Teri Bernstein, MBA, CPA has been teaching full time in the Business Department of Santa Monica College since 1985. Prior to that, she worked in Internal Audit and Special Financial Projects for the 1984 Los Angeles Olympics, CBS, Inc., and Coopers & Lybrand. She attended the University of Michigan and Wayne State University.
book by Robert Skidelsky and Edward Skidelsky
The book linked above is a comprehensive look at money from both a personal finance and macro-economic and philosophical viewpoints. But several other experts have voiced cogent opinions that can help individuals set money goals that will enhance their lives.
These resources might help answer questions--or inspire other questions--surrounding this topic:
Source: "One Money Question To Rule Them All: How Much Is Enough?" by Ron Lieber, New York Times, November 24, 2016.
image from Second Chance Recycling
Most folks take their mattresses for granted...until they need a new one. Not only does a new mattress represent a major investment, the recycling of old mattresses presents both a problem and an opportunity. The big problem is disposing of huge mattresses and box springs. The business opportunity exists in reclaiming the raw materials for re-sale and re-use. Duluth Goodwill Industries does that. But first they had to figure out how to do it in a cost-effective way.
Like all recycling businesses, Duluth Goodwill Industries had to consider these central questions:
With respect to the mattress and box spring disposals, revenue can be generated from selling the reclaimed components after they are separated and re-formed. For the used mattresses, these components and revenue streams include:
Because this program in Duluth is part of Goodwill Industries, labor costs are below market. The overhead costs are also less than market. In addition, as a non-profit, Goodwill received much-needed start-up help from the Natural Resources Research Institute in designing and building a key piece of processing equipment. These cost efficiencies would not be available to a for-profit recycling business.
A new revenue stream, however, may open up in the future, making this and other recycling businesses more viable.
The revenue stream is a fee paid by the purchaser of the replacement item. To assess an appropriate fee, the true cost of an item can be calculated using "environmental accounting" techniques. In the past, the cost to the municipalities and the public at large of disposal and waste have not been factored in. They are, however, a reasonable part of the "Cost of Goods Sold" of an item. This issue is beginning to get the attention of policy makers. In three states--California, Connecticut, and Rhode Island--a $10 fee is collected when each mattress is purchased. This fee covers disposal costs, which could be passed on to recyclers if the components were not going to end up in the landfill.
Source: "The economics of mattress recycling: the spring's the thing," by Britta Greene, Marketplace: American Public Media, November 29, 2016.
Patricia Williams--image taken by Jason Henry for the NYT
Many employees hesitate to "blow the whistle" on fraudulent practices by employers for fear of losing their jobs. This may particularly be a factor for someone who is the sole source of financial support not only for themselves, but for their children. Patricia Williams, however, is a single mother who risked everything to bring to light the improper practices of Wyndham Vacation Ownership, a company that sells time-shares. Ms. Williams, who had 15 years of experience in the industry, was branded as a troublemaker and fired from her position as a sales representative. She found it impossible to find similar employment and compensation. The retaliation by Wyndham was an extreme consequence, as Ms. Williams had followed company policies regarding "Wyntegrity": she went to her supervisors and managers rather than an outside regulator. These were some of the practices she reported:
After a four-year case, a jury recently awarded Ms. Williams $20 million in compensatory and punitive damages. The case, however, may be appealed by Wyndham.
Source: "'My Soul Feels Taller': A Whistleblower's $20 million vindication," by Gretchen Morgenson, New York Times, November 25, 2016.
Halloween is over. All of us who are amateur pumpkin-carvers are probably done with our pumpkin carving for 2016--and have moved on to year-end holiday decorations. However, there is a business in New York City--Maniac Carvers--that specializes in high-end pumpkin carving. Their product line includes:
The owners, Marc Evan and Chris Soria, are artists--not business people. They were completely unknowledgeable about how to run a business when they started out, but have learned a lot--primarily in the areas of pricing and logistics.
Source: "The Pumpkin Carvers," produced by Sky Dylan-Robbins and Nate Lavey, newyorker.com/video, October 29, 2013; reposted in 2016.
truffles--image by Dan Ashman, WNBC
Truffles are a specialty food item. According to the podcast, truffles taste like "dirty socks--in a good way." The acquired taste of truffles makes them valuable to high-end restaurants, as "foodies" seek out the truffle experience. Here are some reasons that truffles are special:
The interviewers in the linked podcast follow around 24-year-old entrepreneur and truffle enthusiast, Ian Purkayastha, as he spends a day selling $20,000 worth of truffles (about eight pounds) to several NYC restaurants. He makes the sales from a styrofoam box in the back of a rental car. His profit is about 10%, although the restaurants he sells to make considerably more.
