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Dave Johnson: Royal Wedding of Austerity and Trade Deficits Is Killing Our Economy

by Dave Johnson on April 29, 2011

Huffington Post…

Sometimes you can just see glimmers of something through the DC brain fog, other times it becomes so clear that you can’t ignore it. The current DC brain-fog motto is, “if it doesn’t work, do it more.” Today’s GDP-growth report shows that austerity isn’t working, so the geniuses in DC want to do it more. And they say, “government just gets in the way of business” so we send our businesses out on their own to compete with governments, and the resulting trade deficits eat our jobs. Cutbacks Cut Growth How long ago was it that DC was all about cutting taxes for the rich even more? And how many minutes after that was DC all about cutting budgets — “austerity” — because of the resulting budget deficits? So instead of the jobs that will fix the deficits the government gives us cutbacks — cutbacks in taxes on the rich, cutbacks in construction projects, cutbacks in teachers and police and other government functions, cutbacks in the things We, the People do for each other. We watch as England, Greece, Ireland and other countries try cutbacks — austerity — to get out of slow growth and their growth gets slower as a result. The U.S. tries it, too, and our growth gets slower, too. The first quarter growth figures are out: 1.8% for the first three months of the year : Total output grew at an annual pace of 1.8 percent from January through March, the Commerce Department said Thursday, after having expanded at an annual rate of 3.1 percent in the fourth quarter of 2010. But the DC fog machine blames the weather, not austerity. Higher commodity prices and winter blizzards that shuttered businesses and delayed construction were among the main causes of the slowdown. Our growth slows because of austerity. So they blame the weather and insist on more austerity. Because austerity “gets government out of the way” of the wealthy few and their accumulation of the rest . Trade Deficit As the economy recovered a bit and people started to buy a few more things , the things came from elsewhere, and the money and jobs just left the economy . Without government policies to deal with it, our trade deficit will continue to get even worse, costing us even more jobs and growth and draining even more money out of the country. Germany runs a trade surplus, so German unemployment is at its lowest level in 19 years. Headline: German Unemployment Declines to 19-Year Low as Export Boom Drives Demand : German companies are hiring as they increase production to meet booming export orders, fueling domestic demand. … German factory orders and industrial production rose more than economists predicted in February. … More than a third of Germany’s medium-sized companies plan to take on staff in the second quarter… Germany also pays workers more than we do, gives them lots and lots of vacation time, health care, pensions, rights on the job — all the things that our leaders say hurt our businesses. Our leadership is making every effort to return to the old economy that caused the crisis. This is because those who benefited from that economy are still in control of the system, still using their great wealth to get what they want , damn the consequences for the rest of us. (Hint, the first link is to a post titled, Nine Pictures Of The Extreme Income/Wealth Gap , and the second is a post titled, Corporate Propaganda Response To Town Hall Medicare Anger .) Contractionary Policies Cause Contraction Conservatives say so many silly things that are proven wrong by the simplest fact-checking — cutting taxes increases revenue, taxes take money out of the economy, tax cuts grow the economy — and the silly thing they say that is hitting us now: cutting back causes expansion. Huh? Here is what really happens in the real world. Following are a few charts showing the effect of the “stimulus” and what has happened since the stimulus ran out. First, manufacturing. See the plunge through 2008? That’s the collapse. See the sharp change to an upward direction through 2009? That’s the stimulus. See the leveling off since? That’s the end of the stimulus. Now look at the following chart of job growth. See the downward slope, when we were losing more and more jobs every month? That’s the collapse. See the upward slope, when we were losing fewer jobs every month, up to where we were actually gaining a bit? That’s the stimulus. See the leveling off, standing still through 2010, going into 2011. That’s the end of the stimulus. You can see in front of your face what works and what doesn’t. We should be doing what works, not what doesn’t. Why did I even have to write that sentence? Solutions As I wrote the other day , we have to invest in rebuilding our infrastructure if we want to continue to be competitive in the world, so right there are millions of jobs that need doing. And the payoff from doing that pays for doing that. We need to retrofit our economy to be energy efficient , so right there are millions of jobs that need doing. And the payoff from doing that pays for doing that. We need more teachers, more police, more firefighters, more judges, more scientists, more social workers, more park rangers, more noise abatement and met and safety and environmental and other kinds of inspectors and so many other things that We, the People do for each other — so right there are millions of jobs that need doing. And the payoff from doing that pays for doing that. So right there are millions of jobs that need doing. And the payoff from doing that pays for doing that. But wait, there’s more: National Manufacturing Strategy The idea of a manufacturing strategy or industrial policy is hardly a radical concept. Alexander Hamilton constructed America’s first industrial policy in 1791. Setbacks during the War of 1812 due to a lack of domestic capacity to build naval vessels and military equipment cemented the determination of the federal government to grow manufacturing, a policy that continued until the end of World War II. To solve the trade deficit and create millions of good-paying jobs (like in Germany) we need a national manufacturing strategy — a government-sanctioned plan to ensure that U.S. manufacturers remain competitive in the global marketplace. Click this link for a few examples of countries that have national manufacturing strategies. Following is the Alliance for American Manufacturing’s plan : Expand American Production, Hiring, and Capital Expenditures Establish a manufacturing investment facility to leverage private capital for domestic manufacturing Expand and make permanent clean energy manufacturing tax credits and industrial energy efficiency grants to allow America to lead on green job creation Link federal loan guarantees for new energy infrastructure projects, including nuclear, wind, solar, other renewable energy sources, as well as the smart grid, with expanding domestic supply chains Adopt immediate, up-front expensing rules for plant and equipment to spur capital expenditures Enforce our trade-legal Buy America and other domestic procurement requirements to prevent leakage of tax dollars overseas Invest in America’s Infrastructure Create a National Infrastructure Bank to finance high-value, long-term infrastructure projects, such as roads, bridges, high-speed rail, and other needs Enact a robust, multi-year surface transportation infrastructure program of at least $500 billion financed exclusively by fuel taxes Enhance Our Workforce Refocus on technical and vocational education, providing a seamless program that bridges high school and post-secondary education to produce the next generation of highly skilled manufacturing workers Reward companies that are investing in effective skills and training programs for their workers Make Trade Work for America Keep America’s trade laws strong and strictly enforced to provide a level playing field for our workers and businesses Penalize and deter mercantilist nations such as China that manipulate their exchange rates and implement non-tariff barriers to gain an unfair trade advantage As the Administration works to double exports, expand the goal to include balancing our trade account so that gains in exports are not overwhelmed by increased imports Rebuild America’s Innovation Base Make permanent the research and development tax credit and enhance it to incentivize commercialization and production in America Focus federal investments in new technology and workforce training on promoting regional clusters of innovation, learning and production And finally, It Never Hurts To Quote The Boss Press release WASHINGTON’S FIXATION WITH AUSTERITY IS HURTING THE ECONOMY Campaign for America’s Future Urges Lawmakers to Put Job Creation First Washington, DC – Campaign for America’s Future’s co-director Robert Borosage commented on today’s economic indicators. Borosage said: “The first quarter growth figures — 1.8% for the first three months of the year — are an ominous reminder of the reality that Washington has forgotten. “This economy is in trouble. For most Americans, the recession has not ended. Growth is painfully slow. Unemployment remains high. Home values are dropping; gas prices are rising; wages are not keeping up. “Despite this — and despite the warnings of economists — Washington, driven by the new House Republican majority, has turned prematurely to austerity. Contractionary policies cause contraction. They will impede any recovery, and slow an economy that is barely moving. “Washington offers no answer because it is fixated on the wrong question. The question is how do we get the economy going and put people back to work — not simply how do we balance our books? Every deficit reduction plan — from the President’s to the House Republican’s to the Congressional Budget Office projections — assumes faster growth than we saw in the first quarter. “The most powerful deficit reduction measure is to put people to work, turning them into consumers and taxpayers. If growth and unemployment stay at this level, deficits will rise, not fall. The White House and the Congress should turn to measures to put people to work, to stave off debilitating layoffs of teachers and police at the state and local level, instead of ignoring the reality that Americans are struggling with every day.” Sobotka, from The Wire : This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture . I am a Fellow with CAF. Sign up here for the CAF daily summary .

