game

Jeff Jarvis: What Should Google Do?

November 28, 2010

Twitter was abuzz last night with links to David Segal’s amazing NYTimes yarn of a bad internet actor who says he uses — and eggs on — customer complaints to get more links and mentions online, thus more Googlejuice, thus more business. The Times didn’t go the next step to ask what Google should do about this. And Google didn’t help itself by dispatching only an unnamed spokesperson who then, Segal complains, didn’t send a followup email. Google would have been much wiser to have hooked Segal up with Matt Cutts , the company’s wizard in the game of bad-guy whack-a-mole, to discuss the options and implications. It’s not as simple as it seems, for Google and its algorithms are now a set of laws of the web and if you intervene in one way, you may trigger the law of unintended consequences in another. What if Google sensed the positive or negative sentiment in links and used that to guide its placement in search, as some suggested? Makes sense in the case of bad-guy Borker and his virtual eyeglass store. But as someone pointed out on Twitter last night: If Google did let sentiment affect rank, then what would it do with the negative links regarding Barack Obama or Sarah Palin, to Islam or GM? How would you write that law, remembering that the code is the law? What if instead Google intervened in a case such as this and, seeing all the complaints, manually downgraded the guy in search? The first problem with that is scale: how do you find and investigate all the bad guys? The bigger problem is whether we want Google to be the cop of the world. Google has been sued by companies it decreed were link-bating spammer sites, downgrading them in search, while the sites said they were legitimate directories. This is the one case in which Google holds the power of God in a market and it’s a dangerous position to be in. I have suggested before that Google should set up a jury of peers to adjudicate such cases. I didn’t use the verb “crowdsource,” for crowds can be gamed, as Mr. Borker amply demonstrates. But a trusted ( cue Craig Newmark) jury could give Google distance from the decision. I say peers — fellow business people — because in cases such as this, their interests and those of Google and us, the users, are aligned: We don’t want bad guys to game search. Google, especially, wants to — in Cutts’ words — find more signals of quality and originality so its results are of higher quality and relevance. What I’m really saying is that as Google, Facebook, Twitter, and other private players come to be the law of the land on the internet, they need to start acting like public players with Constitutions and Bills of Rights and the means of enforcement and adjudication with due process. I’ll be exploring this notion in Public Parts . In the end, Segal’s story looks like a failure of search, Google, and the internet. The internet made it possible for a bad guy to win. Well, so does Wall Street. But I don’t think this was Google’s failure (cue fan-boy accusations). The moral of the story should be that if you search Google for the name of Borker’s company, you see plenty of loud complaints in the results. The internet doesn’t nullify the First Law of Commerce: caveat emptor . When I had my now-legendary problems with Dell, I kicked myself for not doing a search of “dell sucks” before buying my computer. That’s my responsibility as a shopper. And, as I pointed out at the time, Google would have given me the information I needed. Ditto for the lady in Segal’s story. If I think of buying from a new vendor, I’ve learned my lesson: I search Google first because fellow customers, using Google, will help protect me. That is the lesson The Times should have given its readers: Use Google to guard against those who would use Google.

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Insider Trading Probe Leads Investors To Wonder: Is The Market Rigged?

November 24, 2010

NEW YORK — The Wall Street insider trading investigation may lead everyday investors – already rattled by a stock market meltdown, a one-day “flash crash” and the Madoff scandal – to finally conclude that the game is rigged. “A large part of trading has to do with trust, and I don’t have it,” says Mark Swenson, a 43-year-old plumber from New Hampshire who refuses to buy individual stocks. “When a stock moves up 10 percent, you don’t know why,” he added. “We can pretend that everyone has access to the same information, but they don’t.” Even before news broke that federal investigators were looking into whether hedge funds traded on inside information, small-time investors were pulling their money out of stocks – despite a remarkable run for the market since the spring of 2009. Americans have pulled $60 billion out of U.S. stock funds this year, according to the Investment Company Institute, a trade group. Meanwhile, investors have piled money into Treasuries and bond funds that are considered safer investments, even if they don’t return as much money. And at the same time, banks like Wells Fargo have reported that money is moving into checking and savings accounts. To be sure, it’s natural for people worried about their jobs or the falling value of their homes to sock cash into more conservative investments. But this has been no garden-variety recession. It has coincided with turmoil in the stock market that goes back a decade, to the collapse of the Internet bubble and portfolio-draining scandals involving high-flying companies such as Enron and WorldCom. More recently, investors have lived through the housing bubble, the collapse of Wall Street firms such as Bear Stearns and Lehman Brothers and stomach-churning days when it wasn’t clear whether capitalism would survive. On top of that came news that financier Bernard Madoff had bilked investors out of billions. “Virtually everyone on the Street believes there are significant improprieties, and I think there is an even more important point for the massive number of investors who are not Wall Street players,” says former New York Gov. Eliot Spitzer, once known as the “sheriff of Wall Street” for aggressively prosecuting white-collar crime as state attorney general. “And that is for most of us, you can’t beat these guys at their own game.” People are nervous about the state of their assets in part because their homes are worth so much less these days, not to mention job insecurity and slow economic growth overall. Some pros on Wall Street say hesitation by small investors is good news. It means that there’s plenty of “dry powder” to propel the market higher in the next few months when and if the little guy finally relents and joins in the rally. The insider-trading probe could test that theory. The FBI this week searched the offices of three hedge funds, and some of Wall Street’s most influential firms, including Janus Capital Group, have been subpoenaed in the probe. On Wednesday, an employee of a firm that supplied market intelligence to hedge funds was arrested and charged, among other things, with conspiracy to commit securities fraud. It was not yet known whether the man dealt with the funds raided this week. For Swenson, the allegations of insider trading are unnerving, particularly on top of the “flash crash” in May, when a computerized selling program set off a chain reaction that drove the Dow Jones industrials down nearly 1,000 points in mere minutes. The sell-off was a reminder to some individual investors that hedge funds and other powerful traders use computer programs to make rapid-fire stock trades, giving them an advantage over the slower smaller investor. “The hedge funds are resorting to more questionable tactics. It’s mind-boggling,” says Swenson, who invests largely in exchange-traded funds, which track market indexes and can be traded throughout the day, unlike mutual funds. Spitzer says the new insider trading probes illustrate how the game is tilted against small investors. “If you are sitting there in front of a screen, thinking your information is going to be good enough to make smart judgments that will permit you to outperform the hundreds of thousands of people on Wall Street who have access to better information and more timely information than you, you’re mistaken,” Spitzer says. It’s not the first time small investors have been scared out of stocks. Charles Geisst, a finance professor at Manhattan College who has written 18 books on the history of markets, says investors balked at buying for years after the Crash of 1929 and Black Monday in 1987. The view both times: The odds are stacked against the little guy. To combat such an impression, the Securities and Exchange Commission was established in 1934, and “circuit breakers” were instituted after the 1987 crash to stop massive selling. But all of the safeguards don’t seem to be helping lately. “If the stock markets had any reputation for integrity, they lost it in the past year,” Geisst says. Restoring small investors’ confidence may depend on whether they see ample evidence that federal regulators are successfully cracking down on bad behavior, says Ross B. Intelisano, a securities fraud attorney with the firm Rich & Intelisano. The market needs them back. Most of the stock in U.S. companies, both public and private, is held by individuals, not institutions, according to Federal Reserve data. Small investors may be comforted to know that professional investors don’t always fare better, even with the edge they have over the masses. Numerous studies have shown that mutual funds overseen by professional stock pickers often are outperformed by computer-driven index funds. The record for hedge funds hasn’t been so impressive, either. Since 2008, when the number of those funds hit 10,000, nearly 3,000 have gone out of business, according to Hedge Fund Research in Chicago. “The edge is hugely exaggerated,” says Richard Ferri, founder of the investment advisory firm Portfolio Solutions and an advocate of low-cost index funds. “If the small investor does the right thing, he can do better than 99 percent of anyone else.” ___ Associated Press writer Michael Gormley contributed to this report from Albany, N.Y.

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Michael Tasner: My Favorite Things, Oprah Style

November 24, 2010

My favorite Oprah episode of the year (yes I admit it, I watch Oprah from time to time) is her “Favorite Things Show.” While I understand these are not always her favorite things (as companies pay handsomely for the product placement), I simply love watching the audience reaction when they hear they are getting things like: • Diamond Earings worth $2000 • A Volkswagon Beetle (the new 2012) • High end Pot Set worth $500 • And Beyond In following Oprah’s Favorite things show, I decided to release my first ever “Michael’s Favorite Things.” One big thing I do want to point out, however, is that these really are my favorite things, and I was not paid by any of these companies to mention their names. Here we go… Project Management: BaseCampHQ — Most companies have a variety of projects going on at the same time and lots of moving pieces. We found that it was essential for clients to have everything in a central place, especially with projects that we had to involve outside vendors. We turned to Basecamp and have never looked back. For example, all of our design projects are in Basecamp with milestone dates and to-do items so everyone can see everything. It has saved us quite a bit of time and headaches. Document Sharing and Email: Google — There are some days when I say Google more than my own name. My staff and I simply use Google for pretty much everything. From email and sharing files to creating slide shows, all stored in the cloud. It’s an amazing tool and at $50/year it’s totally worth the money. Managing Customers: Salesforce.com — One area that I’ve noticed most people need some support is in managing their customers and their leads. Many people simply don’t track this information, and if they do track the information it’s all over the place and incomplete. We’ve been using Salesforce.com for over five years and have found it to be an amazing tool. We track our leads, customers, contracts, and even our contractors through Salesforce.com. The data is once again stored in “the cloud”, so you can access the information from anywhere without having to download any software. Video Conferencing: Skype — As I have contractors throughout the world, it wouldn’t make sense for me to buy a phone plan for everyone, so we turn to Skype. While I’ve had a love/hate relationship with Skype (sometimes it simply does not work), it has been an amazing tool. When you take a step back and realize you are talking to someone halfway across the world for free, and with video it makes you wonder where technology will be in another five years or so. Web Sites: Wordpress — Boy do I love Wordpress. Every web site that we designed in the last 12-18 months has been in Wordpress. It’s easy to use, easy to customize and has the option of being scaled to drastic levels using one of the tens of thousands of plug-ins. Member Sites: Wish List Member — Passive, reoccurring revenue has been the name of the game in a down economy. We’ve been accomplishing that through membership-based web sites. As all the sites we design have been in Wordpress, we wanted to find a really cool plug-in that makes making membership sites a breeze, then we stumbled upon Wish List Member (created by two really cool guys). The plug-in has rocked our socks off and seems to get better every version they release. Sharing Files: Dropbox — Last but not least, Dropbox. Remember the days of sending files (small or large) back and forth or using a site like Yousendit.com. Those days are long gone. Install Dropbox on your computer (s) and you’re in business. You can upload files and it will automatically sync those files with your other computers in the office. Need to share a folder or file with someone? Right click share, put in their email and the files start transferring to their computers. My favorite part — if you share a folder with someone once, anytime you move anything into the folder it gets shared with them automatically, like magic! I could have went on and on with some of my other favorite things but I wanted to limit the list to seven things that you should be using regardless of your business size. These tools are all easy to use and can be deployed quite quickly. Happy Thanksgiving to everyone in the US. And to everyone else, have a rocking week!

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Robert Reich: The Failure of the G-20 Summit

November 15, 2010

The president emerged Friday from a meeting with the heads of state and finance ministers of the 20 biggest economies, in Seoul, South Korea, saying they had agree to “get the global economy back on the path of recovery.” But where are the specifics? The three-page communique that also emerged from the session brims with bromides about the importance of “rebalancing” the global economy, “coordinating” policies, and refraining from “competitive devaluations.” All nice, but not a single word of agreement from China about revaluating the yuan, or from the United States about refraining from further moves by the Fed to flood the U.S. economy with money (thereby reducing interest rates, causing global investors to look elsewhere for higher returns, and lowering the value of the dollar). China and the U.S. are the only big players in the currency game. And with neither of them stepping up to bat, the game is in dangerous territory. Other nations will now do whatever they can to reduce the value of their currencies in order to stimulate more exports — and therefore create more jobs. The underlying problem isn’t just or even mainly an international imbalance. It’s an imbalance within many nations — especially inside the United States and China. In the U.S., more and more income is concentrating at the top, thereby reducing the relative purchasing power of the vast American middle class. That means more pressure on exports to fill the gap. In China, more and more income is going to the productive sector of its huge economy rather than to Chinese consumers, thereby reducing the relative purchasing power of the Chinese relative to what the nation is producing. That means more pressure on exports to fill the gap. It’s always nice to talk about international cooperation, and to create global photo ops. But the truth is that much more needs to be done to ease tensions that are moving the global economy closer to the brink of outright protectionism. The key responsibility falls to China and America — both in terms of what they do internationally and also what they do domestically. Both have failed. Robert Reich is the author of Aftershock: The Next Economy and America’s Future , now in bookstores. This post originally appeared at RobertReich.org .

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Valerie Orsoni: How to Succeed in a Macho World

November 5, 2010

Did you know that there was a time when women ruled the world? When the most revered figures were females: goddesses, empresses, and mothers? But three thousand years ago, the vast majority of humanity abandoned goddesses for gods as our ancestors settled and developed agriculture, marking the end of direct female domination. Or perhaps not? Thanks to their formidable inner-strength and unflinching determination, women soon began to develop their own talents in order to get what they desired, be it a husband, a child, wealth, a house, and more. Women intrinsically knew that achieving a goal was far more important than the path one takes to reach it. Women understood that they should never let men feel they have lost face or have been manipulated. Women inherently recognized that men need to believe they are responsible for their success in order to fully enjoy it. And women have always been aware that confrontation is not the way to victory (ultimately). So how do these realizations translate in our world today? How does the modern woman thrive in today’s macho business environment? There are several ways to succeed. They might all be combined, or they can exist individually, making it fairly easy in the end to succeed in a macho world! MyPrivateCoach / LeBootCamp conducted a survey where we asked 256 people (50/50 men to women ratio) if they agreed or disagreed to 6 specific statements, and the results are exciting! Indeed, the vast majority of women think they need to behave like men in order to be successful, whereas most men believe that what makes a woman successful is, in fact, her femininity! Before sharing the results with you, I’d like to share how one of our participants, Rebecca, summed up the fine line that women tread when doing business in a macho world: “If women are strong, they are ball busters, and if they show any weakness or softness, they are little girls trying to play in a man’s world.” (1) Use feminine attributes (Men: 90% – Women: 25%) Interestingly enough (and should I say, as expected), men and women are absolutely not in agreement on this statement. Little girls’ education gives us some undeniable advantages to compete in a dominantly male group or company: better communication skills, better empathy with colleagues and clients, and most importantly, better cooperation and better understanding of the modus operandi of our workmates. We also have a physical way of expressing our femininity, which men believe we try to hide more often than we should. This is even truer since the start of lawsuits against sexual harassment. However, businessmen are begging us: be yourself! You can dress professionally and in all your femininity without being provocative. Be a woman and be proud of it (keep in mind though, that a little pinch of perceived vulnerability won’t hurt either). However, I do notice that many female executives and CEOs (still too rare) in the software, legal, banking and high-tech industries, wear rather conservative suits (usually pants) and short haircuts… something to think about! Is this the reason for their success? Or are they trying to avoid despising comments like: “I know how she climbed the ladder — short skirt and sexy attitude.” (2) Talk about facts, not feelings (Men: 95% – Women: 30%) Again, it all goes back to our childhood games, and women tend to give more weight to non-tangible elements than facts in a business relationship. While this attitude can be a great sales closing tool, more often than not, it will hamper our efforts in the day-to-day corporate world. Strive at not letting your emotions take over facts. Do not take things personally. When you foresee your feelings may prevent you from considering facts in a clear manner, or negotiating successfully, sit back, relax and reformulate your thoughts and ideas in a logical and rational way. Rather than saying: “I like this idea,” try to (think, and) say: “This idea will work because of XYZ logical or marketing reason that we know about this audience.” This works wonders in a male/female business relationship. If we look at what men and women think about this statement, we see an enormous gap! Almost all men agree that facts matter! Women don’t seem to realize how much of a showstopper the “facts vs. emotions paradigm” is. (3) Don’t imitate male machismo (Men: 76% – Women: 20%) Thriving in a high-profile executive job requires a “genetic” mutation: the development of thick skin (Men: 54% – Women: 89%) typical to men, to prevent direct attacks from hurting while still remaining soft so as not to hurt the male ego. The most effective female business leaders I have met don’t try to imitate male machismo. They use some “feminine” attributes such as greater attention to interpersonal interaction, and a degree of approachability in order to lower people’s defensiveness. But underlying this soft approach they remain focused on the bottom-line goals, express self-confidence, and succeed in achieving those goals without having the men around them feel that they have been manipulated or lost face. What’s more, imitating is irritating. And, though men are not people readers in general, they can see through a bad imitation almost instantaneously. (4) Be a warrior (Men: 25% – Women: 75%) Let’s not deny it: not giving in to male machismo does not mean we should be subdued to everything! Being a warrior, or developing a survivor’s spirit helps a woman be more successful — NO question about it. The only problem is that we are not wired to accurately identify rivals. We are not wired to be warriors; we have to work on becoming one. If you develop into a warrior yourself, think like a man and play his game. Since women have this great ability to adapt to nearly any situation, this should not be too tough. Paradoxically, this attitude will help you mingle better in situations where you are the only woman. But once you’ve found your place, remember to shift to a more feminine (and more efficient) attitude. (5) Treat men as equal (Men: 60% – Women: 76%) Stop thinking he is man, I am woman, there must be some difference. By brainwashing ourselves into thinking about differences, we focus on the wrong element and hinder our ability to succeed. Let’s stop thinking about differences; when conducting business, let’s believe in one species: Homo sapiens. (6) Recognize when the game is over (Men: 82% – Women: 13%) Harking on the past and broaching former incidents when in the heat of an argument, is a typically female habit. This attitude is particularly detrimental to our business success in a dominant male world. What happened five years ago, is over; no need to bring it to the (business) table anymore. I know it is a hard one; we are wired to react this way… but aren’t we also wired to be extremely adaptive? ;-) Keep in mind that this wiring happens when we are very young. Little boys are taught to play war-oriented games and sports, which have a clear end. In contrast, little girls play with dolls and kitchen sets — activities that have no real clear-cut ending; play that is more of a process rather than a timed game. The poll result for this one was very interesting, indicating that women do not consider this attitude as a showstopper when it comes to their success in the corporate world. I bet that you have found yourself using (whether consciously or not) one or more of these key factors to success in a macho world, and likely discovered that it was not THAT easy or THAT straightforward. Recapturing the former woman’s glory, not to mention its social, religious and political power, is considered difficult, if not unattainable. But is it necessary? I don’t subscribe to this point of view. In fact, I don’t support allegation about gender struggle in general, as I have never believed that businessmen and businesswomen were doomed to be at odds. The old dichotomy of black/white, man/woman, power/submission is long gone. In 2010, the “businesswoman homo sapien” species has evolved and is now a patent pending complex mix of 10% man, 2% warrior, 88% woman. I will leave the last words to one of the male participants in the survey, who is definitely not macho: “The best way to succeed in a macho world is to make up your own rules, rather than compete with the macho element. The bottom line is that the macho thing may look formidable, but it’s really not an effective business strategy; (in my opinion) it lacks subtlety…”

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Don Hutson: The Massive Price of ‘Negotiaphobia’

November 1, 2010

Our research and experience have convinced us that “negotiaphobes” in America have left enough money on the table to pay off our National Debt! Why is it that today so many people are reluctant to engage in negotiations? Working with business professionals on six continents has shown that this reluctance to engage in negotiations in both our professional and personal lives is due to a desire to avoid confrontation, a lack of skill in the negotiation process, and a willingness to be a victim and simply live with an (often dysfunctional) status quo. Negotiaphobia is a disease that can be treated. This treatment is simple and it involves learning the various negotiation strategies and the skills to deploy them. Our book, ” The One Minute Negotiator ,” shares an E-A-S-Y three-step process which will get you on the road to fighting back your fears as you become mentally ready to engage and succeed in negotiating for your desired outcomes. We examine this simple yet innovative process below. The E in E-A-S-Y stands for engage … asking yourself “Is this an encounter where a negotiation is possible?” Many people miss these opportunities, as the people they deal with mask them by saying things like, “Of course there is a $20 dollar set up fee.” We all see the big negotiations like tax and health care reform, but we miss the ones such as a drop fee on a rental car. These “small” ones are the exchanges we can do something about and they do impact our discretionary income, and thus our quality of life. Once there appears to be the opportunity to negotiate, the second aspect of this initial step is to quickly review the four viable negotiation strategies presented in a clear 2X2 matrix form in the book. These strategies are avoidance (reactive and low cooperation), accommodation (reactive and high cooperation), competition (proactive and low cooperation) and collaboration – sometimes called win-win (proactive and high cooperation). Each of these four strategies has its place in the various negotiations we face on a daily basis. The “A” in E-A-S-Y prompts negotiators to assess their natural tendencies to use each of the four strategies, as well as the probable tendencies of the party they are negotiating with to follow one of the paths. To assist readers in assessing their own tendencies, The One Minute Negotiator includes a 20-Question self-assessment scale in its fifth chapter. This easy and fun tool can also be downloaded for no charge at www.theoneminutenegotiator.com. We propose that the best read on what strategy someone will use in negotiating with you is how they have negotiated with you in the past. This is the other dimension of negotiaphobia; lack of adaptability. Most people are one-trick ponies as they use the same approach every time. For people we have not negotiated with in the past one of the best reads on behavior is their interaction style. Drivers tend to come out in a very competitive stance, but do not overlook the possibility of winning them over to a collaborative approach. Expressives embrace the idea of win-win collaboration, but they rarely have the attention span to do so. “Strategize” is the third-step in the E-A-S-Y treatment process. Based on the significance of the situation, one’s own tendencies, and the expected strategy to be deployed by the other side or sides, a person now carefully selects their opening and fall-back strategies. The fall-back strategy is a lot like having an umbrella with you. If you have an umbrella in your brief case or your golf bag it rarely ever rains, but leave it in the trunk of your car and prepare to get drenched. On the issue of significance, you should not just look at this one encounter, but look for long-term potential. Some deals, like buying a car, are usually one-offs that push you toward competition. There are other instances where a small opportunity today, if handled collaboratively, could lead to a much larger and recurring deal into the future. Engage, Assess, and Strategize combine to form the “Y” in our acronym… “Your one minute drill.” This is where on a regular basis you automatically cycle through the first three steps as you face any negotiation. This one-minute reflection should become an automatic and very powerful tool to make you a more effective negotiator. We recognize that many negotiations take longer than a minute; some hours, months and even decades. The EASY process, however, will be your guide to get your head in the game for each negotiation encounter. Our personal and coaching experiences clearly show that most negotiations are won or lost before the first words of communication between parties even take place. We know that if you follow the E-A-S-Y process you will have more success and less stress in all areas of your life!

