• New Years' resolutions: profit opportunities


    The resolution business is booming every January...and many individuals are ready to hire some help in achieving their goals:

    • Books on self improvement sales increase (often paid for with holiday gift cards).
    • People join gyms, sometimes optimistically planning to go 5 times a week
    • Willingness to hire a personal trainer
    • Meditation programs
    • Smoking cessation
    • Drinking habit modification
    • ...and, of course, DIETING

    The optimism associated with positive changes creates business opportunities, and at least temporarily boosts employment and sales. These positive bumps slightly mitigate the lay-offs of holiday retail employment. For "resolution businesses," employees must be hired and trained to be ready for the upswings in business volume. These include gyms, personal trainers, diet plans, life-coaching and other self-help businesses.

    Some businesses structure year-long contracts that look good to the well-meaning self-help enthusiast. What a sales opportunity! Marketing optimism and emphasizing a deficit which can be fixed is a classic marketing technique.

    Source: "The Business of New Year's Resolutions,"  on AJ's YouTube channel.

    Follow up

    • Google "business opportunities for the new year". What are some business opportunities that may arise from making business resolutions or taking advantage of others' resolutions?
    • Make a list of resolutions that might improve your life. You might want to incorporate some of the suggested resolutions for business students from a previous blog.
    • Narrow your list to 5 items, and have them start at least two weeks apart--not all at once on new year's day. This gives you a chance to be one-pointed about your new habit and give the previous habits time to settle in. 
    • Prepare a cost/benefit chart for each of these habits. Be sure to include all of the costs, short and long term, and all of the benefits. ( these might be quantitative and they also may be qualitative. Evaluate each habit to see if it is a yes. 
    • Make the final list...and store a second copy in a sealed envelope to open next year. 
    • Form one new habit at a time.  Succeed if you can...But if not...figure out why not, and try again. Success is built on failures. Keep a journal.

                                                                                      

  • Alcohol consumption at business parties


       image from human resources.about.com 
       photo credit: David De Lossy/Photodisc/Getty Images


    Alcohol consumption. It can loosen inhibitions...and it can cause problems in business interactions. The article below is written to warn employers about the hazards of serving alcohol at company parties. But embedded in the article are several guidelines that apply to employees. The limits that are recommended for employers can be adopted by employees--even if there is an open bar and others are getting inebriated. 

    Remember--some employees will be drinking with restraint. Or not drinking at all. Employees that are drinking (to excess) might be compared to that standard.

      cartoon by Joseph Ferris, purchased by TB from cartoonstock.com

    Source: "15 Tips employers need about serving alcohol at company events," by Susan M. Heathfield, About.com, About Money, December 3, 2015.

    Follow up

    • Read the article: Make a list of behaviors and limits that employees can set for themselves, based on the suggestions made for employers in the article. List the pros and cons of each. 
    • Have you ever had too much to drink at a company event? Describe the situation and the consequences, in retrospect. 
    • Can you think of a way to apply the suggestions for employers to a school club function, a fraternity or sorority party, or a social event like a wedding? List the pros and cons of applying these suggestions in each of these arenas.

                                                                            

  • The Birkin Bag: marketing, production and sales


       image from Birkin on Flickr

    The Birkin bag, by Hermes, is an enduring status symbol.  It is hard to find. It is expensive, It has simple, classic styling. There is a padlock on the clasp.

    It is known as the "It" bag. If you own one, you have really "made it." 

    How did this ultra-pricey niche handbag become the ultimate handbag status symbol? There is a luxury market that includes several designer bags, for example:

    • Louis-Vuitton
    • Chanel
    • Chloe
    • Stella McCartney
    • Givenchy
    • Coach (well, maybe not Coach)

    None of these brands begin to compare to the Birkin bag. It is even hard to see a Birkin bag, as they are not kept in stock by Hermes stores. There is a waiting list to purchase one of two to four years. 

    Moreover, the bag costs $60,000 (though you can find a used one from third party sellers). Even Samantha of Sex in the City (via YouTube, below) had trouble buying one:


    I'm sticking with my Highways bag.  

    Source: "Episode 672: Bagging a Birkin," by Stacey Vanek-Smith, NPR Planet Money, December 25, 2015. 

    Follow up

    • In the article, the comment is made that the usual rules of commerce for the Birkin bag are "upside down." What does this mean?
    • What details of the bag supposedly make it so expensive and so hard to get?  Could Hermes make more bags if they chose to? Explain. 
    • What, according to the article, are the negative marketing strategies used successfully by Hermes with respect to the Birkin bag? 
    • What, according to the article, are the two tricks to purchasing a Birkin bag? What is the bargain price if one of these strategies used?
    • What, according to the article, are other business types that use the same marketing strategy?