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Dave Johnson: Royal Wedding of Austerity and Trade Deficits Is Killing Our Economy

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Dave Johnson: Budget Battle: Who Is Our Country For?

by Dave Johnson on April 7, 2011

Huffington Post…

Who is our country for ? Is this a country for We, the People, where all of us are banded together to protect and empower each other, together? Or is this a country where a powerful few reap all the benefits, and the rest of us are little more than “the help?” That is what the coming budget/deficit/debt/shutdown battles are about. In the past several decades our country and economy has been thrown out of balance in ways that hurt most of us but greatly benefit a powerful few. Communities are being bankrupted, forced to lay off police, firefighters, teachers, nurses and other essential people who work to protect and help us. More and more working people are hurting, falling ever further behind, losing or barely clinging to their jobs and homes and businesses and health. At the same time big-company CEOs who cheat, bankrupt their company, ship jobs overseas and fire white collar workers by the thousands are not held accountable — instead they are rewarded with big bonuses. And in the larger picture the country is falling behind, the economy is losing its competitive edge, the infrastructure that supports our businesses is crumbling and our public structures — like the court system and schools — are deteriorating. And in the face of this decline our public confidence, trust, civility and other measures of civic health are falling. The measure of any serious budget deficit reduction program should be to look at these imbalances and address them. That is the role of We, the People government. But instead, the new Republican budget accelerates the imbalances — on purpose . It cuts or eliminates the programs that assist people, helping us maintain or rise to a middle-class existence. Decades of Stealth Attack Most of us probably thought this country was a “We, the People” democracy where we are all in this together, looking out for each other. But for decades corporate conservatives have been engaged in a stealth attack on the middle class, taking all of the gains of our joint investment in a prosperous economy just for themselves. The effects of the stealth attack on the middle class have been creeping up on us, and are now widely felt. Incomes have been stagnant for some time, as costs rise. Predatory industries increasingly prey on the public and small business. At the same time, a powerful and wealthy few have benefited from these changes so much that today, just 400 people have more wealth than half of our population of 300 million people combined ! One measure of the price of maintaining a middle-class existence is the “toil index.” The index of toil measures the work hours it takes for a family to live in an average home where children have access to an average school. In the past few decades the work hours required to maintain a middle-class existence has gone up 62.4% . So in 1950 the “toil index” was 42.5 hours. That dropped to 41.5 by 1970. But then it started to rise — a lot. By 2000 it was 67.4 hours, an increase of 62.4%! Yet this was at a time when the country as a whole got ever wealthier. And since 2000 it has obviously gotten much worse. Now The Attack Is In The Open Now the attack on the middle class is out in the open. The new Republican budget plan takes away any pretense of our government working for We, the People, and transforms it completely into a government of, by and for the top 1%. Programs to maintain the middle class are cut or eliminated. Help for the jobless is cut back. Government workers are eliminated. Medicare is privatized. Social Security is phased out . But in this budget, taxes for the wealthy few and big corporations are cut, big oil companies continue to raid the treasury, the arms industry prospers and other multinational giants continue to receive subsidies and advantages over smaller, less-powerful competitors. This budget is clear in its purpose: to create a one-dollar-one-vote plutocracy for the wealthy few, while gutting our one-person-one-vote democratic system. How We Got Here Let’s look at the effect of the recent decades of this stealth attack on our We, the People government and economy. Top tax rates for the rich have been dropping and dropping, resulting in big budget deficits that add up to big debt: The Republican budget doesn’t fix this at all. It makes it worse. It cuts tax cuts for the rich even more , and guts the things We, the People do for each other. The next chart shows how corporate taxes have declined, the one after that shows who owns those corporations: So at the same time as income taxes for the wealthiest dropped the tax share from the corporations — mostly owned by the wealthiest few — also declined dramatically. On top of that, cuts in taxes on capital gains and dividends pushed even more of the gains to the top. The Republican budget plan makes this worse. As top tax rates have been dropping working people’s payroll taxes have been rising. This is the money we set aside in the Social Security Trust Fund for our retirement. (Chart from Urban Institute ) The Republican budget not only doesn’t address this, it raids this money we have set aside for retirement by cutting our retirement benefits! Because of cuts in taxes for the rich and the corporations they own, inequality has been increasing dramatically. The Economic Policy Institute shows that, “The share of income going to the majority of households has dropped considerably since the 1970s.. Share of household income held by bottom 99.5%, 1913-2008:” The share of income that 99.5% of us get has fallen from 93.7% to 83.1%. The top half percent get all the rest. The Republican budget plan doesn’t fix this at all. It makes it worse. Here is a chart of the increasing concentration of income at the top: The Republican budget plan doesn’t fix this at all. It makes it worse. How It Happened The “Reagan Revolution” cut taxes, deregulated business, opened our borders to let in goods from “thugocracies” that exploit workers , dramatically increased military spending and cut back on the things we (government) do for each other. It cut back on investment in our people, our infrastructure, education, public structures like our courts, our labor protections, our consumer protections, and attacked the independence of the ways we receive objective information. Things have gotten steadily worse in the years since. Last year’s post Reagan Revolution Home To Roost — In Charts shows the impact on us of these changes over time, concluding, Sometimes it can be so obvious where a problem comes from, but very hard to change it. The anti-government, pro-corporate-rule Reagan Revolution screwed a lot of things up for regular people and for the country. Some of this disaster we saw happening at the time and some of it has taken 30 years to become clear. But for all the damage done these “conservative” policies greatly enriched a few entrenched interests, who use their wealth and power to keep things the way they are. And the rest of us, hit so hard by the changes, don’t have the resources to fight the wealth and power. Look at the influence of these entrenched interests on our current deficits, for example. Obviously conservative policies of tax cuts and military spending increases caused the massive deficits. But entrenched interests use their wealth and power to keep us from making needed changes. The facts are here, plain as the noses on our faces. The ability to fight it eludes us. Will we step up and do something to reverse the disaster caused by the Reagan Revolution or not? The Republican budget plan doesn’t fix this at all. It makes it worse. Much, much worse. More Charts In the meantime, lobbying to influence our government against the things that help We, the People has gone through the roof. (Chart source Sunlight Foundation .) The Republican budget doesn’t fix this at all. They lobby because it pays off. It pays off because the lobbying buys them special favors, breaks, subsidies and policies that favor them over their competitors and the rest of us. This happens because we let them get away with it. Of course, when powerful interests can use money to bend the rules they will bend the rules in their own favor — and will start by bending the rules in ways that let them bend the rules even more. Of course, this is what they have been doing. Here is what is happening in the case of some specific industries: Lobbying for “defense” has increased: And the result show how this has paid off: (note, chart includes defense-related spending .) We spend more on military than all other countries combined . The Republican budget doesn’t fix this at all. Imbalances So these are just some of the imbalances that government should be addressing. But it isn’t. The Republican budget doesn’t fix this at all. It just makes all of these problems and imbalances worse . And this is because of that ability of the wealthy and powerful to pay to get the rules bent in their favor. We need to instead change the system to hold politicians and CEOs accountable, making sure the rich are not abusing the system. This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture . I am a Fellow with CAF. Sign up here for the CAF daily summary .

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Tom Grasty: Thinking "Inside" the Box: How Freeloaders Can Make You a Load of Cash

