• Shorter workdays and increased productivity

      Video thumbnail of Swedish study

    It seems to be an employee's dream to work fewer hours in a day--and get paid the same thing.  But how does that work from the employer side of the equation? 

    A Swedish study in Gothenburg, now in its second year, has documented lower absenteeism, improved productivity, and better health. Nevertheless, not everyone  is in favor of this program: 

    What do you think?

    Source: "In Sweden an experiment turns shorter workdays into bigger gains," by Liz Alderman, New York Times, May 20, 2016.

    Follow up:
    ---  Research how long daylight in Sweden lasts from April to September. Comment on how you might use your daylight hours if your workday was structured like this Swedish experiment. 
    ---  What is your personal experience with your productivity when you take daily time to relax and renew your energy?
    ---  In what type of business was the Swedish study performed? How does that environment compare to other work sites? Do you think the differences have an effect on the conclusions from the study? How does telecommuting fit into the picture in an office environment?

  • Whole Foods quality control problems

     video about Whole Foods quality control and stock problems [it is followed by Fox News version on You Tube]

    It is never great to hear about sanitary problems in prepared foods:
    --  Listeria bacterial contamination
    --  Lack of temperature controls
    --  Employees not washing their hands
    --  Wet and uncleaned food preparation surfaces
    --  Toxic cleaning chemicals being used on food surfaces

    All of these problems have been identified by the FDA as issues at Whole Foods stores throughout the FDA test area in the northeast.

    Yuck factor: infinity.

    The branding problems are exacerbated when a store has positioned itself as "high end" and has prices to match. 

    Stock prices for Whole Foods have been affected by this latest scandal--which follows a previous problem regarding pricing arose a year ago. 

    Source: "The FDA says Whole Foods packaged foods commit 'serious violations'," by Kara King, Thrillist.com, June 15, 2016.

    Follow up:
    ---  How would the health issues noted above affect your purchases at Whole Foods? Comment on this, as well as your attitudes toward government regulation in this arena.
    --   Are there investing problems--or opportunities--here as well?
    ---  What was Whole Foods' issue from June of last year? Do these two instances suggest a pattern regard Whole Foods management?

  • Credit card warning signs

     Linked to a page with a  PODCAST regarding credit card warning signs, particularly of retail credit cards.

    Before the Great Recession of 2008, there were warning signs that a collapse might be coming. If you saw the movie The Big Short, or if you read any of the analysis in retrospect, the obvious and ignored signs are evident.

    One similar financial warning sign has begun to arise over the last few months. Once again, it involves financial institutions and borrowers with poor credit ratings. Department store and other retail credit cards are issued with minimal or non-existent credit checks--right at the point of sale in many cases. According to Synchrony Financial, which issues many of these cards, borrowers using these cards have been skipping payments at a higher rate. In addition, missed payments on car loans have also been increasing. 

    Not only is this trend a problem for the borrowers who are paying top-of-the-market interest rates on the store credit cards, it is also a problem for the investors in the companies issuing the cards. Some financial observers note that it is "too soon for alarm bells," but others note that an environment of "loosened credit standards...never ends well."

    Source: Early consumer credit warning signs," by Ashley Milne-Tyte, Marketplace, American Public Media, June 15, 2016.

    Follow up
    ---  Who benefits from lowered standards for issuing credit? Who loses?
    ---  Do you have any outstanding balances on your credit cards? Do you have a store credit cards? Have you ever missed a payment? Discuss the way you manage your personal finances regarding debt.

  • "Spendthrifts" and inheritances

    When individuals structure their wills--especially if they have substantial estates--they are wise to consider the spending habits and life situation of their heirs. Even though it can be more complicated, setting up a "spendthrift trust" for heirs who have some of the issues illustrated in the graphic above might be considered. 

    One hurdle that needs to be addressed in setting up a trust that parcels out inherited money over time, rather that in a lump sum is: Who should be the trustee?  The simple answer is: Not a sibling or other family member, as that will undoubtedly cause conflict. It is better to hire a professional. An experienced estate attorney should also be hired to create the trust.