                                                                                                  

  • New Year's Resolutions for business students

    It's resolution time, and even business students probably have some habits they'd like to improve.  If you are looking for some direction, here are five resolutions you might consider, offered by an MBA candidate at Cal State Fullerton:

    1. Make Your Web Presence Professional: since so many of your colleagues (71% of millennials) check social media every day--not to mention the folks in Human Resource departments--it is a good idea to have a web presence that is positive, professional, and controlled by you.
    2. Use LinkedIn or About.me: These are career-oriented sites, and are useful for networking. Really use them. Check in with others, connect, interact...at least a few times a week.
    3. Develop a personal portfolio:  This is a set of examples of what you can do--like an in-depth resume.  You can include project summaries, solo and group work (with permission from your boss, or your company's legal department) and examples from volunteer work.
    4. Volunteer or get an internship: Either can help you build skills and get recommendations, as well a build your resume.
    5. Get involved in clubs or professional societies:  Again, this is for networking, as well as building your confidence about being in the business you have chosen to work in.  

    Of course, Forbes magazine quotes researchers as saying that only 8% of resolution-makers keep their resolutions. Since these resolutions overlap with your life-long business prospects, they just might be easier to keep.

    Sources: "Five New Year's Resolutions for Business Students," by Daniel Coats, California State University Fullerton blog, December 29, 2015. 

    "Just 8% of people achieve their New Year's resolutions--Here's how they do it." by Dan Diamond, Forbes Magazine, January 1, 2013. 

    Follow up:

    • What resolutions did you make last year? What were the results?
    • Will you incorporate any of the above resolutions into your list for 2016? What are your resolutions for the coming year?

                                                                                             

  • Employee retention for small businesses


       Carol Roth, via CNBC and Bank of America--small business and retention-YouTube

    A small business has a tough time retaining workers...especially when large businesses and recruiters can alway lure employees with:

    • a little more money;
    • opportunities for advancement in a hierarchy;
    • 401(k)s or stable, company-negotiated health care benefits 

    Small business owners have to be creative about ways to retain employees--which are their primary asset.  The "human touch" (see previous blog) is often the special factor that a small business can provide. Trained, loyal and committed employees are a requirement to retain that asset. 

    Here are a few of the strategies that small business owners may employ to retain valued employees:

    • One-on-one communication
    • Paying first-and-last-months' rent
    • Fantastic job titles
    • Travel paid for after a certain amount of longevity

    Would any of these strategies work? Sometimes just the ability to re-negotiate ones options directly with the entrepreneur/CEO directly in a small business is a major factor for employees.

    Source: "Small business owners devise creative ways to keep workers," by Kathleen Murray, New York Times, December 2, 2015.

    Follow up

    • Read the article: What motivator would keep you working at a small business, and why? What would be the major factor that might lure you away to a larger business? How about to a different entrepreneurial business?
    • Listen to and watch the video: What additional suggestions are offered? Evaluate the options.

                                                                                                   

  • Soft skills give human touch in a computer world


        image from www.scoopnest.com

    The world--and the workplace--are increasingly automated.  And big businesses have many, many advantages over entrepreneurships. But one place that small businesses can make a difference is by providing the personal touch. The article linked below focuses on two areas where the cost/benefit of have a human intermediary provide expertise that computer algorithms and internet search engines cannot: travel and home electronics installations.

    Travel agents are specialized service providers that can make the difference between a messed-up vacation and a memorable highlight of rest and relaxation. But rising airline prices and the concomitant growth of travel websites (that compete to offer the cheapest travel experience) have caused many of us to forget the advantages of having a travel agent. A travel agent has ongoing relationships with hoteliers and tour guides...and may also be able to negotiate air/hotel packages or go to bat for an inconvenienced traveler making a claim on travel insurance. Many times a travel agent has actually seen and experienced the locations where the booking takes place. Most personal computers or mobile devices don't have the same needs for comfort and security that a human traveler might look for. 

    Setting up a home stereo system is another area that can require a serious skill set.  As we sometimes say in our house--"We'll know how to do it after we're done".  Or "I think I need to take one more trip to Best Buy for that cable." Some projects--like setting up WiFi, or a home surround sound system with multi-media integration-- only get done once.  An expert can make all the difference.

    Service can be a strength of small businesses...and excellent service (and good online reviews) can help consumers justify the cost/benefit of paying for services to ensure a good experience...rather than just dealing with the internet and trying to do-it-yourself.