Purkayastha also produces other truffle products that bring in more money, but he feels that the heart of his business depends on his relationships with the chefs that buy his truffles from the trunk of his car.
Source: "A Trunk Full of Truffles," by Stacy Vanek-Smith, hosted by Dan Ashman, Planet Money--Episode 733, National Public Radio, November 4, 2016. [transcript]
Black Friday 2015 from linked article; Yana Paskova/Getty Images
Some consumers look forward to Black Friday, the marketing phenomenon and shopping spree that occurs on-ground on the day after Thanksgiving. The corresponding shopping day for online shoppers is known as "Cyber Monday." Research shows that the demographics are different for these groups. In addition, there are several operational differences from the retailers' side:
As usual, the deals online are not as jaw-dropping and spectacular as the Black Friday offers. And, as in prior years, to get those in-store deals, shoppers need to arrive early and read the fine print in the advertisements.
Dollars spent by consumers have been shifting from in-store to online purchases--so deals are also offered by many retailers that can be used either in-store or online. There are examples of each type of discount linked in this article. And there are some shopping tips in this article.
Source: "It's Black Friday Cyber November," by Jed Kim, hosted by David Brancacchio, Marketplace, American Public Media, November 21, 2016 [podcast].
image from affordablewebdesign.com
Many people feel pressure, in the current business environment, to enhance business connections by creating their "brand" on social media, and to network with others in their field. Many others use social media to keep up with acquaintances or family. Social media is also used as a news source, a source of entertainment, a platform for gossip, and/or an arena for political expression. While these uses may seem attractive, the author of the article below (who is an associate professor at Georgetown University, author, blogger and computer scientist), takes another viewpoint. He posits that time spent using social media may be more harmful than helpful--especially to one's career:
"I think this behavior [social media use] is misguided. In a capitalist economy, the market rewards things that are rare and valuable. Social media use is decidedly not rare or valuable. Any 16-year-old with a smartphone can invent a hashtag or repost a viral article. The idea that if you engage in enough of this low-value activity, it will somehow add up to something of high value in your career is the same dubious alchemy that forms the core of most snake oil and flimflam in business."
Cal Newport also notes that, because social media use does not require concentration on difficult tasks over the medium- or long-term, it harmfully trains people to opt for the easier short term reward. This is a feature of addictive substances. An additional feature is of addictive behavior is the need to use more of the substance over time.
Newport does not even mention the possible harm that may come from a manager or human resource professional discovering an unsavory post in an employee's feed.
Here are some resources where a concerned social media user might measure their own internet obsession and/or addiction:
Source: "Quit Social Media: Your Career May Depend On It," by Cal Newport, New York Times, November 19, 2016.
Follow up: Consider these questions:
Hulton Archive, Getty images ( linked article): Golden Gate under construction.
Donald Trump, our President-elect, is in the construction business. He has the opportunity--pointed out in the article linked below--to:
"Build something awe-inspiring. Something Americans can be proud of. Something that will repay the investment many times over for generations to come."
Examples of stellar, memorable projects from the past include:
The country might be able to unite behind either a symbolic and grand masterpiece of architecture and design--open to the public--or totally modernized, safe, and sturdy roads, bridges, and schools. Talk about putting America back to work! There is a lot to be done. Some suggestions made in the article include various rail projects, a bridge project and both freshwater and sea-based projects.
Somehow, I don't think that the (now back-burnered) southern border wall would fit the bill...
Source: "Trump-Size Idea for a New President: Build Something Inspiring," by James Stewart, New York Times, November 17, 2016.
image from BuzzFeed and Huffington Post
The issue of tips and compensation paid by employers is sometimes debated among human resource managers and politicians legislating the minimum wage. Nevertheless, for individuals who depend upon tips to make a living wage, maximizing tip compensation is a priority.
Workers in several locations have taken it upon themselves to come up with creative ways to enhance tips. The opportunity to vote in a "tip survey" such as the one illustrated above is one example; several more are shown in the articles linked below. Anecdotally, and in limited research studies, these seem to have a positive effect.
Tip increases have also been noted arising from a different arena: mobile point-of-sale (mPOS) apps. These often give customers a palette of multiple-choice options for percentage or flat rate tipping. This not only prompts the customer to consider tipping, it also relieves them of the responsibility of calculating the tip.