November 16, 2010

Maybe it’s the low barrier to entry. Maybe it’s a downtrodden economy that’s forced a displaced workforce to become more entrepreneurial. Or maybe, to update the old adage, there really is “gold in them thar clouds.” Whatever it is, more and more people lately seem to be looking to the sky in search of that proverbial pot of gold. As a former entertainment executive turned internet entrepreneur, I, too, have been looking beyond the horizon. And the question I’m asked most often (interestingly, the inquiry often comes before I even tell them what our sites does) is this: “How are you going to make money?” When I tell them the plan isn’t to charge for our service (our service being a collaborative online video editing platform, thank you for asking), the reaction is always the same: “So you’ll be giving it away?” “Actually, yes,” I reply. “For a while, anyway.” What happens next never fails. They smile, arch their eyebrows and nod their heads in a slow, synchronous bob. Not a word is spoken. But I know what they’re thinking: “Well, that’s certainly one heck of a way to run a business.” As it turns out, it actually is. “Free” has long been a mantra for aspiring entrepreneurs and investors willing to cut the cost of their wares to as close to nothing as possible in exchange for traffic that can be converted downstream. And while “free” may fuel a business’ growth in terms of name recognition and word-of-mouth, the concept of “free” often runs out of gas when it comes to actually filling the financial tank. “Free,” it turns out, is a fickle thing. Consumers typically don’t like to pay for something they’ve been getting for nothing. But then again, consumers can surprise you. Just ask Jason Rosenthal. Last March, Rosenthal took the CEO reins of Ning, the popular online service that allows users to create and share their own customizable social networks. Shortly after being promoted, Rosenthal announced he was going to take a hard look at how Ning did business. Thirty days later, Rosenthal fired a fateful shot across the “freemium” model’s bow, “This process has brought real clarity to what’s working and what’s not, and what we need to do to make Ning a big success.” And with that, Ning bid farewell to “free”: If you wanted to keep your Ning account, it was going to cost you. The ability to let consumers design their own social network, and do so for free (the core offering at the center of Ning’s value proposition), had often been cited as a shining example of how to leverage a free, open online platform into massive market share with impressive customer acquisition to boot. The conventional wisdom last March, therefore, was that Rosenthal’s decision to abandon the “freemium” model would cost Ning dearly. But that hasn’t happened. According to Forbes tech writer, Taylor Buley, since freeing themselves of “freemium,” 35,000 of the 300,000 Ning networks have signed up for paid plans. Of course, the flip side of that equation is that 265,000 presumably balked at Rosenthal’s “pay or play” ultimatum. But no matter, Buley maintains, “Ning wooed nearly 12% of its non-paying customers into opening up their wallet — more than double its previous conversion rate. Ning’s paying customer base is three times its previous size.” In hindsight, things turned out quite well for Jason Rosenthal. After five years in the marketplace, the company is on track to turn a profit early next year. But it could have just as easily gone off the tracks. What Rosenthal did was risky. At the time, his decision to discontinue non-paying sites left many in the social media space questioning the move: “What could Rosenthal possibly be thinking abandoning a business model that’s at the core of Ning’s success?” I submit Jason Rosenthal was thinking inside the box. Don’t you arch your eyebrows at me. No, I don’t mean “outside the box” — I mean inside the box. The “shoebox” to be exact. Rosenthal’s ploy to turn a profit for Ning is what I pithily refer to as the “shoebox effect,” and it lays out something like this: Whether we want to admit it or not, we’re suckers for sentimentality. We take photographs, we shoot video, we save every drawing our kids commit to paper. And what do we do with all those photographs, video clips and assorted scribblings? We pack them away in closets, cabinets, cupboards and, yes, shoeboxes. And we forget about them. Then one day, we stumble across that old shoebox. And when we do, we realize those photos, videos and drawings that once seemed a nuisance to keep track of are, in fact, a treasure trove; the shoebox in which they are stored is a treasure chest. So we do what any self-respecting sentimentalist would do. We replace that cheap, corrugated shoebox for a photo album (maybe one with an embossed leather cover and a nice gold trim?) that can give our memories the respect they deserve. In case the point is lost on anyone, allow me to spell it out. Shoeboxes are free. Embossed leather photo albums with gold trim cost money. And there’s a point when you gladly pay the price. Returning to the Ning example for a moment, many maintain that Rosenthal wasn’t thinking inside the box at all when he abandoned Ning’s longstanding business model. To the contrary, they argue, since Ning’s infrastructure makes it virtually impossible for customers to port their content out of Ning and into another platform Rosenthal was actually boxing his customers in. And while I would concede Ning’s remarkably high conversation rate can, to a certain extent, be attributed to the fact Rosenthal turned the proverbial shoebox into something more closely resembling an iron-clad locker, I would suggest something else is at play here that’s contributed to Ning’s remarkable retention rate: the perception of value. There’s no question Ning had their share of users who reveled in the fact they were getting something without having to pay for it. But I suspect after using the Ning platform, a sizeable percentage of those freeloaders saw real value in the service. And because a variety of price points were offered to keep their accounts current, they found one that aligned with their perceived value. Now they’re gladly paying for it. I further suspect this is precisely what Pandora, MailChimp, Flickr, LinkedIn, Evernote and Skype all are banking on. All have successfully been built on the back of the “freeloader.” Ning was just the first company to prove those pesky freeloaders can actually be converted… and make you a boatload of cash in the process. All of which is why I endure all those incredulous eyebrow arches when asked how my new internet endeavor is going to make money. In an age “cloud computing” when we’re all are looking for a ‘locker in the sky’ to store our stuff in, the key isn’t building a better mousetrap — it’s building a better shoebox. I feel confident we have one. Tom Grasty is a novelist, screenwriter and 15-year veteran of the entertainment, advertising and internet industries. He is also a co-founder of Stroome, a collaborative online video editing community that connects friends, family and aspiring content creators.

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Dave Johnson: Erie, PA Town Hall: "No Country Ever Went Broke Investing in Its Own People"

October 19, 2010

Last night’s “Keep It Made In America” Town Hall meeting was at the Bayfront Convention Center in Erie, Pennsylvania. Kyle Foust, Chairman of the Erie County Council welcomed the attendees and led off the Town Hall meeting, quoting Hubert Humphrey: “No country ever went broke by investing in its own people.” I recently spoke with a Tea Party member who did not know that it is government that builds the roads, airports, sewer systems, etc. that make up the infrastructure that is the foundation of our country’s ability to have companies at all. He actually thought that private companies do this, and that “government spending” just “takes money out of the economy.” Maybe this is why so many candidates in this election say that “government spending” is bad but will not say, no matter how hard they are pressed , what spending they plan to cut in their quest for “smaller government.” The Town Hall Following a Unitarian invocation by Rev Steve Aschmann, Scott Paul of the Alliance for American Manufacturing (AAM) — the organization that is putting on these “Keep It Made In America” Town Hall events — explained what AAM is about, strengthening manufacturing in this country. Scott gave the audience several facts about manufacturing: 74% of Tea Party supporters support more manufacturing, as do 82% of union members. 563,500 in Pennsylvania work in the manufacturing sector This is down from 864,000 in 2000 And represents a 35% cut in manufacturing jobs. Candidates Speak Two local House candidates spoke at this meeting. Mike Kelley, Republican candidate for Congress spoke first. “We can’t control unfair competition. Just make it fair, that’s all, make it fair. Enforce the rules. We play by the rules, other people don’t. Chinese currency.” Q: “Will you support buy American policies?” A: Who would not? Especially in taxpayer-funded projects. Q: “Hold China accountable?” A: The world has been waiting for America to take the lead. China has to be held accountable when they break the rules. Q: “Policies?” Competition, we never back away from competition. We need to get a national strategy in place. Taxes — need a VAT. Others all do it. (Note, Kelley’s answer is good for manufacturing. Short explanation: Other countries use a VAT to boost their manufacturing sector. Their manufacturers get a VAT rebate, but goods imported from the US do not, so in effect a VAT is a either a subsidy of their companies or a tariff on imports from us.) Next up was his opponent in the race, Congresswoman Kathy Dahlkemper: We need to get back to a manufacturing economy, to provide that good family-sustaining wage. How to keep it made in America, three points: 1) Close the loopholes, Republicans’s did not vote with us on this. My opponent has pledged, signed a pledge no to remove the tax advantages given to companies for moving factories out of the country and outsourcing American jobs. (Note see my post on this today.) 2) Stop China’s cheating. Everyone knows China cheats. The currency bill, voted for it, the Chamber of Commerce — that’s the national Chamber which is a very different thing from the local Chambers — is against it. We also have to stop China’s illegal trade practices and dumping (selling below cost to capture markets). 3) Invest in our domestic manufacturing base. The COMPETES act has passed the House, but Senate… Education. Raw materials — rare earth elements, China is saying they can get these IF they bring manufacturing to their country. We can produce them here, but don’t. Because China subsidizes, it is not profitable to start production here. The Panel This Town Hall’s panel of local experts: • Kenneth Boothe Jr., General Manager, Donjon Ship Builders • Reverend Jeffery Priscaro, St. Ann’s church • Ron Oliver, Community Labor Leader • Tim Ryan President, Apex Offshore Wind. • David J. Rosenberg, Head of Marketing, North America Gamesa Energy • Hillary Bright, Blue/Green Alliance Field Organizer. Priscaro — When people make things It create sjobsm, revenue, they buy houses, participate in economy. Ryan — Windmills, local wind turbines on old steel mill site, made in the US. Sun Ray project in Texas used GE wind turbines, GE Transport made the gearboxes. Gemasa, of Sain, has set up manufacturing near here. The Export/Import bank financing requires high local content. We need a national Renewable Energy Standard , then there is a tremendous opportunity for American manufacturing in wind energy. Oliver — the effect on people of losing job, moving, move in with mom, manufacturing is the heartbeat of America. Boothe — Donjon has recently gone from 13 employees, in 10 months have 118. 125 by end of year, 150 then up to 250. Bright — Labor and environmentalists share common goals Hadn’t recognized how intertwined manufacturing is with a healthy community, environment, wages, families, healthy communities. And healthy environment. The way we see America in future generations, manufacturing is key to recognizing that. Q: “Where are we going to get jobs? We need the infrastructure rebuilt, everything reconstructed. How?” Bright — AAM, others have recognized that one of the largest opportunities is in clean energy. The stimulus was a down payment. Opportunity at federal policy level like Renewable Energy Standard to create the market and the demand to get it going, otherwise we lose the race to countries like China. Oliver — We need to create the jobs here, the stimulus was using money to buy windmills made in China. Ryan — We need new power plants as well as wind energy power plants. National policy has been up and down up and down, industry can’t survive on federal programs that last 6 months or a year, we need national policy that looks at the next 20 years or so. Priest, we lost jobs because of legislation, we can gina jobs by legislation. Q: “What can we do to stop the leak of jobs from US?” Scott Paul: Stop tax breaks to ship jobs overseas. (Note — All pictures by Ike Gittlen, USW, with permission. Click any pic for enlargement, see the entire collection here .) This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF. Sign up here for the CAF daily summary .