    Source: "Money Talk: How to structure an inheritance for a spendthrift heir," by Liz Weston, Los Angeles Times, June 12, 2016. 

    Follow up:
    ---  What is the estate amount below which funds are not taxes, as of June 2016? Discuss the fairness or unfairness of this tax-free windfall to heirs. Should inheritances parceled out at income over a long period of time be taxed differently?
    --- Would a family member who might include you in their will have doubts about your ability to manage the money? Do you have a sibling or potential co-inheritor that may have these issues? Have a discussion with a family member about this topic, even if it is a difficult discussion. 

  • The Middle Class and the U.S. economy

         podcast linked at Marketplace

    What does it mean to be middle class in America?  The U.S. Commerce Department parameters defining this group include:
    ---  steady job
    ---  home ownership
    ---  two cars in the garage
    ---  annual family vacation
    ---  ability to send kids to college
    ---  ability to save something for retirement
    ---  annual family income between $48,000 and $145,000

    How many Americans fit into this category? In 1971 it was 70%.  By 2016 it was less than 50%. And many of those defined as being middle class feel as though they are living "just above the poverty line." They are a paycheck or a medical emergency away from financial upheaval. 

    Many economists and even CEOs believe that it takes a strong middle class for the economy to thrive. If the trends noted by research continue, the effect on the U.S. economy could be quite dire. 

    Source: "What it feels like to be a middle class family today," by Kai Ryssdal and Tommy Andres, Marketplace, American Public Media, June 9, 2016. 

    Follow up
    ---  Do you aspire to be middle class? Upper middle class? Really rich? How do economic conditions (including student loans) affect your goals? How do your goals compare to the financial environment in which you were raised?
    ---  What strategies, if any, might have been used by the family in this article and podcast to improve their financial status? What strategies have they implemented to survive?
    ---  How does the middle class effect the U.S. economy?

  • "Ugly" as a marketing technique: using color psychology


    Australia commissioned a study to determine the ugliest color in the world.  The winner? Pantone 488C, known as "opaque couché."  It was described by those in focus groups as "sewage tinged" and "dirty." Australia intends to put this research to use by requiring it to appear on cigarette packaging. Other countries may also adopt the practice. 

    Color psychology has been studied to correlate human behavior with specific colors. These results have been used widely in marketing, branding, and motivational interior design.

    Source: "Experts say THIS is the ugliest color in the world," by Suzy Strutner, Huffington Post, June 7, 2016.

    Follow up:
    ---  Do you think color actually has an influence on people's reactions? What is your favorite color? What is your least favorite color? How do you feel about Pantone 488C? 
    ---  List some other marketing campaigns that have used negativity to motivate customers.
    ---  Read about color psychology. What colors are associated with what behaviors? Make a chart. 

  • The NBA and overtime pay

      A two-minute NBA mini-movie about the 2016 finals

    The third game of the NBA finals will be played tonight. The Golden State Warriors, at this point, are up by two games over the Cleveland Cavaliers. Theoretically, they could sweep the series by winning the next two games. That would mean that three games that COULD have been played (games 5 through 7), would be played. From a business standpoint, that is three games of ticket revenue, parking revenue, advertising revenue (TV and radio) and concession stand revenue. 

    I always thought that the extra revenue of the extra games meant that there was overtime pay for the players. However, as noted in the podcast linked below: 

    I wonder what most fans prefer--a 4 game sweep or a 7 game series?

    Source: "The NBA doesn't pay overtime," by Andy Uhler, Marketplace, American Public Media, June 8, 2016.

    Follow up
    ---  What prevents business pressures from being applied to players to "extend the series"?  Discuss the pros and cons of a 4 game versus a 7 game series.

  • Dell minority shareholders win fair-value lawsuit

       news report from three years ago when lawsuit was initially brought by Dell Shareholders

    Three years ago, in 2013, a buyout group organized by Michael Dell took Dell Inc. private by buying up a majority of the outstanding shares of stock. He did this by making a deal with the Dell board of directors, and he negotiated a very low price for the buyout. Michael Dell was the original founder of Dell, and he had taken the company public in 2008. This was an action that returned the company to privately controlled ownership. Because Michael Dell got a bargain price in the 2013 re-privitization, the overall book value and market cap of the stock fell.