For more information about tipping, visit tipping research.com .
Sources: "3 Reasons Why mPOS is Driving Up Tipping," by Matt Niehaus, Inshore, June 10, 2016."The tip jar goes digital and it is costing you," by Jenny Hoff, creditcards.com, January 27, 2016. "Baristas take note: How to get more money in your tip jar," by Jody Avirgan, Marketplace, American Public Media, February 18, 2013.
Last weekend's New York Times Magazine ran several articles about the massive trend toward re-designing logos. Part of it is modernization, in terms of what translates well to social media. Part of it is trying to appeal to millennials. I suspect part of it also is advertising and design companies trying to maximize sales by creating a need--which is one of their areas of expertise. There is also an uptick in product redevelopment. The whole issue is worth a look to those interested in business trends, products, marketing, and design.
One of the most interesting topics is: what logo designs and redesigns have not worked. Infamously, there was an almost immediate redesign of the Trump/Pence logo, as the original design was deemed by many to be humorously suggestive.
Source: "Do Over: On the Current Obsession for Redesigning Everything," a collection of articles by Jake Silverstein, Yudhijit Bhattacharjee, Malcolm Harris, Yiren Lu, Paola Antonelli, Nikil Saval, and Rob Walker via a "21st-century redesign craze themed" The New York Times Magazine, published in print on November 13, 2016 (and worth looking at in print or at least on a tablet or iPad).
Blake Irving of GoDaddy; image by Michael Schennum, The Republic
Blake Irving, GoDaddy CEO, was featured this week in the NYT "Corner Office" column. Irving responded on several topics:
Blake Irving had this to say about his experience as a CEO:
"What I have found really interesting, and what I like about it, is that when you’re the C.E.O., you get to set a tone from your seat that’s different than if you’re working within an organization. That ability— to actually shape the culture, talk about the things we’re going to do, how we’re going to treat each other, what we want our values to be — is different. I didn’t realize it until I was in the seat."
Being able to set the "tone at top" is a known important feature of establishing the ethical environment of a company. At GoDaddy, it has been expressed in Irving's support of women in technology positions, pay equality, and working with integrity.
Source: "Blake Irving of GoDaddy: At the Top, You Get to Set the Tone," by Adam Bryant, New York Times: Corner Office, November 11, 2016.
survey image via CleanTech; input from Bloomberg
There is mixed sentiment among analyst concerning the pending merger of SolarCity and Tesla. Both companies are headed by Elon Musk, a visionary and alternative energy entrepreneur, spokesperson, and major investor. The shareholder vote (the only vote that really counts) will occur this Thursday. Meanwhile Tesla has reported a third quarter gain, although both companies face cash management issues.
Optimism exists because of the positive future prospects of solar-based energy and electric cars. The projects are integrated by the Powerwall 2. This in-home battery storage unit is a product that is being developed by Tesla. It can store excess solar energy production generation to prevent it from flowing back to the power grid. Instead the energy can be stored in the Powerwall and used to charge electric cars or to power electric appliances as otherwise needed.
Source: "California Inc.: Moment of Truth for SolarCity/Tesla Merger," by David Lazarus, Los Angeles Times, November 14, 2016.
Follow up: What are your thoughts on, and your interest in purchasing or investing in:
source: Bureau of Labor Relations
The "gig economy" seems like a fabulous idea at first glance, but--like much of society--it is tiered into financial classes. Some individuals operate as sole proprietors or independent contractors, with many "clients" rather than employers. They perform jobs on a project basis--and include bookkeepers or errand-runners/personal assistant, and may command a wide range of compensation.
Others operate in a grey area (Uber, Airbnb) where there is one company that operates as a clearinghouse to obtain clients. These workers operate on what in other eras was called a "piecework" basis--they are paid by job, and these job are short term in nature. Other individuals sign up with the more traditional temporary employment agencies, where the company takes a flat fee for placing individuals at entry-level positions for various short-term clients of the employment agency. These workers are actually employees of the temporary agency, and are paid on a "wage" rather than "salary" basis.
Most of the individuals operating in these areas of the gig economy are making around $15 an hour--or less if they are providing their own assets, and the cost of those assets is figured in. But "Supertemps" make much more. These individuals often have MBAs and executive experience, but for various reasons are not interested in being a permanent employee. Companies need these highly skilled individuals in times of transition--mergers or downsizing, for example. One benefit to the Supertemps is that the compensation is sometimes even higher than regular executive compensation.