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Dave Johnson: Lorain, OH Keep It Made In America Town Hall Meeting

October 17, 2010

Thursday evening I attended the “Keep It Made In America” Town Hall in the John Spitzer Conference Center at Lorain County Community College, an impressive, large campus. Lorain, Ohio is another town with closed factories, boarded-up houses, high unemployment, and ringed by the national big-box vulture chains whose business model is to suck the remaining funds away to Wall Street. Driving into Lorain As you drive from town to town in Michigan and Ohio you see one after another a ring of the “big box” stores and national chain stores around each city. You also see the “brownfields” of rusted-out, closed factories, empty, falling-down buildings. Then you go to the downtown and you see boarded up houses, empty storefronts, deteriorating and deteriorated communities, idle people standing on corners. As you drive into these towns you can just see what is happening in a nutshell. You used to hear about how Wal-Mart was predatory, how it would show up in an area and after a while the downtowns would dry up, local business-owners would go broke, local business employees would be laid off, and the local people would have to work for low wages at Wal-Mart, while the region’s spending money would go off to the wealthy few who run these things. Well a juicy story of devastation like that one gets around, and there are those who hear it and say, “Hey, that’s a great idea, I wanna get me some of that.” So the Wal-Mart business model has taken off and now there are any number of these vultures, ringing the cities and towns around the country, so often private-equity owned . They are draining away the lifeblood of the downtowns, fighting off the unions to keep wages down, even demanding tax breaks to move in and “create jobs.” You see all the same stores circling every town now , running all of the local and regional businesses unto the ground. Here are some pictures from the inner Lorain area but you see it all around: (click for large) The Lorain Town Hall Meeting As I said, the meeting was at Lorain County Community College. The turnout was good, a number of candidates, local officials, and people from the community. The opening speaker was Congresswoman Betty Sutton. “Manufacturing is the backbone of our economy. It’s the backbone of our nation. We’re aware here in Northeast Ohio that it created and promises to support the idea of a middle class.” Sutton talked about the bill passed recently by the house that confronts Chinese currency manipulation. She hopes the Senate will also pass this, but we all know how difficult it is to get anything through the Senate. She also said that unlike Wall Street shuffling paper money around, what creates real value is the manufacturing of goods, which supports four surrounding jobs in the economy for every manufacturing job. Following the opening remarks Scott Paul of the Alliance for Ameican Manufacturing presented a number of facts about manufacturing in Ohio and the country. 624,700 people work in manufacturing in Ohio, down from 1,021,000 in 2000. 39% of Ohio’s manufacturing jobs were lost in the last decade. For the country the last decade was the worst ever, worse than great depression. We lost 1/3 of all manufacturing jobs with 50,000 manufacturing facilities closed. “When I grow up will there be jobs in America?” Next came a panel, moderated by Scott Paul, with Larry Taylor, Plant Manager, US Steel Corp’s works in Lorain Dave MaCall, Director of District 1 for the United Steelworkers, USW in Ohio Kelly Zelesnik, Dean of engineering technologies at LCCC Elyria A video of a question from a young person in Lorain: “When I grow up will there be jobs in America?” was asked of the panel. MaCall: there will be jobs, because we have to take action, have to level the playing field. Things we need to do. Not be protectionists, have fair and balanced trade. But we need net exports. That’s how we grow. Every other country has a value-added tax so when someone makes a product that country writes a value-added check, so it is a subsidy on them and a tariff for us. America’s Visa card has run out. We have 100 million tons of demand for steel in the US, has been for decades, last year demand was 60 million tons. Huge numbers of people laid off, from lack of demand, lack of consumption, and illegal trade. Kelly, LCCC is partnering with manufacturing. LCCC invested in needs of community, 2 of 4 cornerstones of the college are education and economic development. LCCC is helping grow local economy with a new sensor center to develop and commercialize sensor technology. Industry and educational partners and entrepreneurs to access the center to develop and test prototypes and shorten the time to send products to the market as well as train employees. The center is an attractant to new businesses. MaCall: We need national policies like every other country has. Businesses need to know there is a policy in America that will make sure there is access to capital, etc. For green startups, it is hard for companies to make investment when other countries helping their industry and we are not. Wall Street gets refinanced, now they’re holding it back, won’t let small businesses have access at reasonable rates. Paul Q: What is the role in trade laws to keep steel competitive and on level playing field? Taylor – We need strong trade policies that are strictly enforced. If they are not enforced they do no good, if we have this there will be jobs in future, level playing field. We stopped China on the steel tubes , but now other countries are producing subsidized product, we don’t get government subsidies, they do, we must have strong policies that we enforce. Concluding Over and over I am hearing these themes emerge: trade is good but stop illegal trade practices, level the playing field to enable us to compete, put together a national policy, improve trade education and training, invest in our future. This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF. Sign up here for the CAF daily summary . The last three photos by Ike GITTLEN: USW

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Phil Bronstein: ‘Billboard Family’ Puts Itself — Kids and All — On Sale

September 28, 2010

It’s no surprise that we’ve come to this: there’s a family for sale on the Internet . No, these aren’t hostages held by Somali pirates or advertised on a Craigslist adult S&M posting. I’m talking about a middle American family that may have willingly, enthusiastically crossed the line between personal brand management and indentured servitude. Anyone with a digital footprint is selling themselves these days. But in the spooky wasteland where product placement meets slavery, you will find the Martins. Not to diss entrepreneurial spirit in a down economy. Patriarch Carl Martin told me today that “overall, this has been the best decision we have ever made.” The Martins call themselves “The Billboard Family,” with what ad industry site Adrants says is “an offering that allows advertisers to own the Martin’s lives.” Yikes. Dad Carl, mom Amy and kids Layne and Kaitlyn have turned themselves into human signage. With a social media upsell. I know they’re serious but it’s a pretty funny pitch on their website. “We are a REAL family of 4 (with one on the way) who wears YOUR COMPANY SHIRTS all day long, taking loads of photos and videos. We then promote your company online on Facebook, Twitter, Flickr, YouTube, and our Website, as well as to all of the many people who ask us why we are all wearing the same shirts.” Uh, because you’re from St. Louis? Carl says “most of the companies we have already reached out to are ones whose products we use.” Their “main demographic is family oriented companies, being that we are a real family.” Still, “we are happy to advertise for any companies that do not violate our terms and conditions.” They may be an actual family, but potential sponsors usually like organic reality, as in real doctors who prescribe Nexium in their practice, not people just selling their endorsement. But on their video, the likable Martins even show a sonogram snap of their unborn child. Getting a t-shirt on a fetus might be tough. I was just about to ask the marketing department here about inking a deal for the Martins to wear Chronicle t-shirts — you have to send them the shirts; like Google, they don’t make products. Then I wondered just how many people might actually notice what the family is wearing. No worries there. The Martins “travel and take vacations frequently” from their Missouri home to places like Chicago, Seattle, and Walt Disney World (where at might be hard to stand out among people wearing black socks and bermudas). “We have plans to travel much more in the near future.” Don’t we all? They also have 2,700 followers on Twitter and 200 Facebook fans. (Over 2,500,” Carl says, if you include friends on personal pages.) Not exactly the makings of a viral stampede. “Many of our followers help spread the word,” according to Carl. “The potential to reach a large audience is there.” The “Billboard Family” also has two competitors: I Wear Your Shirt (Carl: “They are not family-centric”) and Girl In Your Shirt (doesn’t sound very family-centric). In their “About Us” section they have more personal stats for each of them than the average big league ball player: eye color, favorite color, height, weight and shoe size. How else would you ever know that four-year-old Layne wants a Power Wheels Cadillac Escalade? Carl’s dream job is to be a “professional t-shirt wearer”, which makes sense given this particular value-added business proposition. Carl, who has a computer sciences degree, was “inspired” in this new enterprise “by his desire to make a respectable living.” Well, who these days can really afford to make fun of that? Also, he said to me he “really wanted to teach our kids about self-reliance and business..They’re very young but they have been very involved..They also love the attention.” The Martin site is thick with optimism, including nifty separate sections for them to publish all their “National Press, “Local Press”, and “Other Media Outlets.” They’re all empty. I wonder where my blog post will go. They also have Yelp-like social media page for clients who write “a review of our services.” Empty. Also a place for Flickr photos and YouTube videos. Zip. Except a short about the Martins. To be fair, they only launched a few days ago. But in the “Only 84 Days left for sale!” calendar, 30 of them are filled with “SOLD” signs, all for around $550 per, calculated by their graduated pricing formula throughout the year (Would you rather have four people wearing your brand on their tees or buy an iPad?). So far one advertiser — “Studio-R” — has bought the Martins for a day, according to the calendar. And they boast that their October through November “Non-Profit slots [are] filled” by a children’s literacy program, “Everybody WINS!” Maybe they do. Here I am writing about them. Besides, it’s a buyer’s market out there and who’s to say the Martins aren’t the next big thing in digital marketing services?