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Bill Gross: Fed Policy Is A ‘Brazen’ ‘Ponzi Scheme’

October 27, 2010

The Fed should stop meddling with the economy now, before it does more damage, say two top asset managers. The Fed Reserve Bank’s quantitative easing program, expected to begin next week, in which the central bank will go on a spending spree to inject more money into the economy, will deal untold damage to the system it attempts to support, say Pimco managing director Bill Gross and GMO chief investment strategist Jeremy Grantham. These purchasing strategies, in which the Fed will likely buy government bonds, intending to lower interest rates and stimulate demand, don’t work, Gross and Grantham say in letters to investors: They actually make things worse. “I ask you: Has there ever been a Ponzi scheme so brazen?” Gross says. “There has not.” Gross says that government debt has always operated in a Ponzi-like manner. The U.S., he says, can rely on future investments to pay for its current expenditures, in a theoretically unending chain. But in this case, Gross says, the government will be its own investor, feeding its own Ponzi machine. “Instead of simply paying for maturing debt with receipts from financial sector creditors … the Fed has joined the party itself. Rather than orchestrating the game from on high, it has jumped into the pond with the other swimmers,” Gross writes. “There is no need — as with Charles Ponzi — to find an increasing amount of future gullibles, they will just write the check themselves.” Gross, it should be noted, has a huge personal stake in the matter. His company, Pimco, invests in bonds — as Reuters notes, Pimco’s bond-focused Total Return Fund, which Gross runs, has about $252 billion in assets, making it the world’s largest bond fund . When Gross criticizes the Fed’s anticipated quantitative easing, he complains that it will likely boost inflation, which would deal a severe blow to bonds, ultimately reducing their value (and his fortune). “Bondholders, while immediate beneficiaries, will likely eventually be delivered on a platter to more fortunate celebrants,” he writes. Grantham, whose firm manages more than $94 billion in assets , also had some choice words for the Fed. The title of his report, “Night of the Living Fed,” not only conveys the danger he anticipates from quantitative easing (it’s “a play on the traditional scary Halloween season,” Reuters explains) but also suggests that the Fed’s program will artificially — and harmfully — jolt the tepid economy. “If I were a benevolent dictator, I would strip the Fed of its obligation to worry about the economy and ask it to limit its meddling to attempting to manage inflation,” he writes. “I would force it to swear off manipulating asset prices through artificially low rates and asymmetric promises of help in tough times. … It would be a better, simpler, and less dangerous world.” The Fed’s powers are limited to adjusting the currency — setting interest rates and determining how much money is in circulation. By taking that limited power to its furthest possible extreme, Gross and Grantham say, Fed chairman Ben Bernanke is making matters worse. Real stimulation, Grantham writes, will come from elsewhere. “If you really want to worry about growth, you should be concerned about sliding education standards and an aging population,” Grantham says in his letter. Gross, in his letter, makes an argument similar to Grantham’s, with a similar metaphor. He suggests that the economy might be stronger in the long run if the Fed were to allow it to grow naturally, “from admittedly lower levels.” “The Fed, on Wednesday, however, will decide that it is better to keep the patient on life support with an adrenaline injection and a following morphine drip than to risk its demise and ultimate rebirth in another form,” Gross writes. So outraged is Gross by the Fed’s anticipated policy that he gives it a nickname. “I call it a Sammy scheme, in honor of Uncle Sam and the politicians (as well as its citizens) who have brought us to this critical moment in time,” Gross says. “It is not a Bernanke scheme, because this is his only alternative and he shares no responsibility for its origin. It is a Sammy scheme — you and I, and the politicians that we elect every two years — deserve all the blame.

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Les McKeown: The Vital Missing Voice in the Economic Recovery Debate Is Someone You’ve Never Heard of

October 21, 2010

It’s clear that we’re going to see a shakeup in the administration’s economic policy team before the end of the year , and there’s been much talk of bringing in a successful business leader (such as Anne Mulcahy, ex-Xerox CEO) in an attempt to counter criticism that the Obama White House appears out of touch with — and unsympathetic to — corporate America. While I admire many successful leaders of large corporations — it’s a hard and complex job and requires a wide range of skills — with the greatest respect to those same people, theirs is not the voice that we most need to hear from at this time. To stabilize, strengthen and accelerate our barely-breathing economic recovery, a truly brave move on the part of the president and his team would be to appoint not a marquee “brand name” business leader like Mulcahy, but instead, to turn to one or more successful founder-owners from the SME (small- and medium-sized enterprise) community. Why? There are five main reasons we need to hear from this group, rather than from their more well-known celebrity big-business colleagues: 1. They think, talk and act with skin in the game. Founder-owners are distinguished from just about every other business group as being people who live or die by the decisions they make. There are fewer Mark Hurd-like second acts in the world of SME business owners, and as a result, they ruthlessly stress-test the likely results of their decisions. With all the best will in the world, when you’re “merely” salaried (no matter how high or performance-oriented that salary is), you think in a completely different way from people who are literally “all in.” It’s like the old adage of the chicken and the pig. When it comes to breakfast, the chicken may be involved in delivering the egg, but the pig is committed . Founder-owners are committed. Celebrity CEOs are merely involved. We’ll get very much less of the “let’s throw it against the wall and see if it sticks” policy approach if founder-owners are part of the process. 2. They do results, not optics. Let’s face it, running a public company these days is as much about the optics — how things look — as it is about the underlying fundamental realities. In this regard, most celebrity CEOs are far too like their political brethren in being easily swayed to agree to a path of action because it looks good, rather than because it will actually make a real positive difference to the people impacted. Running a privately-held organization is a different game altogether. Managing by “what makes me look good” has a short shelf life, and those that rise to the top in the SME world — and stay there — tend to be people who trade in bloody, inconvenient reality. 3. They’re less likely to be building a future platform. We’ve all seen the celebrity CEO that has used their business fame as a stepping stone to political power — see the current races in California as an example. That’s their right, of course, and more power to them — but it’s not the type of person we need to hear from while trying to stabilize and accelerate our faltering economic recovery. The people we need to hear from — urgently — are those who will only under the utmost reluctance engage in public service; give it their all while they can make a difference, then get the heck out of there and back to where their true passion is — running their business. Would one or more SME founder-owners become enamored of the political life and decide to hang around? Sure. But I’d rather start with the reluctant many than depend on the clamoring few. 4. They know how to (and will) speak truth to power. If, as I have, you’ve worked in a wide range of both privately-held and publicly-traded companies, you’ll have noticed that one of the biggest differences between them is the degree of honest interaction at the very top. There’s simply less… well, politics. That’s not to say that there aren’t privately-held companies where senior execs play politics, or publicly-traded organizations with a mature, no-nonsense top team, but the general tendency is that founder-owners put up with (and generate) a lot less bull-hockey, and tend much more toward straight talk. You think we could do with some straight talk right now? 5. They’re closer to the real world. If there’s one thing that marks the era of modern-day economic policy making, it’s that the policymakers are increasingly cocooned from personally living with — and suffering from — the impact of their decisions (I’d love to watch a few senators travel coach for a month before approving yet another dignity-abasing piece of security theater at the airport). Especially in the area of economic recovery, we need the policy debate to be from people who live, eat and sleep in the real world just like the rest of us — not for reasons of schadenfreude (I have no problem with celebrity CEO’s traveling by company jet everywhere, heck, if I could get that gig I might take it too), but because we need real, working answers in the next 18 months — and those are much more likely to come from people who are living it in the trenches every day. There’s no glamor or media brownie points in eschewing the celebrity CEO and appointing a relative unknown founder-owner from the SME community to advise on real-world economic reform — but there just might be a massive payoff.

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MIT Entrepreneurship Review: Pixable: Why We Weren’t Afraid To Have Facebook As A Competitor

October 13, 2010

MIT Entrepreneurship Review : Despite the tawdry tales behind the recently released movie The Social Network , most Americans would still confess to at least a tinge of envy at Facebook founder, Mark Zuckerburg’s meteoric rise in business. Who would not dream of the techno gold struck by formerly geeky students the like of Zuckerburg, Sergei Brin, or Bill Gates? In fact, these titans are only the figureheads of a massive movement across American universities — students taking ideas from the classroom or the lab, and into the market. Student entrepreneurship derives from two powerful streams — education and business creation — meeting to form the most creative new products on the market. Today, the MIT Entrepreneurship Review brings you a story of Inaki Berenguer, whose recent graduation present to himself was a company to run, a company that he conceived and brought to life within the halls of MIT. Inaki Berenguer : My co-founders, Andres Blank and Alberto Sheinfeld, and I started Pixable when we were at MIT between our first and second years in the business school. Pixable is the place to go to browse and manage all your photos online — photos on Facebook, Picasa, Flickr, and even photos on your computer. It’s a way to unify your photos that are based on different websites, group and edit them, and do other cools things like creating video slideshows or photobooks that we would print and send to you. We came up with the idea thanks to the trips that we were taking at MIT, particularly our trip to Japan. We went on the trip and at the end of it we wanted to create a photobook to remember the experience, so we went to all our classmates and asked if they’d give us their photos on a USB drive. And all we heard was, “No, they are on Picasa,” “They are on Facebook,” “They are on Flickr,” and so on. It was frustrating because the photos were already online and we had access to them, but we still couldn’t group them. So we said, “Well, let’s try and solve this problem for ourselves.” When you’re starting to research a market that’s big enough, you’ll find opportunities there. So it’s a matter of being in that market and not just solving a problem, but solving a hard problem that isn’t solved yet. Even if you don’t solve the problem, along the way you’ll solve other adjacent problems and you’ll still be in the same big market. In our case, it also helped that we were solving a problem that we were experiencing ourselves as consumers. In the middle of the second year we decided to put some money down and hire a development team in India. Most people don’t put time or anything out of their own pocket and just want investors’ money. But why would you invest in someone like that if they are not even ready to invest their time in themselves? With the initial money down, we actually went to India to work with the developers, wrote the product specs, and bought the domain. We also wanted to partner with a printing facility, so we flew to different printing facilities in the U.S. All of that happened in 2009 during our second year of the MBA program. In March of that year we incorporated the company and raised half a million dollars from friends and family before finishing business school. We went to our friends for money and they gave us around 30K each here and there. And that’s another thing, you don’t ask your friends for money if you’re still considering taking a job. If you ask your best friend for 25K, that’s because you have skin in the game and you’re going to be with your startup no matter what happens. We started working full-time on the startup in New York City right after graduation. In June, we closed our first round of financing of $2.5M from Highland Capital Partners, which brought to our board James Joaquin, who was the founder of oFoto and CEO of Kodak Gallery, and Bob Davis, the founder and CEO of Lycos and managing partner at Highland. We’re living the dream. Biography of Inaki Berenguer : Inaki is a founder and and CEO of Pixable. Before Pixable, Inaki completed Master’s and PhD degrees in Engineering at Cambridge University, completed an MBA at MIT, and spent two years as a Fulbright scholar at Columbia University. He also worked as a researcher at HP, NEC Labs and Intel. More recently, he spent two years as a management consultant at McKinsey & Company in the high tech, banking and telecom sectors, and as a manager in the Corporate Strategy Group at Microsoft. Inaki is trying to convince the rest of the team to open a Pixable office somewhere warm in Spain.

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Fred Whelan and Gladys Stone: Wilson Delivered for the Giants. Do You Deliver When It’s the Bottom Of the 9th?

October 13, 2010

If you’re not a baseball fan you may not know who Brian Wilson is. He is a relief pitcher for the San Francisco Giants and, as a “closer”, his job is to do what few people can do – deliver under extreme pressure. Wilson only comes in at the end of the game (usually the 9th inning) when the game is close. Last night, he played in Atlanta where 50,000 Brave fans where rooting against him. A lot was riding on this game as this would have tied up the series for Atlanta. Instead the Giants won, vaulting them into the National League Championship Series. Wilson delivered the win. To a certain degree all of us are “closers” at various points in our careers. Whether it’s an important meeting, presentation or some other high profile event, it can be a “do or die” situation. And like the game last night, there are no “do-overs”. What does it take to operate at your peak level when so much is at stake? Prepare – Whatever the situation is, if you want to excel, this will require preparation. The more and the better you prepare the finer the result will be. If it’s a presentation you’re giving, that means doing the necessary research, development of the material and rehearsing your delivery. Try and simulate the exact conditions – practice in the facility using the equipment you’ll need for the actual presentation. If it’s a meeting, research the subject matter, get “buy-in” from the attendees beforehand, etc. Don’t leave anything to chance. Many people incorrectly believe that Abraham Lincoln scribbled the “Gettysburg Address” on the back of an envelope on his way to the cemetery. That’s a myth. He actually spent a couple of weeks writing, revising and perfecting what turned out to be a two minute speech and a timeless classic. Focus – When Brian Wilson takes the mound, he’s not thinking about last night’s game or the one to follow. He’s not thinking about the screaming fans or anything other than the batter he faces. His focus is on getting that batter out. This ability to focus on the most important thing is what differentiates him from his peers. Use this principle in your career. For example, say you have a sales call with what could be a major customer. You’ve worked hard to get this meeting on the calendar and know that you have one opportunity to impress them. Rather than thinking about the commission you’ll make on the sale or the negative consequences if you don’t close them, focus on your reason for being there – to win the business. Communicate how your product will solve their biggest problem. Perform – Wilson takes the field knowing what’s at stake, and doesn’t let it negatively affect his performance. He takes the energy that is created from the stress and uses it to his advantage. Channel all your energies into your event – don’t leave anything on the table. Perform at your optimum level for whatever time is necessary. After that you can let down, but being “on” means putting 100% of yourself into the effort. The average career has several defining moments in which you must deliver your absolute best. For virtually all of these, you will have advance notice, so take that time to prepare. On the day of, focus on your objective and block out all distractions. Deliver with the mindset that you will be great. Be like the athlete who holds nothing back when the game is being played and you’ll thrive. Fred & Gladys Whelan Stone Executive Search and Coaching Authors of GOAL! Your 30 Day Career Plan for Business & Career Success

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Richard (RJ) Eskow: The First Domino: Foreclosure Fraud and the ‘Invisible Bailout’

October 12, 2010

The foreclosure fraud scandal is a big deal (or a big “effin’” deal, as Joe Biden might say). But its real significance is an even bigger deal. Foreclosure fraud is one domino, and if it falls others will follow. The result could be an end to the “invisible bailout” — the one you never hear about, the one that forces millions of people to subsidize bad lending practices in order to prop up Wall Street. The invisible bailout is the reason why the government isn’t pushing to freeze foreclosures. If the foreclosure process is halted and lending practices are thoroughly investigated, it might eventually force bankers to own up to their own lawlessness — and write down billions of dollars in artificially inflated assets. How are they going to pay themselves record bonuses if that happens? How much could that cost? One in four US homes is underwater, which means that proper accounting would require a writedown of enormous proportions. And, as the AP reported , “forecasters at John Burns Real Estate Consulting predicted that 41 percent of residential sales this year would be on distressed properties.” The banks have been counting on that revenue. Write down one mortgage in four? Halt nearly half of all home sales? Now that’s a big effin’ deal. To play the game, first place the blame Ever wonder why so many pundits and politicians keep hammering underwater homeowners as morally reprehensible, while giving bankers a free pass for lending to them? It’s because the ongoing success of the bank bailout depends in part on protecting banks from having to account for the billions of dollars in bad loans they generated. How do you do that? By convincing the public that borrowers are the ones who were irresponsible, if not downright criminal, and that they have a moral obligation to pay banks the full value of these loans. That’s the agenda that gets served by pieces like last year’s ” Homeowner Bailouts Reward Irresponsibility ,” which singled out real estate flippers and lambasted people who overspent for houses they couldn’t afford. But flippers are a tiny percentage of the real estate market, and those people with houses they “can’t afford” were told they could afford them… by the banks! That’s also why so many stories of mortgage fraud singled out homeowners who overstated their incomes or otherwise provided falsified information in obtaining a mortgage. But the FBI — hardly a bastion of socialism — estimated that 80% of mortgage fraud was performed by businesses (“Fraud for Profit”) and not individuals (“Fraud for Housing”). Yet homeowners are being stigmatized in order to reduce political pressure to provide them with some form of mortgage relief. As for the noncriminal loans, which presumably remain the majority of those outstanding, borrowers didn’t take them out as part of a nationwide attempt to live beyond their means. These loans were aggressively marketed to homeowners by banks. A lot of people got rich giving out these loans. But our “invisible bailout” policy requires a public belief that homeowners are morally obligated to pay full value on loans written at inflated house prices. That’s where pieces like one written by Fareed Zakaria (and discussed here ) were so important. For this argument to succeed, it was necessary to believe that the economic crisis was the result of their “bad habits” and their own native greed. “We… took out a massive mortgage and financed our fantasies,” Zakaria writes. But who fueled the fantasies? Who offered consumers these mortgages? Catch-22 for Homeowners Banks convinced people their homes were worth an inflated amount and persuaded them to borrow against that amount. The “invisible bailout” strategy relies on homeowners to pay them the full amount of that inflated loan, with no penalty to the bank for its role in that transaction. To help homeowners, the government’s response has been to lower interest rates. But the banks won’t lend money to someone whose collateral is worth less than the value of the loan! (Banks suddenly get religion about a home’s real value when it’s time to issue credit.) That leaves homeowners in a catch-22. Who benefits? The banks, of course. They still collect against the inflated value of the house, and at older, higher interest rates — while pocketing the zero-interest money the Fed is throwing their way. That’s the invisible bailout, and it’s worked like a charm… until now. Bled Dry Of course, when you’re bleeding people like they’re meat-locker inventory in a vampire delicatessen you’re going to lose some of them. Foreclosures — lots of them — are the cost of doing business this way. But the banks must have decided that it’s better to go through the foreclosure process than to write down their stated assets to a reasonable level. But there’s a problem with that. They had themselves quite a little party by swapping these inflated mortgages as securities, but now that the party’s over it’s getting messy. Nobody knows who owns what, exactly. That left them with a choice: Admit that they can’t always trace the chain of ownership, or falsely claim that they had this information when they really didn’t. Remember, if banks admit that they can’t prove ownership, then they have to write down a lot of assets. If their lack of information had become known, they might have had to negotiate with homeowners… for the actual, current value of the home! That’s exactly what they don’t want to do. Blackmail on the Books So the banks bluffed it out instead and hoped they’d get away with it. That’s a reasonable enough assumption. After all, they’ve gotten away with so much already. As ” Synthetic Assets ” points out: “Over the past half century the financial industry has not treated the law as a bedrock institution that constrains… its activities, but rather as a set of rules that can be forced to adapt to the industry’s needs and desires.” As long as a financial collapse threatens the entire economy, these bankers understand that the government will retrofit the law to fit their behavior. The alternative would be an economic crisis. (That’s why we need to break up the big banks.) Bankers. Aren’t they supposed to know something about managing money? Mortgage fraud was a huge business in the 2000′s, leading to more than a billion dollars in restitutions in 2003-2005 alone (and identified cases were a tiny fraction of the total). Bank assets are loaded down with fraudulently written loans which, if acknowledged, would hit them hard (and make it more difficult for bankers to pay themselves record bonuses again this year). Then there are the legally obtained but still highly overpriced assets, mostly real estate that’s worth much less than what’s on the books. And consider this: We have a massive problem with homes under foreclosure because bank haste and greed have left them with no clear title. That means it’s not clear who owns these houses. We only learned about it through the foreclosure process, but the same title problems must exist for homes that aren’t going through foreclosure. We could be looking at millions of homes whose ownership is unclear. No wonder bankers tried to hide the problem with fraudulent affidavits. The IMF estimated that banks worldwide still needed to write down $550 billion in bad debt — and that was before this problem arose. Investors hate banks right now, and no wonder. Non-interest revenue has fallen by more than $10 billion since 2007, while this kind of problem will cause their expenses to rise. Banks are trading below book value on the open market , which should be (but won’t be) celebrated by the right as an instance of an informed market making a wise decision. (Only 8% of banks traded below their book value in 2001, and by 2008 that was up to 60% .) As the IMF says, bankers are running a “very fragile” business. Even with a license to break the law, profits are down and they can’t dig their way out of the hole they made. That suggests they’re not very good at their jobs. What’s the right set of incentives for that kind of record? Record bonuses, of course — even if it means taking a bigger percentage of their reduced profits to do it. But what they must do at all cost to protect those bonuses is pretend everything’s fine. They’re not even writing down second liens on homes, which are notoriously over-borrowed. (Did I mention that these guys are giving themselves record bonuses?) Dominoes Nobel prizewinner Joseph Stiglitz, who also bears the distinction of having been correct about the housing bubble, thinks it’s time for the banks to write down the excess value of these loans . As Stiglitz observes, that will be painful for the banks in the short term, although it would be “nothing in comparison to the suffering they have inflicted on people throughout the rest of the global economy.” But the administration’s reluctant to do that. That’s why we heard such tepid remarks from the White House about the foreclosure fraud scandal over the weekend. If the foreclosure fraud issue is pursued too aggressively, it throws 41% of all expected housing sales into question. It raises even more questions about the ownership of millions of loans in good standing, potentially giving homeowners leverage to renegotiate based on the actual market value of their homes. And it reopens the issue of “writedowns.” Illegal submission of foreclosure documents was part of a larger cover-up. People need to be arrested for it — but that, of course, would open up a larger can of worms. The legal process could very well reveal the extent of the title problem, as well as other potentially widespread criminal practices. Still, that’s no reason not to cuff ‘em and book ‘em. If you can’t do the time, don’t do the crime… Foreclosure fraud is the first domino. If it’s tipped over, the “invisible bailout” would end. Banks would no longer be subsidized by American homeowners. Know what that means? Bye-bye, bonuses. Hello, increase in discretionary spending for American consumers. And hello there, new jobs. Anyone for a game of dominoes? ___________________________________________ Richard (RJ) Eskow, a consultant and writer (and former insurance/finance executive), is a Senior Fellow with the Campaign for America’s Future. This post was produced as part of the Curbing Wall Street project. Richard also blogs at A Night Light . He can be reached at “rjeskow@ourfuture.org.” Website: Eskow and Associates

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Jake Blumgart: Six Months After Upper Big Branch, Republicans Still Obstructing Progress