    Source: "In a self-serve world start-ups find value in human helpers," by Farhad Manjoo, New York Times, December 16, 2015.

    Follow-up:  

    • What other businesses can thrive by providing specialized services? Are these one-time sales opportunities or on-going? How can these businesses create repeat business with high value?
    • The article's author uses the term "disintermediation." What does it mean and how does it apply to business trends?

                                                                                       

  • Martin Shkreli: Price-gouging, business frauds, and PR problems


      Interview with Martin Shkreli published on YouTube by Forbes, December 7, 2015. 


    Martin Shkreli, known since September as "the most hated man in America," was arrested early on December 17, 2015. He was charged with various counts of business fraud related to his leadership of Retrophin Pharmaceuticals. Shkreli seems to have managed Retrophin as part of a succession of intertwined Ponzi schemes. "Returns" were paid with cash from new investments, rather than excess earnings. In addition, Shkreli misrepresented company assets when trying to attract new investors. At one point, he told investors he had assets of $37 million, when his net assets were closer to $700. 

    Shkreli's remarkably notorious reputation did not arise from business fraud, however. It arose because of his perceived avarice. As he formed Turing Pharmaceuticals, Shkreli purchased the rights to manufacture a unique anti-parasite drug, Daraprim. He then raised the price of this drug by over 5000%--from $13.50 per pill to $750.00 per pill. This created a major public and media reaction--of disbelief, condemnation, and even hatred. 

    But business is business--and to one company at least, Shkreli looked like he knew what he was doing. KaloBios Pharmaceuticals Inc. named Shkreli as CEO in November 2015. KaloBios then negotiated the purchase of the rights to another anti-parisitic drug, benznidazole. Health care observers feared more price gouging, but increases had not yet been implemented at the time of Shkreli's arrest. At that point, trading in KaloBios was halted by Nasdaq, and KaloBios fired Shrekli as CEO. Problems at KaloBios seem to be mounting. 

    As more of this story unfolds, Shkreli seems to be untroubled by his arrest as well as the trail of financial chaos that has followed his leadership. He "resigned" from Turing. He pleaded "not guilty" to the fraud charges. He is out on bail. In addition, Shkreli has a new focus: Twitter and other social media.  He started using these platforms to try to convince the public of his innocence. But when outrageous statements attributed to him began to surface (expletives, giving away free money, claiming to be God), he claimed that he had been hacked. 

    What will happen next?

    Source: "Drug CEO Martin Shkreli arrested on fraud charges," by Julie Creswell, Stephanie Clifford, and Andrew Pollack, New York Times, December 17, 2015. 

    Follow up:

    • Did you follow the aspect of this story that emerged in September of this year? If you didn't, then read the link now.  What is your reaction? 
    • If you were the public relations firm managing Shkreli, what mistakes do you think he has made since August, 2015? How would you have advised him around the time of the Turing price increase scandal? How do you think Shkreli' nonchalant attitude since his arrest is being perceived? What advice would you give him at this point, regarding the management of his reputation and his business plan over the long term? 

                                                                                  

  • Dilbert: Jargon fails to communicate

    The Scott Adams Dilbert Cartoon published on his blog


    The cartoon above contains several instances of jargon. Jargon sometimes communicates special concepts within an industry. At other times it is used to obfuscate effective communication. This may be because one or both parties to the topic do not fully understand it...but do not want to appear to be lacking in knowledge.  It is sometimes used in a passive-aggressive way to assert superiority (when the person using the term knows it will not have meaning to the recipient).

    A few of the terms used above are familiar terms--for example, there really is a "cloud" to store data. And "harmonize" in business does mean to reconcile different concepts or department functions.  But "harmonize the cloud"? What does that mean? 

    The Pointy Haired Boss sets the tone for the conversation here...and Dilbert and Wally join right in. As Dilbert realizes, "I'm almost certain that was nonsense." Business communication, leadership and employee management seems to be suffering in this interaction.

    Source: "Dilbert," by Scott Adams, Los Angeles Times, December 12, 2015.

    Follow up

    • Go through each statement in the cartoon panels and isolate the individual pieces of jargon that are used.  I gave an example of this above when I isolated "harmonize" and "the cloud."  Make a list and explain the business meaning of the individual bits of jargon. 
    • Do you read "Dilbert" on a regular basis?  What are the main themes of the cartoon? Why do you think this cartoon resonates with many office workers? Comment on the management and leadership issues that are highlighted in this comic strip.

                                                                                    

  • Responding to negative online reviews


         from NBC Nightly News


    When Slapfish restaurant received bad online reviews for high prices and small portions, owner Andrew Gruel undertook a two-pronged approach to improve his reputation:

    • He wrote personal emails to his customers, asking them to come back..and saying it would be worth their while
    • He listened to the reactions of customers and took practical actions: he lowered prices, increased portion sizes and created "combo meals"

    His efforts were successful. Gruel's reviews went from one star to five star.

    Some businesses have taken a more drastic and impersonal approach to thwarting negative reviews. Punishments have been instituted. The insertion of "non-disparagement clauses" in fine print supposedly warn customers that large fines will be charged if they post negative reviews. In the instance highlighted in the news segment above, the private fine charged was $3,500. 

    Only in California are these clauses illegal. However, Congress is currently considering a law that would outlaw these clauses in all fifty states--based on free speech principles. 

    The existence of the non-disparagement clauses is an indication of how important online reviews have become to businesses. Small business owners often check social media review sites several times a week to keep on top of how they are being perceived. 

    This type of vigilance can often be a tip off to false reviews (perhaps generated by competitors), which are destructive to all segments of the business interaction--the businesses, the consumers, and the ratings sites.

    Sources: "A bad review is forever: How to counter online complaints," by Constance Guske, New York Times, December 9, 2015. 

    The segment from the NBC Nightly news linked and shown above.

    Follow up:

    • Have you ever written a negative review online? What rating site did you use? Describe the situation and try to reproduce the review you wrote. Do you often write positive reviews as well?
    • Do you read online reviews? How seriously do you take them?  Is your reaction different depending on which products or locations might be involved?

     

                                                                                         

  • Communicating with not-quite-handwritten cards

    Even in this day of email and text messaging, online chats, FaceTime and Skype, it is still a treat to get a handwritten piece of snail mail. The sales evidence of the effectiveness of this kind of connection is evidenced by the greeting card industry.  Americans spend $7 billion to $8 billion on greeting cards every year.

    Nevertheless, from a business perspective, the time, materials and employee expenses involved in writing a piece of real live mail--versus sending an email or a text message--is costly. The cost/benefit of this marketing outreach can be prohibitive. 

    Sonny Caberwal, of Bond, saw this market niche, and developed the technology to provide this scarce resource. This makes the process more affordable--even when outsourced to his fledgling company. They have have robotic machines with arms that can duplicate a custom signature. For an additional charge, notes can be generated by business owners using a mobile app. 

    Is this progress in communication technology? Maybe it is a good compromise in this digital world. 

    Source: "A handwritten card signed and sealed by the latest technology," by Eileen Zimmerman, New York Times, December 16, 2015.

    Follow up

    • When was the last time you got a "real" handwritten note (before the holiday season of card-sending)? Was it special to you? How do even holiday cards received by mail compare to digital holiday cards (either static or an animation)?
    • Would you open a piece of snail mail that you suspected was computer-generated, even if it was on fancy paper? Have you opened a piece of company mail that you thought was personal, to find it was computer-generated?  What was your reaction?  What types of businesses do you think are most suited to this type of marketing communication?

                                                                                                    

  • Pineapple, Pesticides and Parkinson's

    A pineapple pesticide, heptachlor, that drifted onto grazing areas for cows in Hawaii, has been linked to Parkinson's disease in men.  The cows that ate from the contaminated fields produced milk which was known to contain the pesticide. Heptachlor was used throughout the 1980's, but was taken off the market in 1988.


       from NewsBeat Social, December 10, 2015


    If this happened in the 1980's, why is it in the news now? 

    Much of the milk produced by cows grazing in those fields was exported to Japan, and the men who drank the milk are now dying. Brains can only be completely analyzed for the presence of Parkinson's disease after death. A study (published in Neurology) has been conducted that looks at the brains to identify the presence of Parkinson's disease. The study also checked for the presence of heptachlor. Researchers said: 

    "Among those who drank the most milk, residues of heptachlor epoxide were found in nine of 10 brains as compared to 63.4 percent for those who consumed no milk,"

    The correlation is meaningful because there are no known genetic factors that are linked to Parkinson's disease, so environmental factors are the focus of study.

    The results also bring up the concept of "Sustainable Accounting". This is an attempt to include ALL of the costs of environmental effects that may discovered in the future as a cost in the earlier period when the income was recognized. In this pesticide case, it means that the pineapple producers using the pesticide would have to estimate the damage claims that may result from the recent discoveries back in the 1980's when they were using the pesticide after its detrimental properties were established.