    Minority shareholders filed a lawsuit against the board of Dell Corporation, alleging that they were deprived of share value by this transaction. This week, a judge upheld their assertion. This is the first time this interpretation of "fair value" has been used to supersede the market value established by an actual dollar purchase transaction. What may make this case different, in terms of the application of accounting principles of valuation, is that the transaction was a "related party" transaction rather than an "arm's length" transaction. A valuation method similar to those used in leveraged buyouts (present value of predicted future cash flows) was the basis of this recent decision. 

    Source: "Who Decides Fair Value? In Dell's Case, a Judge," by Andrew Ross Sorkin, New York Times DealBook, June 6, 2016. 

    Follow up
    ---  If a majority shareholder can make a special deal for bargain priced stock, is that the same as a "volume discount" common in many sales transactions?  Explain both sides of the issue. If the deal was analogous to a volume discount, what is makes the Dell re-privitization different?
    ---  Define "market capitalization" and "book value" in your own words. Which number is likely to be lower and why?
    ---  Compare and contrast "related party" and an "arm's length" transactions. Give examples of each. 

  • Flood insurance companies profiting from disaster

      from Frontline, May 25, 2016

    When a homeowner buys $250,000 of insurance on their home--or top-of-the-line "replacement coverage"--they expect that, in the event of a disaster like Hurricane Sandy, they would be able to collect enough insurance money to rebuild. They do not expect a settlement of $90,000 (see linked article). An extensive investigation by Frontline and NPR has discovered that insured individuals that were victims of Sandy have not been able to obtain adequate settlements to recover from the flood damage. In the process of settling these claims, insurance companies have profited--and these profits have been subsidized by taxpayers. 

    The National Flood Insurance Program requires that homeowners in flood-prone areas buy flood insurance. When there is a disaster, this government program, through FEMA, pays insurance companies a percentage of all premiums previously collected, plus fees for administration of claims. However, insurance companies often assess the damage "due to the flood" at only a percentage of the real damage--claiming that pre-existing cracks or wear-and-tear should not be subject to reimbursement. There has been no government oversight to these assertions. This has resulted in settlements that do not allow the insured homeowners enough money to do repairs.

    This under-assessment of damages has allowed insurance companies to collect far more money from FEMA than they have paid out to the victims of the flood.  Here is a chart summarizing the results of the Frontline/NPR investigation:

        Source: NPR/Frontline analysis of data from FEMA and the National Association of Insurance Commissioners

    After the report was made public, FEMA began their own investigation into these payments and claims. 

    Source: "Business Of Disaster: Insurance Firms Profited $400 Million After Sandy," by Laura Sullivan, National Public Radio News Investigations, May 24, 2016; with additional reporting from Emma Schwartz, Rick Young and Fritz Kramer of Frontline.

    ---  What penalties, if any, should be imposed on the insurance companies that evaluated claims in a manner detrimental to homeowners? Do you feel the insurance companies' assessments were fair, from a business point of view?
    ---  Do you try to represent your promises to others in one way, but fulfill them in a way that is substantially less than what your associate expects? Give examples of the following: 1) when you fulfilled a promise in full; 2) when you did not fulfill a promise in full--analogous to the actions of the insurance companies; and 3) when someone else behaved like the insurance companies with respect to a commitment meant to you. What were the consequences in each situation?

  • High pressure sales at a for-profit college

      Bob Guillo paid $34,995 for this certificate from Trump University.
          image from NY Daily News

    A college education can be expensive. But a student or prospective student expects to see a cost/benefit relationship between the cost of a private education and the skills learned or connections garnered from that education. High quality professors are also usually expected with high tuitions. 

    Private, for-profit higher education institutions may not always provide the expected cost/benefit ratio. High pressure sales techniques can be used to bump up the costs to the student (and the revenue to the for-profit institution). One university is currently on trial for such practices: Trump University, which was in business from 2010 to 2013.  New York attorney general Eric Schneiderman brought suit against Trump University for these practices. Documents released this week by a federal judge delineated detailed university sales procedures for seminars and courses, including how to counter doubt and resistance among potential customers. Sales people were also encouraged to convince wary (and cash-poor) students to max-out their credit cards. Real estate training was promised, but many instructors had no real estate qualifications.

