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.
This week, the Supreme Court has agreed to hear a case brought by public employee Mark Janus of Illinois. He objects to paying union dues, which are required under the "closed shop" policy allowed under Illinois state law. "Closed shop" means that if an employee benefits from a union contract, then he or she is required to pay union dues, even if they would rather not. "The decision, due by next June, could prove a costly setback for public-sector unions in 22 states, including California, where such fees are authorized by law. Labor experts have predicted a significant percentage of employees would stop supporting their union if given a choice. The other 28 states have 'right to work' laws that forbid requiring workers to join or support a union." (Los Angeles Times)
Without the ability to collect dues from all beneficiaries, the clout of unions may be affected in terms of their ability to bargain for salary and benefits for employees. According to the Economic Policy Institute, this would negatively affect the salary and benefits for other workers over time.
Since the appointment of Neil M. Gorsuch this year to the Supreme Court, there are now five judges who would likely vote to strike down closed shop provisions.
Source: "Supreme Court poised to deal a sharp blow to unions for teachers and public employees," by David G. Savage, Los Angeles Times, September 28, 2017.
Swedish home furnishings company, IKEA--famous for its meatballs as well as its assemble-it-yourself bookshelves--recently signed an agreement to purchase TaskRabbit. TaskRabbit is a San Francisco company that provides a platform by which various services can be arranged with independent contractors.
When a company buys another company like itself, it is horizontal integration. When it buys its suppliers, distributors, or servicers, it is vertical integration, which applies to the TaskRabbit purchase. We can't get all the details of the purchase, however. IKEA--which is controlled by a trust based in Holland--has purchased a corporation that previously had been funded by private venture capital. Because IKEA is also not publicly traded, it can choose NOT to disclose the price it agreed to pay for TaskRabbit.
The deal is expected to be completed sometime in October, but TaskRabbit will continue to operate autonomously.
Source: "IKEA enters "Gig Economy" by Acquiring TaskRabbit," by Tiffany Hsu, New York Times, September 28, 2017.
While hipsters and hunters may seem to be at odds in these economically divisive times, one product seems to be enchanting those in many far-afield demographics: the Yeti cooler. The product was developed by two outdoors-y brothers in 2006 to solve their own problems with coolers that would underperform and break. Sales grew via outdoor gear outlets, and the company attracted a major investor, then filed for an IPO in July 2016. It has yet to move forward with the public offering, however.
The Yeti coolers are expensive, sturdy coolers, constructed like kayaks and built to last. They keep ice frozen for days rather than hours. The Tundra line can also be used as a seat. The company also makes a "Rambler" line that contains tumbler-sized products that can keep a single drink cold.
It is interesting to note that a truly high quality product that meets people's needs and will last a long time is a product that has broad appeal.
Source: "Can a $300 cooler unite America?" by Steven Kurutz, New York Times, September 28, 2017.
"Half of the workers in construction in Texas are undocumented," reports Stan Marek, CEO of Marek Construction, via Fox News. Moreover, the National Association of Home Builders reports that 54% of developers nationwide have felt a shortage in their labor pool in 2017, since the immigration ban began. These reports were made in August, PRIOR to Hurricane Harvey's devastation in Houston. This was also prior to the edict phasing out DACA (Deferred Action for Childhood Arrivals).
DACA beneficiaries (also known as "Dreamers") have undertaken training programs and have become employed in helping professions as well as construction and other trades. With their prospects suddenly at risk, the services they have been and would be providing as Houston cleans up and rebuilds are also in jeopardy.
Ramon Ibanga Jr., professionally known as Illmind, wanted to make money in the music business. He faced the same disrupted revenue environment as others wanting to be involved in the music business. Illmind's specialty is digital beats and sounds.
He started out small--really small. He recorded snippets of digital drum sounds in his mother's basement (after dropping out of college). He posted them on his MySpace page...and they were stumbled upon by a record label working with LL Cool J. This led to Illmind's first "placement"--a payment for his music. He eventually created his own product: about 150 individual sounds in a digital folder. He set up a PayPal account and offered them for sale for $20 to $25 a folder. He was surprised at his immediate sales, and continued to create product,
He was not the only person packaging sounds and marketing them to music producers, who in turn used the sounds to enrich the music they were producing. Frank Dukes (real name: Adam King Feeney) is one very successful music "sample" entrepreneur--better known to producers than to the public. He creates sound segments that are central enough to others' creative content to get him writer or producer credit--producing royalty revenue as well as one-off sales.
Illmind, continuing to network and develop his now unique brand of sounds, and also has been able to enter this more lucrative "sampling-ready" content market. Although he still sells his $25 folders as well, much of his current income comes from being sampled by major artists such as Bruno Mars, Taylor Swift, Drake, and others.
Illmind Beats for Kanye West:
Source: "Episode 794: How to make it in the music business," [podcast] by Jacob Goldstein, NPR: Planet Money, September 17, 2017.
Blue Bottle Coffee is a start up that has recently had an IPO. Nestle purchased it. The impetus for starting a company (especially for a person who has the soul of a musician) is at odds with the profit motivation of large corporation shareholders.
"Repeating to perfection" and "sensory experience" as a value, as well as "being in service" to an idea are all concepts that may not have an overlap with a focus on profits only. The experience of entrepreneurs can be at odds with the values of a public corporation. James Freeman gives some insight into his experience as an artist and an entrepreneur in the video above. The experience is put in context in the NYT article.
Other entrepreneurs and investors have had parallel experiences, including Clamath Palihapitiya.
Quite a bit to ponder, as a consumer and a student of business. As well as a coffee drinker...
Source: "Fixing the 'Brain Damage' caused by the IPO process," Andrew Ross Sorkin, New York Times, September 18, 2017.
Best Buy CEO Hubert Joly has been instrumental in turning around company sales and image for Best Buy. His strategy has been consumer-focused and experiential. If you haven't been into a Best Buy recently, you might be surprised on a visit to notice that Apple products are prominently displayed in a similar but slightly more attractive way than they are in Apple retail outlets. Microsoft and Android products are displayed in a similarly engaging fashion. This on-ground experience translates into sales numbers. What the NYT writer found was:
"Best Buy’s rebound has been surprisingly durable. Revenue figures have beaten Wall Street’s expectations in six of the last seven quarters. The company’s stock price has risen more than 50 percent in the past year. Workers are happy. And judging from several other visits I paid to Best Buy stores, the chain appears to have avoided the bleak fate of other big-box retailers."
The imperatives that have made a difference to Best Buy included a focus on:
Source: "Best Buy's Secrets for Thriving in the Amazon Age," by Kevin Roose, New York Times: the Shift, September 18, 2017.
The newly announced iPhone X (pronounced "ten") has some new features that many view as a step backwards. The thumbprint ID feature is gone...and replaced by a facial recognition ID...that uses infrared light. Supposedly the infrared lighting will allow the phone to be opened in the dark. But infrared usefulness, generally (according to experts) diminishes in bright sunlight. Also, those wanting to open their phones stealthily may not be as hidden as they'd like to be...
The headphone situation has morphed beyond the "dongle" workaround to totally wireless functionality. As someone who still has a landline phone with a cord (for calls that really need to be crystal-clear), I am baffled by the elimination of the corded option. Oh well.
The charging is also wireless--done through the glass casing on a charging mat. This, of course brings up a Catch-22:
Consumers will decide the fate of the iPhone X. Pre-orders begin October 27, 2017, with shipping beginning November 3rd.
Equifax, one of the three gatekeepers of credit histories for individuals, recently announced a breach affecting virtually all financially active individuals in the United States. The breach occurred between May and July of this year, but Equifax opted to delay letting the public know about the breach. In the meantime, three executives, including Equifax's Chief Financial Officer, sold $1.8 million of stock. The Senate is investigating these sales to see if the senior officials had had insider knowledge of the breach.
The issue for most of the 143 million Americans affected is what to do to be protected from identity theft, since social security numbers, mothers' maiden names, drivers license numbers, addresses, and in some cases credit card numbers were stolen. There is some action that needs to be taken immediately, and some financial behaviors to remember for the future.
How to initiate a credit freeze, from CNBC News:
Contacting Equifax to set up a credit freeze or fraud alert by phone can be problematic. Brian Fung wrote for the Washington Post about his 45 minute phone ordeal. I hope he also remembered that it is important to contact TransUnion and Experian as well (contact information is in the Follow Up government link).
On a personal note, I am not surprised that Equifax had a breach and handled it poorly. They created an identity theft problem for me that I discovered in 2016. They merged my credit history with a person whose social security number differed by one digit from mine. To clear up the problem, they deleted my credit history from their system prior to February 2016. Except...they must have just pulled my prior history later from Experian and TransUnion, because the old history (including closed accounts) reappeared. In my experience, the run-around described by Brian Fung is business-as-usual with Equifax.
At least this breach is bringing attention to management problems and privacy issues. Savvy consumers will also be paying more attention to the accuracy of their financial profiles.
Source: "Senators Seek Answers on Equifax Breach, Including Details on Stock Sales," by Tara Bernard Siegel, New York Times, September 11, 2017.