October 5, 2010

Six months ago, on April 5th, 29 miners were killed by an immense explosion at the Upper Big Branch mine in West Virginia. They didn’t have to die. Mine owners, government officials, and union safety experts have known how to prevent such explosions for decades. Some operators take the necessary steps to prevent such occurrences, but others are willing to put short-term profits above worker safety. Massey Energy Company, owner of the doomed mine, falls into the latter category. In fact, the company has one of the worst safety records in the nation. In 2009, the mine Safety and Health Administration (MSHA) tried to fine Massey $12.9 million, but the company appealed a stunning 75 percent of the violations, putting off payment indefinitely. Upper Big Branch alone was cited over 3,000 times since 1995, and received 53 new safety violations in March, including specific citation of the mine’s ventilation system, meant to disperse potentially explosive methane gas. Frequent inspections did little to hinder the operator’s unscrupulous practices, partly because the non-union workers feared retaliation if they expressed their concerns to inspectors. Meanwhile, Massey’s CEO, Don Blankenship, insists that the industry is capable of regulating itself. “Washington and state politicians have no idea how to improve miner safety,” Blankenship declared at a 2009 anti-union rally. “The very idea that they care more about coal miner safety than we do is as silly as global warming.” Since April, two more miners have died at Massey sites. Massey isn’t the only bad actor on the American scene. In a worldwide worker safety survey of 39 companies, provided by financial risk analysts at the RiskMetrics Group, Massey, Patriot Coal, Peabody and CONSOL all received a “CCC” rating, the worst possible outcome. No other surveyed company received such a low rating. This is partly accounted for by the fact that Appalachia’s underground mining is riskier than the machine-dominated surface mining in the Western states. Even so, there is no excuse for the industry’s sporadically inflated death toll in recent years. 44 miners have died so far this year, nearly matching 2006′s grim high of 47. According to Blankenship, the problem is government overreach, not company negligence. “The feeling of the industry is that we’re regulated too much and not too little,” Blankenship told Bloomberg T.V.’s Margaret Brennan in July, a day after the Robert C. Byrd Mine Safety Act passed the House Labor and Education Committee on a party line vote. In August, the West Virginia Coal Association’s senior vice president, Chris Hamilton, indiscriminately blasted all government regulation in a pro-mountain top removal press release . “We plan to…call on lawmakers and administration officials to discontinue efforts to regulate the coal industry–and the hundreds of thousands of jobs it provides–out of business.” These hang-wringing comments echo the views that the industry and its allies have espoused for decades. . “Rigid, inflexible, thoughtless regulation…can have a plainly detrimental effect on achieving a safe, efficient, and productive coal industry,” Ralph Bailey, chairman of the Consolidation Coal Company, protested during the 1977 hearings to update the Coal Mine Safety and Health Act of 1969–the first meaningful piece of safety legislation. “It’s the overregulation and enforcement of the Act as an end in itself that has caused the coal industry most of its problems…” Lawmakers ignored Bailey’s false warnings and passed the Federal Mine Safety and Health Act of 1977. During the 1980s and 1990s, the industry prospered and productivity increased. Contrary to the contentions of Blankenship and his cohorts, Congress’ fresh attempts to reform mine safety laws aren’t anymore likely to disrupt the coal industry than the 1977 act did. And the laws badly need updating. The safety laws were last amended in 2006, in the wake of the Sago, West Virginia mine disaster, where 12 miners died in an explosion. The resultant MINER Act was almost purely reactive–providing for more oxygen reserves, fast response rescue teams–basically strengthening safety measures for workers after a disaster took place but establishing few preventive standards. Many experts agreed that stronger, preventative legislation was needed, but when Rep. George Miller (D-CA) tried in 2008, President Bush threatened to veto the legislation. The bill died in the Senate. The Upper Big Branch tragedy renewed Congressional interest in mine safety In response, Democratic lawmakers, led by Rep. Miller and Sen.Jay Rockefeller (D-WV), crafted the Byrd Act. The Act greatly expands whistleblower protections, granting all miners the “express right” to refuse to work in unsafe conditions and ensuring that miners receive full pay if their section of the mine is closed for safety reasons. To ensure government accountability in the event of an accident involving the death of three or more workers, the act mandates a panel of independent experts to review the actions of the operator and MSHA. Among many other much needed reforms, the act would give MSHA investigators subpoena power, update the agency’s underused “pattern of violations” authority, and increase both criminal and civil penalties while requiring operators to pay their fines within 180 days, on pain of a shut down. In an attempt to justify their opposition to the Byrd Act, business lobbies have latched onto one addendum to the bill, which expands some of the legislation’s provisions to all private workplaces. (Proposed alterations include increased whistleblower rights and heightened criminal penalties.) Business groups, including the Chamber of Commerce and the National Association of Manufacturers, have fiercely denounced this aspect of the Byrd Act. “The proposed changes will impose substantial costs on businesses–particularly small businesses–which are struggling to create and retain jobs,” reads a list of objections issued by industry front-group Coalition for Workplace Safety. The Republicans have gleefully taken up this excuse. Before voting against the House Labor Committee’s version of the bill, ranking Republican John Kline (R-MN) complained: “[The Act will] drive up costs and litigation for employers, all of which — all of which would make it more difficult to create jobs at a time when our economy needs them the most.” On September 28, Sen. Rockefeller (D-WV) tried to bring the Miner Safety and Health Act to the floor for a vote, a move that requires unanimous consent from the Senate. Wyoming Republican Sen. Mike Enzi (R-WY) objected, accusing the Democrats of using the bill for partisan gain, and prevented the vote. (Wyoming produces around 40 percent of the nation’s coal, and Enzi’s largest donor for the years 2005-2010 is Foundation Coal, one of the largest operators in the country.) In fact, numerous studies document that safety regulations don’t result in the job killing apocalypse that business groups and their political allies always predict. A 2004 study commissioned by the Public Citizen Foundation shows that the cost of compliance with every environmental, safety, and health regulation studied have “never [risen] to the levels estimated by private sector industry”. A 2005 report by OMB Watch lists numerous regulations, many concerning worker safety: industry objected to every one with dire predictions of job loss, skyrocketing costs, and business failure. In every case, their predictions were proven wrong. All the rhetoric and excuses from Massey, the business lobbies, and Congressional Republicans are part of the game plan: Delay until November. The Byrd Act’s chances look bleak if the Republicans win a majority in one or both chambers in November. Rockefeller told The Hill last week that the bill “has less of a chance [in 2011 because] there’s going to be even more of the ideology factor plus the party discipline factor.” If the bill survives, it is likely to be substantially weaker than the current iteration. But activists aren’t giving up the fight. “I don’t think it’s dead, and let’s not forget what might happen in a session after Election Day,” said Phil Smith, director of communications for the United Mine Workers, referring to the lame duck session after an election but before the next Congress opens. If the Republicans and their industry allies are successful in sinking the Byrd Act, another option for reform won’t present itself again soon, or at least until the next mine explodes. Jake Blumgart is a researcher with the San Diego-based Center on Policy Initiatives’ Cry Wolf Project funded by the Ford Foundation and the Public Welfare Foundation. Peter Dreier teaches politics and chairs the Urban & Environmental Policy program at Occidental College, and co-coordinates the “Cry Wolf Project,” a foundation-funded research project to examine the accuracy of warnings about the impact of liberal and progressive policies.

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Will Taxpayers Turn A Profit On The AIG Bailout? Not So Fast

October 5, 2010

As AIG and the government hammered out a plan last week to repay taxpayers for the bailout worth up to $182.3 billion , the U.S. Treasury reckoned the total cost would be less than $50 billion, and it might even turn a profit, the New York Times reported. But the specifics of the paydown, which will involve settling obligations to the New York Federal Reserve and to the Treasury, have raised questions about the insurer’s ability to make good. NYT ‘s Andrew Ross Sorkin argues in his DealBook column this week that in a best case scenario, AIG could repay its debt in full and even leave the government with a $13 billion profit. To make the calculation, Sorkin starts with the rounded number of $130 billion (since the government never actually ended up using the full $182.3 billion). Subtracting the revenue from assets that AIG will sell — and other assets that the government could sell — whittles that down to $71 billion. To reduce that further, Sorkin says, AIG will use money it’s borrowed from the Treasury to repay the Fed, a move he admits is akin to “moving money from one hand to another.” Reuters’ Felix Salmon takes issue with that step in Sorkin’s logic: As Sorkin admits, taking money from one government body and giving it to another doesn’t constitute repaying debt. But Salmon offers an explanation. He refers to the AIG press release and concludes that AIG will raise the money to complete the transaction by selling securities that the New York Fed now owns. The real contention comes next. Sorkin says AIG will, at that point, owe the government $49 billion, which it will repay as the government converts its preferred shares in the company to common stock. Such a move would increase the government’s stake in AIG to a whopping 92 percent, would dilute private shareholders, and increase the value of the government’s stake to $62 billion. It would win, Sorkin says, a $13 billion profit. But Salmon begs to differ. His argument, essentially, is that Sorkin neglects to consider the original value of the government’s stake in equity, which, if the company is currently worth $26 billion and the government currently owns 80 percent of that, is about $21 billion. The value of that stake increases only $41 billion in the conversion plan (as the government-held debt loads convert into AIG shares). But that $41 billion is still $8 billion short of the target. Or, put another way, the government will start with $49 billion in debt plus $21 billion in equity (for a total $71 billion stake) and end up with only $62 billion in equity. Both opinions, it should be noted, are speculation. Any number of variables, such as the behavior of private shareholders, could change the game entirely. According to the plan , the stock conversion will happen in early 2011, after the debts to the New York Fed have been repaid.

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Dan Dorfman: Abracadabra on Wall Street

September 25, 2010

Here we go, a dazzling display of Wall Street wizardry. Or more to the point, an amazing run of super up-and-down market calls from an amateur magician who could probably give Merlin a run for his money. That’s what I’ve seen from 70-year-old San Francisco money manager Gary Wollin, who runs about $105 million of assets under the banner, Gary Wollin & Co., and performs in magic circles under the name, The Great Baldini. When he’s on stage or giving investment speeches, Wollin, bald, bearded and easily passable for Santa Claus, generally opens his bag of tricks by turning a regular dollar bill into a giant-sized dollar bill. And that’s essentially his expectation for the stock market, as well, a considerably larger valuation for the Dow, which sees climbing from its current 10,860, to about 12,000 by year end. A relative unknown as money managers go, our magician has also displayed considerable razzle-dazzle in the marketplace in recent years with an awesome exhibition of uncanny market timing. That is, calling a series of significant up and down movements in equity prices. Here’s his documented record. In November 2007 with the Dow about 13,300, Wollin recommended that stocks be sold. It was wonderful market timing as the Dow subsequently crashed, plummeting to around 6,500 by March 18, 2009. At that point, he reversed course and said it was time to buy stocks again. One again, it was wonderful timing as the Dow climbed to 10,400 by February 18, 2010. At 10,400, he turned cautious, saying it was time to take a snooze. Indeed, sleep proved to be the right prescription for investors as the Dow slid to 10,120 by July, 21. Given his array of remarkable market calls, it’s no wonder that The Great Baldini’s forecasts have appeared a number of times in my writings. No one, though, can be Superman all the time, and Wollin showed it in mid-July by reiterating his snooze strategy. That was a goof since the Dow subsequently rose 740 points or about 7%. “I didn’t lose any sleep over missing that move,” says Wollin, “because I’m a long-term investor. The name of the game here is patience and no one is right 100% of the time.” As a money manager, Wollin, whose investment thrust centers on big name blue chips, is no slouch. Over the last 30 years, he tells me, he figures he”s outperformed the Dow by an average 2% a year. So far this year, he’s up 5.1%, slightly above the Dow’s rise of 4.1%. Why so gung-ho on the market with all the worrisome economic concerns out there? Wollin points to the following: The economy has stepped back from the edge of the cliff, is picking up steam and the National Bureau of Economic Research has declared the recession is over (which, by the way, a number of market pros strongly dispute). It looks like the European debt crisis has passed and investors are recognizing it. The Federal Reserve, fearful of killing the recovery, will continue to keep interest rates very low. There is enormous liquidity on the sidelines, notably the trillions of dollars sitting in money-market funds, bond funds and CDs. Vacation is over and the pros (mutual fund and hedge fund managers) have to start buying because anything they have in cash investments is earning practically zero percent. John Q. Public is also saddled with puny yields, as seen by money-market returns of 0.45% for two-year Treasuries, 2.6% for 10-year Treasuries, 0.06% for money-market funds, as measured by the Fidelity Cash Reserves Fund, and around 1.22% for CDs. Given, as well, a strengthening market, as seen in Friday’s nearly 198-point rise in the Dow, reflecting a positive economic report. Wollin expects a decided pickup soon in trading volume, a lot more corporate stock buybacks and an increasing number of companies issuing debt to buy back stock. In conjunction with this scenario, he expects more good economic news, namely top-line sales increases, higher earnings, little by little more job creations and a bottoming out of the housing market by the second quarter of 2011. To Wollin, it all means the public should soon be returning to the stock market. “Greed should come back in fashion big time as fear and uncertainty begin to evaporate,” he says. His 10 favorite stocks, all of which he views as market outperformers over the next 12 months, are IBM, Procter & Gamble, Triple M, Johnson & Johnson, Chevron, AT&T, Bristol-Myers Squibb, Federal Express, UPS and CSX Corp. One final question: How did Wollin come up with the name, The Great Baldini. “My girl friend and I had just finished making love,” he explained. “I’m bald, she said the sex was great, and from now on I’m going to call you The Great Baldini. And that was it.” It’s not every day I chat with a master in magic, the market and love-making. This was one of those days. What do you think? E-mail me at Dandordan@aol.com.

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Dean Garfield: Why Innovation Isn’t Just Another Buzz Word

September 24, 2010

Far too often in Washington, we lose sight of the practical. Essentially, how specific policies stand to impact millions of people and the communities in which they live and work. From health care and energy to technology and innovation, the standard default is analysis and legislative language, not the ingenuity (and vast potential) of a concept or idea. By focusing on the wonky instead of the practical and transformative, we lose sight of the potential of technology to completely change the game . Earlier this week, the organization I lead launched “Faces of Innovation,” a new online campaign that showcases the way in which innovative technologies and the people behind them are positively impacting our data-to-day lives. More specifically, this Web series is aimed at helping the public and policymakers better understand how policies important to the high-tech sector, such as the research and development (R&D) tax credit and ICT enabled clean energy, directly link to developing innovations that make our lives better, businesses and households more efficient , and America more competitive. The message? R&D and innovation matter. Consider the following: due to R&D and the race to innovate in the ICT sector, we are all walking around with computers in our mobile devices that are a million times cheaper, a thousand times faster, and a hundred times smaller than the original computers. As a result, we can access Wi-Fi in a plane, translate language in real time, smartly monitor our energy usage, deploy mobile diagnostic devices to the underserved, and accomplish on the go what only a select few could a mere decade ago. If the exponential pace of development that has taken place in the tech sector were applied to other sectors, a plane traveling from New York to Paris which took 7 hours and cost $900 in 1978 would now take less than 0.25 seconds and cost less than a penny. Unfortunately, the nation’s drive to continue to invest in R&D is stalling at a time when such investment is most needed to keep up with our global competitors. In the early- to mid-1980s, federal funding accounted for approximately 45% of all R&D funding, it is now down to approximately 26% of all R&D. That is bad. Fortunately, the private sector continues to invest. Even in an economic crisis the private sector continues to increase its spend on R&D. In fact, private sector R&D spending will likely exceed $260.3 billion this year and will account for 64.8% of all U.S. R&D. Yet, despite this, more needs to be done. We need policymakers to stand alongside the private sector and make R&D a national priority. We need to encourage and reward innovation, as well as the people behind it. And, without question, we need to do so while the U.S. is still considered a global leader. Check out “Faces of Innovation” by clicking here.

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Fred Whelan and Gladys Stone: She Landed the Perfect Job, but Couldn’t Land the Title

September 24, 2010

A Vice President of Operations at a Fortune 1000 retailer restructured herself out of her job. The retailer had been hurting and the VP decided it was the right decision for the company. She negotiated a great severance package – one year’s salary, benefits and outplacement. For the first time in her career she found herself on the market. Her outplacement coach asked her a very important question, “What do you want to do now?” This VP had been in retail for the past six years, but had spent the previous nine in consumer packaged goods. She told her coach that she realized she missed working in food and beverage and wanted to run a food company someday. That meant she ought to get back in the category now. So, she started networking and in a short period of time got executive level interviews at six different food companies. The feedback she got was consistent, “You’ve been out of the industry too long to be brought in as a VP.” Ouch. That was a tough pill to swallow. Then, one of the Fortune 500 companies she interviewed with offered her a job as a Director, managing their #1 growth business. Now she was faced with a decision. Take a lower title or continue looking until she landed a VP role? What nagged at her most was that she just started her job search and didn’t want to sell herself short. On the flip side, she had several conversations with senior level people all telling her the same thing. She came to see us and this is how we sorted it all out. While she had just been a VP at a Fortune 1000 company, it had only been for 18 months and that didn’t necessarily translate to a VP at a Fortune 500 company. Secondly, she had been out of a very specialized industry for six years – a period in which significant changes had occurred. Lastly, we thought about her long-term goal of running a food company someday. If she took this Director role, given her talents, most likely she would be promoted to VP in a few years. Then she’d be “back in the game” and well positioned to leverage that experience into a CEO post. We also reminded her that this Director position was an opportunity to manage the company’s #1 growth business, something she was very excited about. At the end of the day she decided to take the job and was happy about it. Rather than looking at the title as a step back, she viewed it as a strategic move. It allowed her to get back into the industry with a significantly larger company. For the first time, she said, she was “managing her career.” Through this process she learned an important lesson. While she had been great at growing and managing businesses, she hadn’t paid the same attention to her career. She admitted that she had wanted to return to the food industry for the past few years, but hadn’t taken any steps in that direction. When she finally did, it was almost too late. Fred & Gladys Whelan Stone Executive Search and Coaching Authors of GOAL! Your 30 Day Career Plan for Business & Career Success

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Josh Bernoff: Empowered: Managing In Real Time

September 21, 2010

Does it seem to you that world is moving faster now? You can whip out your iPhone and instantly find the price online of any product with a bar code. Or look up the movie you were thinking of seeing and see what a thousand people had to say about it – while you’re waiting in line. Even as the consumer is moving faster, corporations are still plodding along. How long does your bank make you wait on hold for service? Why are they designing mass marketing programs months in advance, when people can get instant feedback on what to buy from their Facebook friends? When Heather Armstrong – a self-proclaimed professional blogger who goes by the name dooce – talked to Maytag about her brand new, broken Maytag washing machine that three service calls had failed to fix, the customer support rep was deaf to her pleas. Even when she told the rep that she had a million Twitter followers. Then she tweeted, “DO NOT EVER BUY A MAYTAG . . . OUR MAYTAG EXPERIENCE HAS BEEN A NIGHTMARE.” Brand disaster. Face it. Top-down management can’t move at the speed of today’s technology. The solution for companies is to empower their workers to solve customer problems with technology. Let me share some examples. Leonard Bonacci runs stadium security for the Philadelphia Eagles football team. Working with a company called GuestAssist , he put in place a system that lets anyone at the game text for help to a short code. Those texts could say “A guy spilled coke on my seat” or “The person in front of me is having a heart attack” – but either way, Leonard’s two dozen staffers can get there and solve the problem quickly. He’s turned the 68,000 people in the stadium into his eyes and ears, and the result is an organization that moves a lot faster. Marty Collins, a community marketer at Microsoft, saw that lots and lots of people were tweeting, posting photos and videos, and making Facebook connections about getting stuff done with PCs. She helped Microsoft marketing see how to reclaim “I’m a PC” from Apple ads and make it a positive. And she corralled those positive comments into a feed that anyone could see. It’s at www.windows.com/social . During the launch of Windows 7, that feed was on the home page for Windows, showing what positive things people are posting about Windows right this minute. Sunbelt Rentals rents construction equipment to work sites. Its salespeople were visiting those sites, but by the time they got there, pricing and availability information was often out of date. So John Stadick, the CIO, equipped the salespeople with iPhones and an app that called up accurate inventory and price lists. The people with the iPhones generated 3.5% more rentals and called the office 30% less, because they were now operating at the speed their customers required. These aren’t isolated cases. These people who find and deploy technology to serve consumers are what we call HEROes – highly empowered and resourceful operatives. In the companies I’ve interviewed for our new book Empowered , I see a trend – companies that embrace their HEROes can operate at Internet speed and create loyal customers who spread word-of-mouth. This takes a new way of working for three groups within the companies: managers, the technology department, and the HEROes themselves. Managers need to embrace their workers’ technology ideas and help clear obstacles out of the way. These obstacles can come from PR, senior management, legal, or IT – but they need to be negotiated. Managers also need to be clearer about strategy, so their workers will come up ideas that fit the corporate goals. IT people need to get out their current mindset around technology, which is typically as the department of “No.” People are using social networks, google docs, and other simple tools to get work done (unless you work with Dilbert , of course). Instead, they need to support workers with technology advice. These projects will go forward, but they’re typically too small for IT to own. And IT has to help people work together with collaboration systems. At Deloitte Australia, 4,500 people work together with a tool called Yammer – a sort of corporate version of Twitter – that allows people to operate at the speed of their customers, finding the required resources quickly. And the HEROes themselves need to use their creativity to serve customers, not just to fool around with technology. We’ve got a tool that HEROes can use to assess their projects for value and effort – a better idea than just rushing in. HEROes who work with management and IT to nail down benefits and risks of their projects are far more likely to succeed. The future of business is HERO-powered. HEROes can operate at a speed no top-down organization can match. Every company has them. The question at your company is – will they get the chance to make you more responsive, more sensitive to customers, more competitive? In this age of empowered consumers, you’d better hope so. Josh Bernoff is Senior Vice President of Idea Development at Forrester Research and the co-author of Empowered: Unleash your Employees, Energize your Customers, and Transform your Business (Harvard Business Review Press, 2010). His previous book , Groundswell: Winning in a World Transformed by Social Technologies , was a BusinessWeek bestseller and won the American Marketing Association Foundation’s award for the best marketing book of the year in 2009.

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Katherine Warman Kern: Change the Game

September 21, 2010

I’ve posted about the “Unrecognized Risk of Coupons” because they are so irresistible to media and business looking for a linear, direct, measurable way to prove they can impact sales. In that post, I introduced the idea that couponing (like any temporary discounts, including the “free” internet market) creates a game in which the business and the customer are adversaries. Either customers win by getting more than they paid for, or, business wins by finding a way to take advantage of the customer. For example, the business which coupons during slow periods, but charges full price when they can be assured of seasonal demand. May seem fair to the business, but the customer is thinking, next year I’ll remember to load the pantry so I don’t have to pay full price. Or the free internet, where, as Alan Patrick says , “. . . someone is subsidising everything, and if you can’t see the free lunch then it’s you :-) ” Many internet companies say they are winning that game, but who knows how many active Facebook users there really are or how meaningful the information shared is to advertisers. People like games. Unless or until they think the adversary has an unfair advantage. When the game is between business and customers and the business takes the advantage, the customer will quit. There is no love lost and getting the customer back is very expensive. Ask the financial community what it takes to win back customers who were screwed during the economic collapse. People like to be “wooed” too. As I mentioned in the above post about coupons, another reason they don’t work is because sales is not a “linear” process. It zigs and zags. As I remember Sarah Barber, an early interactive marketer, saying, ” you wouldn’t ask a girl to marry you on a first date, would you?” Sales is more like the game of courtship. Businesses entertain customers because when you get to know a customer in a more relaxed environment they say things they wouldn’t have told you in a formal meeting. There are other business models that “court” people. When a business invests to create something of value for the customer and it shows. Think Apple. Who knew people would pay for music? When customers invest money, time and assets and get a return on that investment – something better than they started with. Think about a CD cabinet carefully organized by genre replaced by something the size of a business card you can listen to anywhere. When the game is risk-free play value. Think about the touch screen technology on the I-Phone and I-Pad. Change the game: from an economic game like the bait and switch of couponing and most internet business models -> to the game of courting the customer, where trust is the only way to win, and returns exceed the time, money and assets shared by both business and customers.

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Michele Colucci: Four Steps to Getting Your Product Out the Door — Everybody Needs a Steve Bennett

September 18, 2010

I run across a lot of people who are rooting around for the next great business idea. I spend most of my time covering my ears, singing out loud and hopping on one foot — trying desperately to keep ideas from bombarding my every thought. Such is the personality type of the compulsive problem solver. Such is me. To successfully cut through the noise, I found Steve Bennett . Steve is my Advisor, Investor, CEO Coach and Friend. He also ran Intuit for 7 years, produced some killer products and hails from the Jack Welch school of GE, so he knows what he’s talking about. In reality all entrepreneurs, with their limitless ambition and big dreams, need a Steve … This is how a “Steve” can help you get your product completed and business launched: 1. Focus: The single most important, and also most challenging, skill for entrepreneurs. Whenever I get carried away telling Steve what a great white label solution I will have and how I plan to expand to foreign markets, he sobers me. “It may be all those things. But let’s launch first.” And he’s right. Without proving the basic value, there’s no point in exploring what could be. Identify the core value you’re offering, and prove it out. If it really works, options will be the least of your concern. (“Of course, that second product iteration is actually really cool… let me tell you about it…” Ouch!) 2. Devil is in the Details: If you are crazy passionate about your idea, chances are you also have a tough time boiling it down to “the big idea.” Explaining your value proposition in a sentence thwarts many an entrepreneur with fund-raising and with launch success. And as Leonardo da Vinci says, “simplicity is the ultimate sophistication.” An informed mentor will challenge you to really think this through. It took Steve about three weeks to get me to own that level of clarity. And he still has to pull me back to center every so often. I was an early Google adopter — why? Because it had one, and only one goal, or “call to action,” for its’ users. SEARCH. And they executed on that one critical action with extreme alacrity and substantive results. (Love to know my search took 16 seconds! Superfast!) So take some time to identify THE big idea, focus on doing it better than anyone else, and don’t get caught up in the labyrinth of all those awesome functionalities. (Awwww, man, this is soooo hard!) 3. Run Before you Walk: It’s hard to see who I am when there’s so much I can become! Reality bites. Some like to visualize it to realize it. Others say build it and they will come. Whatever your metaphor, the key here is that the capacity of the business has to match the reality of resources, development and bodies. I made an early mistake by cutting a great deal with Dunn & Bradstreet for my search engine way before we had the capacity to integrate it. Both Steve and Allen Morgan have talked me out of some pretty exciting partnerships pre-launch. It’s easy to be flattered when you’ve been struggling for recognition. Don’t succumb! If your business is tech, finish the technology. If it’s green like Ian Wright’s super amazingly fast drive train that saves tons of money, then build the drive train. If it’s building the next perpetual motion machine, well, as my bud Jamis of Buck’s would say, “forgetaboutit!” 4. Prioritize: People in venture will always tell you — “Launch!” OK, so not all launches should be shoved out the door, but the idea is right. Get your product or business into the market and improve or expand it later. Prove one thing that puts you above the noise, and save the rest for later. Unfortunately this is an idea that may take awhile to seep in because all those little extra’s are such fun to create… Getting a product out the door and successfully launched, for any entrepreneur, is directly related to one’s ability to honestly identify their own strengths and weaknesses, and to get the input they need to compensate for the weaknesses. That’s why I found my Steve Bennett. He keeps my overactive problem solving mind focused on one single execution. Motivation takes many forms: children, affirmation of your friends/family, personal passion, faith. Whatever your reason, if you want someone to put their money where your mouth is, you have to block everything else out, focus on one big idea, be realistic about your capacity and prioritize the things that are directly related to executing on that one big idea. But more important, find your own Steve Bennett. Without the advice and counsel of someone who has done it before, whose skills are directly related to your business and who has skin in the game, it is very, very, very difficult to view your business with objectivity and recalibrate accordingly. Because success is collaborative, in this instance, at least, it does take a village. (More about how to build your village in my next blog…) Inspire, Innovate, Illuminate.

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Dan Dorfman: Bad Guys Ballooning on Wall Street

September 17, 2010

Wall Street’s bad guys continue to multiply even though their idol, Bernie Madoff, currently serving a 150-year jail term, would be the first guy to tell them that crime doesn’t pay. Indicative of this accelerating bad guys trend is the stepped-up number of insider trading probes by two of Wall Street’s leading regulators on the securities beat — the Securities and Exchange Commission (SEC) and the Financial Independent Regulatory Authority (FINRA), which oversees nearly 4,700 brokerage firms. Both, I’ve learned, have recently kicked off investigations into the stock trading of a trio of prominent companies prior to their receiving well publicized buyout offers in recent months totaling about $58.5 billion. These fresh, unreported investigations center on what one aspect of Wall Street killings — the illegal kind — are all about. In brief, you buy a stock and you’re lucky. Some firm steps in and makes a bid for the company at a sizable premium to the existing share price and you reap a big gain as the price of the shares balloon. Then again, maybe you weren’t so lucky. Maybe it was a sure thing transaction. Maybe you bought the stock after obtaining privileged, non-public information, which is precisely what Gordon Gekko did before winding up in jail. That’s basically what the SEC and FINRA are looking into with regard to the three takeover offers in question. They involve: –The $38.6 billion hostile bid by Australian-based BHP Billton, the world’s largest mining company, to acquire Canada’s Potash Corp., the globe’s biggest fertilizer supplier. The bid was rejected. –An $18.5 billion offer by French drug maker Sanofi-Aventis to buy Genzyme Corp., a leading U.S. biotech company. That bid was also rejected. –A $1.2 billion offer by Hertz Corp., later raised to $1.43 billion, to acquire a rival in the rent-a-car business, Dollar Thrifty Automotive. It’s all very legal, of course, to buy the shares of a takeover candidate, but not if you have precise knowledge of an impending buyout offer that has not been publicly disclosed. That’s not playing the game on the up and up. If you’re caught cheating — namely, illegally trading on inside information — you can, as you well know, get hit with a hefty fine, join Madoff and Gekko in the clink, or both. With the mergers and acquisitions game heating up, thanks to low interest rates, strengthened balance sheets, a desire by companies to beef up their growth prospects in a weak economic environment and pent-up efforts by overseas corporations to crack the U.S. market, the opportunities to beat the system with inside knowledge of non-publicly announced deals have become much greater. Apparently suspicious that some unethical trading may indeed have taken place in the shares of Potash, Genzyme and Dollar Thrifty Automotive, the SEC and FINRA in recent weeks sent out inquiries to the brokerage community in which they specifically requested the names of any clients who traded in these securities both in domestic and foreign markets in specific time periods. It’s unclear whether any of the investigations mentioned here extend beyond the trading in the companies’ securities. Both agencies declined comment, but I have obtained copies of internal SEC and FINRA documents from a regulatory contact that detail the three investigations. In addition, both agencies recently initiated a number of other stock trading investigations, with energy companies particularly conspicuous. Again, I have gotten my mitts on copies of regulatory documents detailing these investigations. Included here are SEC probes into such stocks as Valero Energy, Hess Corp., Adobe Systems, Transocean, Ltd., Occidental Petroleum, Valeant Pharmaceuticals International, Annaly Capital Management, Lennar Corp., Hewitt Associates, Americredit Corp., BMC Software, Halliburton, Cameron International and Las Vegas Sands. Meanwhile, FINRA, the documents show, is probing the trading in such stocks as Priceline.com, BJ’s Wholesale Club, Atlas Pipeline Partners, L.P., Prospect Medical Holdings and DigitalGlobe. What does it all mean? That insider trading is far from dead and the securities industry’s cops monitoring the Wall Street beat probably need more handcuffs. I don’t want to sound like a broken record, but about a year ago I wrote a similar kind of piece on stock trading investigations and tried to explain why there are so many bad guys on Wall Street. One answer — “Because our product is money and money attracts scum” — was given to me then by Malcolm Lowenthal, a stockbroker at Kern Suslow Securities. That covers it all. What do you think? E-mail me at Dandordan@aol.com .

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William Astore: Major Sporting Events: Too Corporatized, Too Controlling, Too Much

September 15, 2010

Been to a major American sporting event lately? If not, consider yourself fortunate. The NFL and NASCAR are already over-the-top when it comes to manufactured noise, exaggerated pyrotechnics, and wall-to-wall corporate advertisements. Even my beloved sport of baseball has fallen victim to sensory saturation and techniques of crowd control that would make a dictator proud. The grace and spontaneity of America’s pastime is increasingly lost in Jumbotrons, overly loud and canned music, and choreographed cheering. With all the Jumbotrons and other video screens everywhere, people are no longer focused on the game as it takes place on the field, and perhaps turning to their neighbor for an explanation if they miss a play or nuance. Instead, people look to the screens to follow the game. Indeed, sight lines at some seats at Yankee Stadium are so poor that the only way you can watch the action on the field is on video screens posted at strategic locations. Speaking of Yankee Stadium, last month a friend of mine went to a game there and found the experience “shocking.” In his words: “The new stadium is flooded with noise from constant speakers as well as screens everywhere. It was so loud that there was really not much independent reaction from the crowd. I got a feeling like I was in a scene from Triumph of the Will . The noise would come out of the speakers and people would chant. When it stopped so did the people. The entire experience left me dying to get out of there!” Mediocre seats are $110 each, and an $11 beer only compounds the pain. Attending a Yankees game “used to be something of a social leveler, where people of all classes would come and meet to support the team… Although the place was packed for a Red Sox game, it was a largely white crowd, looking nothing like the mix of people who actually inhabit New York,” my friend concluded. I share my friend’s concerns. I hate being coerced by screens and speakers telling me when to cheer and what to say. Even at my local Single-A baseball games, the post-game fireworks are set to music, usually of a patriotic tenor. I’ve got nothing against music, but why can’t I just enjoy the fireworks? I don’t need “Proud to be an American” blaring to make me proud to be an American. But it seems like many fans are happy being told when to cheer, what to say, even what to feel. Or they’ve simply become accustomed to being controlled, which has the added benefit to owners of suppressing any inconvenient spontaneity. More and more, our senses are saturated so we cannot pause to converse or even to think. If the game grows tiresome, people turn to cell phones, palm pilots, and other personal technologies for stimulation. And the phenomenon is hardly limited to sporting events. Today’s version of “Sesame Street” is an exercise in frenetic action and hyperkinetic stimulation; one wonders whether it’s designed for ADHD kids, or to create ADHD kids. More and more, we’re surrounded by and immersed in near-total sensory saturation; the stifling effect such an environment has on individual spontaneity and thought can’t be disregarded (nor can it be accidental). And it appears in the most unlikely of places. I used to watch air shows at the U.S. Air Force Academy. Few things are more viscerally thrilling (or chilling) than a formation of F-16s screaming overhead. But that effect apparently wasn’t enough. The powers-that-be “augmented” the air show with loud rock music (call it the “Top Gun” effect) along with an especially annoying (and superfluous) narrator. There was even a proposal to add huge video screens and even bigger speakers to the performance until it got shot down due to charges of contractual cronyism. In a way, it’s sad to compare today’s thunderingly loud yet sterile air shows to their Depression-era counterparts. The latter, as another friend reminded me, had in his words: “No concrete runways, no visitor stands, just grass in a field on the edge of town. I loved planes so much that as an eleven year old I would take the two streetcars … then walk a mile to the airport. There was always one or two old biplanes and the small crowd would wait expectantly for the pilots and the daredevils to appear. What excitement just to see those little planes taxing across the grass and getting into position to take off. Gunning their little engines and racing along into the wind. Loops, upside down and then the big thrill, the ‘wing walkers.’ Try that on a jet.” Bigger, faster, louder doesn’t always mean “better.” Whether it’s an air show or ball game today, we seem saturated by noise, video images, and other sensory distractions, often advertised as “necessary” to broaden the appeal to non-fans or casual spectators who simply want to feel that they’ve witnessed a spectacle, whatever its meaning. It’s hard to develop an inner life when you’re constantly plugged-in and distracted. It’s also hard to take independent political stances when you’re constantly bombarded by infotainment, not just in the mainstream media but in the sports world as well. I don’t care about off-field shenanigans or contract disputes or manufactured grudges between teams, nor do I want to watch pre-game and post-game shows that last longer than the games: I just want to watch the game and marvel at the accomplishments of world-class athletes while cheering for my home team. Sports have always been a form of entertainment, of course, but today’s events are being packaged as life-consuming pursuits, e.g. fantasy football leagues. And if we’re spending most of our free time picking and tracking “our” players and teams, it leaves us a lot less time to criticize our leaders and political elites for their exploitation of the public treasury – and betrayal of the public trust. I wonder, at times, if we’re heading in the direction of “Rollerball” (the original movie version with James Caan), in which a few corporations dominate the world and keep the little people (you and me) distracted with ultra-violent sports and hedonistic consumption, so much so that people can’t recognize their own powerlessness and the empty misery of their lives. Until our sporting events and air shows return to a time when players and fans and enthusiasts collectively showed up simply for the love of the game and the purity of it all (and I can hear my brother mischievously singing, “Until the twelfth of never”), count me out. I can be more spontaneous in my living room with friends — and the beer sure is cheaper. Professor Astore currently teaches History at the Pennsylvania College of Technology in Williamsport, PA. He writes regularly for TomDispatch.com and can be reached at wjastore@gmail.com .

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John Schneider: Will the Middle Class Have Room for Baby Boomers’ Kids?

September 15, 2010

Watching our kindergartners engaged in a game of musical chairs, we nudge them along mentally, past the gaps, hoping they end up in the right place, at the right time. The music stops. Ten kids scramble for nine chairs. Nine land safely; one panic-stricken kid is left standing, squeezed out of the game. When it’s our kid who has no place to sit, our hearts break just a little. And so we baby boomers watch, with trepidation, as our grown children scramble for their spots in the middle class, with its tricky dance steps, its new rules, its ever-dwindling number of chairs. We observe their progress, nudging them forward, helping where we can, hoping they’re in the right place, at the right time. If they’re lucky, they approach the game with all the basic tools – a solid upbringing, an adequate education, a firm work ethic, a pocketful of emotional intelligence, a head screwed on straight. Getting a toehold Maybe they are fortified with degrees from good schools. Maybe they are ambitious, or charming, or lucky. Maybe they know somebody who knows somebody with an employment opportunity. Maybe they are blessed with perfect timing. Or maybe they are just more resumes in tall stacks on the unoccupied desks of people who were downsized — more college graduates with big student loans and big dreams on hold, struggling to get a toehold in the world. They piece together part-time jobs that may, or may not, turn into something bigger. They work outside their fields. They roll with the punches — downsizing, pay freezes, unpaid furlough days. If they are fortunate, they accept bare-bones health insurance grudgingly bestowed up them by tight-fisted employers; if they are not so fortunate, they pay for their own insurance, or go without it. They scrape. They stay alive. A different script We’ve been inclined, for some time now, to wonder if our children will ever duplicate our standard of living — a standard built on steady, if unspectacular compensation, good health, rising real estate values, and the prudent use of readily available credit. We rose above our parents, economically, following the script of the American Dream. Is that still a viable model? Will the next generation rise above the previous one? Mounting evidence says it won’t. Everywhere you look these days Arianna Huffington is talking about her book, Third World America , in which the Huffington Post creator lays out a convincing case for the disappearance of the middle class in this country. Huffington is hardly the first person to notice the growing gulf between rich and poor, and the erosion of the middle. Consider just one piece of the crumbling puzzle: A record 2.8 million U.S. households got foreclosure notices in 2009, and the wreckage could be even worse this year. Will our children own their own homes? Will they find jobs, and keep them? Will they be able to give their children the advantages they, themselves, enjoyed? Will they figure it out? Will they find a chair when the music stops? Email John Schneider at jschneid@lsj.com. This post originally appeared on September 12, 2010 in the Lansing State Journal .

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Elizabeth Warren Under Consideration For Interim CFPB Chief

September 13, 2010

This item was first reported in HuffPost Hill . The White House is considering tapping Harvard professor and consumer advocate Elizabeth Warren to be the interim director of the Consumer Financial Protection Bureau, a source familiar with the White House deliberations told HuffPost. Such a move would allow Warren to begin setting up the agency immediately and prevent the GOP from filibustering her nomination. She could serve until Obama nominates a permanent director — a nomination he’s not required to make, meaning that Warren would be able to serve indefinitely with the full powers of the director. Obama could also name Warren as the permanent director following an interim appointment, which would give the Senate an opportunity to debate her selection. The ability of the administration to nominate an acting director indefinitely, avoiding a lengthy confirmation battle, was first reported by HuffPost’s Shahien Nasiripour in July . American Banker is also reporting that Warren is under consideration for the interim position. White House spokeswoman Amy Brundage tells HuffPost: “Elizabeth Warren has been a stalwart voice for American consumers and families and she was the architect of the idea that became the Consumer Financial Protection Bureau. The President will have more to say about the agency and its mission soon.” On Friday, Obama gave away the game, saying he was a “dear friend” of Warren’s, but wanted to wait a bit until making an “official” announcement. Simon Johnson laid out the case for an interim nomination on Friday.

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Dean Baker: The Soft Bigotry of Incredibly Low Expectations: The Case of Economists

September 13, 2010

In a country with almost 15 million people out of work, it is amazing that any economists still have jobs. This one is their fault first and foremost. Economists are supposed to know about the economy and provide advice on how to avoid disasters before they happen and help us recover from the bad things happen in spite of good advice. The economics profession has not done well on this simple scorecard. Remarkably, rather than improve their game, economists are now busy dampening down expectations so that the public will not hold them responsible for the state of the economy. Towards this end, a group of Fed economists recently put out a new study claiming that it was impossible for economists to recognize the $8 trillion housing bubble before it wrecked the economy. In effect, they argued that economists should not be blamed for this failure because: “The state-of-the-art tools of economic science were not capable of predicting with any degree of certainty the collapse of U.S. house prices that started in 2006.” This raises the obvious question: if economists can’t see an $8 trillion housing bubble, what can they see? This is bit like the firehouse where everyone sits around calmly sipping their coffee as the school across the street burns down. Completely missing the largest financial bubble in the history of the world is pretty inexcusable, even if economists continue to make excuses. Having failed to prevent disaster, economists are now anxious to tell us that there is nothing that they can do to remedy the situation. The story they are pushing is the unemployment is structural, not cyclical. This means that people are not unemployed because of a lack of demand in the economy, but rather they are unemployed because there is a mismatch between the available jobs and the skills and location of the available workers. Before examining the argument here more closely, it is worth noting that arguments about rising structural unemployment come around during every recession. When the economy fails to produce jobs fast enough to bring down the unemployment rate economists quickly turn to blaming the workers. The problem is not that economists came up with bad policies; the problem is that workers don’t have the right skills or live in the right place. This happened after each of the last four recessions. The story the economists tell is that we have jobs available but the workers who are unemployed don’t have the skills to fill these jobs. The “structural unemployment” gang got a big boost last week when the Bureau of Labor Statistics reported an increase of 180,000 in the number of unfilled job openings for July. There are some logical implications of the structural unemployment story that are easy to test. For example, if there are sectors of the economy where they is a substantial unmet demand for labor then we should expect to see wages rising rapidly in these sectors. This is a simple supply and demand story. If demand exceeds supply then we should expect to see wages rising as firms compete for workers. There is no major sector in which wages are keeping pace with the overall rate of productivity growth. Wages have been rising pretty much at the rate of inflation in most sectors for the last year and a half. In fact, taken as a whole the wages of production/non-supervisory workers have been rising slightly more rapidly than the wages of all workers over the last year and a half. Since all of the less-skilled jobs fall in the production/non-supervisory group, this suggests that the premium for skills has actually fallen somewhat in the last year and a half, the direct opposite of the structural unemployment story. In the same vein, if employers can’t find enough skilled workers, then we would expect them to have their existing workforce put in more hours. So, there should be sectors of the economy where average weekly hours are increasing. The evidence refuses to cooperate here also. The biggest increase in average hours over the last year has been in mining and logging and manufacturing, industries that are not typically thought to be centers of new economy skills. On the whole, average weekly hours are far below their pre-recession level. Oh yeah, and what about that big jump in job openings in July? With the July jump there are just over 3 million job openings being reported which gives us a little more than 1 opening for every 5 unemployed workers. Furthermore, the current number of openings is down by roughly a third from its level in 2007, before the recession began. And, no one was talking about structural unemployment three years ago. In short, there really is no evidence for a problem of structural unemployment. The problem is that because of bad policy we don’t have enough demand in the economy. If there is a mismatch of jobs and skills it is between economist positions and the people who fill them.

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Dean Baker: The Soft Bigotry of Incredibly Low Expectations: The Case of Economists

September 13, 2010

In a country with almost 15 million people out of work, it is amazing that any economists still have jobs. This one is their fault first and foremost. Economists are supposed to know about the economy and provide advice on how to avoid disasters before they happen and help us recover from the bad things happen in spite of good advice. The economics profession has not done well on this simple scorecard. Remarkably, rather than improve their game, economists are now busy dampening down expectations so that the public will not hold them responsible for the state of the economy. Towards this end, a group of Fed economists recently put out a new study claiming that it was impossible for economists to recognize the $8 trillion housing bubble before it wrecked the economy. In effect, they argued that economists should not be blamed for this failure because: “The state-of-the-art tools of economic science were not capable of predicting with any degree of certainty the collapse of U.S. house prices that started in 2006.” This raises the obvious question: if economists can’t see an $8 trillion housing bubble, what can they see? This is bit like the firehouse where everyone sits around calmly sipping their coffee as the school across the street burns down. Completely missing the largest financial bubble in the history of the world is pretty inexcusable, even if economists continue to make excuses. Having failed to prevent disaster, economists are now anxious to tell us that there is nothing that they can do to remedy the situation. The story they are pushing is the unemployment is structural, not cyclical. This means that people are not unemployed because of a lack of demand in the economy, but rather they are unemployed because there is a mismatch between the available jobs and the skills and location of the available workers. Before examining the argument here more closely, it is worth noting that arguments about rising structural unemployment come around during every recession. When the economy fails to produce jobs fast enough to bring down the unemployment rate economists quickly turn to blaming the workers. The problem is not that economists came up with bad policies; the problem is that workers don’t have the right skills or live in the right place. This happened after each of the last four recessions. The story the economists tell is that we have jobs available but the workers who are unemployed don’t have the skills to fill these jobs. The “structural unemployment” gang got a big boost last week when the Bureau of Labor Statistics reported an increase of 180,000 in the number of unfilled job openings for July. There are some logical implications of the structural unemployment story that are easy to test. For example, if there are sectors of the economy where they is a substantial unmet demand for labor then we should expect to see wages rising rapidly in these sectors. This is a simple supply and demand story. If demand exceeds supply then we should expect to see wages rising as firms compete for workers. There is no major sector in which wages are keeping pace with the overall rate of productivity growth. Wages have been rising pretty much at the rate of inflation in most sectors for the last year and a half. In fact, taken as a whole the wages of production/non-supervisory workers have been rising slightly more rapidly than the wages of all workers over the last year and a half. Since all of the less-skilled jobs fall in the production/non-supervisory group, this suggests that the premium for skills has actually fallen somewhat in the last year and a half, the direct opposite of the structural unemployment story. In the same vein, if employers can’t find enough skilled workers, then we would expect them to have their existing workforce put in more hours. So, there should be sectors of the economy where average weekly hours are increasing. The evidence refuses to cooperate here also. The biggest increase in average hours over the last year has been in mining and logging and manufacturing, industries that are not typically thought to be centers of new economy skills. On the whole, average weekly hours are far below their pre-recession level. Oh yeah, and what about that big jump in job openings in July? With the July jump there are just over 3 million job openings being reported which gives us a little more than 1 opening for every 5 unemployed workers. Furthermore, the current number of openings is down by roughly a third from its level in 2007, before the recession began. And, no one was talking about structural unemployment three years ago. In short, there really is no evidence for a problem of structural unemployment. The problem is that because of bad policy we don’t have enough demand in the economy. If there is a mismatch of jobs and skills it is between economist positions and the people who fill them.

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Marty Zwilling: Ten Key Elements Make a Startup a Risky Business

September 13, 2010

You have probably heard plenty of times that being an entrepreneur is a risky business, and investors talk all the time about reducing the risk. Yet everyone seems to have their own view of key risk sources for startups, and I’m no exception. I don’t agree, for example, that the first priority is to avoid startups with a high attrition rate, like trendy restaurants and entertainment. Here is my own priority list of key risk sources that every entrepreneur and every investor should evaluate and minimize in starting a business: 1. Team experience and depth risk. Here I’m talking about both the experience and track record of the founders in starting a business, as well as their experience and knowledge of the business domain. Like most professionals, when I get a business plan, I flip first to the founders section to see if it is a balanced team who has been there and done that. 2. Market and opportunity risk. There is always less risk with a well-defined problem in a large and growing market. All the people in China is a large and growing market, but all the people with cancer is much more well-defined. It’s hard to make money in a shrinking market, or with a solution that is “nice to have” versus painfully needed. 3. Competitive risk. Think seriously about the number and clout of your competitors. Having none is a red flag (may mean no market), but having more than a couple of large ones may mean this is a crowded space. Even in an open space, you need intellectual property, like patents, to keep potential competitors from overrunning you. 4. Financial risk. Very few businesses can be started without money. You as the founder will be expected to put your own “skin in the game.” The business plan should be realistic about how much cash will be required to break-even, and how big the return will be for investors in the first five-year timeframe. 5. Market entry strategy risk. The selection of an inappropriate pricing, marketing, or distribution strategy is a large potential risk. For example, many new social websites proclaim that they will offer a free service, and live on ad revenues (not likely in the first year without a huge marketing investment). 6. Political and economic risk . Sometimes founders are just in the wrong place at the wrong time. Recessions are a tough time to sell luxury goods. Under-developed countries may have a strong need for your product, but are often unstable and dangerous. Four specifics include tax rates, tariffs, expropriation of assets, and repatriation of profits. 7. Technology risk. New technologies, especially those characterized as “paradigm shifts” or “disruptive” may have long and costly acceptance cycles, or may run into unpredictable performance or manufacturing problems. Medical technologies have costly legal testing requirements, approval processes, and insurance validation. 8. Businesses with high attrition rate risk. Certain business sectors have historical high failure rates and are routinely avoided by investors and many founders. These include food service, retail, consulting, work at home, and telemarketing. On the Internet, I would add new social networking sites, and new matchmaking sites. 9. Operational risk. Some businesses require huge support or administrative infrastructures. For example, vehicle fuel improvements require service stations and maintenance shops nationwide, before they are viable. Even small operations can have breakdowns of specialized equipment and complex support processes. 10. Environmental risk. A nuclear reactor built on an earthquake fault line is a huge risk. Evaluate your business and location for sensitivity to floods, hurricanes, and catastrophic pollution problems, like the oil spill in the Gulf of Mexico. The biggest risk of all is starting a company, any company, for the wrong reasons. See my recent related article ” Ten of the Worst Reasons for Starting a Business ” for a good start in this category. If your startup is clean on both of these lists, you will most likely build a successful business, get the funding you need, and have fun at the same time. What more could a budding entrepreneur like Tom Cruise want?

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Marty Zwilling: Ten Key Elements Make a Startup a Risky Business

September 13, 2010

You have probably heard plenty of times that being an entrepreneur is a risky business, and investors talk all the time about reducing the risk. Yet everyone seems to have their own view of key risk sources for startups, and I’m no exception. I don’t agree, for example, that the first priority is to avoid startups with a high attrition rate, like trendy restaurants and entertainment. Here is my own priority list of key risk sources that every entrepreneur and every investor should evaluate and minimize in starting a business: 1. Team experience and depth risk. Here I’m talking about both the experience and track record of the founders in starting a business, as well as their experience and knowledge of the business domain. Like most professionals, when I get a business plan, I flip first to the founders section to see if it is a balanced team who has been there and done that. 2. Market and opportunity risk. There is always less risk with a well-defined problem in a large and growing market. All the people in China is a large and growing market, but all the people with cancer is much more well-defined. It’s hard to make money in a shrinking market, or with a solution that is “nice to have” versus painfully needed. 3. Competitive risk. Think seriously about the number and clout of your competitors. Having none is a red flag (may mean no market), but having more than a couple of large ones may mean this is a crowded space. Even in an open space, you need intellectual property, like patents, to keep potential competitors from overrunning you. 4. Financial risk. Very few businesses can be started without money. You as the founder will be expected to put your own “skin in the game.” The business plan should be realistic about how much cash will be required to break-even, and how big the return will be for investors in the first five-year timeframe. 5. Market entry strategy risk. The selection of an inappropriate pricing, marketing, or distribution strategy is a large potential risk. For example, many new social websites proclaim that they will offer a free service, and live on ad revenues (not likely in the first year without a huge marketing investment). 6. Political and economic risk . Sometimes founders are just in the wrong place at the wrong time. Recessions are a tough time to sell luxury goods. Under-developed countries may have a strong need for your product, but are often unstable and dangerous. Four specifics include tax rates, tariffs, expropriation of assets, and repatriation of profits. 7. Technology risk. New technologies, especially those characterized as “paradigm shifts” or “disruptive” may have long and costly acceptance cycles, or may run into unpredictable performance or manufacturing problems. Medical technologies have costly legal testing requirements, approval processes, and insurance validation. 8. Businesses with high attrition rate risk. Certain business sectors have historical high failure rates and are routinely avoided by investors and many founders. These include food service, retail, consulting, work at home, and telemarketing. On the Internet, I would add new social networking sites, and new matchmaking sites. 9. Operational risk. Some businesses require huge support or administrative infrastructures. For example, vehicle fuel improvements require service stations and maintenance shops nationwide, before they are viable. Even small operations can have breakdowns of specialized equipment and complex support processes. 10. Environmental risk. A nuclear reactor built on an earthquake fault line is a huge risk. Evaluate your business and location for sensitivity to floods, hurricanes, and catastrophic pollution problems, like the oil spill in the Gulf of Mexico. The biggest risk of all is starting a company, any company, for the wrong reasons. See my recent related article ” Ten of the Worst Reasons for Starting a Business ” for a good start in this category. If your startup is clean on both of these lists, you will most likely build a successful business, get the funding you need, and have fun at the same time. What more could a budding entrepreneur like Tom Cruise want?

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Ian Fletcher: America Was Founded as a Protectionist Nation

September 11, 2010

Contemporary American politics is conducted in the shadow of historical myths that inform our present-day choices. Unfortunately, these myths sometimes lead us terribly astray. Case in point is the popular idea that America’s economic tradition has been economic liberty, laissez faire, and wide-open cowboy capitalism. This notion sounds obvious, and it fits the image of this country held by both the Right, which celebrates this tradition, and the Left, which bemoans it. And it seems to imply, among other things, that free trade is the American Way. Don’t Tread On Me or my right to import. It is, in fact, very easy to construct an impressive-sounding defense of free trade as a form of economic liberty on the basis of this myth. Unfortunately, this myth is just that: a myth, not real history. The reality is that all four of the four presidents on Mount Rushmore were protectionists. (Even the pseudo-libertarian Jefferson came around after the War of 1812.) Historically, protectionism has been, in fact, the real American Way. This pattern even predates American independence. During the colonial period, the British government tried to force its American colonies to become suppliers of raw materials to the nascent British industrial machine while denying them any manufacturing industry of their own. The colonies were, in fact, the single biggest victim of British trade policy, being under Britain’s direct political control, unlike its other trading partners. The British knew exactly what they were doing: they were happy to see America thrive, but only as a cog in their own industrial machine. As former Prime Minster William Pitt, otherwise a famous conciliator of American grievances and the namesake of Pittsburgh, once said in Parliament, If the Americans should manufacture a lock of wool or a horse shoe, I would fill their ports with ships and their towns with troops. Thus the American Revolution was to some extent a war over industrial policy , in which the commercial elite of the Colonies revolted against being forced into an inferior role in the emerging Atlantic economy. This is one of the things that gave the American Revolution its exceptionally bourgeois character as revolutions go, with bewigged Founding Fathers rather than the usual unshaven revolutionary mobs. It is no accident that after Independence, a tariff was the very second bill signed by President Washington. It is also no accident that the Constitution — which notoriously does not authorize a great many things our government does today — explicitly does give Congress the authority “to regulate commerce with foreign nations.” (Article I, Section 8.) This fact drives flag-draped libertarians crazy, but there it is. Protectionism’s first American theorist was Alexander Hamilton — the man on the $10 bill, the first Treasury Secretary, and America’s first technocrat . As aide-de-camp to General Washington during the Revolution, he had seen the U.S. nearly lose due to lack of capacity to manufacture weapons. (France rescued us with 80,000 muskets and other war materiel.) He worried that Britain’s lead in manufacturing would remain entrenched, condemning the United States to being a producer of agricultural products and raw materials. In modern terms, a banana republic. As he put it in 1791: The superiority antecedently enjoyed by nations who have preoccupied and perfected a branch of industry, constitutes a more formidable obstacle than either of those which have been mentioned, to the introduction of the same branch into a country in which it did not before exist. To maintain, between the recent establishments of one country, and the long-matured establishments of another country, a competition upon equal terms, both as to quality and price, is, in most cases, impracticable. The disparity, in the one, or in the other, or in both, must necessarily be so considerable, as to forbid a successful rivalship, without the extraordinary aid and protection of government. Hamilton’s policies came down to about a dozen key measures. In his own words: 1. “Protecting duties.” (Tariffs.) 2. “Prohibition of rival articles or duties equivalent to prohibitions.” (Outright import bans.) 3. “Prohibition of the exportation of the materials of manufactures.” (Export bans on raw materials needed for industrialization here at home.) 4. “Pecuniary bounties.” (Export subsidies, like those provided today by the Export-Import Bank and other programs.) 5. “Premiums.” (Subsidies for key innovations. Today, we would call them research and development tax credits.) 6. “The exemption of the materials of manufactures from duty.” (Import liberalization for industrial inputs, so some other country can be the raw materials exporter and we can industrialize.) 7. “Drawbacks of the duties which are imposed on the materials of manufactures.” (Same idea, by means of tax rebates.) 8. “The encouragement of new inventions and discoveries at home, .and of the introduction into the United States of such as may have been made in other countries; particularly those, which relate to machinery.” (Prizes for inventions and, more importantly, patents.) 9. “Judicious regulations for the inspection of manufactured commodities.” (Regulation of product standards, as the USDA and FDA do today.) 10. “The facilitating of pecuniary remittances from place to place.” (A sophisticated financial system.) 11. “The facilitating of the transportation of commodities.” (Good infrastructure.) Hamilton set forth his case in his Report on Manufactures , submitted to Congress in 1791. Perhaps the most startling thing about his suggested policies is how modern they are: few people realize that the R&D tax credit was first proposed in 1791! Due in large part to the domination of Congress by Southern planters, who favored free trade, Hamilton’s policies were not all adopted right away. It took the War of 1812, which created a surge of anti-British feeling, disrupted normal trade, and drastically increased the government’s need for revenue, to push America firmly into the protectionist camp. But when war broke out, Congress immediately doubled the tariff to an average of 25 percent. After the war, British manufacturers undertook one of the world’s first cases of predatory dumping, whose purpose was, in the words of one Member of Parliament, to “stifle in the cradle, those rising manufactures in the United States, which the war had forced into existence.” In reaction, the American industrial interests that had blossomed because of the tariff lobbied to keep it, and had it raised to 35 percent in 1816. The public approved, and by 1820, America’s average tariff was up to 40 percent. Fast-forward a few years. Gloss over a number of important tariff-related political struggles, such as the South Carolina Nullification Crisis of 1832, one of the precursors of the Civil War, in which South Carolina tried to reject a federal tariff. There was a brief free trade episode starting in 1846, coinciding with the aforementioned zenith of classical liberalism in Europe, during which America’s tariffs were lowered. But this was followed by a series of recessions, ending in the Panic of 1857, which brought demands for a higher tariff so intense that President James Buchanan–the last free-trade president for two generations–gave in and signed one two days before Abraham Lincoln took office in 1861. Lincoln, Teddy Roosevelt, and most of the other great names from American history were all protectionists. Protectionism was, in fact, Lincoln’s number two issue after slavery. As he put it in 1847, Give us a protective tariff, and we will have the greatest nation on earth . Revealingly, the only major exception to America’s protectionist consensus was the antebellum South, because free trade is the ideal policy for a nations that actually wants to be an agricultural slave state. An economy founded on slave-based agriculture has no hope of achieving competitive advantage in anything else, as slaves have proven unsuitable for industrialization since the time of Ancient Rome. Because the tariff was the main source of federal revenue in those pre-income tax days, the South also bore a disproportionate share of the nation’s tax burden. No wonder it was in favor of free trade–which the Confederate constitution eventually mandated. Back when protectionism was American policy, it enjoyed a broad popular consensus. Only the left- and right-wing extremists of the day dissented. Extreme right wing Social Darwinists like William Graham Sumner–who published a fuming book in 1885 entitled Protectionism, the Ism That Teaches That Waste Makes Wealth –saw protectionism as a subsidy for the incompetent and an interference with the divine justice of the free market and the survival of the fittest. At the other extreme, Karl Marx, who was alive in those days and keenly watching American capitalism, wanted to see American capitalism break down and therefore favored free trade for its destructive potential. Unfortunately for Marx, this was the golden age of American industry, when America’s economic performance surpassed the rest of the world by the greatest margin. It was the era in which the U.S. transformed itself from a promising mostly agricultural backwater, pupil at the knee of European industry, into the greatest economic power in the history of the world. What happened to America’s long protectionist tradition? In the end, America only seriously turned away from protectionism as a Cold War gambit to prop up capitalist economies abroad and tie them to the U.S. Geopolitics trumped domestic economics. Ironically, our old protectionist playbook for economic development is the same one, in many respects, that China and other nations are using against the United States today. Back when we were the ascending economic power in the late 19th century, it was Britain that complained about “unfair trade!” They were right, of course–but given that nobody forced free trade upon them, it was their own fault. Today, having forgotten our own history, we can’t even recognize the game being played against us, let alone figure out how to counter it. We will continue to pay a high price in lost jobs and declining industries until we wise up. Ian Fletcher is the author of Free Trade Doesn’t Work: What Should Replace It and Why (USBIC, 2010, $24.95) An Adjunct Fellow at the San Francisco office of the U.S. Business and Industry Council , a Washington think tank founded in 1933, he was previously an economist in private practice, mostly serving hedge funds and private equity firms. He may be contacted at ian.fletcher@usbic.net .

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Katherine Warman Kern: The Dog Look

September 8, 2010

Ever get that clueless “dog look”? Here’s an example shared by Adriana Lukas : A Doctor’s office attempts to fix a problem — patients are sitting on hold waiting endlessly to schedule appointments — by buying a turnkey platform designed to speed up the process online. But this solution creates a new problem. Namely, personal data is requested which could make patients vulnerable to identity theft. When a patient, Mary Hodder (the editor of Napsterization.org ) calls with concerns, those concerns are met with the “dog look”. I totally agree with Mary’s concerns about the risk to the patient. But importantly, we need a better way to innovate than this vicious cycle of trial, hope, & error. There are exceptions to every rule, of course, but dogs naturally want to please. If you’ve ever experimented with putting more emphasis on rewarding good behavior than punishing bad you find that you get fewer “dog looks” and more “aha, oh this is what you want me to do.” The purpose of this metaphor is not to suggest that we should reward error with positive reinforcement. This metaphor is about business and customers cooperating for better outcome for both parties. Comradity has a theory that when mass production, mass communication, and mass distribution transformed the US economy from local markets to a mass market we lost a “Culture of We”. The mass marketplace operates on scale. Transactions are numbers. The identity — business or customer — is not always obvious. Moving more quantity is more important than the very expensive challenge of improving reputation or convincing consumers to share more information. So business does it more efficiently by taking information the customer hasn’t offered to share, despite the fact that businesses has yet to develop an efficient way to handle all that information on a large scale to create value. Customers expect the worst, refuse to give the benefit of the doubt, and believe rumors on the internet before they believe articles in traditional media or ads. In a local market, the transaction is human. Identity, buyer or seller, is obvious. The interests, assets, and intent are transparent. Both business and customer benefit when business does the right thing for its reputation and continues to improve in response to customer communication. So there is cooperation – customers and business share information, costumers are receptive to business education, relationships are cultivated — not just between customer and business, but among happy customers who reinforce each others satisfaction. Either we considered the loss of the local market “Culture of We” a trade-off to gain the mass market advantage — making quality of life affordable for more people, or, we just took for granted that business-costumer cooperation would still play a role. But now that today’s interactive technologies make it possible for customers to communicate directly with business, we’re confronted head on with the elephant in the room — the mass market has created a “culture of me”. Customers complain they don’t trust business and business complains that customers are fickle. But customers aren’t going to start making their own cellphones or stop talking on them. And business is still producing enormous quantities which they hope will sell at a profitable price. Although they count on each other, they resent each other. Many say that this is what is and nothing will change it. That’s not the clueless “dog look”, by the way, that’s a dog that’s been abused and only knows how to be abusive right back. These are not innovators. Innovation makes change possible. It does not accept or excuse the negatives of the status quo. So if you are still with me, the first change we need to make possible is a better marketplace for innovation. A place where big companies — who want to support innovation that goes beyond trial, hope, and error — can discover new ideas and those with new ideas can learn what it takes to change the game instead of just creating more problems. Specifically, a place where everyone is less threatened and in a defensive “me” mode and more confident and in an outgoing “we” mode: 1. Start with a promise that if you share information, you will discover where you’ll get the best reception. 2. Use the information to visualize where individuals fit in the community. 3. The roles participants play are obvious. 4. Customers initiate contact when the timing is right for them. 5. Business can see the interests, assets, and intent within cluster they intend to satisfy and anticipate how to capitalize when they are contacted. 6. Each participant, business or customer, controls the information they share, with whom, in what context and timing — when it may be released or destroyed. 7. Communication tools maintain a sense of security that sharing information will not make one vulnerable to exploitation. Who wants a better marketplace like this for innovation? Well, let me know if you do, by tweeting about this post with the hashmark #bettermarketplace.

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Tom Pappalardo: Gold & Silver Trading Biggest Scam in History Financial Armageddon Could Result

September 6, 2010

For those with a good memory this is the promised follow up to my piece on the manipulation of the silver market and its very scary ramifications. Before we get into the possible end of civilization as we know it details, a recap is in order. Andrew Maguire of London blew the whistle on JP Morgan Chase’s very likely profound manipulation of the silver market to the CFTC. As financial government watchdog agencies are wont to do these days, they did their best to sweep it all under the carpet. How the SEC handled Bernie Madoff’s ponzi scheme is a prime example of this. This matter is not a ponzi scheme but it is a the largest scam ever going into the trillions of dollars territory. But back to Maguire who was quite determined to clean up the business of commodities trading. He goes public with powerful compelling evidence of JP Morgan Chase’s manipulation of the silver market. This happens on a Kingsworld radio show. The next day someone tries to kill him by ramming a car into Maguire’s car. Maguire and his wife who was also in the car are hurt pretty bad but survive. After this in their infinite wisdom the commodities watchdog the CFTC decides to have a meeting with most of the key players in commodities trading but exclude Maguire from attending. At this meeting a secret is revealed that could easily tear apart the fabric of our barely functional financial system. The secret is that for every 100 ounces of gold and for every 100 ounces of silver traded on paper there is only one actual ounce of gold and one actual once of silver to back up these trades. Given that yearly there is trillions of gold and silver traded on paper this is the literally biggest scam in the history of scams. Now the guy who let this cat out of the bag didn’t think it was a big deal using the logic that as long as the buyer was paid the value of his purchase at the time he wants to sell it doesn’t matter if his purchase was backed up by an actual commodity. This cavalier attitude does seem to reflect the mind set of people working in our financial system that everything is smoke and mirrors except the money being exchanged. It is quite possible and even probable that someone with enough financial resources and the will to do it could turn our financial system upside down and make an enormous profit from it. This person would have to have no loyalty to western currency and the financial well being of western countries. So let’s assume a very wealthy Asian wants to take a shot at getting into Bill Gates’s wealth status. From what I gather the game plan would be a simple one. That is buy enormous amounts of what I like to call the paper version of silver and gold and buy even more actual silver and gold. Then start a run on Comex by demanding to replace your paper with actual gold and silver. The next part is for me admittedly a bit fuzzy so my play by play of this could be off a bit but I believe the general idea fits the situation. Given that commodities’ trading is a relatively small community, if the player of this scenario has purchased enough of these metals and starts demanding their paper be replaced with the real thing, their demands should cut fairly deep into Comex reserves and then the rumor mill will kick in big time. It shouldn’t take long for the word to get out that there is more paper of gold and silver out than actual gold and silver exists to back it up. Once this gets on the street it should not take long for the Comex reserves to get wiped out. Then financial chaos is right around the corner. However as chaos swirls around them those that possess actual silver and gold will see their investment shoot up perhaps skyrocket in value. I believe a conservative estimate would be to rise anywhere from 2 to 4 times in value. However given the volatility of anything financial these days I fully expect it to zoom to 5 to 10 times in value. That’s the good news if you are sitting on actual gold and silver but the bad news is really really really bad because the basis for all valuation including the stock market, the dollar the euro etc. etc. is gold and silver. Remove silver and gold from the valuation process and as one financial analyst recently told me the stock market probably drops to 25 percent of its value the dollar probably loses 30 percent of its value and so on. These figures are guesswork and possibly conservative but what is not a guess is that the value of stocks, the dollar, the euro and more will lose big chunks of their value enough to throw our fragile financial system into chaos. The value of silver and gold are bedrocks for building the valuation of currencies the stock market and other financial entities. Remove a bedrock and the house comes tumbling down or at least a good part of it probably most of it. Financial Armageddon anyone, sure we have already looked that bullet in the eye and dodged it. However, many financial wizards have predicted it could still occur and none as far as I know took into account the wipeout of the silver and gold reserves. However back to the gutsy whistleblower Maguire, he was scheduled to be interviewed back when all this broke out by all the big news outlets. However, quite suddenly all of these major media sources cancelled these interviews. So unless someone you know who is into the silver market brought this to your attention, it likely went completely under your radar. Presumably, the government the wolves of Wall Street and every other financial player who has a lot to lose are working hard to keep this on the way down low for as long as possible. I can’t really blame them for this given the impending catastrophe revealing this secret will release. However the trigger for all this going public is likely the DOJ and SEC’s investigation of JP Morgan Chase’s manipulation of the silver market. Once this investigation comes to a close there has to be some consequences which the media can’t completely ignore and then the stink storm hits the fan for most of us and for those that own silver or gold their personal value jumps up quite a bit. Between silver and gold, silver gives the much stronger appearance of giving an investor a more viable short term reward. Since the DOJ and SEC started investigating JP Morgan Chase’s very likely manipulation of silver, you no longer see silver pushed down hard after it has rallied up. In fact an interesting phenomenon has taken place recently regarding silver. Silver and gold used to be joined at the hip in that both would go up and down together as a matter of course. However, silver has continued to go up regardless of when gold goes down. Even more remarkably, silver has recently continued to go up even if the stock market goes down. This shocking behavior of silver only strengthens the case that JP Morgan was manipulating the silver market. That the silver market has such staying power is not really surprising given the big picture of high deficits, a weak dollar, a weak euro. Silver stands out as a relatively safe investment perhaps the safest investment anyone with a some extra money can make. Right now its just under $20 an ounce which is a whole lot more affordable for the average person than gold at around $1250 per ounce. Obviously, if any of you readers have some money and you can afford to sit on for 6 to 18 maybe 24 months, it is my opinion that buying actual silver or gold especially silver is one hot investment. I suggest this time frame because I suspect within ½ to 2 years the investigation of JP Morgan Chase’s obvious manipulation of the silver market will be concluded and made public. The government will no doubt drag this out as long as they can which is why I foresee this possibly lasting a good 2 years. It’s also possible that within that time frame, some enterprising filthy rich person is willing to blow up the silver and gold market to make to make themselves super rich. I wouldn’t just take my word on any of this. If this subject grabs your interest I strongly recommend you listen to an interview between Andrew Maguire and Adrian Douglass of GATA. GATA is the Gold Anti-Trust Action Committee and was organized in January 1999 to advocate and undertake litigation against illegal collusion to control the price and supply of gold and related financial securities. When you hear these two speak about the inevitability of the biggest fraud in the history of man being exposed you cant help but feel that its just a matter of time before what I like to call the big bang hits our financial system. One of the questions Douglass asks Maguire is why it was allowed to happen that we now only have 1 ounce of gold and 1 ounce of silver to back a 100 ounces of each that is being sold on paper. As I recall Maguire thinks it happened because at a low point it was a quicker way to juice the financial markets and eventually it all just got way out of control. I see a parallel in the steroids era of baseball and sports in general. After the baseball strike put the sport in a dark period, the lords of baseball looked the other way while some players juiced themselves up so they could hit more home runs in one season than had ever been hit before. This created a major buzz for baseball and quickly took them out of this dark period. However when the stink hit the fan baseball would be forever tarnished and would never be the same. Apparently the fools that run our government and our financial world also looked the other way and took the short term upside gambling against the long term loss. The question begs to be asked if and when this big bang hits given all the other bullshit that the protectors of all financial have allowed to be fostered upon the general populace, will said general populace ever again trust the members of the Fed Reserve, big banks the Secretary of Treasury etc etc ad nauseam ever again. There sure isn’t much left to trust so this new catastrophe ought to really wipe out any vestige of trust the peons of Main street still have for any and all of the big financial players. I doubt if this will lead to people stuffing cash into their mattresses but it will probably lead to the creation of more state run banks like the one that now exists in Montana. To any of you who read my first piece on the silver market please accept my apology for not keeping my promise of following up right away with a second piece. If you care for an explanation, at first I delayed because the BP oil spill seemed like more than enough of a major downer for everyone to handle and I didn’t want to pile on. Then I got distracted and lazy. Now after a two week vacation I feel renewed enough to finally keep my promise. Hope it was worth the wait. Lastly a note of caution given that I am recommending you readers to spend your hard earned cash on an investment, for those thinking of jumping into buying silver or gold or any investment, when contemplating making any purchase especially big ones, there are two lines not to cross. Crossing these lines is a leap from risk taking to gambling and I strongly recommend you don’t gamble with your money. In my considered opinion an action becomes a gamble when you risk something you can’t afford to lose like betting your rent money. The other line not to cross is taking unnecessary risks. I am not suggesting you should live like you are in a straight jacket but with money it’s usually best to be cautious. Taking lots of unnecessary risks can become as addictive as betting on the ponies or sports. The reason for this is both give you an adrenaline rush. The more someone takes unnecessary risks the more likely they will get burned. With that in mind please be conscious, be cautious be smart and pick your battles or risks wisely.

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Robert Kuttner: Not Just Jobs — Good Jobs

September 5, 2010

On Labor Day 2010, we are short at least 25 million jobs. And just as importantly, we don’t have enough jobs that pay decently. The press last week was full of stories that the jobs picture was not as dismal as feared. The economy is actually generating jobs again — just not enough to make a dent in the backlog of 15 million Americans officially out of work and another 8 million with part time jobs seeking full time ones, and millions more out of the labor force entirely. In the government’s most recent report, released Friday, officially measured unemployment actually increased to 9.6 percent, just one tenth of a point below its rate last Labor Day. The stock market rose on reports that we will avert a “double-dip” recession. Economic growth is still in positive territory. But the economy grew at a decent rate after the Great Depression bottomed out in 1933, as well. Nonetheless, unemployment remained stuck in double digits for the next seven years, until World War II. As in the middle and late 1930s, economic growth is positive — just not strong enough to create sufficient jobs. This, of course, is the lingering fallout from the financial collapse of 2008, just as persistent unemployment in the Depression was the legacy of the Crash of 1929. But there is a larger story here that predates the recent financial collapse. The economy not only has a scarcity of jobs, but a shortage of good jobs. And while Republicans would resist legislating a serious public jobs program, the administration should fight for one anyway. And there is plenty that government could do right now to improve jobs pay via executive powers. One of those powers is government’s role as a contractor. The other is to enforce laws already on the books that prohibit employers from stealing wages and that guarantee workers the right to join or organize unions. The Obama administration has made some heartening steps in both directions, but it could do a great deal more. Federal procurement, directly or indirectly, affects about one fourth of the jobs in the economy. In past administrations, government procurement was used as leverage to stop deeply entrenched patterns of racism in hiring and promotion. Before there were the votes in Congress to pass the great civil rights acts of the mid-1960s, Presidents Kennedy and Johnson used executive orders to require corporations bidding on federal contracts to end discriminatory practices. And during World War II, President Roosevelt’s War Labor Board required that companies with war production contracts have good labor relations — which meant acceptance of unions when workers voted for them. In the Obama administration, the Labor Department is getting an additional $25 million to better enforce wage and hour laws. And the Vice President’s Task Force on Middle Class Working Families is doing important work, though with a tiny staff. Obama, early in his term, issued four executive orders that mainly corrected for anti-labor orders by George W. Bush, but these do not take full advantage of the leverage that government has. Today, President Obama could issue orders requiring that companies bidding on government contracts behave as decent employers. This would be the game-changer. Unfortunately, companies that are flagrant union-busters, such as Fedex, still get billions in government work. Corporations that routinely disguise permanent workers as temps or independent contractors, in order to reduce their wages and rights, are still on the approved list. And contractors in agriculture that pay starvation wages and have appalling working conditions for farm workers still supply food products for the school lunch program and even for the Pentagon’s MREs — Meals Ready to Eat — for America’s service men and women. The American Prospect has just published a special report on all the things government could be doing — without new legislation — to turn bad jobs into decent ones. The high rate of joblessness has gotten nearly all the attention. But the declining quality and pay of most jobs is every bit as big a problem. Wages, adjusted for inflation, have barely risen in three decades, while productivity has doubled. Nearly all of the gains have gone to the very top. Very high unemployment only exacerbated that trend, because it puts job-seekers into competition with one another for the available work, and undermines any remaining leverage for raises, a word we don’t hear much lately. Even before the recession started, in the period from 2000 to 2007, only about three percent of the workforce managed to increase their earnings adjusted for inflation. The long term trend reflects an epic shift in the bargaining power of workers and managers. The causes are multiple. Unions have been weakened by relentless union-busting by industry, while government has largely failed to enforce worker rights to organize or join unions under the Wagner Act. Increased trade with countries that pursue predatory trade practices and that recognize no worker rights has undercut wages in the U.S. Companies that once had tacit social compacts with their stakeholders now feel free to outsource work if someone else will do it cheaper. Supposedly, education and training is the cure-all. But think about it. Back in the 1950s, when most Americans did not go to college and the average factory worker didn’t finish high school, our income distribution was far more equal and we had a blue-collar middle class. Today, tens of millions of college graduates are working at jobs that don’t require a college degree. Some professions that require extensive education have had fairly flat earnings over the past decade. Certainly we need a well educated workforce, but that by itself does not assure decent wages. In the 1940s, ’50s, and ’60s, median wages and the economy’s average productivity growth moved upwards in lockstep. The income distribution actually became more equal. That trend had little to do with the fact that workers were becoming better educated — and everything to do with the economy’s “equalizing institutions.” These included an effective labor movement, backed by government’s commitment to enforce worker rights and to expand opportunities. President Obama is in political trouble today because people are anxious about both their jobs and their paychecks. He could help himself and all working Americans by moving more boldly on both fronts. Robert Kuttner’s new book is A Presidency in Peril . He is co-editor of The American Prospect and a Senior Fellow at Demos.

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Robert Kuttner: Not Just Jobs — Good Jobs

September 5, 2010

On Labor Day 2010, we are short at least 25 million jobs. And just as importantly, we don’t have enough jobs that pay decently. The press last week was full of stories that the jobs picture was not as dismal as feared. The economy is actually generating jobs again — just not enough to make a dent in the backlog of 15 million Americans officially out of work and another 8 million with part time jobs seeking full time ones, and millions more out of the labor force entirely. In the government’s most recent report, released Friday, officially measured unemployment actually increased to 9.6 percent, just one tenth of a point below its rate last Labor Day. The stock market rose on reports that we will avert a “double-dip” recession. Economic growth is still in positive territory. But the economy grew at a decent rate after the Great Depression bottomed out in 1933, as well. Nonetheless, unemployment remained stuck in double digits for the next seven years, until World War II. As in the middle and late 1930s, economic growth is positive — just not strong enough to create sufficient jobs. This, of course, is the lingering fallout from the financial collapse of 2008, just as persistent unemployment in the Depression was the legacy of the Crash of 1929. But there is a larger story here that predates the recent financial collapse. The economy not only has a scarcity of jobs, but a shortage of good jobs. And while Republicans would resist legislating a serious public jobs program, the administration should fight for one anyway. And there is plenty that government could do right now to improve jobs pay via executive powers. One of those powers is government’s role as a contractor. The other is to enforce laws already on the books that prohibit employers from stealing wages and that guarantee workers the right to join or organize unions. The Obama administration has made some heartening steps in both directions, but it could do a great deal more. Federal procurement, directly or indirectly, affects about one fourth of the jobs in the economy. In past administrations, government procurement was used as leverage to stop deeply entrenched patterns of racism in hiring and promotion. Before there were the votes in Congress to pass the great civil rights acts of the mid-1960s, Presidents Kennedy and Johnson used executive orders to require corporations bidding on federal contracts to end discriminatory practices. And during World War II, President Roosevelt’s War Labor Board required that companies with war production contracts have good labor relations — which meant acceptance of unions when workers voted for them. In the Obama administration, the Labor Department is getting an additional $25 million to better enforce wage and hour laws. And the Vice President’s Task Force on Middle Class Working Families is doing important work, though with a tiny staff. Obama, early in his term, issued four executive orders that mainly corrected for anti-labor orders by George W. Bush, but these do not take full advantage of the leverage that government has. Today, President Obama could issue orders requiring that companies bidding on government contracts behave as decent employers. This would be the game-changer. Unfortunately, companies that are flagrant union-busters, such as Fedex, still get billions in government work. Corporations that routinely disguise permanent workers as temps or independent contractors, in order to reduce their wages and rights, are still on the approved list. And contractors in agriculture that pay starvation wages and have appalling working conditions for farm workers still supply food products for the school lunch program and even for the Pentagon’s MREs — Meals Ready to Eat — for America’s service men and women. The American Prospect has just published a special report on all the things government could be doing — without new legislation — to turn bad jobs into decent ones. The high rate of joblessness has gotten nearly all the attention. But the declining quality and pay of most jobs is every bit as big a problem. Wages, adjusted for inflation, have barely risen in three decades, while productivity has doubled. Nearly all of the gains have gone to the very top. Very high unemployment only exacerbated that trend, because it puts job-seekers into competition with one another for the available work, and undermines any remaining leverage for raises, a word we don’t hear much lately. Even before the recession started, in the period from 2000 to 2007, only about three percent of the workforce managed to increase their earnings adjusted for inflation. The long term trend reflects an epic shift in the bargaining power of workers and managers. The causes are multiple. Unions have been weakened by relentless union-busting by industry, while government has largely failed to enforce worker rights to organize or join unions under the Wagner Act. Increased trade with countries that pursue predatory trade practices and that recognize no worker rights has undercut wages in the U.S. Companies that once had tacit social compacts with their stakeholders now feel free to outsource work if someone else will do it cheaper. Supposedly, education and training is the cure-all. But think about it. Back in the 1950s, when most Americans did not go to college and the average factory worker didn’t finish high school, our income distribution was far more equal and we had a blue-collar middle class. Today, tens of millions of college graduates are working at jobs that don’t require a college degree. Some professions that require extensive education have had fairly flat earnings over the past decade. Certainly we need a well educated workforce, but that by itself does not assure decent wages. In the 1940s, ’50s, and ’60s, median wages and the economy’s average productivity growth moved upwards in lockstep. The income distribution actually became more equal. That trend had little to do with the fact that workers were becoming better educated — and everything to do with the economy’s “equalizing institutions.” These included an effective labor movement, backed by government’s commitment to enforce worker rights and to expand opportunities. President Obama is in political trouble today because people are anxious about both their jobs and their paychecks. He could help himself and all working Americans by moving more boldly on both fronts. Robert Kuttner’s new book is A Presidency in Peril . He is co-editor of The American Prospect and a Senior Fellow at Demos.

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Katy Welter: Small Banks May Fail but They’re Still a Better Bet

September 3, 2010

Businesses fail. Or at least, a fair number should fail in a healthy capitalist system. Risk — of failure and reward — is an essential component of the American way of doing business. Americans have always risked personal and financial failure in pursuit of greatness, as when pioneers settled the West, scientists advanced medicine, or inquisitive minds invented personal computers. But large banks pervert this system: they revel in massive risk-taking with your money because they’re confident that the federal government will rescue them from failure. Small banks, on the other hand, have to play the game fair. They do fail, as any business does. But since bank shareholders (not taxpayers) bear the expense, they must manage their risk, and forego profits in doing so. Still, there’s no getting around it: community banks fail at much higher rates than large banks. All 118 failed banks year-to-date have been small or regional institutions. But the causes of these banks’ failures — and the explanation of why big banks don’t fail — are among the many reasons why you should move your money to a smaller institution. One major reason why small banks are failing so rapidly is that they are heavily invested in local residential and commercial real estate. In other words, they’re out of luck because, like us and our neighbors, they underestimated the severity of a real estate market collapse. As small banks fold while holding a local mortgage, big banks are propped up despite still gambling on investments that don’t boost the economy. When small banks fail, they don’t bring America down with them. Unlike notoriously “too big to fail” commercial bank monstrosities , the government sees little reason to assist small banks. If the American economy is a forest, then a small bank’s failure is a lone tree tipping. When a large bank teeters on insolvency, it threatens a ravaging forest fire. Big banks fail less frequently, as Federal Reserve Chairman explained on September 2 , not because they’re better run, but because they aren’t allowed to fail. And they aren’t allowed to fail because their failure threatens to uproot entire economy. Effectively, then, big banks are holding the American economy hostage — pay up, or else. Bernanke may have no choice but to rescue to them, but you do have a choice. You can move your money to a local institution that offers lots of upside when it succeeds (for example, they promote small businesses and make more local loans) and minimal impact when it fails. Typically, a failed small bank is acquired by a larger bank, usually through a deal brokered by the FDIC. Moreover, contrary to popular belief, when a small bank fails, your taxes do not pay for the lost deposits (deposits are lost because that money has been loaned out to borrowers who cannot repay). Banks insure your deposits through regular premium payments to the Federal Deposit Insurance Corporation (FDIC). Yet, when large banks fail — or even threaten to fail, as we’ve seen — the global economy cowers and could collapse. There isn’t enough insurance in the world to guard against that loss. Even if your local bank were to fail, your money will be safe and you won’t be inconvenienced. My bank failed in August. I received an email from the FDIC on a Friday afternoon informing me that my bank had been closed by the agency, and that the acquiring bank would assume my deposits. All the branches have stayed open, my checks remain valid, and online banking access hasn’t changed. Currently, the FDIC, an agency funded by financial institutions, not taxpayers, insures $250,000 per depositor — including corporate accountholders — plus an additional $250,000 for Individual Retirement Accounts. This coverage is more than enough for the vast majority of bank customers. This is America. A place where risk and failure are an inevitable, even essential, part of the economy. These features of our system only become problematic when the someone other than the original risk-taker and reward-maker (ie, shareholders and executive officers) assumes the losses associated with failure. And that’s exactly what has happened with the big six banks. There are two banking systems in this country: one is a dysfunctional mega-banking network where institutions take wild risks with depositors’ money and redefine “success” to mean embarrassing profits followed by hemorrhaging losses requiring taxpayer bailout Band-Aids; the other is a system where moderate risk is the norm and failure is an unfortunate consequence. Which system do you support with your money?

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Gilbert B. Kaplan: Fighting the Trade War for American Jobs

August 31, 2010

One of the most amazing things about the trade war we are fighting is that the U. S. government often does not appear to know we are even in a war. But if you go to any manufacturing town in this country, and look at the empty storefronts and the broken down plants, talk to a taxi driver or a Dunkin Donut clerk who used to work in the local factory for triple his current wage, it is clear we are in a war and it is one we are losing. First, let’s be clear. It is not that manufacturing has left the planet earth. That is basically the line of the apologists for our failed trade policy — that there is some kind of natural shift to a post-manufacturing economy. But that is simply not the case — it is just that the jobs and the plants have left the United States. We have lost 8 million manufacturing jobs in the last several decades and are now at about 11.7 million. But China has over 100 million people employed in manufacturing. If we had a policy which resulted in recovering even a fraction of these jobs from China we would be showing long term manufacturing job growth, not decline. Similarly, our trade deficit in high technology goods is steadily growing. In 2009 we had a $56 billion trade deficit in these goods, up from a $37 billion deficit in 2006, and a positive balance of $5 billion in 2000. It’s not that these goods are not being manufactured any more, it’s just that they are not being manufactured here. The United States has by far the largest trade deficit of any country on earth, last year about $375 billion. Meanwhile our major competitors all have strikingly positive balances of trade, China, plus $297 billion, Japan, plus $141 billion, Germany, plus $135 billion, even Russia is at a positive $50 billion. More and more Americans are sure we need a policy which will balance trade, not one based on failed economic theorizing. The deficit is just the most blatant example of the war we are losing and the jobs we are exporting (on job exports we would have a positive balance!) But for those of us working in the trade law area, on the U. S. side of the battle line, there are other battles every day. Example one: for the most part, the trade laws, such as the antidumping law which counters unfair pricing and the anti-subsidy (or countervailing duty) law which counters subsidization, are simply not being vigorously enforced. The Obama Administration has had in their hands the tool that could play a big role in turning around the trade problem with China. That would be to put on tariffs to off-set the amount of subsidies created by Chinese currency undervaluation. But they have not done this. This has resulted in increasingly strong calls from Senators Schumer, Brown, Graham and others to the Administration, demanding them to step up and take action. Example two: the Congress is not entirely without fault. It has been 16 years since the Congress undertook a major rewrite of the trade laws. In those 16 years enormous changes have occurred in the world of trade, not the least of which is that China became a member of the WTO and began running the largest sustained trade surplus with the United States of any country in our history. We cannot be left with 16 year-old tools. Example three: even more aggravating is that in those instances where one can get a trade case order against Chinese or other foreign unfair imports, the orders are often violated through illegal circumvention or fraud. The mechanisms to counter this are expensive and need to be updated. Against this unfortunate background of trade problems, it simply makes no sense to focus on one or two bright spots, such as a new plant making solar cells, or a successful trade mission to one small country. We need to revamp the whole trade system and start winning the war. The U. S. is not out of the running. We still have the largest manufacturing sector in the world (measured by gross output), but we are very far off the top of our game. We are like a great athletic franchise that has had twenty years of bad results and needs a new strategy to turn it around. What will that strategy be? That is what the Committee to Support U. S. Trade Laws and other like minded organizations will discuss at our Conference on the Renaissance of American Manufacturing at the National Press Club in Washington, on September 28. Among other issues, we will look at how to reform the trade law system in a major way, and how to make it work for U. S. manufacturers. The Conference will also look at why manufacturers are losing the trade policy battle, and at what structural changes need to be made in the U. S. economy. Finally, we will discuss what Congress can and should do to fix this problem. It’s high time we get some good news from the manufacturing sector and not an unending string of defeats, job losses, and plants moving overseas.

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Gilbert B. Kaplan: Fighting the Trade War for American Jobs

August 31, 2010

One of the most amazing things about the trade war we are fighting is that the U. S. government often does not appear to know we are even in a war. But if you go to any manufacturing town in this country, and look at the empty storefronts and the broken down plants, talk to a taxi driver or a Dunkin Donut clerk who used to work in the local factory for triple his current wage, it is clear we are in a war and it is one we are losing. First, let’s be clear. It is not that manufacturing has left the planet earth. That is basically the line of the apologists for our failed trade policy — that there is some kind of natural shift to a post-manufacturing economy. But that is simply not the case — it is just that the jobs and the plants have left the United States. We have lost 8 million manufacturing jobs in the last several decades and are now at about 11.7 million. But China has over 100 million people employed in manufacturing. If we had a policy which resulted in recovering even a fraction of these jobs from China we would be showing long term manufacturing job growth, not decline. Similarly, our trade deficit in high technology goods is steadily growing. In 2009 we had a $56 billion trade deficit in these goods, up from a $37 billion deficit in 2006, and a positive balance of $5 billion in 2000. It’s not that these goods are not being manufactured any more, it’s just that they are not being manufactured here. The United States has by far the largest trade deficit of any country on earth, last year about $375 billion. Meanwhile our major competitors all have strikingly positive balances of trade, China, plus $297 billion, Japan, plus $141 billion, Germany, plus $135 billion, even Russia is at a positive $50 billion. More and more Americans are sure we need a policy which will balance trade, not one based on failed economic theorizing. The deficit is just the most blatant example of the war we are losing and the jobs we are exporting (on job exports we would have a positive balance!) But for those of us working in the trade law area, on the U. S. side of the battle line, there are other battles every day. Example one: for the most part, the trade laws, such as the antidumping law which counters unfair pricing and the anti-subsidy (or countervailing duty) law which counters subsidization, are simply not being vigorously enforced. The Obama Administration has had in their hands the tool that could play a big role in turning around the trade problem with China. That would be to put on tariffs to off-set the amount of subsidies created by Chinese currency undervaluation. But they have not done this. This has resulted in increasingly strong calls from Senators Schumer, Brown, Graham and others to the Administration, demanding them to step up and take action. Example two: the Congress is not entirely without fault. It has been 16 years since the Congress undertook a major rewrite of the trade laws. In those 16 years enormous changes have occurred in the world of trade, not the least of which is that China became a member of the WTO and began running the largest sustained trade surplus with the United States of any country in our history. We cannot be left with 16 year-old tools. Example three: even more aggravating is that in those instances where one can get a trade case order against Chinese or other foreign unfair imports, the orders are often violated through illegal circumvention or fraud. The mechanisms to counter this are expensive and need to be updated. Against this unfortunate background of trade problems, it simply makes no sense to focus on one or two bright spots, such as a new plant making solar cells, or a successful trade mission to one small country. We need to revamp the whole trade system and start winning the war. The U. S. is not out of the running. We still have the largest manufacturing sector in the world (measured by gross output), but we are very far off the top of our game. We are like a great athletic franchise that has had twenty years of bad results and needs a new strategy to turn it around. What will that strategy be? That is what the Committee to Support U. S. Trade Laws and other like minded organizations will discuss at our Conference on the Renaissance of American Manufacturing at the National Press Club in Washington, on September 28. Among other issues, we will look at how to reform the trade law system in a major way, and how to make it work for U. S. manufacturers. The Conference will also look at why manufacturers are losing the trade policy battle, and at what structural changes need to be made in the U. S. economy. Finally, we will discuss what Congress can and should do to fix this problem. It’s high time we get some good news from the manufacturing sector and not an unending string of defeats, job losses, and plants moving overseas.

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Judge: Video Game Addiction Lawsuit Can Proceed

August 29, 2010

HONOLULU — A federal judge has ruled that a man who says he’s psychologically dependent and addicted to an online video game can proceed with some of his lawsuit against the game’s South Korean manufacturer. Craig Smallwood says “Lineage II” left him unable to function independently in daily activities, such as getting dressed, bathing or communicating with family and friends. Smallwood says he’s spent more than 20,000 hours playing the multiplayer online role-playing game since 2004. The 51-year-old says NCSoft Corp. never warned him about the danger of game addiction. A Honolulu law firm that represents the company had urged that the case be dismissed, but U.S. District Judge Alan Kay in his Aug. 4 ruling allowed half of the eight counts to continue. ___ Information from: Honolulu Star-Advertiser, http://www.staradvertiser.com

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Katy Welter: Want to Help Small Businesses? Move Your Money to One

August 23, 2010

Small banks are small businesses, too. And they pay it forward. When you keep your checking or savings account–yes, even those of you with what you perceive to be “small change”–with a local bank, that bank loans it to local business owners (among other borrowers). The Small Business Administration defines “small business” in a striking number of ways , but generally it is a business with fewer than 500 (in some industries 100 or 1,000) employees. According to 2004 census data, these small businesses create more jobs than mid-sized and large businesses combined . Your deposit in a small bank could mean one fewer person in the now-staggeringly long unemployment line. Small banks make significantly more small business loans than large banks, relative to the number of deposits they hold. While small banks hold only 12% of the country’s deposits, they make 20% of America’s small business loans . When it comes to loans for truly local businesses–loans under $100,000–small banks back an impressive 50% of them. And since the Small Business Administration estimates that half to two-thirds of new jobs are created by businesses with fewer than 20 employees, these small loans are critical to our growing economy. And this isn’t necessarily because big banks loan all their funds to big business: large corporations, after all, predominantly borrow in the form of bonds or commercial paper , rather than bank loans. Small banks not only loan more money to small businesses; they also help keep them in business by providing tremendously valuable advice. In the urban corporate world, big companies turn to professional consultants–large accounting, law, or investment banking firms–for advice on tax, legal, or other business strategies. Those brilliant consultants are either unavailable or unaffordable to small business owners. The community bank, instead, fills the shoes of all of the above. In advising their customers, small banks are also far more likely than big banks to meet with their business customers face-to-face, while the large banks tend to provide assistance over the phone, email, or mail. Small banks are able to advise their commercial customers because small bank lenders know their customers and they are intimately familiar with the community in which the business operates. Economists call this “soft information,” but this term undersells the value of a long-time lender-borrower relationship. Soft information is, for example, knowledge that a borrower has tremendous experience in an industry even if he may not have significant personal wealth or a long credit history. Soft information is knowledge that a borrower is the kind of person who will go to extraordinary lengths to repay a debt. Without small banks taking the time to learn this information, many small businesses simply wouldn’t obtain loans, since large banks require financial reporting and other standardized information that many entrepreneurs struggle to produce. After all, they are experts in their businesses–farming, small manufacturing, making pizza–and not necessarily finance. If small banks are making so many small, labor-intensive loans, then how can they also make a profit? One way is through long-term relationships. Customer turnover, like employee turnover, is costly. While large banks depend on high volumes of customers chasing “hot money” (ie, good, temporary deals on rates or terms), small banks try to stay out of this game by maintaining long term relationships, thereby keeping down advertising and interest rate expenses while encouraging bank officers to satisfy existing customers. These relationships promote higher repayment rates from borrowers, and also help banks make more knowledgeable, creditworthy loans. Small banks also save money while providing better service to small businesses through their simpler organizational structure. Because small banks tend to be organizationally “flat”–that is, they have fewer levels of management–small businesses can obtain loans, renewals, and extensions of credit in a more timely, less stressful way. This benefit came to mind recently as I watched a credit-worthy friend endure a refinance with Bank of America that took nearly three months! It was a pathetic display of inefficiency, ineffectiveness, and just plain bad service. And I can’t imagine how a massive organization with a byzantine structure can provide timely, consistently helpful service to small businesses. Small banks are the number one source of funding for the country’s greatest source of new jobs: small businesses. Help tip our fragile economy toward a bold recovery by moving your money to a local bank.

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Katy Welter: Want to Help Small Businesses? Move Your Money to One

August 23, 2010

Small banks are small businesses, too. And they pay it forward. When you keep your checking or savings account–yes, even those of you with what you perceive to be “small change”–with a local bank, that bank loans it to local business owners (among other borrowers). The Small Business Administration defines “small business” in a striking number of ways , but generally it is a business with fewer than 500 (in some industries 100 or 1,000) employees. According to 2004 census data, these small businesses create more jobs than mid-sized and large businesses combined . Your deposit in a small bank could mean one fewer person in the now-staggeringly long unemployment line. Small banks make significantly more small business loans than large banks, relative to the number of deposits they hold. While small banks hold only 12% of the country’s deposits, they make 20% of America’s small business loans . When it comes to loans for truly local businesses–loans under $100,000–small banks back an impressive 50% of them. And since the Small Business Administration estimates that half to two-thirds of new jobs are created by businesses with fewer than 20 employees, these small loans are critical to our growing economy. And this isn’t necessarily because big banks loan all their funds to big business: large corporations, after all, predominantly borrow in the form of bonds or commercial paper , rather than bank loans. Small banks not only loan more money to small businesses; they also help keep them in business by providing tremendously valuable advice. In the urban corporate world, big companies turn to professional consultants–large accounting, law, or investment banking firms–for advice on tax, legal, or other business strategies. Those brilliant consultants are either unavailable or unaffordable to small business owners. The community bank, instead, fills the shoes of all of the above. In advising their customers, small banks are also far more likely than big banks to meet with their business customers face-to-face, while the large banks tend to provide assistance over the phone, email, or mail. Small banks are able to advise their commercial customers because small bank lenders know their customers and they are intimately familiar with the community in which the business operates. Economists call this “soft information,” but this term undersells the value of a long-time lender-borrower relationship. Soft information is, for example, knowledge that a borrower has tremendous experience in an industry even if he may not have significant personal wealth or a long credit history. Soft information is knowledge that a borrower is the kind of person who will go to extraordinary lengths to repay a debt. Without small banks taking the time to learn this information, many small businesses simply wouldn’t obtain loans, since large banks require financial reporting and other standardized information that many entrepreneurs struggle to produce. After all, they are experts in their businesses–farming, small manufacturing, making pizza–and not necessarily finance. If small banks are making so many small, labor-intensive loans, then how can they also make a profit? One way is through long-term relationships. Customer turnover, like employee turnover, is costly. While large banks depend on high volumes of customers chasing “hot money” (ie, good, temporary deals on rates or terms), small banks try to stay out of this game by maintaining long term relationships, thereby keeping down advertising and interest rate expenses while encouraging bank officers to satisfy existing customers. These relationships promote higher repayment rates from borrowers, and also help banks make more knowledgeable, creditworthy loans. Small banks also save money while providing better service to small businesses through their simpler organizational structure. Because small banks tend to be organizationally “flat”–that is, they have fewer levels of management–small businesses can obtain loans, renewals, and extensions of credit in a more timely, less stressful way. This benefit came to mind recently as I watched a credit-worthy friend endure a refinance with Bank of America that took nearly three months! It was a pathetic display of inefficiency, ineffectiveness, and just plain bad service. And I can’t imagine how a massive organization with a byzantine structure can provide timely, consistently helpful service to small businesses. Small banks are the number one source of funding for the country’s greatest source of new jobs: small businesses. Help tip our fragile economy toward a bold recovery by moving your money to a local bank.

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Liz Ryan: Will My Consulting Experience Hurt My Job Search?

August 20, 2010

Dear Liz, I have a total of 13 yrs of professional experience ranging from companies like Accenture to Consulting positions and Corporate roles. The only gaps in my employment history are two lay-offs from past years. I am beginning my job search as my current company is begining to down-size and showing signs of cash constraints. I just had two employment agencies tell me that b/c I have “consulting” experience on my resume will hurt me when looking for permanent employment. Just wondering how much truth there is to what these agencies are telling me about my consulting exp hurting me or them not wanting to place me in a perm role b/c of past consulting jobs. Anyone?? Thanks, Kevin Hi Kevin, Employment agencies are practically in the business of talking candidates out of their own requirements. In your case, they’re saying that consulting experience on your resume will hurt you. That’s absurd, but if an employment agency person can get you off your game confidence-wise, you may settle for a lower level position for less money. Half the world jumps from consulting to in-house employment every couple of years. Your consulting experience isn’t a problem in any way. I would really try to wean yourself away from employment agencies. That is not the best way for you to reach employers. For now, while you’re dealing with agencies, you can say, “Wow! I am surprised to hear that you think my consulting experience could be a problem for an employer. I can’t imagine working for an employer who would be alarmed about that. Tons of people have mixed consulting and in-house experience on their resumes, and more and more of them are showing up every day. Why don’t you ask the particular employer we’re discussing, whether my consulting experience is actually a problem, or not?” You have more influence with recruiters than you may think, because they don’t make money unless a candidate gets hired. Don’t lose your mojo in your conversations with them! You are more than half the equation. Cheers, Liz www.asklizryan.com

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Devon Swezey: Deutsche Bank’s Parker: Senate Clean Energy Policy Failure Driving Investor Exodus

August 13, 2010

The failure of the U.S. Senate to pass clean energy and climate legislation has caused investment giant Deutsche Bank to take its clean energy dollars elsewhere, according to Kevin Parker, Global Head of Asset Management for the firm. “They’re asleep at the wheel on climate change, asleep at the wheel on job growth, asleep at the wheel on this industrial revolution taking place in the energy industry,” said Parker. Deutsche Bank manages over $700 billion in funds with $6 to $7 billion invested in clean energy markets worldwide. These blunt comments from the global investment firm have cap and trade advocates renewing the argument that a price on carbon would have made the United States a world leader in clean energy technology. Yet according to Deutsche Bank’s own reports, cap and trade and carbon pricing would have done little to change the investment outlook in the United States relative to its competitors. In a report released last October, after the passage of the House’s Waxman-Markey climate and energy bill (HR 2454), Deutsche Bank ranked the United States as a “moderate-risk” nation for private investment in clean energy since it relied on “a more volatile market incentive approach” and “has suffered from a start-stop approach in some areas.” By contrast, countries like China, Germany and Japan were “low-risk” nations for investors because they each rely on “a comprehensive and integrated government plan supported by strong incentives.” Mr. Parker is correct that the Congress remains “asleep at the wheel” as international competition for clean energy markets heats up. The fact that the Senate got nothing done on climate and energy this year is outrageous, and continued policy uncertainty will ensure that the U.S. will keep lagging further and further behind economic competitors in the global clean energy race. But let’s be clear. The cap and trade legislation that Congress spent the better part of two years debating would have had at most a modest impact on America’s standing in global clean energy markets, and would have been wholly insufficient to keep the U.S. in the game with economic competitors in Asia and Europe. Is Carbon Pricing Really the Key? We issued precisely that warning last November when the Breakthrough Institute and ITIF published ” Rising Tigers, Sleeping Giant .” The comprehensive report documented that the United States already lagged China, Japan, and South Korea in the production of virtually all clean energy technologies, and was poised to be out-invested three to one over five years by the three Asian ‘Clean Tech Tigers,’ even if the House-passed cap and trade bill had become law. Deutsche Bank themselves clearly acknowledge that while carbon pricing may be important in the long-term, it is not what is helping governments around the world attract private investment and build domestic clean economies in the near-term. According to Deutsche Bank’s Parker and Global Head of Climate Change Investment Research Mark Fulton: “While emissions targets express an intention and carbon markets might deliver a price signal in the long-term, governments must strengthen underlying mandates and incentives immediately if capital is to be deployed to cover the gap, creating more investment and jobs.” Deutsche Bank’s conclusions are consistent with other analyses of the impacts of cap and trade legislation in the United States. According to the U.S. Environmental Protection Agency (EPA) , under the House’s Waxman-Markey bill: “allowance prices are not high enough to drive a significant amount of additional [deployment of] low- or zero-carbon energy (including nuclear, renewables, and CCS) in the shorter-term, excluding the technologies with specific financial incentives (e.g. CCS).” Similarly, the EPA concludes that the cap and trade system’s impacts on transportation markets would be negligible. With potential carbon prices the equivalent of just 10 or 20 cents per gallon of gasoline, “the increase in gasoline prices that results from the carbon price … is not sufficient to substantially change consumer behavior in their vehicle miles travelled or vehicle purchases …” What Really Matters What really matters to create a new clean energy economy and stimulate private investment in the near-term are policy regimes that employ direct and targeted public investments to cover the cost gap between higher-cost clean energy and fossil fuels. Indeed, China has surpassed the United States as the largest beneficiary of private clean energy investments without a price on carbon. Rather, China, along with Germany, Japan, and other “low-risk” nations, has implemented generous, technology-specific deployment incentives that reduce regulatory risks and are much more attractive to investors, and are backed by aggressive, long-term national targets for clean energy deployment. China has targeted procurement policies for clean energy, and a variable feed-in tariff for wind power. In Germany, Deutsche Bank credits the nation’s generous feed-in tariff policy, not the carbon markets of the European Emissions Trading Scheme (ETS), for Germany’s world-leading solar energy sector. These incentives have “demonstrated their ability deliver renewable energy at scale,” according to the bank. If the United States wants to avoid being permanently relegated to the backwaters of the global race for clean energy investment, it needs a new clean energy competitiveness strategy that, like those of its competitors, prioritizes large and sustained public investment in clean energy technology. That strategy should include robust and long-term investments in areas such as research and innovation, manufacturing, market creation, workforce training and education, and the development of new, globally competitive industry clusters. Time is short, and the next several years will see first-movers establish dominant positions across a range of clean energy sectors. Already the U.S. is failing to attract significant private-sector investment in clean energy markets, losing out on a key opportunity to grow American jobs, build new high-tech, export-oriented industries, and capitalize on the economic opportunity of a fast-growing clean energy sector. If Washington continues to ignore this growing economic imperative, the U.S. will remain behind in clean energy investment and will wind up importing the vast majority of the clean energy products needed to satisfy U.S. markets. Almost as dangerous, however, would be a continued reliance on cap and trade and the modest carbon prices it would establish as they key to building America’s clean energy industries. The message from clean energy investors like Deutsche Bank and the model provided by our global competitors are both quite clear: what the U.S. needs is not cap and trade but a comprehensive clean economy strategy. And it needs one now. Devon Swezey is Project Director and Jesse Jenkins is Director of Climate and Energy Policy at the Breakthrough Institute. Both are co-authors of ” Rising Tigers, Sleeping Giant: Asian Nations Set to Dominate the Clean Energy Race by Out-Investing the United States ”

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John F. Wasik: What to Create Millions of Jobs? Look to China

August 13, 2010

How to beat China at its own game By John F. Wasik American politicians campaigning now would do well to stop polarizing the climate change debate and start talking about jobs, economic development and beating China at its own game. That would mean employing social capitalism to create a powerful national energy plan that ignites the private sector through public incentives. Although the Chinese are faced with horrible environmental conditions, at least they are doing something about it and may win an economic war in the process. Aided by a currency peg to the dollar — many say an unfair manipulation that has hurt U.S. exports — the Chinese are currently winning the trade battle. Imports from China surged to $33 billion in July, a figure not seen since the dark days of 2008, ballooning the U.S. trade deficit with the People’s Republic. To date, U.S. policymakers are losing the Earth Race and the only environmental target they can hit are their own feet. The Chinese recently pulled ahead in the contest, announcing through its State Information Center that it would spend $738 billion in renewable energy projects over the next decade. INVESTMENT-STRATEGIES/ By any measure, that’s a great leap ahead of U.S. clean-tech efforts. The stimulus plan set aside about $36 billion for a host of U.S. Department of Energy-led projects in the wake of the 2008 financial meltdown. In contrast, China’s stimulus investment for reducing greenhouse gas emissions was $221 billion, according to a report by British Bank HSBC. What’s at stake isn’t whether climate change will be tackled this year by the world’s largest economy. It’s a matter of millions of new jobs that will likely flow to China, Germany and any other country with a comprehensive policy. Even poor, tiny Portugal has a better energy plan — it gets more than one-fifth of its energy from renewable sources, whereas the U.S. only gets 4%. The International Energy Agency estimates that there’s a $27 trillion market for clean-tech over the next 50 years. If the U.S. just captures 14% of this business, that creates 850,000 new jobs, reports the World Wildlife Fund. Clean energy is not only a proven job creator, it’s relatively recession proof, according to a Pew Charitable Trust study. It declined only 6.6% last year despite one of the worst economic climates since the 1930s. A tremendous opportunity for America is being lost as Washington has stumbled at every turn this year when it had a chance to launch a world-class energy policy. DAVOS/GREEN Despite the passage of a U.S. House plan to address climate change and promote energy projects, the Senate was unable to bring any energy bill to the floor and recessed this summer without doing a thing. Not even the largest oil spill in history was a call to arms. Misguided deficit hawks have been deriding clean-tech as an expendable line-item. Some $3.5 billion in renewable energy loan guarantees have been rescinded this year, according to the Solar Energy Industries Association, a trade group. And an untold number of clean-tech ventures have been put on hold. If the U.S. doesn’t get in this game soon in a big way, it will be playing catch-up for years. So, to help our country along, here is what we must do: • Increase and extend loan guarantees and tax breaks for all clean-tech companies over decades, not year to year. A national energy program shouldn’t be subject to the political climate of the moment. • Create incentives for all consumers to buy clean power. There’s a reason why Germany is one of the largest manufacturers and consumers of solar power appliances. Utilities buy back home-generated power over time. The U.S. needs a renewable energy portfolio standard to do the same. • Create financing that favors energy-efficient buildings. That means widespread programs for “green” mortgages that offer lower rates for environmentally friendly buildings. That would stimulate the overall housing market and green building. • Enact a permanent national trust fund to build/repair infrastructure in an environmentally friendly way. By my rough estimate, we need at least $5 trillion to fix crumbling roads, bridges, water systems and other public amenities. (The estimate is based on what the American Society of Civil Engineers projected should be spent to fix up essential infrastructure in 2009 minus what was allocated by the stimulus plan.) Washington has battled many enemies over the years and rallied Americans to the cause. When it comes to forging a long-term, job-producing U.S. energy policy, though, their worst nemeses are stateside. So having an external foe may rouse more productive emotion than simply citing numbers and bungled opportunities. John F. Wasik is the author of The Audacity of Help: Obama’s Economic Plan and the Remaking of America From Reuters.com

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Cleve Stevens: Asleep at the Organizational Wheel

August 5, 2010

Massey Energy and the coal mining disaster. Goldman Sachs, JP Morgan, Citigroup and the destructive misdeeds leading to the financial meltdown. And now, a new CEO later, BP and the Gulf oil catastrophe. Companies led by leaders, apparently well educated and highly experienced, and yet something is clearly wrong. Could it be denial? The human capacity for denial is staggering, nothing short of frightening, really. We see it in individuals, in relationships and perhaps most glaringly in business organizations. And we continue to ignore this ever-so-human tendency at our collective peril. Consider the fact that today we still think about business and leadership virtually the same way we did in the nineteenth century — that’s the time of the Industrial Revolution, if you’re keeping score. Yes, of course, we’ve tweaked our business thinking a bit over the decades — from Adam Smith to John Maynard Keynes to Milton Friedman. But, unfortunately, in the larger scheme of things, these are merely tweaks, minor shifts, in the greater transactional order, shifts that amount to reinforcements of a failing status quo. Even after we nearly drove the global economic caravan off the cliff, we are still doing and thinking the same way about business and leadership. We may have stepped back from the brink a few feet — our painfully slow recovery offers some breathing room perhaps — but despite this near-death experience our overall thinking remains unaltered. Even as the horror of the gulf oil spill unfolds beneath our very eyes every day now, our thinking is still largely business-as-usual. Its astonishing when you stop and think about it. How is this possible and what is the answer, if there is one at all? The good news is there is an explanation for this blindness and there is a pragmatic, if unlikely response — if we have the courage to see the simple truth of what is before us. The reason for our denial and apparent unwillingness to change is relatively simple. Like it or not, we are largely unconscious creatures, driven much less by conscious rational thinking than by automatic, pre-programmed patterns of thought that were largely put in place before adolescence. They are patterns of thinking that often keep us from seeing what is right beneath our noses — as Harvard trained philosopher of science Thomas Kuhn famously pointed out in the 1960s. Most of us, most of the time, operate on auto-pilot. Much of what we think of as rational, conscious thought, is actually a rationalization for what our unconscious mind decided for us in a split-second, without us ever realizing it. Scary but true. It is the power of the unconscious that allows us to deny the obvious. But there is good news. In the face of crisis we can wake up, shaken awake, so to speak, and actually see what is all around us. And when awakened what we see is this: there are businesses who opened their organizational eyes long before the current economic crisis hit, businesses that began to operate from fundamentally different ways of thinking, businesses that have been producing fundamentally different and better results. They realized that the old transactional paradigm, where the leader-follower relationship is predicated on an exchange of mutual self-interest, is no longer viable. It’s the conventional leadership model that says, “I the leader have something you want, money, and you the follower have something I want, labor, so let’s make and exchange.” It’s not bad or wrong. Today it’s simply, well, impractical. These leaders realized ahead of the game that focusing on profits to the exclusion of all else no longer works in a world as complex and rapidly changing, in a world as unavoidably transparent as ours. They’ve embraced what by some is called the new paradigm, by others transformative leadership, and still others integrative leadership. Irrespective of what we call it (or if we label it at all), it’s the reason a company like Southwest Airlines is the only profitable airline in America today. It’s the reason Costco and Whole Foods continue to thrive while their competition struggles. It’s a primary reason that Starbucks exists and has been able to create a whole new industry. And it’s the reason 60 Minutes once devoted an entire segment to Peoplesoft (before they were gobbled up by Oracle). At its core it says that within a healthy system of capitalism, business is not some free-floating abstraction or an institutional set of policies and procedures that employs people to achieve its ends. Rather, business is in fact a flesh-and-blood human enterprise from beginning to end. To borrow from Jefferson, it’s an endeavor of the people, by the people and, yes, for the people. Sounds quaint, even hoaky, you say? Then consider the basic behavioral logic on which it is based: when fundamental human needs (for belonging, for growth and autonomy, for meaning, and for contribution) are met in the workplace, people flourish and, not surprisingly, so do the hard, measurable results (assuming the leaders have modicum of business and leadership skills). To oversimplify a bit, in this approach the leader’s job is to grow him or herself and to grow his or her people. Period. Far from being idealism, this way of thinking is pragmatism at its most powerful. But waking up from centuries of slumber is never easy. And making the kind of organizational shifts this model requires is surely not without its challenges. In fact, its hard work. But frankly speaking, it’s a hell of a lot easier and far less painful than going through what we’ve been going through (and still may yet have to go through) in this rapidly changing, unavoidably transparent global economy. The truth is, we must explode our dangerous state of denial. We must step back and begin to think, really think (!), and do so from a much more comprehensive perspective, and soon. The clock is ticking, whether we like it or not. Cleve W. Stevens, Ph.D., a transformational leadership consultant to CEOs and the Fortune 500, is CEO of Los Angeles-based Owl Sight Intentions, Inc. ( www.owlsightintentions.com ). E-mail: cs@owlsightintentions.com .

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Richard (RJ) Eskow: Come on Down — It’s Time to Play "Social Security Survivor"!

August 3, 2010

A broad coalition of groups has been formed to defend Social Security, and the videos announcing it are all worth watching. Of all the ideas proposed, my personal favorite comes from AFSCME President Gerald W. McEntee: A new reality show starring the people who want to cut Social Security. He suggests having John Boehner, billionaire benefit-cut advocate Peter G. Peterson, and Deficit Commission chairs Alan Simpson and Erskine Bowles live for a year on the average Social Security benefit of $14,000. “They won’t get a COLA (cost of living increase,” says McEntee, “but they’ll still have to deduct $100 a month for Medicare Part B and still have to pay $200 a month for Medigap insurance.” (The video of his comments is below.) Great idea, Mr. McEntee! Mr. Peterson should be more than happy to take you up on your offer. He likes games, having funded one called “Deficitball.”(1) Alan Simpson seems like a playful sort of fellow, too. It sounds a lot like I’m a Celebrity, Get Me Out of Here! , where the famous and well-to-do are dropped in a jungle and forced to do icky things like eat bugs and snakes. But in this case the jungles will be our own cities and towns and contestants are more likely to eat Purina than piranha. But why limit ourselves to only four contestants? Why not invite those Senators who have pushed for these sorts of cuts, too, like the senior Senator from California ? Dianne Feinstein, come on down! And let’s not exclude economists like Alice Rivlin, a member of the Simpson/Bowles Commission who wants to cut benefits for all the wrong reasons. Let’s meet our newest contestant! Dr. Rivlin thinks it’s “absurdly unlikely” that “widows living on the edge of subsistence” will have their benefits cut – but then, she doesn’t tell us where she thinks that edge lies. That’s a shame because, as women, our last two contestants will be asked to survive on less than the men. The average Social Security benefit for older women is $11,900, so that’s what our female contestants will receive. Unfair? you say. Outrageous? Sure it is, but this is a “reality show” and that’s the reality. “When do you think they’ll stop calling for benefit cuts?” asks McAfee. “Probably in the first episode.” He’s probably right. Chances are that our contestants live in pleasant communities, surrounded by the nearness of family and friends. That’ll be the first thing to change. There may be tearful farewells to children and grandchildren and lifelong friends, as our contestants move to urban slums or the distant and fading outposts of the American dream. Our next dose of reality: Our male contestants will be living on $1,166 each month, and the women will have $991. After those premiums are subtracted they’ll have $866 or $691 for all their monthly needs. (And let’s hope they don’t have out-of-pocket medical expenses.) Rent? Food? Transportation? These amounts will have to cover everything. Our contestants may not know what it’s like to live like this, but here’s their first lesson: Monthly budgets are too long-term when you’re subsisting at this level. If they’re lucky enough to pay no more than $500 per month for rent and utilities, our male contestants will now have $85 per week for all other expenses and the women will have $44.27. Is our reality show “real” enough for you yet, contestants? Are we “living on the edge of subsistence” yet? Eating bugs and snakes for a few weeks is probably starting to look pretty good by comparison. What would we call this reality show? Survivor ? The name’s been taken. The Real World ? Taken. Extreme Makeover ? That one’s taken too. American Chopper ? Not quite right, although would be a good name for what the Deficit Commission is trying to do right now with our benefits. Here’s the reality: Generations of Americans benefited from a three-legged system that ensured their financial security in old age. The first was the pension system, which has been gutted by employers. The second was savings and personal assets, which for most households have been decimated in the last several years. And now the only remaining leg, Social Security, is under attack. “It’s not a benefit cut,” proponents claim. “We just want to raise the retirement age.” But many people who live in the reality show we call “life” can’t work until we’re seventy. Their jobs are physically demanding, or there aren’t any jobs to be had. Raising the retirement age means less money for them. (Of course, it also means less money over a lifetime for those who retire at seventy, too.) Social Security’s the most conservatively managed, financially stable public program we have. It has survived multiple economic downturns. Its greatest threat right now comes from our would-be contestants. Some deficit cutters will promise that lower-income people will not see benefit cuts. But any cuts will break the covenant under which workers have paid payroll taxes for a lifetime. And the question remains: Where will you cut? If you say you won’t do it for people living on $44 per week, what about those whose total income adds up to $65 a week? $75? $100? What will satisfy you? And what assurances will we have that you won’t break your promise again someday? When it comes to tampering with Social Security, millions of Americans are already living the reality we just described. The next one to “play” it may be the teacher who taught you to read, or the nurse that brought you back to health … or your mother and father … or you. Hey, look! The show’s about to begin. Some of the faces look awfully familiar .. . Hey, America! It’s time to meet our newest contestants! ____________________________________ (1) I thought “Budgetball” sounded like a cross between The Fountainhead and Death Race 2000 , but if Peterson plays this game I promise to reconsider. (click here to send a message to every Washington politician on the campaign trail: Hands off Social Security!) (The reality show remarks occur at 2:30.) ____________________________________ Richard (RJ) Eskow, a consultant and writer (and former insurance/finance executive), is a Senior Fellow with the Campaign for America’s Future. This post was produced as part of the Strengthen Social Security campaign. Richard also blogs at A Night Light . He can be reached at “rjeskow@ourfuture.org.” Website: Eskow and Associates

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Sheldon Filger: European Bank Stress Tests are Tragic-Comedic Farce

July 26, 2010

When the Obama Administration assumed office in early January 2009, the President’s chosen Secretary of the Treasury, Timothy Geithner, was already on record as estimating that the United States banking sector was in such dire straits resulting from the global financial and economic crisis triggered by the collapse of leading investment banks on Wall Street, it would require $2 trillion in government bailouts to repair the damage. However, once in power, President Obama and Secretary Geithner were reluctant to ask American taxpayers for another handout for Wall Street after the highly unpopular $700 billion TARP bailout. Their response was to rig a series of so-called banking stress tests, which were completed in the spring of 2009. Only months after the near implosion of the global financial system, Geithner’s stress tests supposedly showed that the U.S. banks were in such excellent shape, only a handful required a measly $75 billion in recapitalization, a sum that could be easily raised through private investors. Never mind that Geithner’s stress tests incorporated “worst case” unemployment rates that were already eclipsed by the summer of 2009 and other less-than-rigid assumptions. The market seemed to be charmed by Geithner’s charade, attested to by rising equity values of financial firms. Now the Europeans hope they can pull off the same performance. With much fanfare, the Committee of European Banking Supervisors has announced the results of their own engineered bank stress tests, involving 91 banking institutions in 20 European countries. The architects of this banking Eurofest knew they could not show that all 91 had “passed” the stress tests, as this would simply not be credible even to the most gullible. For that reason, seven banks were selected as sacrificial lambs, and revealed as having failed the stress test, including five relatively minor Spanish banks, as well as the much larger state-owned German property and municipal funding specialist, Hypo Real Estate. This latter financial institution was so heavily weighted with toxic real estate assets, providing it with a passing grade would clearly have given the game away. However, despite the not unclever manipulation engaged in by the Committee of European Banking Supervisors, a growing number of observers and investors have begun to see through this farcical exercise. Consider this; how valid can a stress test of European banks saturated with government bonds and other long-term public debt instruments really be if the supposed “worst case scenario” envisions no possibility of sovereign debt default in Europe? Only months after Greece was on the verge of public debt default without a massive Eurozone financial bailout, in turn funded by European countries that are themselves becoming increasingly mired in a profound sovereign debt crisis? Neither did the tests consider the possibility of a real estate or commodities crash, despite warnings that, among other dire possibilities, a global commercial real estate crash is increasingly likely. The authors of this banking stress test would have one believe that not a single UK bank is in danger from worsening economic developments, despite a warning issued by analysts at the Royal Bank of Scotland to senior British policymakers in January 2009, entitled “Living on a Prayer,” which stated that almost the entire banking sector of the United Kingdom was “technically insolvent.” In February 2009, the European Union’s own executive branch, the European Commission, issued a confidential report, subsequently leaked to the British newspaper, the Daily Telegraph , which warned that European banks collectively held as much as 18.6 trillion euros in toxic assets. In the past 18 months we have witnessed a massive expansion of public debt across Europe to fund economic stimulus programs, which has produced at best anemic or stagnant growth figures, at the price of catastrophic levels of sovereign debt, prompting these same countries to now reverse fiscal policy and revert to budget trimming austerity measures. The likely outcome is clear; a double-dip recession in Europe, in conjunction with a lack of financial capacity by European taxpayers to again bail out their banking system to the same profligate degree that was undertaken after the collapse of Lehman Brothers. As with Timothy Geithner, the architects of the European banking stress tests hope that investors and the general public will believe their farce, based on totally unrealistic and overly-optimistic scenarios. In the case of Europe, the fervent desire is that the banks which are rightfully worried about counter-party risk will jettison their well-founded anxieties, and resume interbank-lending and credit flows at pre-crisis levels. However, as the American experience reveals, a banking stress test based on public relations requirements rather than realistic financial and economic modeling may boost the stock price of major banks, justifying massive bonus payments to banking executives. However, as a solution for the continuing credit crunch and economic turmoil, it is no more than a tragic-comedic farce designed by committee.