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April Rudin: Reframing Yourself and Your Business: Take a Page from a Master Who Evolved into an App

August 2, 2010

“Constancy is the hobgoblin of little minds,” says Ralph Waldo Emerson. Sometimes we are in need of the “refresh” button. The ability to morph and change our ideas is essential for personal and business growth. For maximum personal growth, it is healthy to evolve and change. Like an unused muscle, we will soon atrophy without evolution. The goal is to keep some of our “old” ideas and integrate some of the “new technology.” We should be open-minded and looking for new ideas which can refresh existing business when it comes to keeping pace with today’s consumers. We must think of increasing revenue by extending our brands and even doing good in the community. It is a “feel-good” experience for our minds, souls and bank accounts. Recently, I had the distinct pleasure of meeting a man who is the epitomizes the sort to whom Emerson was referring. Let me begin by “framing” this man for you. He is an “old master” in the middle of New York City. He is the type of guy who really is a modern-day maverick but in a simple and quiet way. He is a true Renaissance man. For me, he has the vision to take his “old master” expertise and catapult it into the digital age and with a great non-profit spin to boot! He is someone in whom you should be quite interested. His name is Eli Wilner. What man can have one foot planted so firmly in each world so to speak? Read on… Eli Wilner’s fascination with painting began at a very early age. By the time he was 9 years old, he gave his paintings and pastels to his great uncle, who was a prominent collector in New York City. His uncle would frame Eli’s work in antique 17th and 18th century Italian frames. He would then hang Eli’s paintings on his wall next to a collection of masters like Chagall, Modigliani, and Utrillo. When Eli saw his paintings installed in his uncle’s collection, he began dreaming of being a great artist. His “art” evolved into establishing himself as the premiere framer in the world. Probably the most universally recognizable painting ever framed by Wilner is Emanuel Leutze’s iconic Washington Crossing the Delaware for The Metropolitan Museum of Art. At the Museum’s request, Wilner reviewed it continually for many years, seeking a perfect new frame for this masterwork. The opportunity arose in the summer of 2006 when a photograph taken by Mathew Brady in 1864 was discovered in the archives of the New York Historical Society. This photo showed the painting in its original frame! The obvious answer was to copy the original frame. The money for this project was raised very quickly and the work proceeded for 2 years. The frame is now completed and resting safely at the Met. The grand opening is slated for January 2012. Although the exact price for this frame is unknown, Wilner says it would be fair to say that the price would be anywhere from $800,000 — $1,200,000. Eli Wilner is fortunate to have been asked to frame two of the most expensive paintings ever sold at auction: Dora Maar au Chat for Sotheby’s (May 3, 2006), and Nude, Green Leaves and Bust for Christie’s (May 6, 2010). What can we learn from Eli? How did this guy who studies the old master’s paintings, antiques and historical frames get interested in an iPhone app? The story of his iPhone app really began many years ago. According to Wilner, he had originally conceptualized a way in 1988 to “share the joy of his work” with the public. It began with the invention of a magnet frame, a photographic print of a frame from his collection adhered to a magnetized backing. It didn’t pan out. Fast forward to the present, when Wilner read a cover article on “apps” in Business Week in November 2009 which triggered an immediate response. In that instant, he began to understand the value of the 1 billion images which are uploaded to Facebook each day, and the billions of images which are stored in Flickr, etc. He knew that his dream of sharing work with millions of individuals was attainable through this new technology. After much hard work, the app went live on June 19th. Now, Eli Wilner frames are available in an iPhone and iPad app which allows the “masses” to frame their own “masterpieces” or photographs based on over 100 styles which are derived from Eli Wilner’s past and present inventory. This is just as he had dreamed as a little boy. In fact, there is a great enthusiastic boyishness about Eli and his vision for his new brand extension. Outside of this blatant “commercial” for Eli and his frames, what are the business lessons that we can learn? How can we benefit from the brand extensions and forward thinking of Eli Wilner? First, he was able to be focused on a dream and then he achieved it. He imagined and produced a world-class digital product from a world-class “bricks and mortar” product. He takes old antique and historical frames and makes them new again. He continually reinvents and moves easily between the old world and the new. One of the most important lessons to be learned about this app (and Eli’s business model) is the “give back” to non-profit organizations which is essential for someone as passionate as Eli. Eli insisted on creating a way to use this product for viral fund raising by all kinds of groups. The non-profit component to this product is the “feel good” part of the “look good” frame. Successful businesses today must carefully consider their own social responsibility. At the bottom of this blog, there are links for free Wilner iPhone/iPad app products. Tell them April sent you. Free version for the iPhone Free version for the iPad

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Ken Markman: The Advent of Brand Culture

July 29, 2010

Recognizing the Need for Reinvention Whether you work with brands every day or want to develop your own brand, your success lies in a different place than most experts would have you look. We have a tendency to travel the same road, again and again. We talk incessantly about the same problems: The trade, the economy, the licensor, the licensee, the deal. It’s an endless, circuitous, chain of circumstances with little time or effort directed toward understanding the changing consumer. Who is The New Consumer? They are Millennials. They are your strongest advocates. We’re not the first, nor the last to mention them. But, if you don’t know who they are…the short answer is they’re your future. Their values, attitudes and demographic characteristics are different than all previous generations. They are driving digital technologies that are changing media habits; enabling consumers to self-edit, while at the same time, by choice, become advocates of what is meaningful to them. It’s causing brand-marketers and licensors to reconsider how they are reaching the right audience at the right time with the right message in the right place. Like it or not, they are tethered to technology. Successful products offerings enable Millennials to participate in their own experiences. It is tribal; technology is the acoustic rhythm to their narrative. As a result, the convergence of technology (xbox 360 Kinetic, Apple iPad) and the interplay of mobile phones (apps), immersive retail experiences and location based (touch-screen) venues are the new brand media mix. Millennials Millennials, there are about 80 million of them born between 1980 and 19951. They are the prize. They are who you must embrace. They are not just consumers, they are the owners of your brand. They are advocates who dictate purchase patterns and are the voice of authority. Millennials are setting the new social agenda, in a context called BrandCultureTM. We are just beginning to witness the nuances and shifts of their consumer behavior. The real ah-ha will arrive when we unlock the coding of this generation and the hardwiring of their brains. If you know a Cognitive Scientist, hire them; they’ll be your most trusted resource when unraveling the mysteries of your new consumer and the behavior that is driving businesses, brands and culture in the 21st Century. Consumer Attributes They think in pictures: Images are the narrative of culture. 32,000 years ago the earliest of cave paintings served the same purpose. They’re hard wired into our brain. They work like semeiotic messages. Meaning, the images are the language of story-telling. It’s the earliest form of personal and cultural brand messaging. (Consider: Facebook, Flickr and the iPhone). They remember stories; so, don’t repeat facts: Brands are emotional stories. They are experiences, merging interest with intent by igniting curiosity and inviting consumption. “Your brain didn’t retrieve a fact about an experience,” says Douglas Merrill, former Chief Information Officer of Google, “….your brain retrieved the story.” Their brand is their message: Messages are everywhere. They work as reoccurring themes that bond culture. They establish a context and work like scaffolding in your brain. They function in a setting of story-telling and myth-making where symbols are language and images are text. They embrace the “authentic” power of Social Media: Okay. I get it. We know Social Media is important. But, do you really know why? It’s not because of its instantaneous reach or ubiquitous use. Social Media dominates all other media because of its relevance. It’s your story, shared with others, that touches the same core emotions. They use technology: “It’s not just their gadgets, it’s the way technology has been fused into their social lives.” This is the new “collective -connective,” a social dynamic requiring participation — real, authentic participation. It’s that simple. Why We Believe In What We Create? We remember things that are important when they are experienced as stories. Our brains take notice of them. We become conscious of them. They become relevant, take on a purpose and meaning and move to our memory. Cognitive scientists call this process encoding, which means something is being converted from one format into another. Cultural Myth, Story Telling And Recurring Themes Bond Culture It is based upon the uniquely human capacity to symbolically classify experiences, link and then to share them…the process through which an older generation induces and compels a younger generation to reproduce the established lifestyle, consequently a culture that is embedded in a person’s way of life. This multi-generational social condition is called the “Cultural Evolution Theory” which states, “that traits have a certain meaning in the context of evolutionary stages, and they look at relationships between material culture and social institutions and beliefs.” The importance of realism amid such heightened realities in worlds of fantasy make characters, specifically heroes and their powers, when stripped away, real to an audience that wants to believe they really exist. This transformation is a blurring of “reality’s” fantasy. Captured in symbols and an extremely evolved iconography, popular, recurring themes understood completely or not, become folklore…create a suspended disbelief: a new reality for a new generation… borrowing from the past and making them their own…a form of branded history, with its own images indelibly marked on the minds of a new global audience. The images they represent, from myth to folklore, become the legacy that defines a brand. Central to this process is the concept and arch of the Brand…or as we will call it: BrandCulture KKMBRANDS.COM

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George Goehl: This is What Democracy Looks Like

May 17, 2010

Today, thousands of everyday people came to Washington DC for a Shutdown of K Street . The message was simple: Reclaim our democracy and hold Wall Street accountable. Photo courtesy of National People’s Action. Click here for more photos. Retirees and students, family farmers and health care workers, teachers and clergy came together to literally shut down the intersection of 14th and K Street. The action was part of a series of events designed to draw a direct connection between Wall Street and other unaccountable corporations, their K Street lobbyists and the Members of Congress who do their bidding. Big banks and their lobbyists have hijacked our democracy. Despite foreclosing on millions of families, sending our economy to the brink of collapse and needing a $700 billion taxpayer bailout, big banks are now spending $1.4 million dollars a day to defeat reform. A new report by Campaign for America’s Future and the Public Accountability Initiative shows that both parties are equally hooked on big bank money. But it’s not just the banks – one of the great challenges facing the American people is unregulated and unaccountable corporations that drive wages down and health insurance costs up, strip wealth from communities, and destroy our environment. Whether it’s big banks driving the economy to the brink and then lobbying to prevent reform, or big oil pushing for less oversight and then destroying our environment, Americans are on the losing end of a system where big money rules our politics. As a country we have to decide if we are going to continue to allow the big corporations, whether it be big banks or big oil, control our legislative process. Or are we going to reclaim our democracy and advance an agenda that finally puts people first. What is clear from today’s Showdown on K Street is that more and more Americans are ready to join the fight to reclaim our democracy. Democracy only lives up to its promise when it is in the hands of the people. Right now it’s in the hands of corporations and their lobbyists. But if today was any indication, the American people are ready to take it back.

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Jill Schlesinger: SEC Charges Goldman Sachs: Ahab Goes After Moby Dick

April 17, 2010

From hell’s heart I stab at thee; for hate’s sake I spit my last breath at thee. – Herman Melville “Moby Dick” It’s not Mary Schapiro ‘s last breath, but she sure did stab at the ” Vampire Squid ” this morning. The SEC charged Goldman Sachs (press release here ) and one of its vice presidents with fraud for misstating and omitting key facts in structuring and marketing a collateralized debt obligation (CDO) tied to subprime mortgages. The complaint alleges that hedgie legend John Paulson ‘s fund played a role in selecting residential mortgage-backed securities that went into a CDO created by Goldman. ( CNBC is saying that Paulson’s former employee Paolo Pellegrini ratted him out spilled the beans to the SEC, after the agency came hunting for info on Paulson). Now pay attention–this stuff is complicated. Goldman created a vehicle called Abacus 2007-AC1 , which was filled with a bunch of toxic crap that would be sold to Goldman clients. Why would they do such a thing? The SEC believes that Goldman was acting at the behest of Paulson, whose hedge fund wanted a fat, sloppy mortgage mess to bet AGAINST. How? Paulson would purchase credit default swaps that would pay him if the bonds in the vehicle failed. Neat, huh? Think of it like this: Goldman Sachs is asked by Paulson to sell a house that he knows is a fire hazard. Goldman markets the house to its clients and at the same time, Paulson purchases an insurance policy on the house in case it burns down. When the house does in fact burn down, Paulson collects a bunch of money (approximately $3.7B in 2007). And did I mention that Goldman ALSO bought some of that insurance too? This was known as the Magnetar trade–you can read about it in Yves Smith ‘s excellent book ” Econned ” or here in a great segment that aired on WBEZ ‘s This American Life . I’m no lawyer, but here’s my guess as to what is likely to occur: Goldman will deny any wrongdoing, claiming that everything was disclosed to the accredited investors (pension funds, foreign banks and other institutional investors) who purchased Abacus. And even if the SEC’s claim is sort of correct–that it wasn’t disclosed that Paulson was cherry-picking the bad stuff–Goldman will settle for some seemingly large, but ultimately not earth-shattering amount and go on its way. Remember that only Moby Dick and Ishmael survived… Image by Flickr User kdinuraj , CC 2.0

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Yahoo’s Bartz Gives Herself a B-Minus After Not Moving Fast Enough as CEO

January 8, 2010

By Brian Womack Jan. 8 (Bloomberg) — Carol Bartz gives herself a B-minus in her first year as chief executive officer of Yahoo! Inc. , saying she could have moved faster to reorganize the company and strike a Web-search agreement with Microsoft Corp. “It was a little tougher internally than I think I had anticipated,” Bartz, 61, said in an interview at Yahoo’s headquarters in Sunnyvale, California. “I did move fast, but this is a big job.” Bartz, who marks her one-year anniversary as CEO next week, is striving to keep Yahoo’s 15-year-old site relevant in an era of Twitter and Facebook. Yahoo’s sales have fallen for four straight quarters, and its stock trailed the Nasdaq Composite Index in the past year. Bartz expects Yahoo’s sales and profit to grow in 2010 as it makes acquisitions and improves products. “Carol was dealt a pretty tough hand,” said Ryan Jacob , portfolio manager of the Los Angeles-based Jacob Internet Fund, which holds about 100,000 Yahoo shares. “A lot of what she’s put in place — we’ll know in the next year or two really whether it pays off. I think at this point it’s still a bit up in the air.” After becoming CEO, Bartz cut her staff by 5 percent, shuttered underperforming businesses such as the GeoCities Web- hosting site and installed her own management team. In July, she struck a deal with Microsoft Corp. to collaborate in Web search and advertising, letting it cut capital spending by a projected $200 million. ‘Tough Hand’ The company also has been hiring people for sales and engineering, tapping into the savings generated by its cost- cutting efforts. “A very good company kind of got buried,” Bartz said. “It is coming out.” The CEO of Autodesk Inc. from 1992 to 2006, Bartz took the reins at Yahoo from the company’s co-founder Jerry Yang . He rankled investors in 2008 by spurning a $47.5 billion takeover attempt by Microsoft . Yang then pursued an ad partnership with Mountain View, California-based Google Inc. That deal fell apart in late 2008 after the U.S. government threatened to challenge the agreement. By the time Bartz took over, Microsoft said it was no longer interested in an acquisition , preferring a partnership instead. She worked out that deal about six months after her arrival. Under the 10-year agreement, aimed at challenging Google , Yahoo will use Microsoft’s Bing search engine on its Web sites. Bing Partnership Yahoo will sell ads that appear next to Internet-search results, sharing the revenue with Microsoft. Bartz expects the deal to get regulatory approval early this year. The Microsoft deal will help boost operating margins and let Yahoo focus on other services, such as the home page and e- mail, Jacob said. Yahoo expects to achieve profit margins of 15 percent to 20 percent by 2012, up from about 6 percent in 2009. Yahoo fell 47 cents to $16.70 yesterday in Nasdaq Stock Market trading . The shares climbed 38 percent in 2009, a year in which Google’s stock more than doubled and the Nasdaq Composite Index advanced 44 percent. Yahoo’s stock tumbled 48 percent in 2008, when the Microsoft acquisition talks fizzled. Investors have held back from buying Yahoo shares because of the sales slump, said Martin Pyykkonen , an analyst with Janco Partners Inc. in Greenwood Village, Colorado. He rates the stock a hold. Third-quarter revenue fell 12 percent to $1.58 billion from the year-earlier period. Bartz said that while the stock price indicates the company has been in the “penalty box,” the share price is fair. The sales declines aren’t surprising, given the recession and a broader slowdown in advertising, she said. No Apology “We came out of one of the worst climates ever,” Bartz said. “And if you look at growth of Fortune 500 companies, only being down 12 or 15 percent is damn good. I’m not going to apologize for our growth.” Yahoo already is benefiting from the rebounding economy, which is encouraging companies to buy online ads, said Gene Munster , an analyst at Piper Jaffray & Co. in Minneapolis. He said Bartz eventually should be able to get sales growth up to 10 percent annually. “We believe in Carol Bartz and believe that she is going to get the revenue growth to a point that’s acceptable,” Munster said. Bartz said she plans to do more acquisitions this year, probably of less than $1 billion apiece. Potential targets include overseas companies and data-analytics businesses that help advertisers assess their results, she said. More Focused “Last year people talked about, ‘Oh, Yahoo is trying to get smaller,’” she said. “We were never trying to get smaller. We were just trying to get more focused.” Bartz said the company continues to improve its products, such as its home page and e-mail service, though she didn’t give specifics. Last year, Yahoo unveiled a new version of the home page, the site’s first major upgrade since 2006. The home page is the entry point to dozens of services, including Yahoo Finance and the Flickr photo site. The new design lets users easily access other companies’ sites, such as Facebook and Twitter, from the page. The role of Web portals is shrinking, because more users are moving to social-networking sites, said Sameet Sinha , an analyst with JMP Securities LLC in San Francisco. He gives Bartz a B-minus grade as well and recommends buying the stock. “Aggregation worked in the early stages of the Internet, when people were less sophisticated,” said Sinha, who doesn’t own Yahoo shares personally. The fact that the company still serves up billions of pages to users daily shows that Yahoo plays an important role on the Internet, Bartz said. “You’re just going to see Yahoo bloom more,” she said. To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net .