    This is part of the basic accounting principle of "matching" revenues with expenses.  When there is dumping of toxic waste (that saves money in the present), there may be future claims against the company doing the dumping, in terms of personal injury or the costs of environmental clean up. Without sustainable accounting, these costs would be charged against the income in the future period when the problem is uncovered, which is technically a violation of accounting principles. Sustainability accounting seeks to have those expenses reported at the earlier date-when the related sales are made.  

    To some degree, these costs can be both mitigated and provide sustainable accounting presentation by risk management and the purchase of insurance in the current period. However, these long-term measures are often foregone by current managers, who are often compensated for current profits. The purchase of insurance would lower profits. 

    Another reason for not buying insurance in the current period is the hope--shared by both businesses and other under-insured entities--that nothing will go wrong. This could be wishful thinking, especially in the light of long-term studies. 

    Source: "Pineapple pesticide linked to Parkinson's Disease," by Maggie Fox, NBC News, December 9, 2015. 

    Follow up

    • What, paradoxically, is correlated with some protection from Parkinson's Disease? (read the article) Is there any theory about why this is the case?
    • Locate the videos containing testimony from pineapple producers protesting the law banning the pesticide. They can be found in the right margin if you link to the video above in YouTube. What are the pineapple producers' arguments? Describe what you agree with, and what you disagree with, and why. 
    • Do you have adequate insurance for health, auto, and other property? Why or why not?

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  • Chipotle's niche reputation damaged: Permanently?


         from YouTube wochit.news


    Chipotle, Inc. has built its reputation on fresh food...often locally sourced. But a recent outbreak of E Coli has left several students in Boston ill, and it remains to be seen whether Chipotle will recover. The stock price has fallen significantly...from $748.12 at the end of July to $567.83 on December 14, 2015. This is a decline of over 24%.

    Some analysts believe that this is a good opportunity for buying Chipotle (using the wisdom of "buy low, sell high"), but will Chipotle stock rise again? This probably depends on its ability to deal with some major substantive issues:

    • They will have to manage employees differently regarding cleanliness issues;
    • The will have to set higher standards of quality control in its production operations
    • Their marketing communication must be convincing enough to return to previous sales levels; and
    • They will have to communicate with current and future investors to promote stock price recovery. 

    Will the public be willing to give Chipotle a second chance, trusting its mission to provide fresh, quality food?  Or will the failure to meet high standards permanently harm Chipotle's reputation, resulting in lower sales and a continued decline in stock price?

    Source: "Can Chipotle Recover From Food Poisoning," by James Surowiecki, New Yorker, December 10, 2015.

    Follow up:

    • Have you eaten in a Chipotle fast-casual restaurant? What do you think? How would your feel about returning, or trying it for the first time after this incident?
    • What do you think of the fall in stock price? Would you consider taking advantage of the lower price and buy-in? What factors might influence the rise or continued fall of the stock price?

                                                                             

  • What is "preferred stock"?


        Paddy Hirsch's Whiteboard on Preferred Stock


    Many of you are familiar with the "Accounting Equation":  Assets (what you own) minus Liabilities (what you owe) = Equity (the book value of what the owners actually own, after all debts are paid).  But what comprises the equity--actually "Stockholders' Equity" for a corporation?

    Primarily, corporate equity is made up of stock. All corporations must have common stock, which has voting rights and the right to participate in profits, among other rights. Preferred stockholders have a different set of privileges. First, they are guaranteed (which some exceptions) a certain return on the book value of the Preferred Stock each year--say 8%.This compares (favorably) to current interest rates, which makes preferred stock a little bit like a liability.  Secondly, in the case of corporate liquidation, preferred stockholders are paid their share of the net company cash before any of it goes to the common shareholders. 

    Preferred stock may have other attributes, some of which increase the value:

    • convertibility to common stock
    • participation in profits after the common stockholders get their share
    • cumulative property (which it has by default)
    • sometimes limited voting rights.

    Properties which can decrease the selling price of preferred stock are:

    •  callability, and
    • being specified as non-cumulative.

    There are advantages and disadvantages to preferred stock which relate primarily to tax issues, the need to alway pay out dividends, and the voting rights associated with common shareholders. 

    Source: "What is Preferred Stock," by Paddy Hirsch, Marketplace American Public Media Whiteboard, November 18, 2015. 

    Follow up

    • What is "book value"?  How does it differ from the value something has in the marketplace? Which is more important to accountants (preparers and auditors of financial statements)?  Which is more important to investors?
    • Watch the video. What analogy does Paddy Hirsch make regarding preferred stock?  How does that relate to the order groups would get paid if the the company was dissolved (liquidated)?
    • What is "callable preferred stock"? When would the stock be called? Why does this attribute lower the value of the stock on its issue date?


                         $    %             $     %             $     %           

  • Dangerous Beijing smog levels cause shutdown


     " Worst Smog Of the Year Chokes Beijing," from New China TV.

    Beijing, China almost always has fairly high smog levels, but the "Air Quality Index" (AQI) over the last few weeks has reached the 300+ level.  Areas around Beijing are even worse--by some estimates 200% to 300% times the Beijing level.To put this in perspective...here are the AQI guidelines and what they mean:

    To further put this in perspective with respect to China...even though the U.S. calls 151-200 a "red alert" situation, the Beijing threshold is higher. Some areas outside of Beijing do not issue a red alert until the AQI reaches 500, which is dangerous to everyone.

    The businesses in neighboring cities and provinces (Anyang and Handan in the Hebei and Henan provinces, respectively), may be responsible for the conditions in Beijing, as winds from various industrial entities blow pollutants toward Beijing. The shutdown of operations in a major metropolis such as Beijing, however, affects tourism as well as other businesses. This may force the Ministry of Environmental Protection to take some action. 

    Source: "As Beijing Shuts Down Over Smog Alert, Worse-Off Neighbors Carry On," by Edward Wong, New York Times, December 9, 2015.

    Follow up:

    • According to the video above, what is the World Health Organization's Recommendation for the Air Quality Index?  What is the current level in Beijing (per the video, not the print article)? What is the highest level in the surrounding areas? What is the major cause of the smog problem?
    • What are the components of the AQI? What problems can each of these elements cause?

                                                                                 

  • Investing in guns...by accident


      Matt Damon as Will Hunting, responding to an interview question in the movie Good Will Hunting.
         He is citing the far-flung unforeseen consequences of what seems to be a positive action.

         His answer begins about one minute into the video.

    If you signed up to contribute to a retirement plan, or if you are saving for a large asset by investing in a mutual fund, your primary goal is likely to be earning as much on your money as possible. The only factor that your advisor may have mentioned to you is a question about the level of risk you are willing to assume. You may not have considered whether the funds were invested in companies that did not align with your values. And your advisor may not have asked you about it. 

    But almost everyone who has an investment in a fund (e.g. Vanguard, Fidelity) has an investment in gun manufacturers.  As gun violence is on the increase in the United States, the debate about gun ownership and the power of the gun lobbies has escalated.

    Individual investors may have thought about the unforeseen consequences of a seemingly innocent investment (analagous to Matt Damon's rant above). Or they may be thinking about it for the first time now. This debate has spilled into the business and investment world as well. Those opposed to current gun laws are now questioning the investments they may have unknowingly been making in the manufacture and growing sales of firearms. And they are contacting their investment advisors. 

    Complicating the whole issue is that investments in gun industries have been profitable. Smith & Wesson shares are up about 400% since 2010. That kind of performance can really make a fund prosper. 

    Nevertheless, since the Sandy Hook shootings in Newton, Connecticut, public pension funds have been considering selling their shares in gun manufacturers. The push by some investors to take action on this idea has increased due to the latest mass killings. But what is the fiduciary responsibility of a pension fund whose primary purpose is to ensure good returns in order to support employee pensions over the long haul? If they divest, will they be able to make other investments--with the same low level of risk--in other companies?

    Financial professionals are wrestling with this ethical dilemma. 

    Sources: "Guns In Your 401(k) ? The Push to Divest Grows," by Andrew Ross Sorkin, New York Times, December 7, 2015.

    The movie Good Will Hunting, produced by Miramax (Harvey Weinstein, Kevin Smith et. al.), 1997.

    Follow up: For all of these questions, if they don't apply to you--ask your parents or other relative about their investments...

    • Do you have a 401(k), or any kind of IRA? Do you have money invested in a diversified mutual fund?  Can you choose in what companies the fund or retirement account makes investments? What are they invested in?
    • Does it matter to you what you are investing in through a third party? You may not have a problem with investments in guns, but there may be some enterprises that you are opposed to. If you make money, is the investment choice a good one?  Why or why not? 
    • If you are invested in a fund that has parameters for investing that exclude causes or companies that do not align with your values, how have they performed, vis-a-vis other similar investment vehicles, without the investment restrictions? Explain why you invested in the funds you did, and explain your reaction to the performance of the fund. 

                        $        $          $          $           $           $          $     

  • Good countries for millennial pensions

    Check out the comparative pension benefits (for those who receive pensions) in various countries:


          from article linked below


    As a follow up to the blog about the rather depressing outlook for pensions in the United States--particularly for millennials and their younger siblings--here is an article about how millennials might do if they were to emigrate elsewhere.

    Of course, those who want to maintain the lifestyle to which they may have become accustomed during their working lives will also need to invest funds while they are working. Separate investments (IRAs, RothIRAs, 401Ks, SEP-IRAs) should be able to provide a separate income stream to make up the net cash difference in spendable income during the retirement years. 

    Source: "These countries will have the best pensions for millennials," by Ivana Kottasova, CNN Money, December 2, 2015.

    Follow up:

    • Read the extensive blog and other materials of your choice about pensions. Also research what percentage of the population of each country is covered by a pension. Why do you think there are different values throughout the world involving pensions?
    • Would you consider moving elsewhere to receive a pension? How about for health benefits (either now or as a senior citizen)?  Why or why not?


                                                                                                  

  • Global growth and the Greenhouse effect


       Global Warming as explained by by NASA

    The 2015 United Nations Talks On Climate Change are being held in Paris between November 30th and  December 11th.. The purpose of these talks is to create a legally binding agreement on climate. The underlying objective among many participants is to create a plan to stop the warming of the Earth that is accelerated by the unprecedented level of greenhouse gases. "Greenhouse gases" absorb the unused infrared radiation from the sun that otherwise would be reflected back into space by clouds and the polar icecaps. A little trapping of greenhouse gases is a good thing, because it insulates the Earth and modulates temperature. But when too many greenhouse gases are present, the surface of the Earth warms up, which causes polar icecaps to melt, then even more radiation and heat is trapped, and on and on. NASA and many scientists support this hypothesis. A primer on this effect can be viewed at "Short Answers To Hard Questions About Climate Change." Nevertheless, some people disagree that the greenhouse effect is a man-made occurrence (see the second Source entry).

    Greenhouse gases are predominately water vapor first and carbon dioxide second, followed by methane, nitrous oxide and CFCs. We have shown that we can control the amount of CFCs in our atmosphere through regulation on a global scale.  We could further lessen this greenhouse effect by controlling:

    • the number of cattle raised for dairy and meat production
    • the burning of fossil fuels (gasoline) in automobiles
    • the burning of other fossil fuels (coal) for heating and manufacturing production
    • deforestation (trees breathe in carbon dioxide and breathe out oxygen)
    • industrial waste and landfills (which exude methane). 

    All of these contributors of greenhouse gasses are the products of economic growth. This is obviously a business issue, made more radically clear by UN General Secretary Sharan Burrow's statement that there are "no jobs on a dead planet." The Pope has also weighed in on this topic. Nevertheless, business and political leaders find it hard to face the prospect of limiting growth, particularly when analysts addressing this issue conclude that reversing growth that has already occurred is the meaningful solution. 

    "Imagining a world without growth" is one place to start. 

    Sources: "Imagining a world without growth," by Eduardo Porter, New York Times, December 1, 2015.

    A case against the existence of human-influence global warming as a catastrophe: "Freeman Dyson on the Global Warming Hysteria,"Conversations that Matter," April 2015. 

    Follow up:

    • What are CFCs, and why are they less of a problem than before? Briefly summarize their story.
    • Where do you stand on the scientific perspectives on global warming? Explain your position.
    • What are the pros and cons of adopting a no-growth economic policy? Who would the policy primarily affect in a negative way? Would business or group be affected in a positive way (include all stakeholders in your answer)? Does your answer change if you are looking at a long-term versus a short-term outcome? 

                                                                                

  • The business of color: Rose Quartz and Serenity

      
     
         from the Pantone.com website

    When I heard the Colors Of The Year story (during the business hour of my local public radio station), my first thought was "Who Cares?".  As it turns out, not only do several businesses care, the announcement of these colors are drivers of the production and sales cycles of fashion, interior design, and graphics arts industries. These industries wait for the announcement of the Colors of the Year in order to plan their product designs to create popular cycles of what is "in" and "out" of fashion. Not only is this a driver for production, it is a driver for sales and, therefore, budgeting. 

    The color shade for a fad color has to be exactly right--both for production and for advertising. The product palettes (in color chips or swatches) for design professionals generate the revenue steam for the Pantone Color Institute. Palette samples are also available to the retail market, so that individuals attempting their private design projects can also be current with color. 

    What inspired the woman behind the Pantone Color Institute, Leatrice Eiseman, is the subject of the Marketplace podcast linked in the Source below.

    Pantone's vision is based on the tenet that 80% of human input is visual--so color is of primary importance. The company has a commitment to beauty.

    That said, this year's colors look to me like something you might use to paint a baby's room. Nevertheless, I will look for the colors in my retail outlets about a year from now, as the Colors of the Year trickle down to ready-to-wear. I might buy a "Serenity" scarf.