    According to Schneiderman:

    "Essentially every part of the pitch was false, and it's fraud to induce people to pay money based on false representations. And that's really the essence of the case. It's not a very tricky case."

    The $35,000 Gold Elite package was a requirement to possibly meet Donald Trump, who had little involvement with the day-to-day management of the institution. 

    Source: "Documents Reveal High Pressure Sales Environment Within Trump University," by Jim Zarroli and Ari Shapiro, National Public Radio, June 1, 2016. 

    Podcast also linked at that source (3 minutes, 52 seconds)

    Follow up
    ---  What does cost/benefit mean? Give some examples from your own life where you have expended money and you expected a benefit. Did the benefit justify the cost?
    ---  Do you think that Trump University's salespeople went too far? If so, at what point do you think they crossed the line?

  • Food waste: an entrepreneurial opportunity

       video of Olleco, a company that won an entrepreneurship prize in Dec, 2014
           for monetizing food waste

    Companies have been recycling cooking oil from restaurants for several years, primarily for use in diesel engines. But recently, entrepreneurs have gotten into the business of recycling several types of foods that are too unsightly for retail sale. Venture capitalists are supporting these new businesses as well.

    Here are some examples of entrepreneurial companies and their products in this arena: 

    Back to the Roots: mushroom-growing kits for use with coffee grounds
    Cerplus: sale of ugly food at bargain prices to over 60 clients
    EcoScraps: organic fertilizers and other gardening products
    Forager Project:organic juices and vegetable chips
    Misfit: organic juices
    Wtrmln Wtr: watermelon juice (check out which celebrity is an investor)
    Food Cowboy: has a mobile app that connects charities to food

    Even established businesses like Baldor Specialty Foods is embracing this new revenue stream. They are developing a flour from cabbage & collecting onion-free scraps for the farm that supplies their pigs.

    Some of these companies are even posting job openings...And if there is not a food up-cycling business in your area, maybe there is an entrepreneurial opportunity for you.

    Source: "New Crop of Companies Reaping Profits from Wasted Food," by Stephanie Strom, New York Times, May 24, 2016.

    Follow up:
    ---  Do some research: how much food do Americans waste per capita each year?
    ---  Define "up-cycling" and give some other examples of new industries that embrace it.

        ________________________________           ____________________________________ 


  • New overtime threshold: a plus or minus for ambitious employees?

    Employees hired in white collar positions are typically paid for a 40-hour workweek. Employees making less than $23,660 are deemed by federal law to be low enough in the hierarchy to be subject to overtime pay for work in excess of forty hours. The Obama administration, however, is proposing that the salary threshold be raised to $47,476. This would make many more employees--including many college graduates in their first jobs--eligible for overtime pay.

    In some businesses, the norm is to separate the ambitious, super-hard-working employees from the others by requiring tasks that can only be completed in a workweek that extends beyond 40 hours. This practice is common is prestige publishing and entertainment industries, where jobs are scarce and much desired. An entry-level employee wishing to advance in one of these industries is expected to be the kind of workaholic depicted in the film "The Devil Wears Prada."

    However, with this new proposal:

    "...that business model is suddenly under assault. The change represents more than an economic challenge for the companies that rely on the willingness of young, ambitious workers to trade pay and self-respect for a shot at a prestige job down the road." [NYT]

    As the article points out, not all businesses are keen on this rule change, and some think that it will not have any de facto effect on the way employee compensation is managed. 

    Source: "President Obama's Overtime Pay Plan Threatens the 'Prada' Economy," by Noam Scheiber, New York Times: Business Day, May 30, 2016.

    Follow up:
    ---  Are you seeking (or are you employed in) a job for which the starting salary is above $23,660, but below $47,476? What are your thoughts about the effects for employees on this proposed rule change?
    ---  Do you think employers will find ways to work around any changes in the law? How would those workarounds be managed? Do many jobs tacitly require overtime work for salaried employees?