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Jill Schlesinger: Fat Cat Bankers In A Fog

December 15, 2009

Yesterday’s meeting between President Obama and his favorite ” fat cat” bankers was one big show . The President was nonplussed that three of the execs couldn’t figure out how to actually make it to the meeting in person (any of these masters of the universe ever hear of Amtrak ?). Lloyd Blankfein of Goldman Sachs , John Mack of Morgan Stanley and Richard Parsons of Citigroup were stuck in fog, preventing them from making the White House con fab. What a perfect metaphor–bankers really do seem to be stuck in a fog these days. I don’t place all of the blame for the financial crisis; problems with mortgage modification ; or lack of small business lending squarely on the shoulders of Wall Street banks. They had lots of help from current and past members of Congress, previous Administrations, irresponsible borrowers and regulators. My problem is that in the aftermath of the crisis, bankers seem tone deaf. They have short memories and can’t quite understand why the public is so mad that they are making boatloads of money again after taxpayers bailed them out. As Americans struggle with stubbornly high unemployment , which can wreak both financial and emotional turmoil on families, they’re confronted with headlines of TARP repayments , mega-bonuses and massive lobbying efforts aimed at curtailing regulatory reform. While everyone wants a fully functioning financial system, we also want to see broad based participation in the recovery process. Until that occurs, fat cat bankers would be wise to keep those purrs down. Image by Flickr User Nesster , CC 2.0

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Jill Schlesinger: $200B TARP Money NOT Going To Elin Woods!

December 7, 2009

Over the weekend, the government found $200 billion in TARP money and Elin Woods discovered a few more paramours were hanging with husband Tiger . (If that $60 million enhancement to the pre-nup is true, it looks like Elin the scorned will be collecting $6.66M per girlfriend!) Treasury says that over the next 10 years TARP will cost $141 billion, down a whopping $200B from the August estimates. ( Here’s a good breakdown of TARP funds ). The windfall is partially attributed to the speedy repayments by some of the larger TARP recipients. No sooner did we learn that we taxpayers are finally catching a break, that the pundits were talking about how to spend it. The latest idea being floated: use the TARP money for a jobs plan , although Tiger Woods is lobbying to have the money go to Elin. This idea makes me nervous because other than rescuing the financial system from Armageddon, I haven’t been too impressed with the Administration’s ability to spend money in a focused and results-driven way. Here’s a great quote from EconomistMom.com that speaks to my angst: We can’t afford to do stupid deficit-financed spending or tax cuts, because then the short-term (and even longer-term) benefit of the policy can’t possibly outweigh the cost of compounded interest. Which means we would be better off not doing it. So just because we may wish we had more jobs in this country, doesn’t mean we have an excuse to just throw more money out the door-certainly not when we seem to need the money for so many other things like expanded health care coverage, more troops in Afghanistan, and, oh yeah, saving for the future. Before Congress starts throwing dollars at job creation, let’s hope that there’s a sober examination of what parts of the Stimulus have worked, what haven’t and the costs of dong nothing vs. doing something. With a little rigor, we might see a substantive plan that aims for success rather than a 2010 campaign slogan. Image by Flickr User Rio Calle , CC 2.0

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Martin Varsavsky: Why it may make sense to buy Skype back

November 6, 2009

Image via Wikipedia My investors at Fon (Fon is the largest WiFi network in the world and is built by its users) include most of the people and companies that were involved in the recent sale of Skype . At Fon we have eBay , Janus Friis and Niklas Zennstrom personally as investors and board members, Mike Volpi personally as an investor and board member, Danny Rimer as a board member and Index Ventures as an investor, and Marc Andreessen as an investor. So for me to talk about Skype after the recent dispute for the control of this company could be dangerous. But there’s no need to be concerned. This post is not about my opinions on what happened in the Skype dispute. Personally I think that Janus, Niklas, Mike, Danny and Marc are all awesome guys, amazing investors and board members. So what I will speak about in this post is strategy or how I see the future of Skype: the dangers it may face and the opportunities it may have. Before getting started I would like to say that I have been a user of Skype from the very beginning, from way before I actually met and became partners with Janus and Niklas, that I think that Skype is a remarkable product that is way ahead of the competition. While not yet a highly profitable company Skype is heavily used around the world and has certainly been a gift to humanity. Now having sent my thank you note to its founders, let’s talk business. Most communication on Skype as we all know, is totally free, only occasional calls to non Skype parties are the ones that generate the $740 million revenue run rate that allows Skype to make a living. The rest is an enormous amounts of minutes of communication that take place thanks to the amazing piece of software that is Skype. And the few minutes that are revenues are under threat from three main rivals. The first one is called Facebook . While my friends inside Facebook have not disclosed anything confidential to me, I think it is obvious that Facebook will soon have its own Skype. And what´s amazing about Facebook is that even though it produces mediocre to bad apps everyone loves their convenience and uses them. Its pictures apps is mediocre in comparison to Flickr, its email pales in comparison to Gmail and its chat is way worse than that of Skype (no file attachments, no this, no this no that), still the growth of those apps in Facebook is explosive. So much so that while I have been in Skype since 2004 and Facebook since 2006 on a recent check I had around 30 people I knew on Skype and 144 on Facebook chat. When Facebook incorporates a Skype like product, how many people will go on using Skype? Facebook is already hurting MSN big time. Moreover, Facebook is getting so big that soon there will be no Facebook Out. The threat that was Skype’s threat, namely how do you make money if everyone is on Skype and there is no need for Skype Out, is now being transferred to Facebook. But the thing is that Facebook, another gift to humanity, has a different business model, advertising, and they could really hurt Skype. The second threat to Skype is flat rate pricing from telcos around the world. Why would anyone use Skype Out if they have an all you can eat tariff on their phone? And all you can eat tariffs are more and more frequent. In Europe all ADSL plans come with flat rates to all fixed lines, and in USA flat plans to fixed and mobile plans are more and more common. There are also community plans like calling anyone on AT&T for free that turns AT&T mobile into a Skype. It is remarkable that these plans are available to visitors such as myself and my family. We are six and when we go to USA everyone gets a phone with an AT&T card and we all call each other for free on prepaid! And telcos have one big advantage and that is that you don’t need a computer to make a phone call :) The third threat is Google Voice . Google voice is interesting because it came out of the Google Talk fiasco and it shows how relentless Google is when it gets its mind set on something (disclosure Google is also an investor in Fon). What Google Voice is doing with the free phone calls attacks the very livelihood of Skype and that is Skype out. And the integration with Gmail and Gmail contacts is amazing. Skype is weak at that, it has no email. Google first copied Skype with Gtalk and it took off but not really. Google Voice is the second derivative of the Skype attack, and is going well. The $50 million acquisition of Grand Central that resulted in Google Voice stands up there with the acquisition of Keyhole that resulted in Google Maps as two of the best M&A moves of Google so far. So considering that Skype is under attack from Facebook, the largest telcos in the world and Google how can it be a good business to buy Skype? Well the key here for the new investors in Skype is not whether Skype will rule the world but whether it will be worth more than what the investors paid for it. And after giving you the cons here are some arguments and strategies in favor of the acquisition. Skype is simple. Michael Arrington and all of Silicon Valley may find Google Voice amazing but is the average global citizen ready to use it? Massively use it? You download Skype, you find your friends on Skype, you talk. And if you don’t find them you Skype out. And when you talk you can also do video. I LOVE video calls on Skype. I used to use them for people I really cared about, relatives, close friends. Now I even do business calls on video with Skype. It just gives you more of a sense of what is going through the other person´s mind. And Skype is the leader on video quality. So simplicity plus video may be a good way to beat flat plans from telcos and avoid being Tivoed. If the video services can migrate to mobile phones Skype is on to something. Skype can include advertising. If Gmail reads your emails and places ads why can´t Skype do the same thing on their chat or even their voice channels? How far are we from systems that listen to what you say and just as you finish saying “let´s go to Ibiza for the weekend” they start showing you cheap flights to Ibiza. Gmail proved that if you give people a great service they don’t care if you spy on them. That could be an enormous revenue source. So far Google has been kind to Skype even including it in the Google pack. Maybe a Google deal for advertising is in the making. Skype can conquer the business world. Facebook is not the only community in the world, there is Linked In, Xing (disclosure I was an investor in Xing) and other more business minded networks. Those “business types” work best with Skype. I believe that as Facebook squeezes everybody in its quest to Microsoft the world (Mark Zuckerberg told me that Microsoft is his model) a few “Apples” will emerge. Skype could be one of them. Apple has a tiny fraction of the PC market, Dell dwarfs it in revenues. But Apple dominates the over $1000 PC segment and dwarfs Dell in market cap. Skype could position itself as the communicator of choice for businesses. And that has tremendous value. Bottom line, the jury is still out. I have no doubt that Skype now has tremendous brain power. But it will need it all to succeed. Good luck Janus, Niklas and Marc!

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Jill Schlesinger: Jobs Report: Unemployment Breaks 10%

November 6, 2009

10.2% — that’s the most important number from the October Employment Report . For the first time since 1983, the over 1 out of every 10 American is out of work. How’s that for starting your Friday with some sobering news? The 190,000 jobs lost in October means that since the start of the recession in December, 2007, 8.2 million people have lost their jobs and the unemployment rate has grown by 5.3% . The numbers in and of themselves would by bad enough, but they don’t accurately reflect just how hard it is to find a job. For that, you need to drill down to the U-6 measure of employment , or as my friend the economist likes to say, “the true pain threshold.” U-6 starts with the total number of unemployed and adds part time employees and those who are “marginally attached”, which means all of those folks people who took crappy jobs that are beneath their skill levels. The U-6 was 17.5% last month. After digging deeper into the numbers, I was able to find a tiny bit of positive data–the number of temporary workers rose by 34,000, which was the first gain since 12/07. The addition of temps and increase of overtime hours are the first measures that will likely get us out of this horrible job situation. One other bit of solace is that the average work week didn’t decline further, but remained at a record low of 33 hours. Yeeesh…cold comfort, huh? Adding in the rest of the week’s news on employment, here’s what we know: New Job loss is tapering off : Weekly initial claims for jobless benefits fell last week to the lowest level since January 3 rd and ADP reported that the number of private sector jobs lost has fallen for seven straight months. Productivity gains are a Job seeker’s loss : One reason that employers don’t need to hire new people, is that they’re getting more out of the workers they have . The Labor Department reported that Q3 productivity grew by 9.5% annual rate , the fastest pace in six years. Employers didn’t have to pay up to squeeze more out of employees. Labor costs fell at a 5.2% annual rate, capping the biggest 12-month drop since 1948. Where does that leave us? If you don’t have a job, the news confirms what you know. If you have a job, you’re still worried you could lose it. In other words, we are mired in a grinding and painful period, which is like to persist for months to come. Image by Flickr User Egan Snow , CC 2.0

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Flckr’s Caterina Fake: ‘Hard Work’ Can Be Detrimental

October 9, 2009

Caterina Fake, who, with her husband Stewart Butterfield, founded Flickr, knows a thing or two about bliztkreig work schedules. But she points out that late nights are seldom very useful in the grand scheme of things. Hard work? Overrated…

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Jill Schlesinger: Not Breaking News: Regulator Just as Dumb as Ordinary Investors!

September 25, 2009

You probably don’t realize it, but there is a mammoth securities regulator that is not a government entity. The Financial Industry Regulatory Authority (FINRA) , is the largest independent regulator for all US securities firms, overseeing nearly 4,800 brokerage firms, about 173,000 branch offices and approximately 647,000 registered securities representatives. Why should you care about FINRA? Because it is the regulator that oversees licensed brokers and their firms. FINRA was created in July 2007 through the consolidation of National Association of Securities Dealers (NASD) and the member regulation, enforcement and arbitration functions of the New York Stock Exchange. Its funding comes from the folks it regulates, hence it’s referred to as a SRO, or self-regulating organization. FINRA manages about $1.6 billion of its own money and here’s the not-so-breaking news: the regulators who say that “investor protection begins with education,” should head back to school, because they are just as dumb as the rest of us when it comes to investing. According to the Wall Street Journal , FINRA lost 26.5% in 2008 because of its high concentration in stocks, private equity and hedge funds. (Evidently the folks there thought they were managing the Yale endowment !) Hello FINRA–did you not read this part of your own web site? Guess not. For many people, it’s best to manage risk by building a diversified portfolio that holds several different types of investments. This approach provides the reasonable expectation that at least some of the investments will increase in value over a period of time. So even if the return on other investments is disappointing, your overall results may be positive. Your chief defense against systematic risk, as you’ll see, is to build a portfolio that includes investments that react differently to the same economic factors. It’s a strategy known as asset allocation. This generally involves investing in both bonds and stocks or the funds that own them, always holding some of each. That’s because historical patterns show that when bonds as a group–though not every bond–are providing a strong return, stocks on the whole tend to provide a disappointing return. The reverse is also true. After FINRA took the beating, it sold out its risky investment on the lows (way to lock in those losses!) and missed the subsequent rally. In other words, FINRA employed the buy high, sell low strategy. This amateurish mistake on both the upside and downside not only cost money, but it has made FINRA member-firms furious. One has filed a lawsuit against FINRA , accusing the organization of being “reckless in pursuing high-risk strategies inappropriate to preservation of capital.” Nice to know that regulators are just as dumb as the investors it’s supposed to protect. Image by Flickr User pfala , CC 2.0

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Jill Schlesinger: Fed Meeting: What’s on Bernanke’s Mind?

September 23, 2009

When the interest rate decision is announced today, the Federal Open Market Committee will most likely leave its current monetary policy unchanged and say that ” economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period .” In other words, just because Chairman Bernanke said that the recession is “technically over,” that doesn’t mean that consumers are feeling too swell or that Fed policy will shift. Fed governors have told us as much in their public statements and appearances. Just because we have backed away from the edge of disaster doesn’t mean that a sustained recovery is baked in the cake. Here’s what I think is on Bernanke’s mind right now: Sure the worst is over, but if I don’t get this next part right, I’m finished When should we stop buying all of those mortgage-backed securities ? It’s helped stabilize the housing market, but we can’t do it forever. Econ data is moving in the right direction, but with employment still declining and real incomes stagnate , when will consumers join the recovery? I wish the inflation hawks would shut up already. I know that real rates will rise eventually as recovery takes firmer hold, but right now, I’m still worried about deflation–did anyone notice that prices are down 1.5% from a year ago? This stock market rally is freaking me out–glad that all my money is in a blind trust so I don’t have to think about it too much Love that blogger Mark Thoma–wants the Fed to oversee the entire financial system I’m so psyched that the boss gave me another term! Image by Flickr User Cliff1066 , CC 2.0

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Jill Schlesinger: Cash for Clunker Sequel: Dump the Pump

August 28, 2009

Given the success of “Cash for Clunkers,” the government will introduce a sequel that one observer called ” Dollars for Dishwashers “. That’s not really the name, but it’s better than “Clunkers, Part Deux”. It’s reported that Uncle Sam will fund a $300 million program via the stimulus plan that will allow you to swap energy-sucking appliances for new ones that carry that ” Energy Star ” seal of approval. If car dealers thought that getting paid was hard, the sequel plans to allow each state to get in on the act. In other words, while in NY, your air conditioner might fetch a $200 rebate, in Wyoming, it may only get you $150. The Department of Energy wants to focus on ten categories of appliances, but states could petition for an expansion of that list. The rebates are likely to be $50-$200 per appliance. After hearing about this and then the Toys-R-Us “Cash for Kiddie Clunkers,” I started to feel left out. How about a program for women who need new, more efficient shoes for the fall season? Under the “Dump the Pump” program, we’ll trade in our beat up, bull market Manolo Blahniks for more sensible, recession-style flats. For every pair of shoes that we trade, I’m thinking we should get a $50 rebate. The struggling retailers will love it and we would be helping to reduce the cost of podiatry care. It’s just a thought… Image by Flickr User Scalleja , CC 2.0

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Jill Schlesinger: Obama’s Heath Care Promises: Can you REALLY keep your Doctor?

July 20, 2009

In President Obama ‘s weekly radio address , he said: “Under our proposal, if you like your doctor, you keep your doctor.

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