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Michael Rose: Drop Top Gorgeous: Mazda Miata Turning Heads for 20 Years

July 21, 2010

How did Mazda , a Japanese car company best known for using a funny named engine, the Wankel, reinvent the classic British sports car? They listened to a group of Southern California dreamers who lamented the loss of the “everyman” sports cars like MG, Triumph and Austin Healey. Since these cars were no longer being built, there were no comparable sales figures. When the Dreamer team was asked how many they’d sell, all they could do was shrug their shoulders. They needed a plan. “You have to be ready, if you prematurely get it out there it will be killed,” said Mark Jordan, one of the designers of the original Miata. “You have to guard ideas from corporate culture or they will be killed.” Fresh out of Art Center , Pasadena’s fabled auto designer launching pad, Jordan was brought into Mazda by Bob Hall, who was building a team of people who shared his dream of creating a sexy, fun to drive, good performing and affordable sports car. He charged his team with all the enthusiasm they needed to accept the challenge as if they’d been reading Margaret Mead’s famous quote, “Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it is the only thing that ever has.” Hall may have been channeling Mead but he was smitten with Diana Rigg, the actress who portrayed Emma Peel in the television series The Avengers . He drove a Lotus Elan, “a duplicate of Emma Peel’s car.” He knew what he wanted, and watching the far away look in his eyes as he remembered those days, it’s possible he settled for the car. He decided to use the discretionary budget he had as head of Mazda’s North American Research Division to develop the design for his embryonic sports car. The Elan would be “used as a benchmark,” said Hall. “The project was more philosophical, we didn’t have approval,” said Hall. His plan was to go ahead and to move on if after two years it didn’t work. Tom Matano and Mark Jordan, Miata Designers Hall put Jordan together with fellow Art Center graduate Tsutomo (Tom) Matano and others to bring his dream to life. Excited by the prospects, the team started sketching, and while they didn’t know what it would look, like they knew what they wanted it to be. “I remembered when the Jaguar XKE came out in 1961, it was spectacular,” said Jordan. “We had to be timeless, we had to make a design that would endure.” Car design in the early 1980s was edgy and boxy; they wanted something that, “when you ran your hand down it you could feel the natural surfaces,” said Matano, gesturing with his hand as if describing Emma Peel’s shape. Clearly, the team was in synch. Hall liked the sketches of the curvy little roadster Jordan and Matano presented and went to Japan to get some money to build a prototype. A skeptical management said, “make it cheap.” They pulled all the favors they could from engineers in England and Japan, who figured out how to create an inexpensive two-seater with aspirations to be a Ferrari. Photo courtesy of Mark Jordan On a secret test drive through Santa Barbara’s Hope Ranch, where they thought no one would notice the pint-sized sports car, it turned heads. People came out gawking and pointing as they rolled past the local Porsche dealer. They couldn’t stick around and bask in the glory for fear of any spy shots leaking out, but they knew they were on to something. The trick would be translating the buzz of that moment into something that would cause the decision makers in Japan to give them a green light to build their dream machine. Photo courtesy of Mark Jordan Instead of making a typical product presentation at corporate headquarters, they decided to invite the decision makers to California for a road trip up the coast to Carmel. They assembled a stable of comparable sports cars, including the Peel-inspired Lotus Elan, a Triumph Spitfire, an MG Midget and a few others that the visiting execs could drive along with their new prototype. “We wanted to communicate the essence of the experience of a British roadster to management,” said Jordan. “That wind in your face, sun in your hair feel,” he said. The prototype’s light weight, its double wishbone suspension (like a Ferrari’s), 50/50 weight distribution, tight gearbox (modeled after the feel of a Jaguar) and peppy engine in the sexy, elegant body delivered all the smiles per mile they were hoping for. They got the go-ahead. When it was released in late 1989 as a 1990 model it caused quite a stir. Dubbed the MX5-Miata, it unleashed a flood of sporty roadsters from the world’s carmakers. Porsche introduced the Boxster, Mercedes had the SLK, BMW the Z3, Audi the TT, and others came along in rapid succession. Mazda showed the world that sports cars could once again be fun and affordable. The spirited new Miata harked back to the days of low-cost roadsters like the MG, and people snapped them up. “I think most car enthusiasts point to the Mazda Miata as the turnaround. Mazda reminded everybody what they loved about these little cars from the 50s and 60s and even if you didn’t own one in those days you could see the appeal of a little car that seemed to smile and would scoot around corners,” said Ken Gross, automotive journalist. Everyone wanted to get back into the game or improve what they had. This revived spirit was matched by advanced engineering that provided performance with decent mileage and emissions controls. And gas was cheap. It was a renaissance. “When people have some discretionary income, they want expressive fun, interesting cars, and the manufacturers, for once, were right on time,” said Gross. Being right has meant selling over 900,000 Miatas (or MX5s, as they’re known everywhere else) worldwide, with over 400,000 of those in the biggest market, the U.S. These special cars set hearts racing and pulses pounding. They put the joy back into driving and can even make the daily commute an adventure. While there are arguments to be made that we don’t really need sports cars, you should slip behind the wheel of one and see how you really feel. Seeing Hall, Jordan and Matano surrounded by Miata owners at a recent event for enthusiasts made it clear that there are no limits to what, “a small group of people who are on the same wave length can accomplish,” said Jordan. I bet Margaret Mead and Emma Peel would both approve.

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Fortune’s Stanley Bing: Lawyers, Lobbyists and Money

July 21, 2010

That sound you hear coming from Washington is the sound of every lawyer and lobbyist strapping on his or her battle gear and heading for the war zone. Today President Obama signs the financial industry’s nightmare into law. Huge hanks of the way Wall Street likes to do business will for the first time be regulated, certainly impairing every cowboy’s ability to ride the range with his six-shooter and stallion, knocking down homesteads and rampaging pretty much every which way he can. It’s the end of the range, expecially for those who like to be both bad men and law men, depending. Any way you slice it, it’s not gonna be as much fun around Dodge as it used to be. But wait. The fun is only just starting. Those laws are one thing. They’re on the books. But to be enforced, they’ve got to be turned into rules that every townsperson can understand, and every lawman can enforce. And we’re a long way from that, pardners. And that’s where those lawyers and lobbyists come in. Lord, what a mess of meetings and palavering and influence-peddling and horse trading and litigation there’s gonna be! And all that money to be made in town while it’s going on, too. Happy days are here again, ladies and gentlemen. And in the end? When all the shooting stops? Well then, we’ll just see about that. Those jaspers have been at this game a long time, a lot longer than the new dudes in town with all their high-falutin’ talk about reforming the way things are done. I wouldn’t bet against the black hats on this one.

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Danny Schechter: The "War" On Wall Street May Be Over: Who Won?

July 19, 2010

By Danny Schechter Author of The Crime Of Our Time An unusual word crept into the lexicon of the New York Times op-ed page, the arbiter of approved thought in the age of economic collapse. The new conservative columnist Ross Douthat dusted off a key phrase associated with Marxism, “class war.” Of course, as you would expect, Karl was spinning again in his resting place at London’s Highgate cemetery by the Timesman’s spin. But in a country where, officially at least, the only classes are found in schools, the very idea of class war is not something you read about every day, even if the person writing about it is certainly on the wrong side. In fact, the current “war on Wall Street” seems all but over even before the President signs the financial “reform” bill. We have seen very few criminal prosecutions coming out of Obamaland. The recent settlement with Goldman Sachs was limited to one transaction, and quite affordable for the bank that’s been called a “vampire squid on the face of humanity.” Their shares went up when the slimy deal was done, and in any event, that $550 million they paid just represented 15 days of profit taking. This “war” had been notched up by the passage of laws that offended the sensibilities and modestly threatened the bottom lines of mega companies that rely on government as an enabler of their profitability, not an obstacle to it. Already the big health care companies are coming up with new “affordable” plans that limit benefits and choice despite the Administration’s promises when it was passed. The banks are slithering around the financial regulations with their usual fear campaigns, now pressing international regulators in Basel Switzerland to give them ten years to satisfy proposed new requirements, The New York Times reports “Wall Street is already working around the new regulations,” and “the ink is not even dry on the new rules, and the already, the bankers are a step ahead of everyone else.” The newspaper of record characterized the bill as a plumbing operation, “a catalog of repairs and additions to the rusted infrastructure of a regulatory system that has failed to keep up with the expanding scope and complexity of modern finance.” (Huh?) Weren’t they coping with the aftereffects of a deliberate scheme to deregulate and decriminalize a marketplace in the name of “modernization” and “innovation?” The Wall Street Journal explains: “The legislation empowers 10 regulatory agencies with the ability to write new rules governing all aspects of the financial industry — from the types of trades banks can conduct to the standards for mortgages, credit cards, and ATM fees. Many of these decisions will be made by regulators, and this has lawmakers on both the right and the left worried: Those on the right worry about government overreach, while those on the left worry about regulators becoming cozy with lobbyists. Indeed, the banking industry has been reaching out to regulators for months, and JP Morgan Chase has more than 100 teams studying the legislation.” When they say “studying” the legislation, they don’t mean studying in any academic sense. They mean figuring out how to game it, undercut it undermine it and sabotage it, for starters, by imposing new fees and restructuring to evade the law. They are masters of playing this game. So far they spent an estimated $600 million fighting the bill so they have a big investment in assuring a business climate they can dominate’ Economist Gerald Epstein told Real News. “It’s like a world cup game where one team only has a goalie with his hands tied.” While Republicans drool about the prospects of taking back the Congress and repealing laws they don’t like, Wall Street is hardly out of the picture. They have cut back on donations to Democrats while industry groups like the Chamber of Congress mount a major campaign to defend fat cats. Their lobbyists are in the trenches diluting what they can, revising what they must. James Kwak of Baseline Scenario thinks the bill was better than nothing, but adds, “it’s still a missed opportunity. And over the next couple years, as regulators (lobbyists) write the rules necessary to implement the bill, we’ll find out if anything really has changed.” What’s your guess? Leave it to Bill Gross, a top bond salesman to tell the Wall Street Journal bluntly, “Wall Street still owns Washington.” What do other majordomos on the Street think about the bill? Former Republican Treasury Secretary and bailout king Henry Paulson supported it. Most of the opposition comes from demagogues characterizing it as a Soviet-style “takeover.” Please! Lenin would have laughed at this watered down half-measure. And what about prosecutions? Goldman Sachs agreed to a settlement in just one transaction, a civil, not criminal action, while not admitting guilt. The Republicans on the SEC were against going after Goldman, natch, although it appears that Goldman was singled out not only because it was a symbol of public disgust with Wall Street but because it could afford to play the role of evil symbol. That play may have closed. A Times headline on Saturday gave that away: “Goldman Was Regulators First Prize and It May Be the Last.” Wall Street veteran Larry Chin asked, “Are we to think that the Goldman Abacus-CDO transaction is the only ABS-backed CDO that employed improper marketing? Do not be so naive. In fact, if Goldman employed improper marketing in one deal, are we to believe they did not do the same in many others? Do you ever find just one mouse? (Emphasis mine.) The Goldman Abacus deal was a $2 billion transaction. A sizable transaction, correct? Yes and no. We truly need to look at the Abacus deal in terms of the overall ABS-CDO market. How big was that market? Slightly more than $1 trillion in ABS-CDOs were underwritten by Wall Street from the beginning of 2006 until the market froze in early 2008 That seems like too much money to mess with. And that’s not all. Goldman has yet to be held accountable for many of other dangerous investment practices. A new report in Harper’s examines the role Goldman played in escalating the food crisis of 2008 when the ranks of the world’s hungry increased by 250 million. While the government doesn’t appear to have the fortitude to clean up more crime on Wall Street, the Supreme Court is trying to insure that prosecutors will not have the tools they need to jail wrong doers if and when they do. The Washington Post reports, “A Supreme Court ruling last month that gutted an anti-corruption tool favored by federal prosecutors is jeopardizing high-profile investigations into politicians and business executives…” So there you go, Wall Street has wriggled off the hook with a little help from their friends, and is winning the new “class war.” 2.1 million Americans — that’s the new number — can’t even get unemployment benefits extended. Why are no anti-war activists talking about stopping this war and “withdrawing” from Wall Street? The political environment seems grim, not only for Obama, but for all progressive change. That moment may have passed. This does not mean the public is not angry, only that’s its anger is deliberately being channeled by our media in a false direction, into bashing deficits and Dems, not the men in the shadows who are calling the shots. Let’s realize: The financial “spill” is just as devastating as the oil spill. And it has yet to be contained. So if you want to “fight the power,” the time for organizing and educating is here, with a vengeance. Don’t let it slip away. News Dissector Danny Schechter made the DVD “Plunder the Crime of our Time,” a film on the financial crisis as a crime story, now showing on LINK TV, (Plunderthecrimeofourtime.com) Comments to dissector@mediachannel.org

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Jason Gurwin: Live Sports 2.0: The Digital Revolution

July 19, 2010

So you go to the arena and you’re sitting in the nose bleed seats, there’s a drunk guy sitting next to you who won’t stop shouting expletives or blowing into his vuvuzela, and its only the first quarter. Just wait until you have to spend 25 minutes in line to use the bathroom to dispose of the $8 soda you bought. It’s no wonder that people prefer to stay home and watch the game on their 65″ HDTV than drop a week’s worth of salary to bring their family to cheer on their favorite team. The biggest difficulty with creating a great in-venue experience is that there is no control over whether your team wins or loses. As a marketer for a sports team, your job is to ensure that you have a great time no matter if your team is shutout or wins a “nail biter.” In the past, that meant cheerleaders, video clips on the jumbotron, and random giveaways. Today, there are some pretty innovative pieces of technology that can make the live experience that much better. One of coolest new pieces of live venue technology is a system called Kangaroo TV . It bridges the gap between what’s great about watching sports at home, the access to information, and what’s great about going to the event, the energy of the venue. Last month, I had the pleasure of attending the final round of the US Open at Pebble Beach. Unless you have a rooting interest, live golf is up there with the “National Paint Drying Championship.” You miss 90% of the action and your view is often obstructed. Then comes Kangaroo TV. With just a deposit on the device, the handheld 3G-based system provided access to live video of the NBC’s US Open broadcast, as well as additional video feeds including featured pairings, holes, and even the blimp cam. In addition, you could follow the leaderboard or dig into player stats or scorecards. Golf is just the beginning. This technology will be available starting this fall at Miami Dolphins games. It will give you access to the NFL RedZone channel as well as broadcasts to other NFL games. This isn’t the first handheld device to merge the live event with the digital world. In 2007, the Nintendo Fan Network was launched at Safeco Field in Seattle that allowed Nintendo DS users to access baseball content (stats, scores, video etc.), chat with other fans, and even order concessions directly from the device. The question is – why require proprietary hardware like KangarooTV or a gaming system like Nintendo DS when nearly every tech savvy sports fan has a smartphone? Back in 2004, AT&T Park became the first WiFi-equipped sports venue. They also launched an online platform called “Giants Digital Dugout” that provides WiFi video replays, game content, and venue maps. The iPhone app development community has even begun to take on the problem. At Rupp Arena at the University of Kentucky, an iPhone application called “FanGo” has allowed fans to order food directly from their seats. DirecTV even has an iPhone app called NFL Sunday Ticket To-Go that allows NFL Sunday Ticket subscribers to watch any NFL game directly from their iPhone, Android, or Blackberry device. This is just the beginning. There is a huge opportunity here to innovate on the live game experience. Imagine sitting at a baseball game with the live video stream on your iPad and being able to tap on a player to pull up their virtual trading card. Imagine being able to view the twitter stream of all those tweeting about the game. Imagine after a loss getting the option to purchase a discounted ticket to another game as a special bonus for attending the game. With 3DTV no longer a pipe dream, sports teams will have to find new ways to draw fans to their venues – especially when they’re not winning. I don’t have a solution for the exorbitant costs of going to a sporting event, but there is tremendous room to create a more dynamic live experience. However, the solution is not a fragmented set of technologies. The one that will win is the one that creates the ultimate fan experience in one application on the user’s own hardware. And if it also includes a feature so you never need to wait on line at the bathroom, I think you just might have hit the jackpot.

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Frida Berrigan: A Way Forward: Reexamining the Pentagon’s Spending Habits

July 14, 2010

Crossposted with Foreign Policy in Focus What is a trillion? It is a big number for sure. The best explanation I have found for this mind-blowing figure is from children’s book author David Schwartz. “One million seconds comes out to be about 11½ days. A billion seconds is 32 years. And a trillion seconds is 32,000 years.” What is a trillion dollars? What can you get for that much money? Rethink Afghanistan — Robert Greenwald’s effort to help us understand the war on terror, its costs, and consequences — has a new Facebook application aimed at breaking down exactly how much we can get for one trillion dollars. It is fun (in a qualified-world wide web-war on terror sort of way), and eye-opening. During one round of the game, we were able to spend $999.5 billion to: Hire every worker in Afghanistan for one year at a total cost of $12 billion;

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Chris Forbes: Reengineering America’s Future

July 12, 2010

I’ve had the opportunity to meet with many engineering leaders over the past decade. I’ve observed how they work, and talked about their challenges and successes. Our ( Knovel ) customers represent more than 600 organizations worldwide including 70 Fortune 500 companies and 80 percent of the top engineering schools in the United States. In this context, it’s no surprise that I pay attention to statistics related to the next generation of engineers. In the June 14th issue of Fortune, David Kaplan highlights worrisome statistics in his article, “The STEM Challenge”: Out of 4 million students who entered high school in 2001, fewer that 200,000 will graduate with a science, technology, engineering or math (STEM) degree. For every new Ph.D. in physical sciences, the US graduates 50 new MBA’s, and 18 lawyers. Adding to this, the current population of experienced, baby-boomer engineers is aging, and many will soon retire. Replacing these experienced engineers is, and will continue to be, difficult. A recent Boston Globe article highlighted this challenge as it relates to Raytheon Co. and their plans to hire 4,500 engineers this year. According to chief executive William Swanson, they’re encountering difficulties in finding good candidates. So why should we care? Simply put, jobs and economic security are at stake. China and India have increased their influence significantly with successes resulting from developing a workforce that increasingly has relevant technical skills and a STEM education. According to an article by Keith Richburg in the Washington Post , China surpassed the United States as the world’s largest automaker last year and is now leading the world in high-speed rail. These facts are a strong indicator of fierce global competition. A market leader today may be out of the game tomorrow. Facing an acute problem with long term effects, government, business and education have responded with a variety of programs, including President Obama’s Educate to Innovate and the inaugural USA Science & Engineering Festival , that aim to encourage more students to pursue STEM degrees and to help educators teach math and science in a way that is interesting, relevant and engaging. Moreover, an article in The New York Times recently featured a variety of programs that introduce engineering concepts to elementary school students. Still, it will take years to determine the success of these efforts. In the meantime, science information doubles every 15-20 years and 83 percent of an engineer’s required knowledge is acquired post-graduation*. As many companies tap the raw talent of the next generation, it’s crucial to consider how we can help this up-and-coming group to hit the ground running. When it comes to STEM, we need to have a long term outlook and consider the tools and education that engineers need now and throughout their careers. Knovel provides one of these tools by supplying engineers and engineering students with reliable online technical references and interactive data they can easily incorporate into their workflow. Engineers tap Knovel to find answers to technical questions, particularly during the product development and design stages. During this period of innovation, engineers need top-notch tools that help them to learn faster, increase productivity and avoid costly mistakes. In many ways, we are in business to help engineers be the best they can be. When I think of some of the conversations I’ve had with engineering leaders, I am struck by evidence of both a digital and generational divide. A vice president of engineering in a large engineering design firm recently told me that his engineers still go to physical libraries, wait for a reference book to be mailed to them if it’s not immediately available, search though a book for the information they need, physically copy an equation into their notebooks and then use their calculators to solve it. Contrast this experienced engineer with a recent graduate whom has grown up in the digital age and turns to the Internet and online tools for research. The next generation of engineers must be both tech savvy and well educated. As a company focused solely on the engineering community and providing that community with the information and tools they need to be more innovative, we have a unique seat from which to watch how the STEM efforts shake out. And now, more than ever, it’s clear that finding ways to arm burgeoning and established engineering students with the insight, experience and tools required for success is part of a larger global story. As we look to the future, we envision one where the engineer is placed alongside the athletes and actors of today’s world. To get there, we must remain committed to the intrinsic value and role science, technology, engineering and math play in our economy. The future of engineering is closely tied to the future of America. As we work to re-engineer America, let’s not lose sight of the importance of two things: 1) investing in our current workforce by providing them with cutting-edge tools and resources to facilitate innovation, and 2) ensuring our children are exposed to STEM from day one. *Communication Patterns of Engineers, Tenopir, et al, IEEE 2004

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