    Source:  "The Woman Behind The Pantone Color Of The Year," by Ashley Gross, Marketplace American Public Media, December 3, 2015. 

    Follow up:

    • What are the colors that are being advertised for clothes on sale now?  Are they different for next season? What are the popular (or at least dominating the in-store) colors? Do they influence your purchase selections?
    • Do you have any ideas, other than those mentioned in the podcast or website, for markets or revenue sources for Pantone? List and describe.

     

     

  • Fantasy Football Fails Legal Tests

    Fantasy Football is not just an online pastime where a user can pretend to live a football manager's life vicariously and harmlessly.  It is a big business...and the business might legally be considered gambling.

    Some states have outlawed fantasy football entirely (Maryland and Kansas). Others have laws that discourage the activity (Vermont, Tennessee, Arkansas and Washington state). Many other states have allowed it so far, but New York is starting to crack down.

    Here is the legal problem: "skill-based gaming" is allowed under federal law--the 2006 Unlawful Internet Gambling Enforcement Act.  Because fantasy sports are supposedly "skill-based" it is not considered real gambling...or is it? Most state laws don't address fantasy sports vis-a-vis gambling specifically in their laws...yet.

    Big betting companies such as Draft Kings and FanDuel have the support of big media companies and professional sports leagues, compounding the problem of changing state laws to limit or outlaw the betting. Plus--there are a lot of customers. It remains to be seen how this plays out over the next few years.

    What are the odds that fantasy sports will be outlawed?


     
               From the Associated Press/Los Angeles Times article linked below

    Source: "Patchwork of laws poses legal quicksand for fantasy sports, by the Associated Press, published in the Los Angeles Times, November 11, 2015. 

    Follow up:

    • The obvious question: What personal experience do you have with placing bets on the internet in general, and with fantasy football in particular? Explain how it works from an experienced user's perspective.
    • Do you think that government should interfere with this (or any) type of business? Why or why not?

                                                                                                

  • Dyson's success


          the Dyson Big Ball Cynetic Upright Vacuum

    Dyson is a British company known for innovation, primarily in its unusually efficient vacuum cleaners. What sets Dyson apart is how it motivates its engineers to produce superior products by giving them absolutely free creative reign over product developments. Creations can be totally "out of the box"--no specs about how they look--as long as have superior functionality.

    One result of the freedom-to-create is the product shown in the video above--the Dyson Cynetic Big Ball Upright Vacuum.  It has a revolutionary design and is exceedingly powerful and durable. Another innovative product is the Absolute--a vacuum as powerful as a regular plug in model, but that functions like a cordless hand-held vacuum cleaner.  The really key innovation in this product was putting the motor up near the user's hand, instead of at the floor, so the vacuum site would not be unwieldy and hard-to-maneuver. 

    One of the newest products is the 360 Robot Eye, but some observers say that it may not have the level of problem-solving innovation of Dyson's other products.  Vacuums that power themselves around your house, vacuuming like a pool cleaner without anyone guiding it, have some inherent issues (furniture height, pet-hair clogs) that cannot be overcome. In addition, the robot vacuum market niche is already dominated by the almost generic "'Roomba."

    Dyson's human resources policy of letting their people be creative results in a lot of trial and error. Some examples are:  

    • a head-mounted, wearable computer--in 2001, well before Google Glass and Oculus, but lacking the computer hardware to make it worthwhile.
    • the 2006 vacuuming robot--but it wasn't powerful enough
    • a robot vacuum with a cord--that could even wind up its own cord, but meanwhile people were tripping on it.

    Management, however, is comfortable that 80% of their products never make it to market. Dyson funds all of these research and development "fails" by bringing to market products so good that they can command top prices. For example, their regular upright vacuum cleaners retail for $299-$599...when traditional machines go for $100. Dyson products still make Amazon's best selling list.  They are even among Walmart's best sellers. People are willing to pay a premium for a product that really works. 

    I wonder if Dyson will ever try to develop a driverless car...that cleans itself.

    Sources: "Inside Dyson's Innovation Machine," by Tracey Lien, Los Angeles Times: Cutting Edge, November 20, 2015.

    "Dyson 360 Eye Robot Vacuum Faces Tough Competition," by Tony Bradley, Forbes Magazine, October 24, 2015.

    Follow up:

    • In what ways can an openly creative atmosphere benefit a company? In what ways can it be a negative?
    • Are all employees motivated by the "carrot" of creative freedom?  Explain why they might be and why they might not be.
    • Did you get the pun in the title of this blog? Explain.