But transitions require specialized "soft skills" at several levels of corporate organization. Perhaps a new tier is developing for temporary workers who are adaptable to new situations, and who are willing to take on the leadership roles at the middle management level. This means being able to direct the work of other temporary workers needed in a transition situation. Managing others to input data, and providing supervisory checks for accuracy, might command hourly earnings more in the range of $35. When a temporary worker finds himself or herself in a work situation that requires skills beyond those of an entry-level worker, an opportunity to negotiate presents itself.
As the gig economy expands, employees at all levels will be in demand.
Sources: "As Freelancers Ranks Grow, New York Moves To See They Get What They're Due," by Noam Scheiber, New York Times, October 27, 2016."The Rise of the Supertemp," by Jody Greenstone Miller and Matt Miller, Harvard Business Review, May 2012. "Protecting Temporary Workers," OSHA, September 16, 2016.
image from Sustainable America
This blog is directed both to those who feel that they have "lost" with respect to the election results, and to those who are aligned with the outcome, but who still want to direct their charitable and political discretionary income to causes in which they believe. These include, but are not limited to:
The way each of us chooses to dole out our discretionary income is important.
Source: "Where to Spend Your Money Today: Some Things Worth Your Dollars," by the Racked staff, Racked.com, November 9, 2016.
Follow up: Research the links above and/or other links in the Racked article. List them and describe what they are about.
image from The Unitive
Interacting in a work environment the day after a divisive election can be challenging. "Saying nothing" can also be harmful to work relationships. Regardless of whether your candidate won or lost, skills must be developed to cope at work.
Tips from the Business Journal and elsewhere regarding how to act if your candidate has won:
Tips regarding how to act if your candidate has lost:
If you own or manage a business, you may have another option. According to R. Scott Oswald of the Employment Law Group PC, it helps to implement and disseminate a written policy about allowed conversation and actions in the workplace.
Source: "Have a divided post-election workplace? Here's how to handle it," by Sara Kilgore, Washington Business Journal, November 9, 2016.
Andrew Caspersen received a four year prison sentence in New York last week for his part in a $38-46 million securities and wire fraud. Judge Jed Rakoff said this was a "lenient" sentence because of Caspersen's gambling addiction. Caspersen's victims were his friends, his family, and his employer (PJT Partners, Inc.). He used fake companies and fake addresses among other techniques in defrauding them.
Could this have been prevented? Although psychological factors were considered in imposing the 4-year rather than the 7 1/2 to 15 year sentence that comprised the recommendations, the article linked below did not mention any psychological factors that may have affected the victims and contributed to the extent of the crimes. There may have been co-dependency issues and enabling behaviors, since the stakeholders may have been aware of Caspersen's gambling problems, and the fact that Caspersen had been in therapy and quit.
From an accounting perspective, however, the lack of adequate supervisory internal controls may have been a contributing factor. In addition, ethical behavior is often established as part of the "tone at the top" of an organization--and the PJT Partners' website names many prominent investment professionals. The necessity of conducting business honestly may not have been communicated adequately to all investment advisors, even though there was an audit committee that included the company Chairman.
There is no information available on the website or in the article that addresses whether or not there was any regular and contemporaneous review of advisor return-on-investment reports.
Source: "Ex-Executive at NY bank gets 4 years in prison in $38 million fraud," from the Associated Press, via CNBC News, November 4, 2016.
Abigail Johnson, CEO of Fidelity; photo by Stuart Darsch
Although many of the women on Forbes' list of the 25 most powerful women of 2016 are elected or appointed political figures throughout the world, seventeen of the women are business powerhouses, or in positions where they influence world economics. They include:
Indra Nooyi, CEO PepsiCo; photo courtesy AFP
Source: "The World's 25 Most Powerful Women 2016," by Alix McNamara, Forbes Magazine, November 1, 2016.
drawing by Antony Hare in the NYT
Meaningful work almost always includes problem-solving and autonomy over at least some aspects of a process or a project. In prior eras, many "blue collar" jobs--or working class jobs--were factory jobs, which had been de-humanized and made meaningless by being broken down into repetitive tasks to remove the possibility of an erroneous choice in the production process. "White collar" jobs, which often required college degrees or other post-high school training, were career paths that could provide more fulfillment, as well as a paycheck.