"Range anxiety" is less of an issue for the Tesla Model S (200+ miles) than it is for other all-electric vehicles like the Nissan Leaf (107 miles). Nevertheless, for those evacuating areas of Florida in the path of Hurricane Irma, vehicle range in congested traffic conditions was a major factor. (Projected mileage is based on normal driving conditions, not power-draining bumper-to-bumper traffic.)
Tesla was able to remotely boost certain late-model vehicles with software enabled at 60 kilowatt hours to 75 kilowatt hours, extending their range by up to 40 miles. In non-emergency times, Tesla sells this range upgrade for $6,000-$9,500. The free Irma upgrade will expire on Saturday.
While the range extension may have been both practical and comforting to evacuees, Tesla's power to remotely manipulate the range of their vehicles raises other questions. What else does Tesla have control of? Does centralized control mean more vulnerability to hackers? What personal information is Tesla keeping track of?
Perhaps consumers of all things electronic have become inured to privacy and control issues...but that complacently often abruptly ends when there has been an inconvenient error or a breach.
Source: "Tesla boosts car battery power during Irma, raising questions of control," by Tiffany Hsu, New York Times, September 11, 2017.
A person does not have to be a U.S. citizen to own residential real estate in the United States. In fact Chinese investment in U.S. real estate was $36.6 billion last year. Nevertheless, many assume that undocumented immigrants cannot be home owners. But the value of home ownership is high on the list of priorities for many immigrants, just as it is for many born in the U.S. But regular mortgages are not available.
Financing real estate is the big hurdle. While rich foreign nationals may be able to buy an investment property for cash, undocumented immigrants trying to buy their own home can only get a loan at about twice the current interest rate for a conventional 30 year mortgage. This loan is called an ITIN mortgage (see article and link below). In spite of this hurdle:
" More than 3.4 million undocumented immigrants are homeowners, according to the Migration Policy Institute analysis of the 2014 U.S. census data. That’s about 31 percent of the undocumented population."
Are the rates higher because there is a higher risk of delinquency or default? According to CEO Jason Madiedo, of Alterra, which has issued about 300 ITIN mortgages, “Out of all of the ITIN loans that we've done, we have had three loans pay off completely and we've had zero loans default or go delinquent.”
To put this anecdotal data into perspective, the delinquency rate on single family house mortgages in the U.S. are currently at 3.68%, and were at a high of 11.36% in 2009.
For additional perspective on the rates of home ownership, from the linked article:
Silicon Valley firms--including Instagram, Twitter, Amazon, and Facebook--have been making donations to public school teachers willing to brand themselves and use their products in their curriculum. One teacher, Kelly Delzer in North Dakota, set the pedagogical tone which could justify her own participation via a TEDx talk: "Reimagining classrooms: Teachers as learners, students as leaders":
Kelly is featured in the NYT article below. Inspiring though her classroom may be, she alludes in her TEDx talk to teachers being the "gatekeepers" of information about the world. If that is the case, assimilating information through the filter of a specific medium might be a major factor in slanting information in a certain direction. On the other hand, many students might be empowered by a classroom environment that is as addictive as their gaming environments.
Education is an arena where trends and philosophies often change. This "customer"-centered approach will be no doubt continued to be debated.
photo by Don Koeck from the linked article
Side note: One of the comments to the online article asked a question about the lack of diversity in the classroom pictured above. I don't know if it means anything in terms of the classroom choices made by Instagram, the demographics of the district, or an NYT editorial decision. Nevertheless, I would be interested to know the demographics of those who are being served by these programs.
Source: "Silicon Valley Courts Brand-Name Teachers, Raising Ethics Issues," by Natasha Singer, New York Times, September 1, 2017.
Five years ago, Dollar Shave Club upended the men's razor business with its subscription service and sassy advertising. Dollar Shave Club's disruptive branding included human-to-human, non-scripted, customer service. The well-trained "member service agents" were considered by Dollar Club to be an investment rather than an expense subject to cost cutting. Dollar Shave Club's success led to a $1 billion buy-out by Unilever in 2016. As part of the deal, Dollar Shave Club remained an autonomous operation, which Unilever successfully managed with its Ben & Jerry's acquisition. The hands-off approach by a parent company is unusual. It is not unusual, however, for a company to experience growing pains when there is a change in ownership structure.
Unilever expected Dollar Shave Club to expand its product line into other grooming products, and generate a "double-digit, year-over-year" revenue increase. But in the process of re-organizing, lay-offs, and new personnel, Dollar Shave Club has lost some of its "cheeky, underdog" edge. Sales of new product lines have not met expectations. The goal of increasing per-member spending from around $5.50 per month to $12 per month has not been met.
We'll see if the new website design and product campaign planned for this fall makes a difference...and if Dollar Shave Club and its CEO and founder, Michael Dubin, are able to maintain their status as an independently-operating subsidiary.
Source: "Dollar Shave Club succeeded with razors, but the rest of the bathroom is a challenge," by Paresh Dave, Los Angeles Times, September 1, 2017.
Should retailers hike the prices of supplies needed for survival when a disaster strikes? Does the "law of supply and demand" give entrepreneurs the right to buy up supplies, then re-sell the water and the matches and the gasoline or boat rescues to the highest bidder, or at an exorbitant mark-up? If so, should the prices go up by 20%?....or 400%? More?
An opportunistic hike in prices, termed "price-gouging," may be divorced from ethical considerations when it comes to a hotel room on the centerline of the eclipse, or front-row seats to a Lady Gaga concert. But in the face of disaster, what are our responsibilities to other human beings?
Contrary to what some believe, the law of supply and demand is not actual legislation guaranteeing the right to charge what the market will bear in every circumstance. But profit-taking in times of disaster may have consequences for retailers who want to continue doing business in better times. And because the supply chains are disrupted, not all of the normal market pressures are in place to mitigate price hikes. In times of scarcity, rationing in terms of equitable distribution is one solution. Rationing by ability-to-pay is another. Not everyone agrees.
Here is an interview from Fox News with Texas' Attorney General Ken Paxton:
Source: "Economists don't think price gouging is a problem. But what about our social values?" by Adrienne Hill, Marketplace, America Public Media, September 1, 2017.
When a Kickstarter or Indiegogo project meets its funding goal straightaway, what can the entrepreneur do to keep the funding coming in throughout the launch period? Here is an example. Spy Fight launched on August 27, 2017--just over a week ago. Within four hours, it had met its Kickstarter goal of $5,000--but the project will remain open for additional pledges until September 27th. The entrepreneur's immediate circle of contacts probably sponsored the project in the first week. Why would some curious friend of a friend of friend be interested in throwing "extra" money at something that has (at this point) raised more than four times the goal?
What the Spy Fight launcher (Cards for Gamers LLC) did was redesign the Kickstarter launch page to include three "stretch goals." These funding points, if reached, would provide a special bonus card in addition to the regular deck to those who sponsored at the "I-want-one-game" level. With 21 more days to go, the first stretch goal of $20,000 has already been met, and Spy Fight is less than $2,000 away from meeting the second stretch goal of $25,000. The $30,000 stretch goal seems within reach.
My hope is that Cards for Gamers LLC personnel have already prepared a detailed business plan, and that they know their unit costs at various levels of production. I hope they have prepared a flexible budget as part of their plan, so that they know how increased demand may affect their production and delivery plans. And, if the game is good, I wish them profits galore.
Yesterday's blog addressed 10 skills essential to business success compiled by one analyst, but here is skill #11: the ability to write well. Jason Fried, CEO and founder of Basecamp (consulting and web-based project management), always makes sure that a potential employee can write well. The first "writing test" is the cover letter for the candidate's resume. His policy is to encourage people to write clearly about themselves--explaining who they are, what they do and why they want to work for Basecamp.t Additional writing is required at various points in the hiring process.
Fried believes writing is important because:
He thinks that every single employee must be a good writer. How are your skills?
Source: "Jason Fried of Basecamp on the Importance of Writing Skills," by Adam Bryant, New York Times: The Corner Office, September 1, 1017.
Evan Carmichael has pulled together clips in which business leaders and other inspirational and successful people dispense advice about essential skills for success. He points out that the skills might be difficult to acquire, but well worth the effort. His list includes the following individuals and, in their own words, their "must have" skill:
Note: The links above do not correspond to those used in Carmichael's video blog, but provide useful background on the speakers.
Source: "10 Skills That Are Hard to Learn, but Will Pay Off FOREVER!" by Evan Carmichael, via YouTube, August 26, 2017.
It is Pumpkin Spice time again...and it isn't even Labor Day. Today, September 1, Starbucks rolls out its iconic Pumpkin Spice Latte (a week earlier than last year). Several products have been around for weeks, for example:
The marketing boost of social media around limited-season products is one factor in pushing the availability of these products earlier in the season. Once the semester starts, summer is over anyway, right? In marketing terms it must be Fall already. Just like holiday marketing season has crept back to begin at Halloween.
It is interesting to note the two ways that statistics related to pumpkin spice products are presented--first to suggest a trend toward decreasing popularity ("only 10% in 2015 and 2016") and later in terms of the growth from 2013 to 2016 (45% increase).
Source: "Pumpkin Spice Glut Arrives Earlier Than Ever," by Tiffany Hsu, New York Times, August 30, 2017.