: "Facebook Revenue Surges 41%, as Mobile Advertisers and Users Keep Growing," by Mike Isaac, New York Times, November 4, 2015.

    Follow up:

    • Is Facebook use up among your peers? Why or why not? Would you see usage of some of its investment products being popular in your demographic?
    • What have you noticed about the changes to Facebook over the years? Which ones would you consider "bugs"? Which ones would you consider to be real "features"?
    • Is the discrepancy between Revenue growth and Expense growth a problem for Facebook? Why or why not?


  • Johnny Cupcakes: a T-shirt Bakery

      Johnny "Cupcakes" Earle interview at itsbongoboy.com

    Recently, a colleague attended a seminar at which Johnny Earle (a.k.a "Johnny Cupcakes") spoke. Johnny is an entrepreneur that frequently speaks at colleges campuses about business and marketing activities, in addition, he puts those principles into practice as the CEO of Johnny Cupcakes. His business is a T-shirt "bakery"--a manufacturer with retail outlets and a distribution network. 

    His t-shirt designs often make fun of popular icons. One of the t-shirts most identified with his brand is a modified "skull and crossbones." The crossbones are there...but the skull has been replaced by a cupcake. His business thrives on humor and brand loyalty.

    Source: "A Tale of Cupcake Kismet. Are You Fans of Your Fans Like Johnny Cupcakes?" by Stan Phelps, Forbes magazine, March 14, 2015. 

    Follow up

    • What are the many ways in which Johnny sells his T-shirts and hoodies?
    • Describe some unique aspects of his retail stores. What are the other marketing tools that he uses to create a special niche in the crowded field of t-shirt production? Read the Forbes article to get some specific details.

  • No more health food from Organic Avenue

      from the (now pointless) Organic Avenue website

    The twelve Organic Avenue cold-pressed-juice and health food stores in New York City have closed. The company has filed for bankruptcy. They can't pay their suppliers, and bankruptcy is the only option.

    This is surprising to some of its devotees, because the small chain has been promoted and praised by:

    • Gwyneth Paltrow and her promotional website, Goop
    • Vogue magazine
    • Equinox health club devotees
    • several models and artists

    Some of the problems that brought about its business failure included:

    • new competition from Juice Press (promoted and funded by Yankee Mark Teixeira)
    • the "emperor's new clothes" aspect of paying $25 for pureed vegetable parts
    • the elephant-in-the-room: "You can't get people to crave this food," said one investor.
    • the declining popularity of juice cleanses

    Many food fads have a limited life cycle. This seems to be one of them. 

    Source: "How Organic Avenue Lost All Its Juice," by Katherine Rossman, New York Times, November 4, 2015. 

    Follow up:

    • Do you see multiple juice stores in your neighborhood--stores that have opened within the last three or four years? What are their names and what do they sell, in addition to juices? Do they have a particular marketing niche that sets them apart?
    • What other food fads have you seen expand and contract over the last decade? List the companies involved and describe the arc of popularity. Why did these fads fail?
    • What food companies have opened within the last decade and have shown continuous growth? Why do you think they have been successful?


  • Arbitration favors business; hurts employees and consumers

      YouTube video discussing the pros and cons of arbitration from a corporate lawyer's viewpoint.

    Have you ever been handed a page or two of fine-print legalese when you went to the doctor's office? Have you been given a long legal document when you signed a lease? How about when you have started a job? Do you have a credit card? A cell phone? A cable company? These contracts (more likely than not) contain a clause that requires binding arbitration. This arbitration removes the right of the allegedly wronged individual to sue in a court of law. This also means that there is no way to appeal a decision. 

    Because plaintiffs (the employee bringing the lawsuit for discrimination, or the patient who had a sponge left in her abdomen) are virtually always one-time-only customers, and the businesses being accused of wrongdoing are likely to be repeat customers, arbitrators interested in maintaining or building their practices are often more favorable to business interests. They won't be hired again if they side with the plaintiff. 

    As pointed out in both the video above and the article linked below--there are many positives for the businesses who insert an arbitration provision in contracts as a matter of business practice. Primarily, they can control who can be an arbitrator and where the arbitration takes place. An arbitrator does not even have to be a lawyer--and in the case of "Christian Conciliation" arbitration may even be a fundamentalist pastor (third in the series of articles in the NYT). These clauses also may include a prohibition against class-action lawsuits, where several people are subject to the same egregious business behavior. 

    The business bias is mitigated somewhat in union contracts and certain other contracts in which there is a three-arbitrator panel. If a union is involved, the union picks one of the arbitrators, the business picks one of the arbitrators, and the two parties must agree on the third arbitrator on the panel. In addition, there are sometimes ways to appeal the decision of an arbitration panel. These minimal protections are not typical. 

    The take-away from this situation is that it is much harder for employees and consumers to get restitution or punitive damages from business that have made mistakes (either deliberately or by accident). Businesses are not objective parties, and are not subject to the same ethical and professional guidelines to which officers of the court must adhere. And yet a person may be denied medical care, housing, or employment if they do not agree to these arbitration clauses by signing the contract. Here is an opinion regarding arbitration clauses from William G. Young, a federal judge appointed by President Ronald Reagan :

    “This is among the most profound shifts in our legal history. Ominously, business has a good chance of opting out of the legal system altogether and misbehaving without reproach.”

    The article linked below is part one of a three-part series in the New York Times.

    Source: "Arbitration Everywhere; Stacking the Deck of Justice," by Jessica Silver-Greenberg and Robert Gebeloff, New York Times, November 1, 2015 (print).

    Follow up

    • What are the negatives for businesses that do NOT have arbitration clauses? In other words, why do businesses insert arbitration clauses into their contracts?
    • Read the series of articles. List the pros and cons of arbitration arguments for both businesses and plaintiffs. What is your conclusion?