Ironically, "white collar" office jobs have undergone a dumbing-down or sterilization process in recent years. Customer service representatives--rather than being attentive to a customer's needs--follow a prescribed and narrow script from which they are not allowed to deviate. Evaluations are often distilled into numbers rather than descriptively providing positive feedback. Sales quotas in the short term often trump the development of long-term business relationships. In short, the autonomy that provides job-fulfillment is missing from many office jobs.
Sridhar Pappu addresses the work transition made by four men in his article in this week's NYT Men's Style section. Each sought life fulfillment and satisfaction by moving out of office work and into a job where they were actually making something in the physical world.
This template for job satisfaction could also be applied to women in the workplace, in my opinion. Had he not been writing for this particular section of the newspaper, Mr. Pappu might have included some female stories.
Source: "Want To Quit Office Life to Work With Your Hands? Ask These Guys," by Sridhar Pappu, New York Times: "The Male Animal" feature in the Men's Style section published on November 4; online October 31, 2016.
Elon Musk always seems to have new ideas--especially in the realm of two of his interests: space travel and solar energy. This week he launched his new solar tiles. Instead of being perched in awkward and unattractive panels a few inches off the roof, his new design looks just like a regular roof--only more durable, more attractive, and able to harness the sun's energy and convert it to usable electricity.
In his dreams, homeowners would take the opportunity to install these tiles at the point in time where their asphalt tiles would need to be replaced anyway.
I already have those old-school (but VERY EFFICIENT and cost-saving!) solar roof panels, but I am curious about these new solar tiles as I ponder re-roofing a rental property. As a potential customer I have some questions:
With any new product on the market, it is necessary to "think outside the box" and consider "unintended consequences" in order to be a good consumer.
Source: "Elon Musk Unveils Shingles That Could Finally Make Rooftop Solar Sexy," by Alexander C. Kaufman, The Huffington Post, October 28, 2016.
Follow up: (watch the YouTube video first)
image from letusinsureyou.com
How is this for bedside reading for an elementary school dance teacher: "Your Flexible Premium Indexed and Declared Interest Deferred Annuity"? This is an investment made by Melanie Panush Lindert, who, as a teacher, put money into a 403(b) account which invested in this annuity. A 403(b) account is the type of investment vehicle that is allowed to public school employees and others--in lieu of a 401(k). School districts contract with a limited number of investment companies, who send salesmen to schools to get teachers to sign up and divert some of their salary into these funds as a retirement investment.
The problem is, these annuities are often bundled derivative investments that neither the salespeople nor the investor-teachers understand. In fact, they are difficult for ANYONE to understand. Salespeople may be motivated to offer a product simply to get a bonus or a commission, rather than tailoring their advice to benefit the investor. One real-life example of this profit-motivated "advice" is given in the article linked below.
The reason that these investments appeal to teachers (and may appeal to other investors who are not interested in "actively managing" their funds) is that they provide, in retirement, a fixed annual income for life, based on the contributions made throughout the years. However, according to Craig McCann, a former investment analyst with the Securities and Exchange Commission who now specializes in analyzing investments using computer models, an annuity investment like the one mentioned above "Never" makes sense for any investor. From the article linked below:
"[McCann] has employed close to a dozen people with Ph.D.s in math to dissect indexed annuity products as part of his firm’s work, which provides analyses for regulators and litigators representing investors...It took years for his team to master them. 'No agent selling these or investors buying these has the foggiest idea of how these work,' said Mr. McCann, who reviewed Ms. Lindert’s contracts."
McCann says that most bond investments would provide a better return on investment. How does anyone making retirement investments for themselves know they are getting good advice?
Source: "Even Math Teachers Are At A Loss to Understand Annuities," by Tara Siegel Bernard, New York Times, October 28, 2016.
Advertising remains an arena where creativity flourishes. Creativity becomes a particularly important factor in the arc of introducing a new product to the marketplace--whether the product is intended as a "fad" item, or whether it introduces a new type of product or technology. The first aspect of an effective ad in general--and an ad introducing a new product in particular--is its ability to capture the attention of an audience. This might be more of a factor in an age where many consumers fast-forward rapidly through ads on pre-recorded programs, stopping only if an ad catches one's attention by having a curiosity producing visual image in almost every frame.
An ad is particularly successful if it can do three things:
Multiple free airings of the ad--should it "go viral"--make the ad particularly valuable--and may go a long way to making the ad campaign successful (result in actual sales, if that is the goal).
Source: Audi ad on YouTube, September 20, 2016.
Follow up: In your opinion: