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Wray Herbert: The Surprising Benefits of Corporate Disunity

by Wray Herbert on April 12, 2012

Huffington Post…

I love reading accounts of the West Wing’s inner workings, because they are studies in the predictable quirkiness of human psychology. Presidents and their trusted staffs always arrive in the White House with a unified message and team spirit, and they inevitably disintegrate into factions — ideological purists and pragmatists, seasoned vets and young Turks. It’s just as true of Obama’s West Wing today as it was of Nixon’s and FDR’s, and probably every presidency back to the founding. The common wisdom is that such factions are a bad thing, not just for the White House but for any complex organization. Internal bickering takes key leaders off message and saps energy and hurts job performance. But Margaret Ormiston isn’t so sure. Ormiston is a psychological scientist at the London Business School, and together with Elaine Wong of the University of Wisconsin — Milwaukee, she has been studying the consequences of such organizational fragmentation. Her work suggests that disunity may actually have some hidden benefits, including the promotion of more ethical business practices. The scientists’ theory goes like this: As unified leadership teams splinter into factions, the key players become more competitive and more vigilant in monitoring one another. Competition and monitoring have downsides, but they can also influence organizational decision making in positive ways. Specifically, factions foster intense scrutiny and discussion of competing agendas, which in turn lead to more ethical choices and judgments. To test this idea, Ormiston and Wong examined existing data on leadership teams at about 50 Fortune 500 companies. They ranked each leadership team’s degree of fragmentation, based on tenure and education as well as the homogeneity of competing factions. They also measured how centralized, or decentralized, the decision making power was in each company — figuring that disunity would be more beneficial in organizations where decision-making power was dispersed. Finally, they examined each company’s ethical record over a three-year period — measures like charitable giving, for example, or disregard for the local community economics. When they crunched all the data together, the results were unambiguous. As reported on-line in the journal Psychological Science , the more fragmented a company’s upper management was, the more ethical its record — but only in organizations where decision making was decentralized. In companies that consolidated power at the top, fragmentation did not lead to more ethical decision making. It just led to fragmentation. That’s a lesson for any organization, whether its business is business or governing.

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Wray Herbert: The Surprising Benefits of Corporate Disunity

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Brian Tolle: Sales or Marketing?

by Brian Tolle on April 12, 2012

Huffington Post…

The longer I’m in the business world, the more comical the term sales and marketing seems to me. These two disciplines couldn’t be more different. And since I’ve had to wear both hats as a business owner, what each role demands of me is mind-boggling. When I’m the marketer, I’ve got to get and keep the brand right and blast it as far and wide as possible. When I’m the salesperson, I’ve got to get in the trenches and go face-to-face with the real buyer in the flesh. It’s the difference between zone defense and man-to-man. So in the real world, it’s sales or marketing. At any one moment you’re either one or the other, not both. The same goes for when you are leading others; you’re either a marketer or a salesperson. Why is this important? The very nature of marketing requires some sort of medium… television, magazines, Internet, mail. This means the marketer is one (significant) step removed from the end user, the buyer. The two can only connect when the medium is present. If the medium isn’t available, the marketer will check their Blackberries. And the chief weapon they wield is scale. Millions of TV watchers can see one commercial, read one ad in a publication. No surprise, then, that their techniques take on a certain carpet bombing feel with the marketer as the pilot, high above the fray of the buying moment of truth. Regrettably, a leader with this mindset has a hard time connecting with the troops and spends more time in front of groups instead of individuals. Think of those leaders in your experience who epitomize the marketing mindset. How many of them can you imagine gaining commitment from a reluctant front-line employee through a face-to-face discussion? Not many. Without the bullhorn, the marketer has no voice. The very nature of sales requires personal contact… face to face, asking questions, listening for pain, being up front about each step in the process and bold enough to hold a prospect or customer to their mutual agreement, however small in the grand scheme of things. Salespeople hear “no” whereas marketers hear silence. Salespeople come to know the hard truth about the product or service but still work to make it work, it’s the only way they make a buck. Great salespeople have guts; they go back into the line of fire every day. Think of those leaders in your experience who epitomize the sales mindset. They’re never far removed from you in the trenches. They find you to make sure you’re ready to take on the fight. They look you in the eye. It’s sale or marketing. Your choice. Which one will you be? If I had my druthers, I’d take the sales guy.

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Brian Tolle: Sales or Marketing?

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Preetam Kaushik: Starbucks Finally Coming to India: Will It Knock Out the Indian Coffee Retailers?

April 10, 2012

One of my Indian friends abroad was returning home after a three year stint in Japan and mentioned, “Well, the only thing that I would not find in India and I can’t live without is Starbucks.” “But, there are Café Coffee Day and Barista, the Indian Coffee chains, if all you want is a hang out joint and some good tea or coffee,” I said. “No, they are not the same, they don’t even serve Tazo Chai Tea Latte,” was the curt response. Well, it’s only an individual example, but kind of opens up a window to understand how brands develop and make your life incomplete without them being around. It is also precisely this sentiment that would welcome Starbucks in India. However, Starbucks is looking at a much bigger market than merely those who eagerly await its arrival. Indian coffee consumption has doubled up in the last decade to 100,000 metric tonnes . While the main players in the retail coffee chain in India are Café Coffee Day, Barista and Costa Café, it is really only the Café’ Coffee Day that has the largest market share. With over 1250 cafés across various cities in India, Café Coffee Day is progressing at a growth rate of nearly 30 percent a year. In Contrast, Barista remains slightly an upmarket Café with about 250 cafes across the county and Costa Coffee, still lesser at about 100 Cafes. Who amongst these is really the competitor for Starbucks really depends on how the company positions itself in India. Starbucks is partnering with Tatas with a 50: 50 Joint Venture to launch the first set of the 50 retail coffee chains across India by the end of the year. The first launch is estimated in August. Finally! The question one likes to ask is not what is bringing Starbucks into India, but what has really kept it out for so long. It may be the Foreign Direct Investment Policies for single brand retail companies, where the bar was kept at 51 percent. Apparently, Starbucks has long been interested in coming to India but somehow it didn’t work. However in the last few years, contemplating a Franchisee Model and was in talks with Kishore Biyani of The Future Group, India. It however does not work for many brands who do not want to partner with any Indian brand, such as Apple and IKEA. It is only in January, 2012, that the Indian Government allowed 100 percent FDI for single brand retailer raising from 51 percent. The only condition that comes with 100 percent FDI is that the companies who take the 100 percent route must procure 30 percent from smaller Indian companies . It is interesting that despite the 100 percent FDI allowance now, Starbucks has chosen to go for a joint venture with the leading Indian Conglomerate Tata, that too with a 50:50 partnership stake. The two companies who are signing in MO U’s are working on the finer print for the Indian chains set to launch soon. Starbucks is already in agreement with the company over sourcing its coffee from India. Although the final arrangement between the tie up is still not public, it wouldn’t be a surprise if TATAs, who are also in the hospitality business, run some of the retail stores out of their own properties. Starbucks, which runs over 1900 retail stores in over 58 countries, is planning to launch stores in all leading cities in the first round this year. However, it is estimated that Indian market currently has the capacity to absorb more than double the stores it already has. What brings Starbucks to India, when it is a known fact that Indians are not known for their love for coffee? In a country where the predominant beverage across the country remains ‘tea’ and the coffee drinking South Indians drink milky and sugary filtered coffee, it may not sound like a very naturally inclined market for Starbucks. However it is not the affinity for coffee, but the size of the Indian middle class which is estimated at 300 million that is attractive for brands like Starbucks. It is also true that Starbucks isn’t really all about Coffee, the branding apparently is hooked on to the coffee, but Starbuck offers more than the Coffee anywhere in the World and wouldn’t it be fair to expect that there would be something special for Indian market too. Café Coffee Day is no different, it does sell snacks, tea and so many soda based drinks, not remotely connected with Coffee. That brings the discussion to the buzz that is going around in the internet world. From the Washington post to the Wall Street Journal, blogs are talking about suggestive or anticipated menu for the Indian palate courtesy Starbucks. While the guess is that “Frappuccino” and the “Latte” , should remain there, some suggest Starbucks could benefit from having Alphonso Vivanno Lassi for Indians and may also consider change of name for ‘Tazo Chai Tea Latte’. Some suggestions are around having a ‘real masala tea’ as well as serving ‘coconut water’. One could imagine Indian obsession with mangoes, diary and sweet getting twisted into some interesting new beverages. It’s not a long wait now. Starbucks Corp. is serious on spreading its wings in Asia. One, the middle class in any of the East and South Asian countries is growing and the success in China has been definitely impressive for the company. The China success where cafeterias have become a national pastime of the sorts for the middle class, India must be an inspiration. The China experience shows that it is the young from the middle class that are its typical customers. While all across Asia Pacific the Café market is growing and is estimated at 10 percent to 30 percent, Mr. Wang, head of the Starbucks Asia Pacific finds Korea as one of the most promising market . Mr. Wang believes that their entry into the Indian market will lift up the entire coffee market in the country. Self-assured yet cautious, Mr. Wang seem not too worried about the local or national competition from existing brands. One of the reasons he cites is that theirs is a proven global brand. The other being their attitude that any competition helps you remain focussed, keeps them working hard on standing out. Or as they say, there may be a place for everyone to co exists. Interestingly, Mr. Wang who is a trained lawyer thinks that Starbucks culture is about being either a rule breaker or a rule maker. The company, he insists, relies on innovation and engaging customers and the market. Starbucks, he conveys, stands for its goals on sustainable growth, farmer equity and environmental awareness. The Starbucks would like to work with coffee farmers to better yields without reducing chemical inputs. The joint venture between the Tata and Starbucks will be called Tata Starbucks Ltd. It is Delhi and Mumbai which would host the first of these stores. Well, for those who won’t like to go to a café for their coffee, they can still relish a new product that both groups will together launch ‘Tata Tazo”. For the rest, long chats await in a few months from now at Starbucks.

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Mark Samuel: Being Indispensable: When Keeping Commitments Undermines Your Accountability

April 7, 2012

It is common thought that accountability is about keeping commitments. There is nothing so frustrating as when someone has made a commitment to us — to communicate with us, to complete a task we asked them to complete, to assist us with something we’re having difficulty with — and then fails to follow through. It can be hurtful or frustrating, and our typical response is “You aren’t being accountable.” It can be even more frustrating when we don’t keep our own commitments — to things like our diets, keeping ourselves organized or to staying in touch with our friends. We feel we are letting ourselves down and may label ourselves as “not very accountable.” Regardless of which side of the broken agreement or commitment we may find ourselves, thinking that a broken agreement is necessarily an example of a lack of accountability may be a misdiagnosis. It might surprise you to learn that being accountable does not have to mean keeping all of your commitments. Why? Because accountability is more about being counted on to achieve desired results than accomplishing lots of meaningless activities. How many times have you seen someone looking busy doing lots of things they’ve committed to, but failing to achieve quality results, or satisfaction of their target audience (spouse, boss or customer)? Accountability is not just keeping commitments. Accountability is taking action consistent with your desired outcome. It begins with defining the kind of results you want to achieve in your life at home and at work. What kind of partner do you want to be in your relationships? What is the optimal health that you want to experience? What kind of reputation do you want to have at work with your teammates, your boss and/or your direct reports? Being accountable is taking actions consistent with those desired outcomes. It is not making and keeping commitments that take you away from your purpose. Based on those desired outcomes, it is essential to only make commitments that support your “picture of success” rather than accepting every commitment put before you in order to accommodate others… Sometimes, you may even make a commitment that you have to break or change in order to get back to creating your desired outcomes. For instance, I made a commitment one day to go out with my co-workers after work the following Friday. However, after getting on the scale on Wednesday, I decided it was important for me to get back on my eating plan immediately to lose weight and get my cravings under control. I had to break my commitment with my friends for a higher purpose of getting myself back on track with my health. Now, you might wonder, why didn’t I just go out with my co-workers and eat healthy foods and drink water? Because, at that stage of getting healthy, I was still having difficulty curbing my cravings, and I didn’t want to risk breaking a commitment to my higher purpose. I also wanted to support myself by not putting myself in a risky position in order to accommodate others. The problem with keeping commitments that support others at the expense of supporting ourselves is that we feel like we have undermined our own value by breaking a bigger and more meaningful commitment to our own personal success. Six Steps for Increasing Accountability and Keeping Commitments Identify your “picture of success” and desired outcomes for various aspects of your life — relationships with yourself, family and friends; your performance and communication at work; your contribution to your community or your personal/spiritual growth, hobbies and health. Develop the very few commitments you are willing to make to support yourself in achieving your “picture of success” or desired outcomes. These are your “non-negotiable” commitments. Create “recovery plans,” or your best responses which you will use if you find yourself in jeopardy of breaking one of these commitments or agreements. Recovery plans represent how you will communicate with others and yourself if you can’t keep a commitment as is, so that the commitment can be amended or changed without breaking integrity with yourself. Assess any new commitments that others ask you to make in order to stay consistent with your “picture of success” and have the courage to say “no” to a new commitment that breaks your accountability to your higher purpose or your values. If you can’t make a commitment to support or accommodate another person, assist them in finding a new solution or re-evaluating their request so that they can achieve or make progress on their “picture of success.” Acknowledge yourself for every commitment you keep that reinforces your “picture of success,” and acknowledge yourself for every commitment you break or don’t agree to because it will take you away from acting consistent with your purpose or values. If you would like to learn more about making yourself indispensable, I invite you to visit http://www.MarkSamuel.com to download two FREE chapters of my new book. For more by Mark Samuel, click here . For more on success and motivation, click here .

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Neda Talebian Funk: Fitness: The New ‘It’ Bag

April 5, 2012

Remember when dinner conversation between friends was once all about kids, fashion, and where you were traveling next? Today, the topic in vogue is fitness. It may start with, “Who is your favorite spin instructor and what class are you taking tomorrow?” and an hour later, the group is likely still talking about where and how they get their sweat on. Fitness is the new fashion, and — not surprisingly — it is quickly taking a greater portion of wallet share. At over $20 billion, the U.S. fitness market continues to grow at a solid clip. Further, the introduction of “a la carte” group fitness classes has created a growing market of fitness-goers who spend north of $300 per month on their group fitness classes alone. The boom in boutique studios and fitness apparel is proof. Fitness is not only what people are talking about, but it’s what they are doing. As Technogym’s Nerio Alessandri so perfectly once said, “Fashion is looking good outside; wellness is feeling good inside. It’s the new frontier of luxury.” What makes getting your heart rate up with a sweaty workout the new luxury? The Rise of the Boutiques. Let’s face it: The gym has not changed very much over the years. The big box format offers everything — its cardio machines, group fitness classes and locker rooms — all under one roof, and has remained pretty standard. Thanks, Jack LaLanne. Yet, in recent years, there has been a proliferation of “boutique” fitness studios offering a specialized workout. These workouts embody the “3 E’s,” as coined by fitness consultant, Jonathan Fields: efficiency, effectiveness, and engagement. Boutique studios also tend to be upscale: think $30+ per class in major cities. In fact, over the last three years despite the economic downtown, the NYC market has seen an incredible rise in the boutique studio — up over 30 percent, according to FITiST internal research. Chanel, Oscar de la Renta… and Lululemon. Walk down the street in NYC, LA, or any other metropolitan city and you will see more women in yoga pants than jeans. It’s a fact and a lifestyle. Fashion fitness brands such as Lululemon have revolutionized the fitness apparel industry. Remember working out in baggy soccer shorts and big t-shirts? Not anymore. Flattering, formfitting and highly technical sportswear is being worn not only in the gym, but to lunch, on weekends and even in the office. Want proof? Lululemon has posted over 30 percent year over year sales gains for the past nine quarters, and now boasts a market value of $10.4 billion… Yes, that’s billion. In the last quarter, the company’s sales per square foot were over three times that of luxury retailer, Neiman Marcus. And fashion designers themselves are mixing sportier styles into their lines and even doing collaborations with sportswear labels. Stella McCartney’s collaboration with Adidas has been among the more prominent designer athletic lines to date. The Celeb Factor. Simple truth: Thanks to the likes of Us Weekly , our culture is obsessed with celebrities’ every move, including how they sweat. Why do we all know Tracy Anderson? She trained Madonna and now Gwyneth. And who doesn’t want to look like Gwyneth Paltrow? People are more likely to fork over $35 for a class at a studio when they know it’s where Kelly Ripa gets her sweat on, Lady Gaga spends her birthday, or Matthew McConaughey blows off steam. In conclusion, fitness is simply the new “IT” bag, the season’s most talked about story — “seen in” is now “seen at.” For more by Neda Talebian Funk, click here . For more on fitness and exercise, click here .

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Richard Barrington: Seven Ways to Straighten Your Boomerang Child

April 3, 2012

Blame the economy. And get the spare bedroom ready. The recent wave of young adults returning to live with their parents has spawned the term “boomerang generation,” named for the object that turns after you throw it and sails back to you — a painful event if you weren’t expecting it. Similarly, if you’ve recently found your grown children asking to move back in, you may be experiencing pains of your own. Naturally, most parents are more than willing to make sacrifices for their children, and will make accommodations for them when they are in need. However, when young adults return home, it shouldn’t be to experience a second childhood. Parents need a game plan to make the arrangement bearable, get the kids on track to move back out, and most of all, help them finally achieve financial and social independence. In other words, parents need a plan for straightening their boomerangs. About the boomerang trend According to a recent study by the Pew Research Center , 29 percent of young adults (ages 25 to 34) have lived with their parents at some point in recent years. As of 2010, 21.6 percent of that age group was living in a multi-generational household — which typically meant living with their parents. High unemployment is one reason, but there is more to the trend than that. The percentage of young adults living in multi-generational households has been steadily rising since 1980. Back then, this percentage bottomed out at 11 percent, and remained well below today’s levels during the early 1980s, even though the unemployment situation back then was even worse than it has been in recent years. Also, while the trend slowed during the economic boom of the 1990s, the percentage of young adults in multi-generational households continued to rise. The rate of increase has accelerated again as the economy worsened in recent years. In other words, while the Great Recession may have exacerbated the situation, a long-term trend toward this kind of living arrangement has persisted through multiple economic cycles. Seven ways to straighten a boomerang Whatever the reason young adults have for moving back home, some parents may welcome it, while others may view it as a necessary evil. However, in no case should it be an excuse for the younger generation to lapse into adolescence. So, to help make the living arrangements bearable, to keep the kids focused on moving back out, and to help them develop a stronger sense of independence, here are seven tips for straightening out the boomerang generation: Come up with some kind of rent arrangement. Naturally, this should be on more favorable terms than it would be out in the cold, cruel world of landlords, but the young adult should not be absolved of financial responsibility. With so many older Americans behind on their retirement savings , this extra income might come in handy for the parents. If you don’t want to take money from your kids, have them put the equivalent of rent into a savings account , so they start building up the resources necessary to live more independently. Change rooms. If feasible, put young adults who return home somewhere other than the rooms they grew up in. This will help send the signal that this is not a second childhood. Establish ground rules for personal behavior. Your home should not be treated as a dorm or a hotel. Rules regarding noise, visitors and hours for coming and going should be established so as not to disturb your peace. Monitor job application activity. Make sure your son or daughter is applying for work every day — and keeping an open mind. Chances are, mommy and daddy didn’t start out in their dream jobs, and young adults need to understand that they can’t be too choosy in a tough economy. Make volunteering a substitute for work. If your adult child can’t find a job, have them volunteer for a regular set of hours instead. This will help them build a resume, make contacts and avoid slipping into the habit of idleness. Formulate a financial plan. Once your son or daughter starts working, help create a budget that will prepare them to move out. This will make sure they don’t take advantage of your cheap lodging to simply spend what they earn, and will teach them principles of goal-setting and budgeting that will help them maintain their financial independence once they’re back on their own. Discuss all these expectations explicitly and up front. You don’t need a formal contract or rental agreement — though some might prefer that — but you do need to set and reinforce these expectations. If they protest against “being treated like a child,” point out that you would lay down formal terms for any adult who sought to rent a room for you. With the baby boom generation now entering its retirement years, the percentage of multi-generational households may continue to increase, but for a different reason: Many aging parents will have to move in with their children for a combination of health and financial reasons. When that happens, perhaps it will finally be the kids’ turn to make the rules. The original article can be found at Money-Rates.com : ” 7 Ways to straighten your boomerang child ”

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Tom Samph: A 122-Year-Old Start-Up? How Post University Reinvented Itself for the Modern Educational Era

April 2, 2012

Fewer organizations today are able to stay in existence for more than 100 years. Business needs are changing rapidly across myriad industries, and in many cases what was relevant yesterday has been rendered obsolete today by new technologies and new ways of thinking. Colleges and universities have a better track record than most businesses, but even these bastions of longevity sometimes fail to keep pace with market pressures and demands. A number of schools have shuttered their doors in recent years due to increased expenses, declining enrollments, dried-up revenues and dwindling endowments. Post University was about to be one of these schools in 2004. It was 18 months from closing when a new management team took over and started upending everything from basic infrastructure to campus culture. Fast forward to today. Post University is now on firm financial footing, and is becoming known as one the most innovative and vibrant schools in the Connecticut region. If you ask members of the senior management team what they have been doing for the past five to seven years, they will tell you they have been building a “122-year-old start-up.” We have reinvented Post to meet the needs of today’s students, which are increasingly adult learners . That’s why we have a start-up culture and mentality, yet are rooted in 122 years of experience in providing higher education to students around the country. We wanted to share how we’ve made Post University’s offerings relevant to the evolving educational needs of our students, and what we’ve learned along the way to help other educational institutions grow their organizations to better meet their students’ needs, too. First, some background for context. In 1989, Post University was acquired by Teikyo University in Japan. The school became a destination for Japanese students to learn about American culture and language. But as the Japanese economy and demographics changed, fewer students came to Post. Revenues naturally declined. University management in the U.S. did not respond to this issue. As a result, the Japanese decided to sell Post. In 2004, Teikyo Post University became Post University once again, and a new, experienced, metrics-driven group of senior managers took the helm. The team’s primary goals were to 1) create a university that could deliver educational services to students in whatever format was most suitable for them, and 2) make a Post University degree more valuable with each passing year. The team also had a strong interest in restoring the school to its featured role as Waterbury’s hometown university, which it has been since 1890. To achieve these goals, the team realized its initial focus had to be on establishing financial stability. As is true with any business, you can’t do much if you can’t keep the lights on and make payroll. Post’s management team turned to one of the school’s historical strengths: distance learning. Post University has had a distance learning presence since 1976, and several members of the senior management team had experience in this area as well. Post began building up its online education operation by offering the academic programs from its main campus to adult learners in a fully online, asynchronous format. It also started adding graduate programs, including the state’s first fully online MBA degree program . Today, the Online Education Institute of Post University is a leader in providing online accelerated degree programs for working professionals. Looking back on how we got here, there are a couple of takeaways that stand out. We hope you’ll be able to pull out some ideas from this list that you can try in your own educational institution: • Use technologies to meet student needs. Much of our recent growth has come from using technology to expand our academic offerings beyond our campus. For instance, online discussion boards are an integral part of all our online courses. Our students have told us that online discussion forums foster greater interaction with their peers and instructors , and as a result, enrich their learning experience. This technology and others have enabled us to provide flexible online learning opportunities to the growing number of adult learners, which in turn has helped boost enrollment. In 2004, 98 percent of the University’s 150 online students were from Connecticut. Today, about 65 percent of our more than 10,000 online students are from outside our home state. • Be a data-driven organization. We rely on a variety of metrics to assess the effectiveness of our operations, programs and strategies. This gives us greater quality control and fiscal accountability. We continually measure the impact of our academic programs and student support services through methods such as student surveys, responsive data and a host of financial indicators. The insights, challenges and opportunities we glean from our metrics enable us to dynamically make organizational improvements. Our process for collecting and tracking metrics also lets us share a status update with our stakeholders. We are one of the few educational institutions that provide our board of trustees with weekly metrics reports on the progress of the institution. • Operate like a business. Because you are. Without multi-billion-dollar endowments and/or significant state or other outside funding, we’ve found that operating more like a business has enabled us to evaluate our processes and make needed changes, and measure our progress against a well-defined strategic plan. This operational model includes relying on metrics-driven decision-making, having strong financial accountability, continually improving and innovating your product offerings and providing the ultimate in customer service. Through heavy investments in technology, renovations to our Waterbury campus, the addition of new athletic programs and improvements in the quality and breadth of our academic offerings and teaching staff, we believe Post is in a position to thrive throughout the education industry’s evolution. And so can other organizations, by focusing on improving the quality, affordability and flexibility of their educational opportunities for traditional and non-traditional college students. Continuing to do what has been done in the past is rarely a successful formula for sustainable growth or quality improvement. Nurturing a start-up culture is a first step in fostering ongoing innovation to meet the changing needs of our students.

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Mary Ellen Biery: The Hottest Industries To Start A Business In

April 2, 2012

Last year, three out of every 1,000 American adults chose to start their own businesses, according to a study out this month by the Kauffman Foundation. And while that’s slightly below the entrepreneurship rate of 2010, it’s still among the highest levels of entrepreneurship over the past 16 years — a byproduct of the Great Recession’s high unemployment rates, according to the foundation. There are, of course, many considerations to starting your own business. But if you’ve been wondering what fields might be fertile for a new business, a good place to start is the Bureau of Labor Statistics’ new employment projections for 2010 to 2020. Sageworks examined several businesses that entrepreneurs might consider as they look to tap into the trends cited in the government’s employment outlook. Based on a financial analysis of privately held companies’ results in 2010 and 2011, we’ve generated some key operating metrics that may be helpful in evaluating and planning your options. These metrics show some of the routine costs associated with running that type of business. Cost of sales, which covers the direct costs involved in producing a product or delivering a service, could include auto parts for a mechanic’s shop, for example. Overhead, or operating expenses, typically includes things like office-employee salaries, rent and advertising. Average annual revenues for the businesses were derived from the 2007 Census data on taxable establishments. We used taxable entities because Sageworks’ metrics are based on financial statements for for-profit companies. A day care center, an assisted living center or a consulting firm might be options, considering the BLS expects that the health care and social assistance sector, as well as the professional and business services sector, will generate nearly half of the job growth in the current decade. That’s not too surprising, said Libby Bierman, an analyst with Sageworks, a financial information company. “The aging population and growing technological efficiencies will keep demand for these industries fairly strong,” she said. For example, the growing pool of elderly seeking to maintain some level of independence is expected to help make nursing and residential care facilities one of the biggest job boosters, with annual employment growth of 2.4 percent. And the management, scientific and technical consulting services industry should add 575,600 jobs, or 4.7 percent growth annually, as businesses increasingly use consultants to keep up with the latest technologies, government regulations, and management and production techniques, the BLS says. If you’re thinking of hanging out your own shingle, other industries expected to see stronger employment: computer systems design, automotive repair and maintenance, and various non-physician health fields, including massage therapy and chiropractic care. As shown in the chart below, many of these growing industries are labor-intensive. “Personnel play a large role in operations and in the value they deliver to clients,” Bierman said. “That is why these industries–especially day care centers, assisted living residences, and consulting firms–have relatively high payroll costs and overhead expenses more generally.” Day care centers and assisted living residencies must closely watch the number of workers they have relative to clients, often because of various laws or regulatory oversight. “Keeping that ratio high is a also selling point, which makes adding workers a good investment,” Bierman said. “Given the variability in rent or mortgages, a company’s working space and its maintenance can hugely impact the company’s profitability,” Bierman said. Rent expense is more critical for some industries than others, she noted. “Businesses that typically pay out a lot in rent, like day care centers that need playground areas, may try to buy a space while real estate is less expensive or may begin the operation out of a residence,” Bierman said. Other start-ups, like a massage therapist or a management consultant, may be able to set up and maintain their business in a smaller space, allowing more of the revenues to fall to the bottom line sooner.

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Don McNay: Injured People and the One Percent

March 28, 2012

Most people perceive my job as strictly helping people make money. What I really do is help injured people. I keep injured people from wasting a settlement. I help them find every government benefit and program that might make their lives better. I find ways for them to minimize taxes and maximize what they keep. I assist in mediations and help them get claims settled. Many of my clients are in the top one percent of income earners. The bracket that some people are marching against. Most of my “one-percenters” are in wheelchairs or had their families wiped out in accidents. I’ve been doing my work for nearly 30 years and would never trade places with any client who got a large settlement or judgment. No sane person would give up their health or their family for money. Thus, going to war against the top one percent is not black and white for me. I’m for making hedge fund managers pay ordinary income tax like the rest of us do. I’m for tying Wall Street bonuses to doing something productive for society, instead of taking a bonus but not creating wealth. I want to see more being done for Main Street and less being done for Wall Street. I want the average American to get a fair shake and not be ignored by Washington. But what I really want is to keep doing things to help injured people with their money. A financial guru once called me a “financial evangelist.” I think I am more like a financial pastor or minister. I want to comfort the injured and help them heal. I also want them to hang on to their money. Thus, when they start going after the top one percent, I want to make sure that my clients are not the one percent of people they are going after. I want Congress to go after Wall Street but have found that Wall Street have a lot better lobbyists than injured people do. I’ve been encouraged that injured people will benefit from health care reform. I’ve spent the past few months becoming immersed in the nuances of the new health care reform act. I’ve read all 1990 pages of the law several times. After months of study, I understand it. I see how it helps people I want to help. If you like the law, you call it health care reform, if you don’t like it, you call it Obamacare. Before I took the time to really study the legislation I called it Obamacare. I encouraged my Democratic Congressman to vote against it, which he did. Now I am calling it health care reform. It is going to turn the medical system upside down. I don’t know how we will pay for it but I see where it truly helps injured people. Some of the reforms are coming to place now, before 2014, and I am learning how to use them to help my clients. When you dig into the details of the law, you see how health care reform empowers people who have been shut out or minimized by the health care system. It promotes wellness and good health. That’s not such a bad thing. I can also see the new law, along with the bailouts and stimulus packages of recent years, putting a huge strain on the federal budget. There have been calls of “tax reform” to pay for the looming larger deficits. I’ve learned one thing from watching Washington. Whenever there is a “reform” or “call to sacrifice” it is the little people who are supposed to do the sacrificing. Wall Street gets paid back 100 cents on the dollar. I can see reforms, aimed at the “one percent,” actually hitting people like my clients who are using their resources for medical care and a better quality of life. I don’t mind taxing a Wall Street banker’s second yacht or third vacation home. I don’t want them taxing a client who wants to buy a lift for his wheelchair. It’s simple to aim focus at the top one percent of income earners and assume they are all doing something wrong. It’s more complicated when you add in people who got to the one percent by having a drunk driver smash into their car and kill their family. When we start talking about the “one percent,” we need to think about the one percent of society who are hurting and need government assistance and help. And make sure that help is provided. Don McNay, CLU, ChFC, MSFS, CSSC is the bestselling author of the book, ‘Wealth Without Wall Street’; McNay, who lives in Richmond, Ky., is an award-winning financial columnist and Huffington Post contributor. You can learn more about him at www.donmcnay.com. He is the Chairman of the Board for the McNay Settlement Group (www.mcnay.com) which provides structured settlement consulting for injury victims, lottery winners, and the families of special needs children. McNay founded Kentucky Guardianship Administrators LLC, which assists attorneys in as conservators and setting up guardianships. It is nationally recognized as an administrator of Qualified Settlement (468b) funds.

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SaraKay Smullens: Mad Men Was Beyond Maddening: A Season Five Betrayal

March 27, 2012

OK, fellow lovers of nostalgia. We know just who we are. We are those who love to put our feet up for terrific diversion — knowing in Mad Men we will experience phenomenal style and extraordinary period accuracy over substance — and so what! For four seasons we have lived with cardboard figures who manage to typify a time when many believed that barriers finally broken could lead to a more humane population. We visit the furnishings and fashions of this time, kicking ourselves for not saving that brooch, lamp, chair, dress or those shoes or earrings. Those of us with daughters in their twenties and beyond call to discuss all about Mad Men or watch it with us. They scream out in mock horror when we say that we had a dress we did not keep which was exactly like Betty Draper’s, and have the photos to prove it. Oh, what fun! Oh, what luxurious diversion!! And these discussions sometimes even lead to substance: How has America evolved? How have we addressed our challenges? How should we? What has changed, and what has not? And even — Can ideals ever become more important than materialistic emptiness? Then finally Sunday evening, March 25th arrived, our “supposed” two hours of the beginning of Season Five’s Mad Men . This was an evening we have been anticipating for 17 (we counted!) months. We would finally see Joan with her wee one, not fathered by her baby/bully surgeon husband, but instead by her baby/bully Madison Ave. boss. We would learn at long last learn about Betty and Sally and Pete and the rest. We would once again be whisked away to this particular time capsule of adultery, identify theft, betrayal, racism and sexism, as well as the impact of imposed cultural norms on family relationships and individual fulfillment. There we were in anticipation, feet up, pillows propped, popcorn popped, mother and daughter and friend to friend conversations waiting. And what did we get? Relentless commercials, growing into every five minutes as the second hour progressed. The intrusions were merciless, causing what was a dull two-hour experience seem even duller. Those in charge surely know the precise timing of this degrading insult to loyal viewers. There we sat, like the manipulated buyers of the products foisted by the “I don’t give a damn just so the money rolls in” crew at Sterling Cooper Draper Pryce. Yes, considering the realities of corporate life, on the screen and off, perhaps we were naive to expect respect for our long and loyal wait. Still, shame on those who developed and allowed this financial strategy. They would have been far wiser to curtail their greed, understand that enough can and should be enough, and that on screen and off people can get angry, very angry, when taken for granted and manipulated. Follow SaraKay on twitter at SaraKay1710

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Martha Burk: No More Bull: What Women Need to Know About the Economy and Why it Matters in 2012

March 23, 2012

“It’s the economy, stupid!”  That was the rallying cry for the Clinton campaign in the 1992 presidential election.  It’s even more true today. With the U.S. suffering from the effects of a long and painful recession (I know, I know — it’s technically over) — the economy is the number one issue for women and men alike going into the 2012 elections. But women arguably have a bigger stake. They lost more jobs as the downturn continued (men lost more in the beginning), and have gained far fewer back as employment slowly and painfully inches up. On top of that, women earn less in the first place, hold more forced part-time or temporary jobs, and have fewer benefits. All of that adds up to a compelling reason to understand and pay attention to the economy. And we’re not stupid — we’re just mad as hell — and who can blame us? The temptation is just to vote ‘em all out of office.  Women are the majority of the population, of registered voters, and of those who actually go to the polls — meaning women can control any election.  But voting doesn’t help (and can actually hurt) if you can’t cut through the mumbo-jumbo of political rhetoric to get to reality.  That’s where being “well informed and well armed” comes in.  When you know what to ask of candidates, and which answers mean something and which are just bumper-sticker reasoning, you’ll know where your vote belongs — and where it doesn’t. Go ahead and be partisan — not for a political party, but for your own interests. The Deep Divide — What Can Government Do? What Should Government Do?   When the economy slips into a recession or near-recession as it did in early 2008, both political parties get nervous, and propose various “fixes” to get more money into circulation and stop the downward spiral. (It’s unclear whether they’re feeling the people’s pain, or feeling the pain of trying to get elected in a downturn). Debate over how to produce a healthy economy goes to the very heart of the liberal/conservative philosophical divide. Conservatives put their faith in the business sector and the wealthy, while liberals and progressives believe government has a more direct role. From the day he took office in 2001, President George W. Bush had one solution to virtually every economic problem — tax cuts primarily benefiting the wealthy. His philosophy was a simple-minded version of conservative arguments in general: If corporations and the wealthy individuals who fund them through investments pay lower taxes, they will invest those tax savings in ways that will create jobs, such as building new plants, acquiring new subsidiaries, or expanding product lines. Businesses will direct money to suppliers, contractors and employees to accomplish these goals. Everyone will have more money to spend and the economy will grow. Trickle Down, or Trickle Up?   This theory has been generally referred to as “trickle down,” or “supply side economics,” meaning change made at the top of the wealth pile eventually makes its way to workers at the bottom. Corollaries are that private enterprise is always better than government spending, and the less government interferes in the “free market” through regulation, the better. Liberals and progressives believe that putting money in the hands of those that actually need it to live on is a better plan to keep the economy going — because they spend more of what they have instead of just adding it to investment accounts. Low and moderate income people have to spend it all, every month, just to buy the basics. They hold the principle that in a recession, money should be injected into the economy as fast as possible. Progressives also believe that the government can have a positive influence on economic growth through spending tax dollars. They would create some jobs by repairing infrastructure such as roads and bridges, funding green energy research and development, hiring more teachers, police, and firefighters, and restoring government services that have been cut. Fallout for Women   One big factor in both the rise of the Tea Party and the debate over the debt ceiling that almost shut down the government in 2011 was an attack on public sector jobs and public sector unions.  In addition, federal budget cuts and the lack of tax revenue in the states has contributed to the shrinking of public sector jobs. Because firefighters and police are often exempted from these layoffs, the axe has fallen mostly on women, who make up the majority of teachers, health workers, child care workers, and public welfare workers. An analysis by the Institute for Women’s Policy Research (IWPR), in Washington, D.C. found that women employees lost 81 percent (473,000) of the 581,000 jobs lost in the public sector from December 2008 through July, 2011. Though job growth for everyone is recovering very slowly, it is slower for women than for men. According to the Bureau of Labor Statistics, women have regained only one out of five (536,000 or 19.7 percent) of the total jobs they lost as a result of the recession, while men have gained almost one out of three (1.95 million or 32.3 percent).  In the last year, from November 2010 to November 2011, of the 1.6 million jobs added to payrolls, 474,000 or 30 percent were filled by women and 1,126,000 or 70 percent were filled by men. The Big Argument for 2012   The economy promises to be the most contested issue in the 2012 elections, from the race for the White House to down-ticket congressional, gubernatorial, and even local races. The fundamental differences between the parties, and liberal/conservative ideology, remain as entrenched as ever. Because the “super committee” created by the 2011 Budget Control Act failed to come up with additional cuts in the name of deficit reduction, the law provides for automatic spending cuts (called “sequestration”) of $1.2 trillion to kick in in January 2013, divided equally between defense and non-defense programs. Some believe the committee never intended to come to agreement, because members on both sides believed the threat of automatic spending cuts would be politically advantageous.  Regardless of whether this is true, the issue is likely to dominate the 2012 political debate — and women have the most to gain. Or to lose. This post was adapted from “No More Bull: What Women Need to Know About the Economy and Why It Matters in 2012.”

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David Kiley: Can The UAW Organize Volkswagen In The U.S.?

March 23, 2012

Having failed at its organizing efforts with Toyota, Honda, Nissan and Mercedes-Benz in the U.S., the United Auto Workers has turned its sites to Volkswagen’s growing manufacturing facility in Tennessee for new members. It will be a tough slog for the union. The outcome will be perhaps the biggest single decider on whether the union ever organizes any of the foreign-brand factories in the U.S. Union reps have been in Chattanooga passing out authorization cards the last few weeks, a first step toward trying to get a vote for unionization. It is doubtful that Volkswagen’s management will take the same tack as Nissan to try and defeat the UAW. In past years, when the UAW has tried to organize Nissan’s plants, workers got to see CEO Carlos Ghosn via closed-circuit TV reminding them that Nissan has a lot of options around the world to source new vehicles. Hint, hint: Vote to unionize and we will start phasing out this factory. Volkswagen has a different relationship with unions, especially in its home market in Germany. If workers in Chattanooga look poised to organize, I don’t think it will move the company to short-circuit its expansion plans of the new plant. Chattanooga is critical to VW achieving its sales goals in the U.S. and profitability in this market. But Southern states are not the same as Michigan and the rust-belt when it comes to unionizing. These are markets that were economically devastated long before the rust belt began oxidizing with the failure of the steel companies and before auto and other manufacturing began leaving the U.S. for China and Latin America. These states are largely still in a mode of being grateful for all the new good jobs. And politically, the states are Republican and very anti-union. Tennessee is also a right-to-work state. For those who don’t know what that means, this from the National Right To Work Legal Defense Foundation: “[Every citizen has the right] to work for a living without being compelled to belong to a union. Compulsory unionism in any form–”union,” “closed,” or “agency” shop–is a contradiction of the Right to Work principle and the fundamental human right that the principle represents.” I’ve visited the VW plant in Tennessee, as well as Southern plants of Mercedes-Benz, Honda, Toyota and Nissan. In a few cases, I’ve had the opportunity to hang out with some line workers and talk freely. What I observed is an attitude of gratitude for the work, the opportunity for a career, and the investments in these local areas. It’s a very different atmosphere and attitude than I have observed in northern union plants where you commonly find a lot of third- and fourth-generation union workers who were sold a long time ago on the idea that they could retire at 48 on full pension and benefits, and are frustrated that the game changed on them. I have also talked to union members who have told me about rivalries within factories among unions — with members of one union sabotaging the work of a member of another union as a means of trying to gain extra headcount. Then there are higher-than-average absentee rates among union members at UAW plants, in part because they know the union will make it tough for the company to fire them. VW just announced an additional 800 jobs going into the manufacturing campus in Chattanooga, on top of the 2,700 people, including salaried employees, already there. About 2,200 were hired by VW and the rest are on contract with staffing company Aerotek. How much do they make? Newly hired VW workers earn $14.50 an hour and can make up to $19.50 an hour within three years. That compares with workers at GM UAW plants where the average pay for entry-level GM workers is $17.50 an hour, while veteran workers at GM make an average of $29 per hour. Who are the workers the UAW is after? A lot of them are like a worker I met at Honda’s Alabama plant not long ago who put it this way: “Before I came here I was working two jobs with no benefits, sixteen hours a day, convenience store work. Honda hired me and paid me to learn the job … even sent me to Canada to learn, put me up in a hotel and paid all my expenses. Nobody has ever treated me that way, with that kind of respect.” This guy is not anxious to sign a union card if he thinks Honda isn’t going to like it. There are more like him in Chattanooga. The UAW pitch to VW workers will be higher wages and job security. But the VW workers will be wary. They saw how much the union gave up to GM and Chrysler in the 2009 bankruptcies. “I don’t think the UAW makes a lot of sense down here,” said one VW worker I spoke with who did not want to be identified because of the sensitivity of the issue. “But I will tell you this … I am grateful to the union for setting a good pay-scale. The salary is lower, but it’s close enough for most of us, and we know it would be lower without the union setting the standard.” That will not be much consolation for UAW President Bob King if he can’t make his case in Tennessee. King has seen the union’s membership decline over three decades, and the union is experiencing financial pain. It has added non-auto membership in the form of casino workers, university student-employees, and other groups. But the loss of auto worker headcount has cost it. The union has dipped into its strike fund for normal operating funds and sold assets. If King can reel in one foreign-owned transplant factory, it will make others sit up and take notice. Next up on his radar would likely be Mercedes-Benz’s Alabama plant, which the union has long targeted without success. The UAW has done a lot of good for the working class in the United States. Unions are the last entity standing as a source of power to stand up to the country’s monied class. With a historically high and ridiculous disparity between a CEO’s salary and the salary of an average line worker, the only way to balance the power is through collective bargaining. But the union has also been its own worst enemy, arguing for and winning bottom-line killers like the infamous “Jobs Bank,” where workers were paid for years to do zombie work after their jobs evaporated; work rules that had floor sweepers making as much as skilled labor; and protection of bad workers who would have been fired in any other workplace. Those are the kind of measures and contract victories that loses the union respect from non-union workers and the public at large. Grand Blvd. is a weekly column about cars from David Kiley. For more of his writing, and everything about cars, head over to AOL Autos .

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Emilio Azcarraga Jean: A Mexican trade: More Open Television And Telecommunications

March 23, 2012

Last month brought mixed news for Carlos Slim, the world’s richest man . Mexico’s Federal Competition Commission disapproved an investment by Televisa, the country’s largest television broadcaster, in Iusacell, a cellular phone company. That was good news for Mr. Slim because it hampered a rival to his telecommunications empire. The bad news: The nation’s Federal Communications Commission failed to reach an agreement to clear the way for a third and fourth broadcast television network. Mr. Slim badly wants to get into the television business. Both decisions lock in the status quo, are bad for consumers, bad for Mexico, and bad for Televisa, the company I chair, manage and in which I am the largest shareholder. First things first. While we may have seemed against this in the past, Televisa does not oppose the creation of a third, fourth or even fifth nationwide broadcast TV network. If and when the Communications Commission announces the terms of an auction for additional television frequencies, we will not legally challenge it — so long as the rules create a level playing field for competition. We would also not challenge an attempt for a new television network backed by a U.S. partner, so long as we receive reciprocal treatment in the U.S. Currently, U.S. law prohibits foreigners from owning more than 25% of any television station. We welcome greater competition in the Mexican mass media market, particularly in television, because we think our company is the best, and has been so for over a half century. Before launching new networks, however, it is essential to establish regulations that level the playing field for the telecommunications industry. Otherwise, the future of the broadcast, cable and satellite television business would be severely jeopardized. Mexico’s broadcast TV advertising pie is slightly more than $2.5 billion per year; the pay-TV market is another $2.5 billion. But while 95% of Mexican homes have TV sets, cable television (which we own a large subsidiary in) only reaches 30% of all households. And since U.S. law makes it difficult for us to expand our stake in Univision (the U.S.’s largest Spanish-language network and No. 5 overall), Televisa has to branch out to grow. This is why we made a deal last year with Iusacell, a small mobile operator with a 4% market share, owned by our broadcast competitor TV Azteca (which has roughly 30% of the broadcast TV market). We want to participate actively in the telecommunications market, especially cellphones. Mexico’s mobile-phone market is today worth roughly $15 billion. Mexico’s antitrust agency, Cofeco, blocked our transaction with Iusacell on concerns that two broadcasters joining in a common venture in the telecommunications industry could collude in the mass media market. This has never happened and is not Televisa’s intention. We are prepared to establish firewalls in order to address the agency’s concerns. The antitrust agency should understand that not only is it good business for us to enter the telecommunications market, it is also good news for Mexico. That’s because Mexico’s telecommunications market sorely lacks competition. Companies owned by Carlos Slim control 70% of Mexico’s mobile phone market, 74% of fixed broadband service and 80% of the country’s landline market. According to a recent study by the Organization of Economic Cooperation and Development (OECD), Mexico loses 2.2% of its gross domestic product each year because of astronomically high cellphone rates, low Internet penetration, and mediocre connectivity. Mexico has 10% as many wireless Internet subscribers per 100 inhabitants as Turkey. Its cellular phone rates are by far the most expensive in the OECD. Relative to other OECD countries, Mexico is ranked last in terms of investment in telecommunications per capita; but, says the study, “profit margins of the incumbent nearly double the OECD average.” We welcome competition in television. But Mr. Slim has fought tooth and nail to block competition in telecommunications, and delayed government attempts to regulate his fixed-line firm Telmex and cellphone provider Telcel in Mexico’s courts. The OECD recommends that “Telmex should be authorized to provide television services only when it is subject to adequate asymmetric regulations, and there is evidence that it is complying with them and not resorting to judicial challenges to delay or suspend their fulfillment.” Such “asymmetric” regulations would regulate Telmex more heavily than companies trying to enter the market to make up for Telmex’s market dominance. Mexico is changing for the better. Televisa is too. So should someone with the vision, the talent and the clout of Carlos Slim. Originally published in The Wall Street Journal

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Algernon Austin: Blacks See Largest Decline in Health Insurance Coverage

March 23, 2012

Over the last decade, blacks experienced the largest decline in employer-sponsored health insurance coverage. If President Obama’s Affordable Care Act (aka Obamacare) is revoked, as the Republican presidential candidates are calling for, blacks and all other groups will find it increasingly difficult to obtain health insurance. From 2000 to 2010, the employer-sponsored health insurance coverage rate for black workers ages 18 to 64 years old dropped 8.6 percentage points. White and Hispanic workers also experienced health insurance declines, but somewhat smaller ones. Employer-sponsored health insurance coverage declined 6.3 percentage points for white workers and 6.6 percentage points for Hispanics. (Unless otherwise indicated, my employer-sponsored health insurance statistics are taken from my colleague Elise Gould’s report, ” A Decade of Declines in Employer-Sponsored Health Insurance Coverage .”) Children often receive health insurance coverage through their parents’ work. Thus, it is not surprising that black children would see large declines in employer-sponsored health insurance coverage given the trend for their parents. Like black workers, black children saw the largest decline in employer-sponsored health insurance coverage. Black children experienced a 14.1 percentage-point decline. For white and Latino children, the decline was 9.6 and 8.7 percentage points respectively. Most of these children who lost access to employer-sponsored health insurance were likely able to be covered by public insurance programs for children, but further detailed research on this point would be useful. Since most workers obtain health insurance via work, the massive job losses of the Great Recession led to steep declines in health insurance coverage. However, it is important to note that the decline in health insurance began even before the Great Recession. As Paul Krugman has observed , even from 2003 to 2007, during the best years of the prior business cycle, health insurance coverage declined for workers. This fact is another indicator that the American economy has not been functioning well for average workers. One piece of good news is the Affordable Care Act. Although we could have instituted more radical reforms like a Medicare-for-all program, the Act will likely go far in expanding health insurance coverage. The best evidence for this is the tiny uninsured population in Massachusetts. Massachusetts health care reform served as a template for the Affordable Care Act . In 2010, while 15.4 percent of the population nationally was uninsured, only 1.9 percent of Massachusetts residents were uninsured . The main expansion of health insurance coverage under the Affordable Care Act will begin in 2014, but we have already seen one of its positive effects. In 2010, the Act made it possible for young adults up to 26 years old to be covered by their parents’ health insurance policy. From 2009 to 2010, despite large job losses for young adult workers, their rate of health insurance coverage increased. They were the only age group that saw increases in health insurance coverage. In countries with universal health insurance, jobs losses do not lead to losses of health insurance like they do in the United States. The large job losses that blacks have experienced since the start of the recession has also meant significant losses in health insurance coverage. But it is important to remember that even during the best years of the Bush Administration, blacks and all other workers were losing employer-sponsored health insurance coverage. Without a reform like the Affordable Care Act, the decline in health insurance coverage will continue in good times and bad.

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David Tereshchuk: Under-reported: Man-Bites-Dog Story of Global Poverty

March 21, 2012

Oh wow! — a media storm over the great Goldman Sachs being disavowed by one of its own in an Op-Ed article (in the New York Times ) that became, controversially, a news story. Overtaken only by a storm over a semi-journalistic public radio show ( This American Life ) disavowing one of its own episodes attacking the great Apple, Inc. Amid all this tortured media navel-gazing, I found myself staring instead at some other quite different information — straight news, not opinion pages material — that is going largely unattended. I’ve been helped here by a whistle-blower who is coincidentally another Goldman Sachs man. It’s actually their top Asset Management executive, Jim O’Neill. And “flag-waver” or “horn-tooter” are probably better terms for him — since we’re not talking about raising a disturbing alarm here. Pretty much the opposite. And it’s nothing to do with Goldman. Indeed, it is some really good international news that’s evading our close attention, even though O’Neill — an astute man who, like me, I’ll say gratuitously, attended high school in Manchester, England — has been eager this week to tell anyone who will listen. The trouble is, this good news seems counterintuitive. There’s been a global financial crisis, right?Along with that there’s been a serious price hike in food-prices, and now oil-prices, correct? Unemployment is staying stubbornly high in countries desperate for post-recession recovery, isn’t it? And remember the United Nations’ Millennium Goals from the turn of the century? Especially that crucial First Goal which committed the international community to the lofty ambition of “halving the proportion of people living in extreme poverty” by 2015. If you’ve been following the not-very-numerous but always well-meaning media outlets who care about these issues, that goal has for years appeared doomed to failure, given the grim global conditions as reported. Well, the good news is that the facts contradict that pessimism. A World Bank report by its Development Research Group reveals the surprising secret… the world’s poor are now doing better, in fact. Somewhat astonishingly, if we look at the commonly accepted measure of “extreme poverty” — meaning living on less that $1.25 dollars a day — then the goal has already been achieved — was in fact achieved by 2010, a full five years earlier than the target. While in 1990, when the goal was being discussed and formulated, nearly half the developing world’s population (actually 43 percent, well over two-and-one-half billion people) lived below that daily income level, and by the time the first decade of the 21st Century was coming to its close, that proportion had dropped to less than a quarter (22 percent — or 1.29 billion people). Here’s the Bank’s own multlmedia summary of the findings, at a little over three minutes: video platform video management video solutions video player “And to top it all off,” says Goldman’s O’Neill, who can scarcely contain his glee, “it is those who were the absolute worst off that have made the most progress”. What indeed is perhaps the big surprise-within-the-surprise is that, while we might imagine the improvement can be ascribed to the vast and very singular industrialization of China … that simply isn’t the case. Even if you exclude China’s case — gargantuan part of the gobal landscape though it is — the global improvement is still enormous. And Africa — so often considered simplistically as the mother of all basket-cases — turns out to be aggressively improving its grim statistics. Sub-Saharan Africa — generally speaking the poorest region of the world — had by 2008, says the report, reduced that $1.25-a-day poverty rate to 47 percent, the first time it ever dipped below the 50 percent level. And since then it has continued to see falling numbers for the extreme poor, setting in reverse the continent’s previously dispiriting, steady upsurge through the 1980s and ’90s. I’m reminded of working with Kofi Annan, the UN Secretary-General at the time the Goals were published to great fanfare, and his speechwriter Edward Mortimer, as we made a TV program about the world financial scene. Annan was anxious that we emphasize what he impishly (or sardonically?) called “Africa’s best kept secret,” meaning that a lot of money could be made, quite legitimately, through quite above-board transactions, in Africa. He would extol the healthy rates of return at the Johannesburg or Lagos stock exchanges, rolling in then at 25 percent or more. It’s good to be able to point up some under-appreciated economic betterment taking place in Africa nowadays, and taking place to the benefit of more than just the financial elite. Just as it’s good for any journalist, once in a while, to write a “Man Bites Dog” kind of story. * * * * Read more of David Tereshchuk’s media industry insights at his weekly column, The Media Beat , with accompanying video and audio. Listen also to The Media Beat podcasts on demand from Connecticut’s NPR station WHDD, and at iTunes .

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Patrick FitzGerald: Conversations Every Entrepreneur Should Have

March 21, 2012

You have an idea and you’re quite sure it’ll be successful. It might revolutionize the way people shop, eat, exercise, sleep, watch tv, you name it. What’s next? Before you embark on writing that business plan or applying to business school, take some time to talk. To whom? Everyone. Talk to your family: Your family, for better or worse, knows your flaws, strengths, weakness, and desires. For the most part, they also have carte blanche to be perfectly honest. Entrepreneurship isn’t for everyone but the freedom, self-expression, and potential rewards are quite attractive. As you walk your family through your idea though, they will, and should, undoubtedly be more worried about your sanity than your concept’s clarity. How will you make money, who will pay your bills, why would you quit your current job? These are all super relevant issues that you need to have a handle on or at least be able to wrestle with. Proving or pitching to your family that this is the right move is usually a good, safe environment in which to work on your convincing and salesmanship skills. Ultimately, familial support of your entrepreneurial endeavor will come around. Talk to your friends: Similar to your family, your friends know what makes you tick. Even more so, most people, friends included, will have a skeptical view of your concept. It’s human nature. Your friends will likely tell you all of the reasons why it’s a bad idea, what’s wrong with it, and why it won’t work. Don’t shy from this. Once you’re past the family threshold, it’s your job now to convince your circle of friends of the validity. Some won’t get it (frankly, due to latent jealousy of your entrepreneurial gusto). Others will, but they will put you through the ringer. All in all, you’re not out to convince all of your friends but the honest feedback , suggestions and reminders are valuable and most of all free. Talk to your potential customers: Far and away, this remains the ultimate challenge. More often than not, budding entrepreneurs spend an inordinate amount of time writing business plans, research industry trends, obsessing over real and imagined competitors and basically avoiding the obvious. While there is a natural fear towards pitching your idea too early, the best and most obvious form of information will be your potential audience. Talk to them about their business. What are their struggles, concerns, needs, and demands? If you’re lucky, you will hear your solution embedded in the conversation but ultimately you will learn more from these conversations than you will from anything else. It’s important to properly prepare your business by doing research, understanding your timeline and roadmap, and focusing on your product’s flaws and strengths. However, as you’re doing so, take some time to talk to your family, friends and customers. These are the best conversations you’re likely to have.

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Kelly Meeker: Venture Capital in Education at SXSW: New Technology and New Solutions

March 20, 2012

At last week’s SXSW interactive conference, EdSurge blogger Betsy Corcoran convened a panel discussion among venture capitalists on the future of education technology: “Classroom 2020: VCs and the Education Revolution.” Participants included Mitch Kapor of Kapor Capital , Phillip Bronner of Novak Biddle Venture Partners and Rob Hutter of LearnCapital . Education startups are “hot” right now, with stories on TechCrunch , big funding rounds and pop culture attention . But what really matters is not tech hype, but the need: Better solutions for schools, universities and workplace training. At the SXSW panel, the participants set the stage by enumerating the social factors that drive their focus on education: American students’ abysmal performance in science, math and engineering, rising wage inequality and decreasing numbers of jobs available to less-skilled adults. These investors have a broader vision of investing. They look for more than just successful technology, but technology that creates social value. Kapor, Bronner and Hutter view themselves as impact investors, seeking companies that work in the rich target area of needed innovation in education, from delivering content to tailoring lesson plans to individual students. With investments in Edmodo, Udemy and Blackboard among them, the participants are putting their investment funds where their mouth is. The Social Media Inflection Point For the last 20-30 years, schools have experimented with technology tools to deliver rich educational experiences. So why is the education area so interesting right now? New web technologies, like social media, are bringing educational technology to an inflection point, where technology can create rich experiences that deliver education online, with dramatically reduced cost. Hutter shared several compelling examples of tech solutions for educational challenges. In Mooresville, North Carolina, a 1:1 laptop program resulted in substantial improvement in achievement and graduation rates. At KIPP Empower Academy in California, controlled experiments revealed that 98% of students who began the school year below average performance standards either met or exceeded standards after participating in a blended learning program. There’s compelling evidence (beyond just these stories) that online learning is useful. The question is not whether technology is effective — it’s determining the appropriate dosage, and developing scale. How do we bring blended learning from case studies with 20 kids to 20 million kids? Those sweet spots are where Hutter, Kapor and Bronner are eager to invest: Technology that delivers, manages and personalizes blended learning solutions for thousands and millions of students. Content Is Not Tied to the Classroom There are three components of the education system: Content : The educational information to be read, learned and understood. Mastery : Developing the ability to not just regurgitate the information, but provide analysis, critical thinking and demonstration of skills. Certification : Demonstrating mastery of the content to the outside world (through diplomas, certifications and other evidence). Kapor outlined the balance that he believes the education system needs to achieve: “Let’s all watch Khan Academy explain algebra and let teachers act as personal coaches. Kids need to be making things and doing projects, and that’s where teachers can make a real difference.” All three panelists advocated untethering the delivery and consumption of content from the classroom boundaries. Content can created, delivered and consumed anywhere — and anytime. But content isn’t everything. Mastery is achieved through practice, reflection, interaction and exploration of new information and new skills, all experiences that can be facilitated in classrooms, with peers and online.

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Dean Baker: Medicare Costs Too Much and They Better Not Cut It

March 19, 2012

There is an old story about two men in a retirement home. The first declares, “the food in this place is poison.” His friend agrees and adds, “and the portions are so small.” This exchange perfectly captures the Republican approach to Medicare. The Republicans, led by House Budget Committee Chairman Paul Ryan, have argued that Medicare threatens to bankrupt the country. They have pointed to cost projections showing the program more than doubling relative to the size of the economy over the next three decades. The Republicans say that the country cannot afford this expense and scream about huge debt burdens for our children. The Republicans’ concern might lead people to believe that they would support measures to contain Medicare costs. But if you thought that was the case, you would be wrong. The latest Republican crusade on Medicare is to eliminate the Independent Payment Advisory Board (IPAB), which was put in place as part of the health care reform bill passed two years ago. IPAB is empowered to impose a cap on Medicare spending if it grows too fast relative to the size of economy. The way it would reduce cost growth is by reducing or eliminating payments for medicines and procedures that have not been shown to be effective. The idea that Medicare would not pay for some medicines or procedures has Republicans in Congress screaming about “death panels” and “rationing.” It is fascinating how Republicans use these terms. These politicians, who like to portray themselves as lovers of free markets, are now claiming that it is rationing if the government will not pay for something. We have to keep our eye on the ball. No one is telling people that they can’t spend their own money on any medical care they like. The issue is simply what care Medicare will pay for. Under current law the IPAB may impose constraints that stop the government from paying for care that has not been shown to be effective. Only in some bizzaro world can this be called rationing. What’s striking is the Republican alternative. While they scream bloody murder over any effort to constrain costs in Medicare, their own plan is to simply end Medicare as we know it. The plan approved by the Republican House last year would end Medicare as a publicly run system. It would instead give beneficiaries a voucher that they could use to buy insurance in the private market. Under the Republican plan there is absolutely no guarantee that beneficiaries would be able to purchase plans that cover the services that IPAB might exclude from Medicare coverage. As anyone who has dealt with insurance knows, insurers have procedures they cover and those they don’t. In Republican terminology, each plan has its own “death panel” that decides what procedures are covered. Furthermore, the Congressional Budget Office (CBO), based on extensive experience with private sector insurers who already operate in the Medicare system through Medicare Advantage, projects that private insurers will hugely increase the cost of getting Medicare-equivalent policies. This is both due to the fact that private insurers have much higher administrative expenses than the public Medicare system and also that they are less effective in containing costs. Working off CBO projections, my colleague David Rosnick calculated that the Ryan plan would increase the cost of buying Medicare equivalent policies by $34 trillion (in 2011 dollars) over the program’s 75-year planning horizon. In short, if people are worried that IPAB is going to make some procedures unaffordable for some people, then they should want to run as far as possible from Representative Ryan and his fellow Republicans. Their plan will leave beneficiaries far less able to afford care than anything that the IPAB might do. When people look at these long-term projections of exploding health care costs there are two important factors they should keep in mind. First, costs in the United States are ridiculously out of line with the rest of the world. We spend more than twice as much per person on health care as the average in other wealthy countries even though we have little to show for it in the way of outcomes. If our health care costs were comparable to costs in Germany, Canada or anywhere else we would be looking at huge long-term budget surpluses , not deficits. This also suggests one simple way of controlling costs: Let Medicare beneficiaries buy into the health care systems of other countries, splitting the enormous savings with the government. If the Republicans really supported free markets, they would be all for that one. The other point worth noting is that health care cost growth actually has slowed hugely in the last two years. We can’t know whether this slowdown will continue, but if it does, IPAB will not have to do anything to meet its cost targets. We desperately need an overhaul of our health care system, which is a cesspool of inefficiency and corruption. However, in keeping with their desire for larger portions of poison, the Republicans want to dismantle Medicare, which is by far the most efficient part of the national health care system. Instead they want to hand over even more of our money to a badly broken private health care system.

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Yvahn Martin: I’m NOLABound

March 16, 2012

Finally, I’m NOLABound. Six and a half years since Hurricane Katrina destroyed my home and sent my community into a far flung diaspora of despondent resignation… two years of self-imposed exile, four more years of casual visits, content to be a tourist in a city reminiscent of a life long left behind… I find myself returning home, riding a crest of serendipity and curiosity, a part of the BeNOLABound program. What is BeNOLABound? The pitch was that 27 professionals in four industry disciplines would be brought to New Orleans to experience and provide commentary on “New” New Orleans, through an all-expense paid, whirlwind weekend of activity highlighting the best of what New Orleans has to offer. Being intimately familiar with “old” New Orleans, my knee-jerk, neck-rolling reaction was “I’m not about to let a bunch of strangers roll through my city and give ‘comment’ when I have something to say too.” So I threw myself into the three minute video application , determined to be a part of what sounded like a really cool “free vacation” to New Orleans, but also curious about what I would be presented with when I got there. Furthermore, the project will be filmed as a pioneering foray into “docu-tourism,” combining interviews and public dialogues with hyper-local experiences that will paint a thoughtful picture of New Orleans through our experiences this week. Since the selection of NOLABounders was announced, I have had a great time getting to know them and pushing around the potential hot-buttons of our dialogues on our open LinkedIn group. The delegates are as well-traveled, diverse and varied as the industries they represent — arts, digital media, biosciences, and sustainability. Each person is bringing to the trip their own perspective of the various cities they’ve lived in, a dynamic set of professional experience, and an earnest excitement to both see what the city has to offer and to help contribute to the growing emergence of New Orleans as an attractive place to build a life. I think it will be a fun bunch, and I am excited to see what will come out of the discussions that we take part in this week. However, as a person who was displaced by Hurricane Katrina and who made a decision to rebuild my life elsewhere in the aftermath, it will take more than a po-boy and a second line to convince me that New Orleans is a place where I can seamlessly and successfully continue my career in digital media and entrepreneurship. As a single woman who grew up in New Orleans public schools during the time when NOLA was the murder capital of the US, I am fully concerned about crime, education, the levee system, and most of all, long-term economic development and infrastructure investment that will ultimately determine whether or not New Orleans will ever compete on a global scale again. I love New Orleans with all of my heart, and spent all of my formative years there, only to have my hopes dashed as a new college graduate seeking work outside of the hospitality and tourism industries. I know scores of young professionals like myself: my schoolmates and friends who would love to move back home, if only we could fully envision the futures that New Orleans would hold for us. So I’m walking into this project with eyes and ears open, wanting to see the “New” New Orleans that the visionaries who’ve arranged this project want the world to see and the new attitudes and approaches to age-old problems that have plagued our city for decades. Ever the cynic, I hope that I’ll at least come away with a renewed sense of confidence for New Orleans’ future… but a tiny part of me hopes that maybe I’ll even start my own long journey back home.

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Josh Sawislak: Telework, Silver Bullets, Black Holes and a Dog Named "Cheeto"

March 16, 2012

It’s time to clear the air. Last week was Telework Week and while more than 70,000 people pledged to work from somewhere other than their office, I have been accused of being a blind advocate for telework… a cheerleader, if you will. And trust me, that is the only time my name and cheerleader were ever used in the same sentence. Let’s see where I really stand on this issue. It may surprise some of you. No, I won’t declare that all previous posts are wrong and that everyone should punch a clock and sit in his or her cubicle from nine-to-five each weekday. But I want to be honest that I am not convinced that working from home every day with zero interaction with collaborators is the best solution for most people. And there is a very simple reason for why it’s not ideal: we are all human. At least all of us except for Cheeto, the steel dog sculpture in my front yard. And being human, we require a few basic metabolic things: water, air, food (but apparently not so much, according to my doctor) and sleep. We also need what renowned psychologist Abraham Maslow called a sense of belonging. We can’t get that sense of belonging very easily through email, online tools, or even, in my case, talking to a metal dog. We need to interact physically with other humans. Just like we need air, food and water. I read a book recently on particle physics and why the Large Hadron Collider near Geneva, Switzerland is not going to create a black hole and annihilate us all in a nanosecond (but just in case, maybe they should take the day off on Dec. 21 or whenever those Mayans said was the end of the world). The author is a Harvard physics professor named Lisa Randall . Now, Dr. Randall is what my buddies in Boston would call “wicked smart.” And guess what, she agreed to talk to me about working remotely. Why did a guy who thinks about management issues need to consult a world famous theoretical physicist? Well, because in her recent book, Knocking on Heaven’s Door , Dr. Randall makes a statement that while that particle accelerator near Geneva is going to test her most important theories, she can do her work from her office back in Massachusetts just fine and they can send her data as they finish their experiments. OK, here is someone who can help me finally deal with the argument I all the time that telework is “OK for the masses, but what I do is just too darn complicated to collaborate remotely.” I mean really, if Dr. Randall, who deals with extra dimensions, warped space-time and something called a “charmed squark,” can work with people 4000 miles away, tell me your acquisition policy memo is too complex. Really, lay it on me, Larry. I read her book because I was interested in the science, but part of what I got out of it was a surprise to me. She talks about the nature of study and inquiry in a very interesting way. Her discussions of science and art, creativity and collaboration and even the value of competition in driving innovation are applicable to any human pursuit, not just particle physics (which is good because I got a little lost in the multi-dimensional space, super-symmetry discussion). So I have a heavy hitter in my corner and we are cooking with gluons here (sorry, bad attempt at a physics joke). Screech — not so fast, buster. As they say in the army, no plan survives first contact with the enemy. “Well, I might have been a little hasty in that statement,” said Dr. Randall when we spoke last month. She went on to explain that she believes that we lose something when we are not physically in the same place with collaborators. She said what’s lost is often focus and concentration. Dr. Randall said her initial thinking was that she would write a paper, the experimental folks would read it and design their experiments to test her theories, and then send her the data when they were done. However, she explained that going to Geneva and sitting in a room or a café with them allowed her and the experimenters to better understand what the other was thinking and is leading to better science. Does she need to be there every day? No. But not to go at all would have been a mistake, she said. Finally, I asked her if she thought that her students, who presumably are more comfortable with the breadth of communication tools and social media, would find it easier to collaborate remotely. “The students are definitely better at using computers than we are, but they may actually be more social,” she replied. Not sure I am there with her on that one as I have seen two kids text each other from across the table. I went into the conversation thinking I was going to write about complex issues and remote collaboration, but what came out of the discussion was a realization that I need to be clearer about my theories on remote work and collaboration. Complex or simple, the issue is the same for any problem. We often need quiet time to work out something in our head. That might be in our office (if we have a quiet space) or sitting at home (if there are no other distractions), or maybe it’s on a park bench or in Starbucks with our headphones on. Each of us is different and so are our problems. But we have one important thing in common and that’s that we are all human (except poor Cheeto). And as humans, we need to be physically near other humans at least some of the time to build trust and understanding. So no, telework is not a silver bullet. It is just one of many tools that we as workers and leaders need to evaluate on a case-by-case basis to see how we can be most effective and productive. Cheerleader, advocate, or pundit, the one message I want to get across is that there is no one-size-fits-all in telework or in life. I look forward to your thoughts and comments. You can email me at jsawislak@teleworkexchange.com at check out my blog at TeleworkExchange.com/Work .

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David Wolman: Why America Will Soon Be A Cashless Society

March 16, 2012

I’m at some gas station in Hawaii on the last day of a family vacation, and I’ve just changed a $20 bill into three $5s and five crumply $1s. After double-checking that the cashier didn’t miscount, I fold the pale green slips of paper into my wallet. Then, because I’m something of a germaphobe, I take a whiff of my palms. Mistake. Inky rancidity, mixed with locker room and a hint of weed killer. The stink sticks with me for hours, like some viral video you wish you’d never watched. Thing is, I need the cash. We’re on our way to the airport with some heavy suitcases and I plan to get help from a curbside porter who I’m guessing won’t accept tips via PayPal Mobile or some other smartphone-based payment app. As Benjamin Franklin is believed to have said while trying to decipher precisely when, where, and just how much to tip during his time in France: “To overtip is to appear an ass: to undertip is to appear an even greater ass.” After checking in at the airport, I head to one of those newsstand stores to buy a bag of potato chips. I take out a credit card, because what airport in America doesn’t accept plastic for even the smallest purchase?* But as I try to hand it across the counter, I’m told that this is a cash only store. “What? Why?” “We don’t have the thingy,” the cashier says, pantomiming a card swipe through a reader device–and quite deftly, I might add, considering she doesn’t use one of those thingies. “Because they’re so expensive,” I volunteer, nodding sympathetically about those steep transaction fees. “Yeah, but also we don’t really have the time,” she adds, doing the swipe yet again and punching a few invisible numbers. This response is insane and illuminating. I don’t mean insane like the Hawaiian lady is insane and I’m out to pick on her; she’s just doing her job selling potato chips and magazines. It’s insane because, while telling me that dealing with electronic money takes too long, she is literally counting out my change–a bunch of $1s, three quarters and some even smaller and–let’s be honest, here–essentially worthless little metal plugs. As she hands me this pile of inconvenience incarnate, I think back on a study I’d seen about how much Americans spend dealing with pennies in their everyday lives: something on the order of $3.65 per person, or about $1 billion annually. And that’s just the typical consumer; a study commissioned by Walgreens found that the company loses about $1.3 million a year due to the time required for cashiers to hand out correct change out to the one-hundredths column. That might sound like chump change for a company like Walgreens, but zoom out from there to add WalMart, Target, Whole Foods, Burger King, 7-11, and, in addition to such multinational colossuses, every boutique and mom and pop shop in the galaxy, and the costs of dealing with small change suddenly start to look, well, not so small. That seemingly insignificant aside–We don’t really have the time–is illuminating because it speaks to the broader issue of money’s different functions and forms, how we feel about them, and our ability (or lack thereof) to think clearly when it comes to cash. Cash is an anachronism–and it may be on its way out. No one knows if physical money is in its twilight or just very late in the afternoon. It’s getting there, though. Much of this is because of technology. If you’ve been in a Home Depot lately, you may have seen that PayPal has a pilot project underway that will, in theory, help speed transactions even further and strike another blow to cash (or more accurately, its utility). Square, the company started by Twitter co-founder Jack Dorsey, has been making waves with its credit card processing unit for cellphones and, more recently, an app called Card Case . And international development experts are gaga over so-called mobile money and mobile banking services, which are being touted as critical tools for helping people convert cash into electronic money, which is key for building the financial stability necessary for climbing permanently out of poverty. All of this and more pushes cash further and further to the margins. But cash–loveable, hypnotic, unassailable, cash–has worked its way so deep into our hearts and minds that it’s hard for many people to accept the idea of its obsolescence, however gradual and possibly beneficial. Instead, we keep believing that it’s a swift, cheap, and clean form of money, even though it’s none of those! OK, it’s kinda swift when I hand you a $10 for my half of a $20 lunch tab. Yet stop to think just a little more about the backstory of that $10 bill: how it made its way to me by way of an ATM, armored trucks, banks, the Bureau of Engraving and Printing, anti-counterfeiting technology developers, cotton fields where the linen fibers originated, and even the wallets of drug traffickers, pimps, and tax evaders who used that banknote before me… not so simple, clear, or swift anymore, is it? The good news is that cash is getting bumped further and further to the edges of our everyday lives, with indicators popping all over the globe that people are wising up about it’s costs, or at least open to conversations about them. While in Hawaii, I visited Volcanoes National Park, where I saw a sign at the Park entrance that caught my attention; something to the tune of we prefer credit card payments. Yes, there’s some delicious irony to the idea of a National Park dissing the national currency, or at least paper versions of it. But those taxpayer-funded park managers should be applauded for running the numbers and determining that storing, counting, and babysitting cash isn’t cost effective–and for trying to do something about it. *One of the tragic shortcomings of the English language is the absence (to date) of a simple verb describing the act of acquiring goods or services with credit money, which is to say a short-term loan. It’s not buying. I suggest curchase in my book, although my brother has come up with what is probably a better candidate, a portmanteau of borrow and buy: burrow. The stuck-in-a-hole imagery is an added bonus. David Wolman (@davidwolman) is a contributing editor at Wired and the author of the new book The End of Money [Da Capo Press, $25.00] .

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Renee Parsons: JP Morgan and the Largest U.S. Municipal Bankruptcy

March 15, 2012

As if a decade of million dollar fines for their role in the collapse of Enron, World Com , the UK’s Financial Services Authority , mortgage overcharges on active military personnel, misleading state and municipal governments with faulty advice, not to mention its contribution to the 2008 global economic collapse responsible for incalculable loss and suffering, JP Morgan, the largest bank in the U.S. with more than $2 trillion in assets and according to Forbes, the world’s largest public company may now take credit for the largest municipal bankruptcy in American history. Just as repercussions of the 2008 economic collapse continue to plague millions of Americans, the consequence of JPM’s on-going advice to Jefferson County, Ala. officials in pushing their flawed municipal derivative products caused the county to file for Chapter 9 relief in November, 2011. Despite objections from JPM and other Wall Street bondholders which stood to lose $4.5 million in monthly payments, the Northern District Alabama Bankruptcy Court recently upheld the county’s request for a $4.2 billion bankruptcy citing that the county had negotiated “in good faith.” The bankruptcy decision allows the county to move forward with efforts to stabilize its debt. Adding to JPM’s list of earlier accomplishments is a $772 Million settlement brought by the Securities and Exchange Commission for an ” unlawful payment scheme ” related to the bank’s municipal derivative business and the refinancing of Jefferson County’s sewer system debt. While some local Jefferson County officials have served jail time, at least one for accepting $235,000 worth of designer clothes, a Rolex watch and cash, no JPM employee has been prosecuted to the full extent of the law or served jail time for the Jefferson County situation or for any of the above mentioned offenses. The SEC settlement allowed JPM no admission of guilt and included a $75 million cash payment with a waiver of $647 million contract cancellation fees. With a population of more than 650,000 and home to Birmingham, Ala.’s largest city, Jefferson County was cited in 1993 by the EPA for dumping untreated sewage into the Cahaba River in violation of the Clean Water Act. The county began selling sewer bonds in 1997 with no competitive bidding and by 2002 had raised $2.8 billion in bonds for the project. With municipal bond interest rates at their lowest in more than three decades, the county was advised by JPM’s local banker to forgo fixed rate financing and to refinance using adjustable rate bonds and interest-rate swaps that reflected current market trends; thereby saving itself millions of dollars. Swaps, better known as unregulated derivatives, have proven, as a result of the subprime mortgage crisis, to be utterly unreliable. According to Bloomberg News which did an in-depth analysis , Jefferson County records show that the bonds provided the banks with $120 million in excessive fees with JPMorgan selling the county $2.7 billion of interest-rate swaps, Bank of America sold the county $373 million in swaps and Lehman Brothers sold the county another $190 million of swaps. In a 2002 speech just after the dot.com bubble burst but with the economy still intact, Jefferson County officials relied on outside experts like Federal Reserve Chairman Alan Greenspan who lent his support to “new financial products that have enabled risk to be dispersed more effectively” because derivatives “create a more flexible and efficient financial system” and that “shocks to the overall economic system are… less likely to create cascading credit failure.” By 2004, Jefferson County, naively assumed they would never be victimized by their own creditors, sponsored investor seminars to tout its cutting edge fiscal prowess with JPM evangelizing that “the worldwide use of privately negotiated derivatives has generated considerable momentum” as “the need for prudent financial management continues to drive the wider use of privately negotiated derivatives.” In recognition that their client could still be further wrung out in an even sweeter deal, JPM convinced the county in 2004 that it could generate necessary upfront operating cash by entering into additional swaps with Bear Stearns for $1.5 billion and $380 million for Bank of America. In exchange for $25 million cash, the county by then held $5.8 billion of interest-rate swaps, more than other county in the U.S. The deal began to disintegrate in 2008 when politically-connected bond insurers experienced heavy losses forcing the county to increase its monthly debt payment from $10 to an unsustainable $23 million. Payments the county relied on under its swap agreements to cover the interest payments on its adjustable-rate bonds hit the skids when Moody’s and Standard and Poor’s cut the sewer bonds rating to just above ‘junk’. The downgrade entitled the Wall Street banks to back out of the agreement and would have cost the county over $1 billion in additional fees. The county’s reliance on the swaps complicated the existing debt crisis when bank payments to the county dropped precipitously in response to the economic slump. After lengthy negotiations reminiscent of how the IMF deals with foreign countries teetering on default, JPM informed the county to raise its utility rates to cover its losses. What JP Morgan, which never reported a losing quarter throughout the 2008 economic crisis, and Jefferson County’s officials may never truly grasp is the real cost of their greed on the poorest neighborhoods of Jefferson County. As the county laid off up to 1000 employees decimating county services, residents who were paying as much as $250 a month for water/sewer service are now denied basic sanitation facilities including running water and are forced to share portable toilets. Almost four years later, what remains a bitter pill is that four days after an incompetent Congress approved a $700 billion taxpayer bailout without any conditions, Jamie Dimon , once described by President Obama as a “savvy businessman” informed bank executives of his intention to not use the $25 billion from the American taxpayer for new loans but would instead pursue new acquisitions : “I think there are going to be some great opportunities for us to grow in this environment, and I think we have an opportunity to use that $25 billion in that way.” While the sole purpose of privately-owned Wall Street banks is to lend money at interest rates that will make the greatest profit in the shortest amount of the time, the Federal government’s unsustainable interest payment of $5 billion a day on the national debt to the banks raises the essential question of what value banks provide the American people — and how corporate welfare for JPM and its Wall Street cronies denies meaningful assistance to local municipal or state government in a democratic society. The publicly-owned State Bank of North Dakota has paved the way since 1919 depositing its profits into the State’s general fund making those funds available for essential community services and long term municipal infrastructure projects like new sewer plants. If the State of North Dakota can do it, why can’t the Federal government? And finally, in 2011, JPM was fined an additional $228 million by the Department of Justice for bid rigging and ‘anti-competitive’ practices for its activity in the municipal bond investment market. In acknowledgment of having friends in very high places and while the DOJ investigation resulted in criminal charges against eighteen individuals (with nine pleading guilty), the DOJ “agreed not to prosecute JPMorgan for the manipulation and bid rigging of municipal investment… ”

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Adam Levin: Flipping the Bird: Is the Fed on Twitter a Horrible Idea?

March 14, 2012

Even the farsighted Founding Fathers could not have foreseen this — the Fed is now on Twitter ! Just think of the possibilities — one fine Friday any Fed functionary could foment a world crisis in 140 characters or less! It could be as simple as a typo. For example, the Fed’s second tweet was: “Watch a video of Chairman #Bernanke explaining the structure of the Federal Reserve. #fed #economy” What if it accidentally read: “Watch a video of Chairman #Bernanke exploding the structure of the Federal Reserve. #fed #economy” Or even worse, what if a disgruntled Fed employee tweeted: “New Fed figures fuel inflation fears — discount rate will be set at 11% next week” Get the idea? Perhaps it’s a laudable thing that the Fed wants to move into the 21st century by means of instant communication through Twitter. But I wonder — does anyone really need a “cool Fed” or a “fab Fed”? Remember the famous “briefcase theory” during the tenure of Alan Greenspan? That theory held that if Greenspan left his house (on a day when the Open Market Committee was meeting) with a bulging briefcase, it was because the Chairman had armed himself with a battery of statistical reports and planned to argue a rate change. However, a slimmer briefcase indicated that the FOMC would leave rates alone (this was, of course, in pre-iPad times). If people actually resorted to measuring the thickness of a briefcase for a sign of policy change, how long would it be before almost anything that was tweeted acquired major significance? After all, just a couple weeks ago the price of gold dropped by a whopping four percent, evidently because Chairman Benrnanke made a comment about improving employment conditions. So, in a world where the images of the Virgin Mary regularly appear on tuna melts, it’s a safe bet that someone somewhere will find Nostradamus-like predictions cleverly hidden in the verbiage of an otherwise banal tweet. Moreover, why does the Fed feel the need to instantly communicate at all? Looking back, the only time that instant communication was really necessary was during the financial crisis of 2008 . Therefore my conclusion is that the Fed opened a Twitter account because it is anticipating another even worse financial crisis in the very near future — must be, right? (See what I did there?) Remember that during the crisis of 2008 the Fed decided to “open the window,” a move which allowed non-banks such as Morgan Stanley and Goldman to borrow (at virtually no cost) directly from the Fed to cover their suddenly dire cash needs. A Twitter account opens a new kind of window directly into the Fed, and who knows who might be looking in? It’s not exactly news that social networks can be hacked. Just imagine what could happen if someone with sub-prime intentions got control of the Fed’s Twitter account for all of 15 minutes. Worse than that, I wonder if it’s a good thing to have the American public seeing, as they might through this new window, just what the Fed does and how it operates — and that it can more or less print money for any purpose at any time. People are already responding to the Fed’s tweets. In fact, @ronsupportsyou responded to that second tweet about the structure of the Fed with the following : “I would like you to explain (to me and to other American savers) why interest rates that you set can’t be a little higher.” So, how do you answer that one, Ben? Or maybe you don’t answer at all? But if you don’t answer, what will the markets read into your lack of a response? I can only hope that the good people of the Federal Reserve have thought this through. Transparency is an important element of a democratic government, but nobody would want a transparent CIA, and I’m not sure that anybody really wants a fully transparent Fed. Remember what Tocqueville said: A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy… That was written — before radio, telegraphs, telephones, fax machines, the Internet, and of course Twitter — in the 1830s! This article originally appeared on Credit.com . @creditexperts

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Randy Turner: As Company Is Collapsing, GateHouse Media Awards $1.4 Million in Bonuses

March 13, 2012

Only a few short weeks after announcing a centralization of layout and copy editing that will cost jobs at its more than 300 newspapers across the nation, GateHouse Media revealed Friday it has awarded more than $1.4 million in bonuses to its top four executives. In addition, GateHouse, which was trading at five cents per share when markets closed Friday, reworked its severance agreements with CEO Michael Reed, CFO Melinda Janik, General Counsel Polly Grunfeld Sack, and Chief Operating Officer Kirk Davis. While the GateHouse employees who will be shown the door when the centralized copy desks are implemented will be lucky to get two weeks of severance pay, the company’s top three officers will be sitting pretty if they lose their jobs. Reed will receive two years and three months in pay, which includes not only his base salary, but a monthly average of his bonuses of the past three years. For Davis, it will be two years of the same, while Ms. Sack will receive 21 months worth of salary and bonuses. And those figures don’t even include the fringe benefits, none of which are available to the hundreds of workers who will no longer be receiving GateHouse Media paychecks, thanks to the corporate decisions of these people who made sure, despite their singular lack of success and their continued drive to pull community newspapers away from their communities, that they will be taken care of no matter what happens to their product and the company’s bottom line. And the company’s bottom line is sitting at a precarious level, according to the annual report. The company put the following information into its news release issued the same day as the annual report: – Advertising revenue was down 8.6 percent, despite a 17.8 percent increase in digital advertising. – Operating income was down from $43.2 million to $33.9 million in 2011 – A lot of jobs were cut, though GateHouse described it as decreasing “compensation expense,: as in the following phrase — “The expense declines were driven primarily by lower compensation and newsprint expense. Compensation expense was down 10.7 percent on a same reporting period basis as the Company has been able to successfully reduce compensation expense as part of its overall permanent cost savings initiatives.” Apparently, using euphemisms is supposed to make us forget that it is real people who are being damaged by the company. Nowhere in the news release did GateHouse mention the hefty bonuses and golden parachutes company officials were receiving for their “success.” CEO Michael Reed picked up an $800,000 bonus for 2011, according to the company’s filing Friday with the Securities and Exchange Commission. Ms. Janik received $125,000, Ms. Sack $140,000, and Davis $350,000, for a total of $1,415,000. The information is buried toward the end of a long annual report. And nowhere in the report was it mentioned that the company has lost $575 million over the past three years and is well over a billion dollars in debt. While GateHouse’s top officials continue to make sure their futures are assured, the newspapers that have made it all possible for them, more than 300 “community” newspapers across the United States, are struggling to make do with barebones staff, little support from corporate, and fewer and fewer connections with the local community. This would make a great news story, if there was anyone left to write about it.

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John A. Anderson: My Second Act Fulfilled Me In A Way My First Career Couldn’t

March 13, 2012

“What can I do to ensure that whatever positive things I helped create continue after I am gone?” Professor Jim Hammons of the University of Arkansas challenged an audience of community college professionals to think of their legacies in terms of durability as well as content as they approach their own retirements (1). On the last working day in March, I’ll wish someone else success as director of the Textile Technology Center at Gaston College . My second retirement will begin six years to the day after my first career ended. This time, retirement is my choice, and I have an answer to Professor Hammond’s question. Like many people in the boomer generation, the end point of career number one was not really my choice. One morning in March 2006, my boss asked me to join him in a conference room, and when I saw the head of Human Resources there too, I knew what was coming. “We are eliminating your position ….” And while I can recite with clarity the rest of that conversation, I’d rather not. I counted myself lucky, then and now. I was allowed to retire at the end of that month with some dignity. I had the opportunity to say goodbye to friends and customers, and I wasn’t left in financial peril. I know way too many people who got bad news about “downsizing” and had 30 minutes to empty their desks before they were escorted to the door by security, minus their computers, cell phones, company car keys and livelihoods. In the six months that followed, I was never bored. After working continually for 38 years, a break was nice. My wife and I found a balance where most days we each did our own thing until noon, and then shared lunch and planned an outing for the afternoon. The shrubbery was trimmed and mulched, my body mass index was dropping, and while life was OK, I had this nagging thought that I wasn’t really accomplishing anything. Maybe I didn’t have to. I was 60 years old, and even with two kids in college, we could make it financially with a bit of belt tapering, if not outright tightening. And yet I sensed something was unfinished. I’ve often used the phrase “this job came and found me” when I talk about the Textile Center. That’s actually an oblique reference to the lyric ” when my soul was in the lost and found, you came along to claim it. ” We found each other about seven months after my first retirement began. I’m certainly glad we did. Whatever I was able to bring to the Center, I was rewarded ten fold in return, with new knowledge, experiences and friendships that I will carry with me to whatever comes next. Surprise was my initial reaction when I was offered the position. My entire business life had been spent in Marketing and Strategic Planning. Technology was what those guys in R&D and Manufacturing did. I never really paid much attention to it beyond learning what the selling points might be surrounding a particular product. When I joined the Center in November of 2006, the future of the organization was somewhat cloudy. A year earlier, the North Carolina Community College System had restructured its textile trade school to create a “Center of Excellence,” with a charter to “assist the Textile Industry by identifying and solving problems.” A state-appointed Advisory Board set a direction that the Center would assist firms in the textile chain with new product development and product testing. We were to be the place people came to make a prototype and prove a concept worked. In the first year of operation, as a fee for a service entity, the Center had billed $50,000 for total services delivered, a fraction of what the operation was actually costing taxpayers. Looking back, we came an incredibly long way from where we were in the closing weeks of 2006. Today, innovators from around the world come to the Textile Technology Center with ideas, fibers, yarn and fabric to have a concept demonstrated, a problem solved or a product tested. We share their sense of urgency. The best compliment I can think of came from a client: “What I like about the Center is that you do what you say you are going to do when you say you are going to do it.” Who wouldn’t feel proud and confident in the future of an enterprise with that reputation? Numbers tell part of the story. Our total revenue for services delivered grew over twenty fold in five years, and continues to grow. The Textile Center professional staff expanded from 6 individuals to 22 today, all funded from operations. The remainder of the story is about people, attitudes and relationships. Change is a fascinating phenomenon, and you can’t be an agent for change unless you start with yourself. Whatever sense of entitlement I felt owed by virtue of my MBA and years of marketing experience went to the dumpster first, right along with my concept of being an “Executive.” I learned what that “technology stuff” was about, and in the process developed an incredible appreciation for the people who practice it every day. Delegation is a nice concept, but in a small operation, you do whatever needs to be done. I help load trucks, move equipment and run samples up and down the highway right along with recruiting new clients and managing sophisticated technology projects. While we are a state agency inside a community college, collectively we treat our enterprise as though it was our own private firm, and that sets us apart. You can’t help but bring a piece of yourself to a group process, and I believe that some of the principles and values that I brought to the Center will remain after I’ve left. Leaving a legacy was the piece that was missing for me when I left corporate life, and I didn’t realize what that meant at the time. I am grateful for my time at the Textile Technology Center. It has been fulfilling to work with a team to build the Center, and I retire this time with the confidence that the Textile Technology Center team will continue to grow. I move on to whatever is next, satisfied that I was given a chance to give back and I took it. So what is next? In addition to the “day job” I’m about to leave, five years ago I also became a “Community Columnist.” I write a weekly column for the Charlotte Observer that has nothing to do with business, textiles or technology. I get a lot of satisfaction meeting new people and describing unique and interesting happenings in and around Waxhaw, North Carolina. When I uncover something that I think will be of broad interest, I will share that here. Second careers and those that might follow aren’t necessarily about the money. We don’t know how many days we have left, so if you have small hollows in your psyche that need to be filled, there’s no time like to present to go find your trowel. 1. Vol. XXXIV, No. 2 January 27, 2012 NISOD Abstracts

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Marty Kaplan: Is Luck Dead?

March 12, 2012

The trouble with kids these days is that they think luck counts more than they should. That’s the diagnosis of America’s young people offered by a New York Times opinion piece this past weekend. Generation Y has moved back home and given up on gung-ho because in these recessionary times, they’re putting too little weight on the importance of effort and too much weight on the riskiness of risk. This indictment of ” The Go-Nowhere Generation ,” as the piece is titled, is different from the argument that they’re afflicted by fantasies of “meaningful work”; the authors aren’t saying that today’s kids would rather mooch off their parents than take a job flipping burgers until the economy improves. Instead, Todd G. Buchholz and Victoria Buchholz are claiming that economic growth is stalling because our entrepreneurial spirit has been displaced by kids’ misbegotten fear of “the illogic and coincidence of life.” It’s not about luck, honey, the authors are telling American youth, it’s about your timidity. An alternative view of the role of luck in the economy, and in every other realm of life, can be found in the work of Princeton psychologist Daniel Kahneman, winner of the 2002 Nobel Prize in economics. Of the themes in his remarkable new book, Thinking, Fast and Slow , the one most startling to me is the power he attributes to luck. This isn’t a philosophical or theoretical point that he’s making; it’s an empirical observation, based on data. Stock traders, financial analysts, economic forecasters and CEOs may believe that their results are based on research, experience and skill. On the contrary, says Kahneman, the overwhelming evidence – and he provides plenty of it – is that monkeys throwing darts would be just as good (that is, as bad) at doing their jobs. Small businesses fail: that’s the rule. To believe you’re going to be the exception requires not just confidence, it takes a resolute denial of reality. (Intuition, by the way, is also wildly overrated.) Every startup inevitably, and usually fatally, overestimates the brilliance of its own vision and underestimates the genius of its competitors. Entrepreneurs maintain that success derives from sweat and indefatigability, but in fact it nearly always hinges on random, unpredictable events. Look at the case histories of the wizards of the digital age, says Kahneman, and virtually all of them are testimony to luck. Pundits and political scientists who get it right are shockingly rare, and when they do, the reason is luck. The track record of clinicians and therapists depends more on fortune than is humanly bearable to acknowledge. How an athlete performs on a given day always involves a roll of the dice. All of history is driven by chance. Choose any historic figure you like; the sperm and egg that produced them were brought together by blind odds, not by destiny, design or divinity. This weekend also brought word of the death at age 87 of William Hamilton , the professor of church history whose work, much to his surprise, became the basis for Time magazine’s most famous cover, in 1966. “Is God Dead?” it asked, in incendiary red letters against a background as black as crêpe. The cover story traced the fall of God as the all-powerful planner of our personal destiny. What happens to us isn’t written by a heavenly hand; it’s in our own secular hands. Our behavior may be inspired by religious prophets, but the good and bad that befalls our lives can be as much driven by good and bad luck as by good and bad conduct. I wasn’t shocked by the Time cover when it came out. At that point, I was still marinating in the orthodoxy of my childhood. It was Chance and Necessity , the book by Nobel Prize-winning molecular biologist Jacques Monod published a few years later, that opened my eyes to the disturbing notion that chance, not a Book of Life written in the clouds, was the name of life’s game. Back then, when I first entered college, an annual national survey of incoming freshmen revealed that our number one reason for attending college was “to develop a meaningful philosophy of life.” That’s long since dropped to the bottom of the list; today the number one reason is “to be able to get a better job.” I’d like to believe that those goals aren’t mutually exclusive. And when so many families have taken on so much debt to finance a degree, it doesn’t seem unreasonable to want your education to equip you to pay back those loans. The kids slouching toward nowhere in their childhood bedrooms are not, as the Buchholzes would have it, illogically risk-averse. Actually, they’re perfectly clear-eyed about the mythology of entrepreneurship. If everyone were as alert to the power of luck as Daniel Kahneman would have us be, a lot fewer of us would get out of our pajamas. Just as it’s more rational to fear a car accident than a plane crash, it’s also more rational to predict bankruptcy than to imagine becoming the next Mark Zuckerberg. A bad economy is a lousy time to leverage a college education to get a better job. But Kahneman demonstrates that any economic climate poses dispiritingly long odds against striking entrepreneurial gold. It’s facile to blame kids for being gimlet-eyed, and it’s pure punditry to claim that their caution is clamping a ceiling on economic growth. Instead of ragging the “go-nowhere generation” for hanging out at home, we should be congratulating them for taking a pass on the Horatio Alger platitudes. It’s not called “dumb luck” for nothing. This is my column from The Jewish Journal of Greater Los Angeles . You can read more of my columns here , and e-mail me there if you’d like.

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How To Win The Lottery

March 12, 2012

So goes popular opinion: the lottery’s an egregious societal evil implemented and overseen by shape-shifting, blood-drinking reptilian aliens. And that may be largely true – designed to slowly and quietly bleed dry your pockets – that is, unless you learn to drive it.

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Mitch Feierstein: The Bull Market That No One Believes

March 12, 2012

It might not feel that way to you, but we’ve just lived through one of the greatest bull markets in history. Almost exactly three years ago, the S&P 500 stood at 683, a decline of more than half from its highs of 2007. It wasn’t hard to understand that decline. Wall Street was bust. General Motors was bust. AIG was bust. All but a handful of Main Street banks would have been bust too, had it not been for an extraordinarily vigorous response by both federal government and the Federal Reserve. The panic of that winter of 2008-09 may now be a distant memory, but the problems facing the country have hardly gone away. Europe continues to tremble on the edge of crisis. In the housing market, there are still huge levels of foreclosures, distressed selling and a scarily large stock of shadow inventory, waiting to be sold. Yes, joblessness is beginning to edge down, but it’s still at very high levels — and, worse still, the percentage rate of unemployment needs to be looked at skeptically in view of the more than one million dispirited workers who have exited the jobs market altogether. You wouldn’t be able to guess any of that from the stock market, however. The S&P celebrated the third birthday of this current bull market by racing up towards 1,400, more than double where it was three years back. Facebook is hoping to launch an IPO that will value it at some $100 billion. Apple is now worth more than $500 billion. General Motors has staggered from bankruptcy to a healthy market value of $40 billion. However, GM shares still are trading well below the price the government (taxpayer) paid for them and well below the IPO price. Which all raises a question. Did investors panic unduly in 2008-09? Or are financial markets overheating today? The question matters if you’re an investor, but it matters almost as acutely if you’re not. The economic and financial news you listen to is strongly skewed by the state of the stock market. If stock markets are hitting new highs, if IPOs are being boldly launched, it’s hard to argue that the economy is fundamentally weak — yet the real economy and its financial shadow are two very different things. And it doesn’t help that so many financial commentators either work for the sell-side firms (Goldman Sachs, Morgan Stanley and the rest) or on firms that depend on those companies for their business. To a striking degree, the financial coverage we get from the media reflects the views of Wall Street, not the health of the nation. The bulls have a fairly simple argument. Yes, they can point to some real strengthening in the economy and the sheer panic which was present three years ago is gone today. But mostly, the bulls rely on an even more basic argument. The prices of all dollar-based financial assets key off the price for U.S. Treasuries. Since the yields on U.S. Treasuries have recently plunged to lows not seen for decades, that means that the prices of U.S. Treasuries are close to their all-time highs. (Remember that bond prices are inversely related to interest rates. So low interest rates are always correlated with high prices.) And since U.S. Treasuries are trotting along at exceptionally high levels, the equity markets are dragged upwards too. It’s not that investors are unaware of the various weaknesses in the economy, just that they can’t help but respond to the massive gravitational force exerted by the bond market. I’ve been in the financial markets for around 30 years, and for around 27 of those years, I’d have bought that argument too. If the price of one commodity rises then the price of a closely related commodity needs to rise as well, and vice versa. Only these aren’t normal times. The government bond market has been prey to manipulation on a wholly unprecedented scale. I’m not talking about anything you’re not already aware of. I’m talking about Ben Bernanke’s Quantitative Easing, a process which involves the massive purchase of government bonds by the Federal Reserve. Since the Fed can simply print limitless quantities of money to acquire those bonds, the price for them can’t help but shift. So to justify the current euphoria in the stock market by pointing to the jubilant bond market is simply perverse. It’s using the price of one blatantly mispriced asset to justify the price of another. Even that might not matter if the rise in the bond market was permanent. But it isn’t and it can’t be. It can’t be because, over the long term, there is an almost one to one relationship between the supply of money and the level of prices. Since the Fed has been printing money like crazy (to buy all those bonds), inflationary pressure on the economy has increased. That pressure may not yet have fully manifested — because firms and consumers are still stressed — but it’s there, biding its time. The 40 percent rise in crude oil may largely be attributed to QE or money printing. In the longer term, therefore, financial gravity will operate as it always does. U.S. Treasuries will find their own proper level. A level which will reflect a dysfunctional political system, frightening deficits and ever-increasing levels of debt. That repricing will have a calamitous impact on the stock market. It simply can’t play out any other way. And countless investors know this. Most financial firms have money in the affected securities — stocks and bonds — because they need to park their case someplace, but that doesn’t mean they think those things represent good value. If you want a real indicator of the health of our economy, you need to forget about bonds, and forget about stocks. And the global Ponzi Scheme which almost buckled in 2008 is once again alive and well. Global growth since 2002 has been 4 percent. According to my own calculations, the global growth in debt has been 12 percent. One would hope that some lessons were learned from the excesses of credit and leverage when the crisis started in 2007. Yet it appears that leverage and credit are being increased by shifting the Ponzi assets to the central banks balance sheets (taxpayer). This leads us to fairly conclude the price of gold gives you a fairer measure. The higher it is, the more scared investors are. The return on your money if you bought gold a decade ago: more than 500 percent. It’s a statistic which says you shouldn’t feel bullish. You should feel terrified. Mitch Feierstein is the CEO of Glacier Environmental Fund and author of Planet Ponzi .

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More People Used Public Transportation In 2011

March 12, 2012

Americans took 10.4 billion rides on public transportation in 2011 — a billion more than they took in 2000, and the second most since 1957, according to a report being released Monday by the American Public Transportation Association, a nonprofit organization that represents transit systems. The increase in ridership came after the recession contributed to declines in the previous two years.

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Protesters Complain Of Police Monitoring

March 12, 2012

On Nov. 17, Kira Moyer-Sims was near the Manhattan Bridge, buying coffee while three friends waited nearby in a car. More than a dozen blocks away, protesters gathered for an Occupy Wall Street “day of action,” which organizers had described as an attempt to block the streets around the New York Stock Exchange.

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Daron Acemoglu: The Problem With U.S. Inequality

March 12, 2012

Occupy Wall Street (OWS) brought the increased inequality in the U.S. to the headlines, where it deserves to be. Almost a quarter of total U.S. national income now accrues to the richest 1 percent of the population, a figure that was barely above 10 percent 40 years ago. Other countries, most notably the U.K., have also witnessed growing inequality, but none competes with the U.S. in the surge in inequality. Is it unfair and unjust for so few to become so much richer than the rest? Figure: Data from Anthony Atkinson, Thomas Piketty and Emmanuel Saez. But the real reason to worry about this picture is not the unfairness of it all. Any discussion of inequality should distinguish economic inequality from inequality of opportunity and from political inequality. You may not like economic inequality but others may be indifferent to it. There are huge disagreements about how much redistribution there should be, and we know by now that very high tax rates can choke off economic incentives. The problem is that economic inequality often comes bundled with inequality of opportunity and political inequality. Prosperity depends on innovation, and we waste our innovative potential if we do not provide a level playing field for all: we don’t know where the next Microsoft, Google, or Facebook will come from, and if the person who will make this happen goes to a failing school and cannot get into a good university, the chances that it will become a reality are much diminished. There is a lot to worry about here. Our schools are failing and American youth is less likely to graduate from high school or college today than in the 60s. We are no longer the country of opportunity and upward mobility that we once were — largely because that upward mobility crucially depended on the expansion of mass schooling. The real danger to our prosperity lies in political inequality. The U.S. generated so much innovation and economic growth for the last 200 years because, by and large, it rewarded innovation and investment. This did not happen in a vacuum; it was supported by a particular set of political arrangements — inclusive political institutions — which prevented an elite or another narrow group from monopolizing political power and using it for their own benefit and at the expense of society. When politics gets thus hijacked, inequality of opportunity follows, for the hijackers will use their power to gain special treatment for their businesses and tilt the playing field in their favor and against their competitors. The best, and in fact the only, bulwark against this is political equality to ensure that those whose rights and interests will be trampled on have a say and can prevent it. So here is the concern: economic inequality will lead to greater political inequality, and those who are further empowered politically will use this to gain a greater economic advantage by stacking the cards in their favor and increasing economic inequality yet further — a quintessential vicious circle. And we may be in the midst of it. The U.S. tide has lately not lifted all boats; over the last 40 years, while the richest Americans have seen a sharp increase in their incomes, the income of the median household has hardly budged. Predictably, this has gone hand-in-hand with political inequality. Yale University political scientist Robert Dahl painted a picture of U.S. politics in the 1960s through the lenses of politics in New Haven as a system in which not only the wealthy but even the little man had voice. But that system is in decline. Money matters much more in politics today than it did in the 1960s, and we are currently witnessing its import rising. The wealthy have greater access to politicians and to media, and can communicate their point of view and interests — often masquerading as “national interest” — much more effectively than the rest of us. How else can we explain that what is on the political agenda for the last several decades has been cutting taxes on the wealthy while almost no attention is paid to problems afflicting the poor, such as our dysfunctional penal system condemning a huge number of Americans to languish in prisons for minor crimes? How else can we explain, as political scientist Larry Bartels has documented, that U.S. Senators’ votes represent the views of their rich constituents but not those of their poor ones? There is a lot to despair about. But despair would be the wrong reaction. First, we have been here before and we have rebounded. Things were much worse during the Gilded Age, and the wealthy elite more unscrupulous. Yet the robber barons did not prevail. The U.S. political system was also able to tackle the problem of Southern segregation and black disenfranchisement, which if anything looked even more insurmountable. Second, despair would strengthen the tides towards inequality. Americans are proud of their Constitution. But no constitution can enshrine political equality. It needs to be fought for and defended. Whatever we may think of the views, rhetoric, and tactics of OWS, not only does it deserve our respect for putting the question of inequality on the agenda, but also for actually standing up for political equality. Daron Acemoglu and James A. Robinson are the authors of Why Nations Fail: The Origins of Power, Prosperity, and Poverty , available March 20.

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One Month Later, We Might Finally See The Details Of That Huge Foreclosure Deal

March 10, 2012

WASHINGTON, D.C., March 9 (Reuters) – A previously announced $25 billion settlement between five major banks accused of abusive mortgage practices and government officials will be filed in federal court on Monday, people familiar with the matter said late Friday. The pact unveiled Feb. 9 is expected to result in payments and other mortgage relief for about one million borrowers, but must first be approved by a judge. Bank of America Corp, Wells Fargo & Co, JPMorgan Chase & Co, Citigroup Inc and Ally Financial Inc agreed to the settlement after 16 months of negotiations with state attorneys general and federal agencies, including the U.S. Justice Department and the U.S. Department of Housing and Urban Development. But the fine print took another month to finalize. Negotiators had hoped to file a settlement on Friday, but the deal was held up at the last minute over a disagreement between Nevada and Bank of America, people familiar with the matter said. The state and the bank had negotiated a separate side deal to resolve an older lawsuit filed by the state. The nature of the Friday disagreement was not immediately clear. Representatives of Nevada and Bank of America could not immediately be reached for comment after business hours. The larger deal, to be spread out over three years, requires the banks to cut mortgage debt amounts and provides $2,000 payments to certain borrowers who lost their homes to foreclosure. It releases the banks from civil government claims over faulty foreclosures and the mishandling of requests for loan modifications. Forty-nine states signed the pact. The probe that led to the settlement discussions started after evidence emerged late in 2010 that banks robo-signed thousands of foreclosure documents without properly reviewing paperwork.

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Former NYT CEO Receives STAGGERING Payout

March 9, 2012

March 9 (Reuters) – Former New York Times Co Chief Executive Janet Robinson received a total payout of nearly $24 million after she left the newspaper publisher at the end of last year, according to a regulatory filing on Friday. Robinson, a 28-year veteran with the company, has yet to be replaced by Chairman and Publisher Arthur Sulzberger Jr, who is temporarily acting in her place. Robinson’s package includes a $4.5 million consulting fee that The Times had agreed to pay as part of her exit package, as well as pension benefits and performance-related payments. Excluding the consulting fee, Robinson would have been paid the same amount whether she was terminated, resigned or retired, according to the filing with the U.S. Securities and Exchange Commission. Sulzberger received $5.9 million in total compensation in 2011. The Times which, like other U.S. newspaper publishers, has been struggling with sinking advertising revenue and dwindling print subscribers, said it had 406,000 paying digital subscribers at the end of 2011 after it rolled out an online pay system last year. The company started 2012 without a CEO or a digital boss after both Robinson and former digital head Martin Nisenholtz retired. Sulzberger said on Feb. 2 The Times was in the early stages of searching for an executive with digital and brand-building experience to help guide its long-term growth strategy. The focus on an improved digital strategy helped circulation revenue grow 5 percent to $241.6 million in the fourth quarter, The Times said.

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Joel Sucher: Fannie, Freddie, and the FHFA Holding The Line On Foreclosure Policies

March 9, 2012

An ongoing drama is unfolding: a David versus Goliath tale of sorts that pits a Riverside, California family fighting to stay in their home against the weight of that elephant, otherwise known as “Freddie.” Arturo de los Santos, his wife and four children have already been evicted from their home once. But now, with the support of Alliance of Californians for Community Empowerment, Occupy Los Angeles and Occupy Riverside, they’ve re-occupied the vacant house. Their supporters have placed boots on the ground and inside the house to serve as witnesses and shields if sheriffs should come knocking once again. It’s a rage-against-the machine story, but with a puzzling subtext: Santos is working and willing to make a deal, but Freddie has turned a deaf ear. Now, his plight has become the focus for on-going media attention, namely from MSNBC and Huffington Post . A native of Corpus Christi, Santos joined the Marines in 1991 and after finishing a stint on an aircraft carrier found his way to Santa Ana, Calif., where he found a job in the aviation industry. He rose to a position as supervisor, and he’s still there. Together with his wife, Magdalena, they purchased a home in nearby Riverside that’s provided a roof over the heads of four children. When the global economy caved in 2008, his hours at the aviation plant were cut back and he asked his servicer, JPMorgan Chase, for a loan modification. According to Santos and his supporters, events then unfolded in true Kafkaesque fashion. He was denied a loan modification, re-applied, then given a temporary ‘mod,’ on which he made timely payments, then denied, again, for a permanent modification. Before he received his final denial, he learned that his house was going on the auction block. After questioning Chase about what was going on, the response, as he tells it, was “there’s a modification department and a foreclosure department, and the foreclosure department decided to sell your home.” So the great foreclosure machine began to grind away, and because California is a non-judicial state, meaning foreclosures there don’t need to go through the court system, the gears were greased to make eviction a whole lot easier. In January, 2011, Cal-Western Reconveyance Corp. — a title company with a disturbingly sinister moniker — engineered a transfer of ownership to Chase, then to Freddie Mac. Santos protested that he made enough to enable him to continue to pay a modified mortgage. Freddie refused. With foreclosure a done deal, the Santos family left the house. Then a magic slingshot appeared, giving this David a tool to fight back. He signed up with Alliance of Californians for Community Empowerment to be one of those homeowners to participate in a re-occupy-your-foreclosure campaign and, with family in tow, took back his home last December. Accusations have gone back and forth between Santos’s supporters and Freddie spokespeople as an acrimonious backdrop to what has now become a court battle. Last week, a California judge presiding over the case told Freddie to go back to the drawing board and come up with some legally palatable reasons why the family should be evicted for a second time. Arturo de los Santos is one of those emerging soldiers in this war against homelessness, a committed fighter who refuses to submit to a foreclosure firing squad. With Freddie and Fannie Mae together holding or guaranteeing roughly half the nation’s mortgages, that’s a lot of potential executions. Is there any sort of reprieve in the works for Santos or the legions of others caught up in similar straits, perhaps along the lines of the recent robo-signing settlement that offered the possibility of principal reduction? No, says the Fannie/Freddie overseer and majordomo, the Federal Housing Finance Agency (FHFA). Fannie and Freddie never signed on to the Shaun Donovan-brokered agreement. Executives at the “three F’s” are now hunkered down in the trenches, hands clamped over ears, waiting for the shelling to stop and the criticism to abate. No matter that HUD’s Shaun Donovan or California Attorney General Kamala Harris support principal reduction. The D.C. heavies simply won’t countenance any reconsideration. In fact, it’s quite the opposite. FHFA’s acting director, Edward DeMarco, continues to summon up that old “moral hazard” saw when discussing why he won’t lop off some struggling family’s principal. But never mind that notion when it’s time for the GSEs (government-sponsored enterprises) to belly up to the taxpayer’s bar for more cash to cover continued losses. No moral hazard there (think “bailout”). It’s an on-going beltway version of Alice in Wonderland. There are others around the country whose tales are only beginning to surface: like Giovanni and Linda DeCaro, who tried, unsuccessfully, to negotiate a settlement with Freddie to save their Springfield, Mass., home through a short sale strategy, brokered by Boston Community Capital’s Stabilizing Urban Neighborhoods program, that would have allowed the couple to buy back their property at a reduced price and then make monthly payments on a fixed rate 30-year mortgage. Restrictions would prevent them from selling the house for more than they paid without sharing the profits with Boston Community Capital. Sensible, even a tad innovative? Yes. Too much so for Freddie, which sees the DeCaro home as simply an investment property to be sold for top dollar. Greed again rears its ugly head. DeMarco has remained brittle and unbendable in his refusal to consider the emotional damage done to millions of homeowners through the GSEs’ efforts to keep the foreclosure machine running at full speed. As a relic of the Bush administration, DeMarco seemingly panders to a Republican agenda that follows lock step behind Mitt Romney’s call to “let the foreclosures proceed.” Unfortunately, it’s an attitude that continues to fuel the Darwinian fires that have decimated communities around the country. Joel Sucher, a filmmaker with Pacific Street Films in Hastings-on-Hudson, N.Y., is working on “Foreclosure Diaries,” a documentary about the financial crisis. This story comes to us courtesy of American Banker .

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WATCH: The Length Of Cover Letters, From Tory Johnson

March 9, 2012

How long should a cover letter be? Career expert Tory Johnson, CEO of Women for Hire , explains how to successfully write a cover letter. See more clips Add Marlo On Facebook: Follow Marlo on Twitter: @MarloThomas Weekly Newsletter Sign up to receive my email newsletter each week – It will keep you up-to-date on upcoming articles, Mondays with Marlo guests, videos, and more! Sign up here

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They’re Throwing Rocks At Accountants’ Cars

March 9, 2012

Taxpayer anger is rising over IRS delays in processing refunds this year. Some tax preparers report being physically threatened or having rocks thrown through their car windshields by angry people, reports The Wall Street Journal.

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GOP Trying To Bury Investigation: House Dem

March 8, 2012

WASHINGTON — Rep. George Miller (D-Calif.) sent a letter to House Republicans Thursday accusing the GOP of trying to keep portions of an investigation by the federal labor board’s inspector general out of public view. According to Miller, the Republican majority of the House Education and the Workforce Committee asked the inspector general to “impose restrictions” on the release of the report, the subject of which is not publicly known. “I respectfully ask that you withdraw any such request to restrict or in any way quash the Inspector General’s report,” Miller wrote to the committee’s majority leader, Rep. John Kline (R-Minn.). “In the interest of our shared oversight responsibilities, please allow him to complete his investigation unfettered.” For the past year, Republicans and Democrats in the House have been butting heads over the National Labor Relations Board (NLRB), the agency tasked with enforcing labor law and mediating between employers and workers. After a string of rulings seen as pro-labor, Republicans went so far as to try to defund the board, accusing it of catering to unions. The investigation in question apparently piggybacks off an earlier investigation by the board’s inspector general, according to Miller’s letter. In that earlier probe, the inspector general looked into whether the board’s lone Republican member, Brian Hayes, had been improperly urged to resign in order to kill the board’s quorum and cripple it. The inspector general found that although Hayes had discussed employment prospects with a law firm that had business before the agency, there was no evidence that Hayes had been unethically influenced to resign. Hayes had threatened to step down, but ultimately stayed on the board and finished out his term. A spokesman for Kline did not immediately return a request seeking comment on Miller’s letter. The text of the letter : March 8, 2012 The Honorable John Kline Chairman Committee on Education and the Workforce 2181 Rayburn House Office Building Washington, DC 20515 Dear Chairman Kline: I learned today that the majority of our Committee reportedly asked the National Labor Relations Board (NLRB) Inspector General to impose restrictions on the release of an investigative report regarding an individual or individuals at the NLRB. It is my understanding that the report you may be seeking to restrict involves a follow-on Inspector General investigation into matters related to a previously released investigative report. That previous report addressed, among other things, questions of enticements made to NLRB Member Hayes to resign last year. As you know, I referred that matter to the Department of Justice for further investigation. I respectfully ask that you withdraw any such request to restrict or in any way quash the Inspector General’s report. In the interest of our shared oversight responsibilities, please allow him to complete his investigation unfettered and produce the results of his work to our Committee and other interested parties. Sincerely, GEORGE MILLER Senior Democratic Member

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Ian Beale: Risky Business

March 8, 2012

A century ago, when women were still fighting for the right to vote in the UK it would be unfathomable that in 2012 Britain would be celebrating award nominations for a film focused on the life of Britain’s first female Prime Minister. Similarly, when Martin Luther King was assassinated in 1968, members of the civil rights movement would have found it hard to believe that less than 50 years later the U.S. would elect an African American man as President. On a very different front, just 10 years ago consumers around the world were buying DVDs to replace our obsolete VHS collection — today we are buying Blu-ray discs to replace our fast-becoming obsolete DVD collection. It’s amazing just how quickly cultural and technological advances are changing the world around us. As with all changes, though there are benefits, there are risks. The very real consequences of failing to keep up with the changing world include security breaches, reputation damage, regulatory fines, and even falling foul of the law. Adapting to the changing world may seem daunting given the speed at which technology is changing, but it is essential. Through our network of audit directors , CEB has identified at least two technology-based key ‘hot spots’ for businesses that were not top of mind for companies last year, demonstrating the speed at which the world, and global business, is evolving and reinforcing the importance of awareness and adaption. 1. Information Security Recent security breaches have included high-profile names such as Nasdaq, where Directors Desk, a web-based system, was targeted, and The Sun newspaper which was hacked to show a fake report of Rupert Murdoch’s death. In addition, the Scotland Yard and the FBI have been victims of the Anonymous hacking group. If these organizations have succumbed to hackers, businesses really cannot be too careful in their approaches to information security. With the EU-wide proposed data protection legislation including fines of up to €1 million, business leaders should undertake a comprehensive review of what data requires encryption, paying particular attention to information sent or stored using cloud technology. In addition to fines, companies should also be mindful of the very real risk of damage to their reputations. This is not just about customer data, important though it is. It is also about protecting your data. Imagine you have a new product idea. You have invested time, money and effort in this idea, and a lack of adequate information security means someone else has access to your data, swoops in and beats you to the punch. You get left behind while your competitor flourishes. Of course there are all sorts of legal angles to pursue, but they require a considerable commitment of time and money. 2. Social Media A related concern is the increase in social media. More than 70 percent of companies are already using social media tools and most plan on increasing their spend in this area. Some companies use social media as a way to interact with consumers, get immediate feedback and monitor consumer conversations about their company, their products and their rivals. In fact, one of our surveys showed that the leading 11 percent of brands have seen positive business results by using social media. However, in order to ensure effective risk management, businesses need to have protocols in place. For example, in the financial services industry, our research shows that among holders of bank products worldwide, more than two-thirds use social media and nearly 30 percent are using social media to communicate and learn about banking-related issues. And there are more opportunities available, while 70 percent of individuals with greater than $5 million in investable assets use social media, only 40 percent of large wealth management firms have an active presence in this space. Internally, companies are using social media sites such as Yammer and SharePoint to drive collaboration and foster an innovative culture . Our research tells us that 94 percent of businesses indicate that they are currently pursuing a collaborative initiative to drive productivity and performance. With such open, dynamic and informal channels, one of the biggest inherent risks is that of breaching security protocols. A lack of understanding among employees about what they could, should, and absolutely should not share can lead to exposure of confidential information to anyone working across an organisational supply chain. Businesses need to communicate a simple, effective policy of ‘do’s’ and ‘don’ts’ when communicating via social networking sites. Employees must be fully aware not only that they are responsible for their actions, but also are responsible for the consequences of their actions. While it seems like these types of actions have been preached for years, companies continue to face significant risk in this area and many still do not have basic protocols in place. Substantial advantages can be gained from this rapid pace of change, but executives cannot afford let their guard down. Information security issues and the risks presented due to social media have been and will continue to be areas of vulnerability for years to come. However, rather than avoid new technology in order to protect themselves from risk, executives should do all they can to protect the organization and then embrace the exciting possibilities these technological advances present.

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Thomas P. Connelly, D.D.S.: Why Is the Dentist so Darn Expensive ?

March 8, 2012

Okay, let’s be frank — the economy just isn’t what it used to be, is it? The mid ’80s and late ’90s booms are in the distant past and today, more often than not, people are struggling to make ends meet. As an NYC Cosmetic Dentist , I see this type of thing a lot. I see people who have little money to afford what they really need in terms of dental treatment. I see teeth getting pulled instead of getting a needed crown (which is almost always a mistake). I see people going years without checkups and cleanings. I hear complains about insurance, and the like. And I hear this question more than any: “Just WHY is going to the dentist so expensive?” Well, I’m going to answer that question today. Now, before I even start, I have to state two things. First: I, as a dentist, am not looking for any sympathy. I “get” that no matter how I explain it, people getting a crown, etc. are still going to think I pocketed $1,000+ for an hour’s work. And it’s their right to think that. And second: I fully realize the reality of things. I will explain that I do not think it’s a smart economic move to forgo a checkup, but I also realize that if it’s a choice between that or food, well, sorry Mr. Dentist. Okay, are we clear? Good, let’s move on. Here’s why going to the dentist costs what it does: • Equipment is expensive — The next time you visit your dentist, look at the amount of equipment he or she has in their office / treatment rooms. It’s far more equipment than most medical physicians have. We have X-ray machines onsite, and every examination room has a drill (with all manner of attachments), water, and suction. It’s all obscenely expensive. Heck, the chair alone costs as much as some cars do. Not to mention that overhead light. My “equipment bill” never, ever goes away. • Changing Technology — Once the above equipment is paid off, it’s generally at the end of its useful life. A good, competent dentist will always invest in the best equipment. Have you noticed how much X-ray technology has changed (your dentist does use digital X-rays, right?) That stuff is shockingly expensive, but I cannot do my job without it. Again, my equipment bill is immense, and it never goes away. • Schooling — We have the equivalent of a Ph.D. The education / college costs in becoming a dentist (much like the costs of becoming a medical physician or a lawyer) are astronomical. That’s partially why your doctor or lawyer or accountant charges the hourly fee they charge as we all have advanced degrees. A big difference in the lawyer/accountant, though, is the above-mentioned equipment that medical facilities have. Sometimes I wish I made what my lawyer makes. • Materials — If you read here regularly, you know we send out for crowns and such (or, there are machines that make them in-house… at a price that will make one choke). That’s expensive — the material cost of your crown is probably more than half the total fee. More than half the total fee, for that little tiny thing. • Personnel — Almost all dentists have a hygienist on staff. And, unlike many other medical professions, there are almost always TWO people working on you at all times — your dentist, and his or her assistant. We have a busy office, to say the least. • Insurance (mine) — Like physicians, I am required to have a large amount of malpractice insurance. And it’s really, really expensive. • Insurance (yours) — I discussed this in another post (and I’m going to revisit it again soon), but dental insurance is awful. It just doesn’t adequately address the costs involved. Again, I’ve discussed the “why”s of this previously, and we’ll talk about it in the future as well, because it’s a hot button issue, and one I’d love to see addressed. In all of the above, I haven’t mentioned the normal expenses that any office has, like rent, heat, lights, advertising, etc. There’s also continued schooling (again, very expensive). Add the entire thing up, and you have an overhead number that is simply amazing in how large it is. I know most people won’t believe me, but nobody becomes a dentist to get rich. Especially a general dentist. (I will admit my specialty, cosmetic dentistry, pays more up front, but also has even higher material expenses.) I go to work every day, just like you do, and trust me, I’m not retiring anytime soon. I grumble at the price of gas as well. When I charge $1,500-$2,000 for a root canal/crown combo that I spend an hour and a half on, I’m making less than my account or lawyer does. I’m also probably making less than the general contractor who redid my bathroom, and my auto mechanic who fixed my Audi (nope, no Porsche here). Again, I am not looking for any sympathy. I love my profession, and it does afford me a solid middle-class lifestyle, and allows me to put something away for later as well. But us dentists are hardly getting rich here. I’ve also done my share of free work (with free meaning I don’t get paid), and I’ll always try and make myself affordable to anyone who wants to visit me. I hope this post was at least informative to you in regards to high dental costs. Until next time, keep smiling. For more by Thomas P. Connelly, D.D.S., click here . For more on dental health, click here .

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Matt Cohen: The Hitchhiker’s Guide to Negotiations

March 7, 2012

The art of negotiations is traditionally taught using fictional scenarios called case studies. My favorite case studies come from pop culture: just because they’re entertaining doesn’t mean that they can’t also be informative. For example, The Dark Knight  shows how knowing your BATNA can help you to  negotiate like Batman and the picture book Don’t Let the Pigeon Stay Up Late is a lesson in negotiation tactics . Today I’d like to examine a great negotiation scene from the beginning of Douglas Adams’  The Hitchhiker’s Guide to the Galaxy  that sheds some light on pre-settlement settlements, the principal-agency problem, and the gap between positions and interests. If any of that sounds overwhelming, don’t panic — there are some good jokes in this case study, too.   The Parties Here’s a fast introduction to the three players in the negotiation: Mr. Prosser:  Mr. Prosser works for the local council. He wants to knock down Arthur Dent’s house with a bulldozer to make way for a new bypass. Arthur Dent:  Arthur has only just learned of the plan to knock down his house. He wants to prevent this from happening and, lacking any other form of recourse, has lain down in front of the bulldozer. Ford Prefect:  Arthur’s friend Ford has no personal stake in either building the bypass or saving Arthur’s house. He only wants to take his friend to the village pub. He is negotiating on behalf of his “client” Arthur.  The Negotiation Mr. Prosser and Arthur Dent have been locked in a standstill all morning. Prosser has tried to convince Arthur to move and allow the demolition to continue by presenting his position through a series of what he considers to be logical arguments, but Arthur has refused to budge. Upon learning of the situation, Ford inserts himself into the negotiation. Ford’s discussion with Mr. Prosser begins with the following exchange: “Has Mr. Dent come to his senses yet?” “Can we for the moment,” called Ford, “assume that he hasn’t?” “Well?” sighed Mr. Prosser. “And can we also assume,” said Ford, “that he’s going to be staying here all day? “So?” “So all your men are going to be standing around all day doing nothing?” “Could be, could be… ” Having clearly defined the standstill, Ford finds common ground between the two parties: Everybody can agree that nothing is going to change. Arthur won’t move and Prosser won’t retreat. As Ford puts it: “Well, if you’re resigned to doing that anyway, you don’t actually need him to lie here all the time do you?… So if you would just take it as read that he’s actually here, then he and I could slip off down to the pub for half an hour. How does that sound?” In short order, Ford proceeds to convince Mr. Prosser to take Arthur’s place in front of the bulldozer. In exchange for this, Ford offers to fill in for Mr. Prosser if he needs to take a break later. What Went Right Ford was able to negotiate a pre-settlement settlement (as coined by James J. Gillespie and Max H. Bazerman.) A pre-settlement settlement temporarily removes the pressure of having to come to a final agreement. For example, when a union and a company agree to extend the strike deadline so that good faith negotiations can continue, they are entering into a pre-settlement settlement.  A pre-settlement settlement often has the benefit of changing the tone of a negotiation since everybody needs to agree that they are progressing towards a negotiated agreement (even if the details still need to be worked out.) What Went Wrong Even if you aren’t familiar with any of the incarnations* of  The Hitchhiker’s Guide to the Galaxy, you probably already figured out that Prosser knocked down Arthur Dent’s house a few minutes after Arthur and Ford went to the pub. Part of the problem was that a pre-settlement settlement depends on the good faith of all parties. Once the house was demolished, Prosser never needed to have any dealings with Arthur ever again, so preserving a trustworthy reputation was unimportant. There was nothing to keep Prosser in front of the bulldozer. There was also another issue in play. Arthur had a 

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Obama Holds First News Conference Of 2012

March 6, 2012

WASHINGTON — President Barack Obama declared Tuesday that diplomacy can still resolve the crisis over Iran’s possible pursuit of nuclear weapons, and he accused his Republican critics of “beating the drums of war.” “Those folks don’t have a lot of responsibilities,” Obama said. “They are not commander in chief.” Tension with Iran, and Obama’s preference for restraint, dominated his first full news conference of the year, held on the same day that Republican Super Tuesday voting was drawing attention as well. On politics, Obama said that higher gasoline prices as a result of Mideast worries would be a bad idea for any president running for re-election, and he also said he was working to expand America’s energy base. He called violence in Syria “heartbreaking” but showed no new willingness for military involvement in that Mideast country. Obama said his critics are forgetting the “cost of war” in their rush to punish Iran and defend Israel, which sees a nuclear Iran as a mortal threat in its Mideast neighborhood. Rhetoric on the right is “more about politics than about trying to solve a difficult problem,” Obama said. He said he is focused on “crippling sanctions” already imposed on Iran and on international pressure to keep that nation from developing a nuclear weapon. Obama said his private meetings with Israel’s Benjamin Netanyahu this week carried the same message as his public pronouncements. And he implied that Israeli pressure for urgent action was not supported by the facts, saying that a decision was not necessary within the next weeks or months. He added that Iranians need to show how serious they are about resolving the crisis. He said there are steps the Iranians can take “that are verifiable” and will allow it to be “in compliance with international norms and mandates.” On gas prices, Obama dismissed as laughable the suggestion by some Republican critics that he actually wants increases. He said no president facing re-election would want to see gas prices rise because of the hardship that would cause to American families, and that he’s asking his attorney general to examine whether speculation in the oil markets is driving up oil prices. In the past month, gasoline prices have risen by more than 28 cents per gallon, making gasoline the most expensive ever for this time of year. On Tuesday, the nationwide average for regular unleaded slipped less than a penny to $3.764 per gallon, ending a string of price increases that began on Feb. 8.

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Houston Financier Convicted Of $7 Billion Investor Fraud

March 6, 2012

HOUSTON — Texas tycoon R. Allen Stanford, whose financial empire once spanned the Americas, was convicted Tuesday on all but one of the 14 counts he faced for allegedly bilking investors out of more than $7 billion in massive Ponzi scheme he operated for 20 years. Jurors reached their verdicts against Stanford during their fourth day of deliberation, finding him guilty on all charges except a single count of wire fraud. Stanford, who was once considered one of the wealthiest people in the U.S., looked down when the verdict was read. His mother and daughters, who were in the federal courtroom in Houston, hugged one another, and one of the daughters started crying. “We are disappointed in the outcome. We expect to appeal,” Ali Fazel, one of Stanford’s attorneys, said after the hearing. He said the judge’s gag order on attorneys from both sides prevented him from commenting further, and prosecutors declined to comment after the hearing. Prosecutors called Stanford a con artist who lined his pockets with investors’ money to fund a string of failed businesses, pay for a lavish lifestyle that included yachts and private jets, and bribe regulators to help him hide his scheme. Stanford’s attorneys told jurors the financier was a visionary entrepreneur who made money for investors and conducted legitimate business deals. Stanford, 61, who’s been jailed since his indictment in 2009, will remain incarcerated until he is sentenced. He faces up to 20 years for the most serious charges against him, but the once high-flying businessman could spend longer than that behind bars if U.S. District Judge David Hittner orders the sentences to be served consecutively instead of concurrently. With Stanford’s conviction, a shorter, civil trial will be held with the same jury on prosecutors’ efforts to seize funds from more than 30 bank accounts held by the financier or his companies around the world, including in Switzerland, the United Kingdom and Canada. The civil trial could take as little as a day. Stanford was once considered one of the wealthiest people in the U.S. with an estimated net worth of more than $2 billion. But he had court-appointed attorneys after his assets were seized. During the more than six-week trial, prosecutors methodically presented evidence, including testimony from ex-employees as well as emails and financial statements, they said showed Stanford orchestrated a 20-year scheme that bilked billions from investors through the sale of certificates of deposit, or CDs, from his bank on the Caribbean island nation of Antigua. They said Stanford, whose financial empire was headquartered in Houston, lied to depositors from more than 100 countries by telling them their funds were being safely invested in stocks, bonds and other securities instead of being funneled into his businesses and personal accounts. The prosecution’s star witness – James M. Davis, the former chief financial officer for Stanford’s various companies – told jurors he and Stanford worked together to falsify bank records, annual reports and other documents in order to conceal the fraud. Stanford had wanted to testify and jurors were told he would do so, but his attorneys apparently convinced him not to take the witness stand. Stanford’s attorneys told jurors the financier was trying to consolidate his businesses to pay back investors when authorities seized his companies. Stanford’s attorneys highlighted his work to build up Antigua’s economy as well as his philanthropic efforts on the island. Stanford, the largest private employer on the island nation, was widely known as “Sir Allen” after being knighted by Antigua’s government. The financier’s attorneys accused Davis of being behind the fraud and of lying so he could get a reduced sentence. Davis pleaded guilty to three fraud and conspiracy charges in 2009 as part of a deal he made with prosecutors. Three other indicted former executives of Stanford’s companies are to be tried in September. A former Antiguan financial regulator accused of accepting bribes from Stanford was also indicted and he awaits extradition to the U.S. The financier’s trial was delayed after he was declared incompetent in January 2011 due to an anti-anxiety drug addiction he developed in jail and he underwent treatment. He was also evaluated for any long-term effects from being injured in a September 2009 jail fight. Stanford was declared fit for trial in December. Stanford and the former executives are also fighting a U.S. Securities and Exchange Commission lawsuit filed in Dallas that makes similar allegations. ___ Follow Juan A. Lozano at http://www.twitter.com/juanlozano70

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Nelson Davis: A Ballet Dancer’s Lesson

March 6, 2012

A few days ago I read an interview with the famed Russian ballet dancer, Mikhail Baryshnikov, and one of his comments sent me into an hour of business thinking. It may be the first time that a person often seen in public wearing tights has given me a business lesson! Just sitting in the audience watching world class or even fine amateur dancers I’m impressed by their elegant form and disciplined movements. I used to wonder how long it took them to master those soaring leaps and dizzying spins. In truth, my first adult romantic relationship was with one of those dancers and she provided insights into a world of hard work that successful entrepreneurs would likely understand. The dancers have to be relentless in shaping their enterprises (bodies and minds) in pursuit of the results they envision. In the interview Baryshnikov said, “In dance you are trained to identify the wrong stuff and get rid of it: the line of your body, or a clumsiness of movement.” Wow, I said. These days I’m working hard to take my business into several new product areas and it has been a struggle at times. But those few words from a world famous dancer gave me a clue as to what you and I as business owners have to do with things that don’t serve us well. Which of your products, services and people are generating the most sales? What software programs on your office computer system are being used the most and proving to help you run the business better? What customers or clients do you rate as being the best and most enjoyable to work with? Tom Wolfe’s book The Right Stuff said that the first American astronauts had to possess the mindset and skills known as the right stuff to make it into the space program. I love the notion from Mikhail Baryshnikov that if I get rid of the wrong stuff, the desired right stuff is what will remain! Years ago I read about a business principle that helped sort out the good stuff from that which was destined for the trash bin, thrift shop or another job. If you’ve never heard of the Pareto principle (the 80-20 rule) it is worth paying attention to. It is named after an Italian economist, Vilfredo Pareto, who back in 1906 noticed that 20% of the pea pods in his garden contained 80% of the peas! Like Pareto, the Occupy movement in our country will likely rally around the idea that 80% of our resources are owned by 20% of the population. In business, it makes sense that 80% of your sales likely come from 20% of your clients. I suggest that you and your employees devote one hour per day for at least one week having a frank and honest discussion about what has become the wrong stuff in your business. For example, I have a small client that has so many rules and procedures for creating a contract that I regularly refer to them as our PITA customer. You can easily guess the meaning of that acronym. The energy sponge clients deserve your help in finding another place to spend their money. In the same interview, Baryshnikov also said that “In the second part of life, you get rid of stuff you’ve accumulated.” That is great advice. There may be a product or service that served us well and that we lovingly hold onto for old times sake. You have to decide if it’s time is near an end. I remember the day when we stopped offering VHS tapes of our TV shows. Clients welcomed the move to DVDs, beginning with the fact that they were easier to store. Last year I ended a successful 21-year run of our weekly small business show, Making It ! on broadcast TV because the marketplace pointed to a different distribution method, the Internet. The transition is fraught with many of the same challenges as getting a raw startup off the ground, but I’m excited about the prospects. Whether in the world of dance or your business, it all comes down to your personal vision and its clarity. Do you really need 2000 square feet of expensive office space or the shop on Main Street to deliver you product or services? Is that the wrong stuff to shape the business as it exists in your vision? Those things may be exactly what you need but deciding what is right and dispensing with what isn’t right is the key to moving forward and upward. Those decisions are often difficult, but necessary. Another legendary artistic figure’s advice sends us down the same path as Baryshnikov. Michelangelo said, “I saw an angel in the block of marble and I just chiseled ’til I set him free.” Make this a week to take your hammer and chisel to the wrong stuff.

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Interesting Health Care Initiative Picks Up Where Obama Left Off

March 6, 2012

SALEM, Ore. — Pregnant with her seventh child and desperate to kick a meth addiction, Madeline Hutchinson turned to a program from the local Medicaid provider that connected her with a mentor and other support that she said helped her get off drugs. Emmanual, now 2, was born healthy. “We need mentors. We need advocates,” Hutchinson said. “We need someone that’s going to come along and say, `This baby needs to be clean. And we’re going to show you how.’” There’s a smattering of preventative care programs like this around Oregon, and not just for addicted mothers. But there hasn’t been a statewide push – until now. Oregon Gov. John Kitzhaber last week signed a law that will create new regional entities, called coordinated care organizations, which will be able to spend money on programs like the one Hutchinson credits with turning around her life. Kitzhaber says the plan will improve care, reduce costs and serve as a model for the rest of the nation. But critics say that if the program works, more people will use health care benefits and costs will rise. The coordinated care organizations will be responsible for looking after Medicaid patients in their area. Local organizations will determine their exact models. But each will be a holistic approach that addresses every aspect of health – mental, medical and dental – with a focus in particular on people with mental illnesses, addictions or chronic conditions like diabetes, heart disease, asthma and kidney failure. The idea is to target the costliest patients and provide up-front care that can prevent emergency room visits and other expensive interventions, and thus save Medicaid a lot of money. Oregon has long been a pioneer in finding new approaches to health care, and Kitzhaber – a former emergency room doctor who is passionate about overhauling the system – believes the new law could solve several problems. Officials say that if all 50 states adopted Oregon’s changes, the federal budget would save more than $1.5 trillion over the next 10 years – more than Congress’ failed “super committee” was trying to save over the same time period. “I’m convinced … the federal government is going to have to do something drastic about the cost of health care,” Kitzhaber said. “And it’s not going to be driven by how you keep people healthy. It’s going to be driven by how do you keep from defaulting on the national debt, which is two completely different conversations.” Long before the Oregon Legislature passed the law in February, Kitzhaber took his idea to Washington, D.C., to present it to Obama administration officials, and he caught their attention. “There are several states thinking about this kind of approach,” said Cindy Mann, a deputy administrator at the federal Centers for Medicare and Medicaid Services. “This is definitely a time when everybody can be learning from each other.” In some ways, Oregon’s effort is an attempt to pick up where Obama’s health overhaul leaves off. While Obama expanded access to care, his Affordable Care Act leaves it largely up to the states to find a plan for lowering the cost and improving the quality. But there is no guarantee the new Oregon law will do exactly what Kitzhaber wants. A January report by the Congressional Budget Office found that previous projects experimenting with coordinated care for Medicare patients did not provide conclusive evidence of savings. “On average, the 34 programs had no effect on hospital admissions or regular Medicare expenditures,” according to the report. And the ability to usher in widespread cost savings across the health care system will depend on whether the program can expand beyond Medicaid. Even if it works in Oregon, there’s no guarantee that other states with different cultural and political environments would see the same results. Oregon state Sen. Fred Girod, a conservative Republican and a dentist, said he doesn’t think the plan would actually save money because he says it will increase consumption of health care. “Are we going to get more for less?” Girod said in a committee hearing. “I’ve been in the Legislature for a long time, I’ve been promised that I don’t know how many times and I have yet to see it.” Proponents dismiss the CBO report, saying their plans go far beyond the limited experiments that were studied, and point to data from projects in Oregon and elsewhere that more closely align with their plans. A state-commissioned report found that significant savings were possible from eliminating duplicated tests, preventing hospitalizations and other techniques. Oregon’s changes will focus on the neediest, costliest patients. Many of them are on both Medicare, primarily for the elderly, and Medicaid, primary for the poor. Various funding streams from all levels of government for mental, physical and dental care will be pooled into a global budget. Each coordinated care organization gets a share of that budget and will have broad authority to spend the money as it sees fit. Successful organizations will be rewarded with additional cash. Local officials around Oregon have already begun setting up coordinated care organizations in various parts of the state, and some are expected to be up and running on July 1. Supporters of the new law say a project in central Oregon shows that it can work. After identifying 144 patients who were frequently visiting the emergency room – at least 10 times in a year – a group of health providers found that most had mental health conditions and more than half had no primary care provider who could treat simple disorders outside the ER. By creating care plans, assigning case managers to help them navigate the health care system and embedding mental health providers at the doctor’s office, emergency room visits were reduced by 49 percent in six months. Robin Henderson, a psychologist who is director of behavioral health services for the hospital in Bend, Ore., says the program has promise, “It’s an interesting shift in philosophy to start to look at how you care for the whole person.”

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Camilla Webster: Banking on Social Media: The Right Experts Count

March 5, 2012

Just the other day, a high net worth fund manager said to me, “I won’t tweet. I won’t do it. I earn $1,000 an hour. Taking time to tweet would be a waste of time for me.” My first reaction was “Oh no” we must all tweet for ourselves. Certainly that has been the party line for Tweeters I’ve met on blogger nights, but I had to consider said executive was not in the media and just might be right about this, and that generated another thought: Tweeting is a waste of time for the wealth manager but it is not a waste of time for the wealth management business. It may be a waste of time for the lawyer buried in term sheets or appellate briefs, but it is not a waste of time for the independent law firm itself. You see one of the biggest challenges for a private business in traditional areas like finance and law even in a networking hot house like New York City, is it’s extremely challenging to grow a client base and to consistently send out a brand message to new clients, younger clients and new moneyed clients. Social media is a great modern response to this age old conundrum. But you can’t just hire any young thing if you’re in the business of selling advice and strategy and here’s why: you devalue your brand, new potential clients lose trust and you run the risk of looking shoddy. One of the ongoing trends as social media has spread, is for companies to engage tech experts who generate fake followers, and spread information via Tweetdeck and/or Hootsuite. However, in a business like finance, law or say a medical practice this seems like a passive approach when the dissemination of information is this type of business is the owner’s most valuable asset. We have seen in the media business “social media editor” and “social media expert” take on a new status at newspapers and TV networks. Their social media experts are serious journalists handling hundreds of stories over the Twitterverse and other platforms. They publish breaking news updates, press releases, engage in Twitter fests; and share all sorts of information that cannot be left to an algorithmically driven social media service. I advise taking a page out of their book and use the media effectively and approach it seriously. If you want to create new value and reach beyond the outdated Industrial Age landscape for traditional enterprise, while maintaining and increasing the value of your brand, I strongly advise hiring an expert to communicate over social media for your business, particularly if you own a private company. This expert must actually be an expert in your day to day business, not a tech superstar. Do not waste your money on a college student with a social media start-up or even a major social media business if you run or own a company that depends on your advice i.e., law, finance, healthcare. The level of your messaging must reflect the sophistication of your business. If you have a law firm, hire a lawyer to tweet or a paralegal or a former associate: somebody who absolutely understands the law and the cases that cross your desk and what a link to a supreme court case would say about your firm. A partner in an independent firm, engaging a social media expert recently said, “If you did not understand the law I wouldn’t do this with you, it [the social media approach] has to be in line with what I do and you need to understand that.” If you’re in finance, it’s not hard to find an out of work experienced Wall Streeter or top financial journalist who understands how to comment on the important finance stories of the day, wealth management studies and key institutions. They will know the banks, traders and market movers to follow. It’s most important that the person has the appropriate degrees and expertise to language in 140 characters or less as the voice of your business and your company in the social media universe. They are in fact often talking to new clients, building relationships and acting as the voice of your company in social media discussions and you should have a general understanding of how this works yourself. Use your computer help desk to set up the basic Facebook, Twitter, Google+ and more accounts. In New York I recommend using Juicy Orange if you are in the process of designing your website and accounts. I advise you use Cartwheel if you’re looking for overall computer and mail support. If you’re out of work in a certain field that requires multiple degrees and years of experience, I may have just found you a new small business to start — hello, social media editor — get out there and find some clients.

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This CEO Made How Much Last Year?

March 5, 2012

How much did private equity chief Stephen Schwarzman make last year? Depends who you ask. The Wall Street Journal and Reuters both reported that Schwarzman earned approximately $213.5 million in compensation in 2011. Businessweek estimated that the founder and longtime CEO of Blackstone Group made $148.5 million. The number is closer to $750 million, said Paul Hodgson, an analyst at GMI Ratings who studies executive compensation. Hodgson wrote about the wide discrepancy in a blog post on Forbes.com on Friday. He said he arrived at his higher estimate by digging through Blackstone’s filings with the Securities and Exchange Commission, which he said buries a lot of the relevant detail about Schwarzman’s compensation package in footnotes. Blackstone argued that the money in question is cash that Schwarzman received from his ownership stake in the firm and doesn’t count as compensation in any traditional sense. “It is totally absurd to say that Steve ‘earned’ $750 [million] in compensation last year or even came close to it,” a Blackstone Group spokesman told HuffPost, via email. “The majority of that sum represents his ownership interest in Blackstone that has vested over four years.” As the debate intensifies over how much private equity executives like Schwarzman should be paying in taxes, their compensation is under newfound scrutiny. In late January, Mitt Romney, who once ran the private equity firm Bain Capital, revealed that he paid a 13.9 percent tax rate in 2010 and an estimated 15.4 percent in 2011. Last month, President Barack Obama’s administration unveiled a plan , backed by congressional Democrats, to tax private equity profits as income up to 35 percent, rather than as investment at a rate of 15 percent. The industry’s not rolling over. In his blog post, Hodgson noted Schwarzman’s now-famous 2010 comments in response to the demand for a higher tax rate: “It’s a war. It’s like when Hitler invaded Poland in 1939,” Schwarzman reportedly said. “Now, I know he apologized for this remark, but with pay at this level we can understand his concern,” Hodgson wrote. Hodgson said he arrived at his figure by including the amount of money Schwarzman made from shares in Blackstone that became eligible for cash redemption in 2011 -– a figure that, he said, totals around $637 million. This figure, he argued, is the most accurate reflection of Schwarzman’s total Blackstone-related compensation. Hodgson criticized the SEC for not requiring private equity firms to more clearly report these earnings. “The SEC’s disclosure requirements don’t allow shareholders to accurately assess how much compensation is being received by an executive,” he told The Huffington Post. The SEC defended its filing requirements. “Different people may be looking for different information from our comprehensive executive compensation disclosure requirements,” spokesman Jon Nester wrote in a statement. “Information about stock and option compensation realized during the year … are required to be disclosed in a separate, standalone table.” While it can be difficult to accurately assess executive compensation in other industries, this discrepancy highlights the particularly complex business of determining pay in a world where the bulk of executive compensation comes from a variety of sources (from carried interest, to money management fees, to dividend payouts, to ownership in the firm itself) beyond traditional salary. Which, in Stephen Schwarzman’s case, was $350,000 in 2011.

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Deborah Howlett: Raising the Minimum Wage: A Win-Win for New Jersey

March 5, 2012

Can you imagine trying to pay the bills and save for the future on $15,080 a year? That’s all a minimum wage job in New Jersey brings in — a dollar amount that’s well below the federal poverty level for a family of three. Getting by on that much — to say nothing of getting ahead — is especially tough in New Jersey, where the cost of living is higher than all but a few other states. But while making sure hard-working New Jerseyans earn enough to support their families is a worthy goal on its own, it’s not just families with low-wage breadwinners who benefit from an adequate minimum wage. We all do. Raising New Jersey’s minimum wage to $8.50 an hour from $7.25 could inject as much as $1.5 billion into the economy. It would boost the spending power of families struggling to pay utility bills or buy new school clothes for their children. That means greater demand for goods and services throughout the economy. The end result? Many businesses will make more money and hire more workers. The economic sparks created by raising the minimum wage can be intense. For every $1 increase in the hourly minimum wage, a family will spend $2,800 more a year, according to a 2011 study by the Federal Reserve Bank of Chicago . A boost in New Jersey’s minimum wage could benefit 460,000 workers who earn less than $10 an hour, a 2008 analysis by New Jersey Policy Perspective showed. That’s because when the minimum wage is increased, a lot of people making more than the minimum — but still not very much — get raises too. We should also prevent future wage erosion by tying the minimum wage to inflation. For example, if New Jersey’s 1968 minimum wage of $1.40 had increased at the rate of inflation, it would be $9.35 today, not $7.25. Despite what the critics say, raising the minimum wage will not make New Jersey less competitive. New York City Mayor Michael Bloomberg and New York State Assembly Speaker Sheldon Silver are pushing the same increase to $8.50 an hour across the Hudson River. Connecticut lawmakers have introduced legislation to raise that state’s minimum wage, already $8.50 an hour, to $9.75. Nor will raising the minimum wage cost jobs. New Jersey’s 1992 minimum wage increase didn’t result in job loss, even though neighboring Pennsylvania kept its rate stable. Surveying more than 400 fast-food restaurants, a 1994 study by economists at Princeton and UC-Berkeley found that employment actually grew at New Jersey fast-food restaurants. A follow-up study in 2000 yielded similar results. The plain truth is that a minimum wage increase would benefit all of us, without harming business. That win-win scenario is exactly the sort of policy the state should embrace.

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Why Generic Biotech Drugs May Not Be Coming Anytime Soon

March 5, 2012

* Biosimilars seen priced 10-40 pct below branded biotech drugs * Intellectual property, regulatory uncertainties remain * FDA to hold May 11 public hearing By Deena Beasley LOS ANGELES, March 5 (Reuters) – One of the pledges of the Obama administration’s healthcare overhaul was to enable cheaper copies of expensive biotech drugs, but the savings may not be as deep or come as quickly as hoped. Healthcare companies and industry experts say questions over how the market will work and the specter of patent litigation mean robust competition for generic biotech drugs might wait until the end of the decade. The regulatory requirements – which could force drugmakers to spend more money on testing – could mean eventual cost savings for payers of as little as 10 or 20 percent per treatment. That discount is paltry compared with savings of up to 90 percent for traditional generic medicines sold at U.S. pharmacies once the patents on brand-name pills expire. U.S. health regulators issued their first draft of guidelines governing that process in February. Drugmakers and industry experts say the proposed rules still fall short of providing a clear understanding of the best way to develop this market. “It should be the next bolus of growth for the generic drug industry and we need to fight to get a substitutable, interchangeable biogeneric marketplace,” said Heather Bresch, chief executive officer at Mylan Inc, the world’s third-largest generic drugmaker. “We don’t have that today.” The U.S. healthcare law in 2010 stipulated that regulators establish a process for approving lower-cost copies of biotech drugs – often referred to as “biosimilars” because they are not made from the same living cell line as the original drug. It drew upon a 2008 estimate by the Congressional Budget Office that the United States would save $25 billion from the use of biosimilars over 10 years. “The CBO anticipated the first biosimilar to come this year in their score of savings impact,” said Jonah Houts, senior director of government affairs at pharmacy benefit manager Express Scripts Inc. “That is not likely to happen.” Biologic medicines that treat conditions such as cancer and rheumatoid arthritis are derived from living organisms such as proteins and tend to be injected. The innovative drugs – first introduced in the 1980s – can cost tens of thousands of dollars a year. Copying them, while ensuring safety, is much more complicated, and expensive, than making conventional chemical-based compounds. HIGHER BAR FOR INTERCHANGEABLE DRUGS With annual sales near $150 billion, the U.S. biotech drug market is a juicy target for companies that have seen lower-cost generics take a huge share of the traditional prescription drug market. By 2015, U.S. sales of biosimilars are expected to reach $1.9 billion to $2.6 billion, according to IMS Health. The approval process for generic versions of chemical-based pills has existed for nearly 30 years. The U.S. Food and Drug Administration’s new guidelines are meant to provide a similar “abbreviated pathway” for biotech medicines. But the complexity of biosimilars has led to a drawn-out process and more questions posed by the industry. For example, the FDA said that manufacturers could also seek to have their drugs classified as “interchangeable,” which would allow a biosimilar drug to be automatically dispensed by a pharmacy without first checking with the prescribing doctor. The label could also lead to a deeper discount for patients. The FDA is the only health regulator in the world that has been given the authority to make that classification – as stipulated under the healthcare law. It is accepting public comment through early April and will hold a hearing on May 11. For a biosimilar to be considered interchangeable, the FDA said it would require additional clinical studies, which would increase research costs for manufacturers. Drugmakers would need to show that switching back and forth between a brand-name biologic drug and its copy does not compromise patient care. “Sponsors of those drugs have to consider how much to invest,” said Gillian Woollett, vice president of FDA regulatory strategy and policy at industry consulting firm Avalere Health. “An interchangeable would be considered more of a generic drug … the idea would be to gain market share in exchange for lower price.” If the drugs are not deemed interchangeable, doctors will need to issue prescriptions specifically for the biosimilar version, as opposed to the brand drug it is copying. That will require companies to spend more on marketing costs to promote their biosimilars. The FDA’s guidance “could have been written in a way that made interchangeability easier to achieve,” said Express Scripts’ Houts. Hospira Inc, which has a biosimilar to Amgen Inc’s Epogen anemia drug on the market in Europe, expects to launch its U.S. product in mid-2015. It will not be considered interchangeable with Epogen, said chief scientific officer Sumant Ramachandra. “It is likely FDA will avoid interchangeability in the first few years of the market, but that does not negate the possibility they will be approved towards 2020,” Sanford Bernstein analyst Ronny Gal said in a research note. 20 PERCENT, NOT 90 PERCENT Hospira said U.S. biosimilars are likely to sell at discounts of 20 to 40 percent from the branded competitors. Loreen Brown, senior vice president at distributor AmerisourceBergen Corp’s pharmaceutical consulting service, puts the discount at 10 to 20 percent. The magnitude of the discount for biosimilars, even if they are interchangeable, will depend on how many competitors reach the market and the costs to make the medicines. “Manufacturers are going to have to promote these products just like the branded products,” Brown said. The first biosimilar versions of top-selling biologic drugs may not even use the FDA’s new process to reach the U.S. market as companies contemplate simply pursuing a standard drug approval process instead. A standard drug application and a single-usage approval could be adequate for biosimilars with just one use, but may not make as much sense for products used to treat a variety of illnesses – such as different types of cancer. The biosimilar application process includes another requirement that could entangle drugmakers. A company seeking to make a generic version of a medicine will need to share its application with the brand-name manufacturer, a potential source of arguments, or even patent lawsuits, over how the generic was made. U.S. patent expirations for biotech drugs will occur in 2013 for Epogen and another Amgen drug, white blood cell booster Neupogen. The FDA said in early February it had held discussions for a total of 35 potential biosimilar products, but had yet to receive an application. Hospira has not yet decided whether to opt for a standard new U.S. drug application for its version of Epogen as opposed to the process outlined by the FDA’s recent proposed rules, Ramachandra said. The company puts the cost of getting a biosimilar drug approved for the U.S. market at $100 million to $200 million per product, compared with drug industry estimates of about $1 billion for new brand-name medicines. “It’s going to be a costly process. It’s going to be a slow process,” Woollett said. (Additional reporting by Bill Berkrot, Lewis Krauskopf and Ransdell Pierson in New York; Editing by Michele Gershberg and Matthew Lewis)

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Ex-Wrestling Exec Taps Big Donors For Senate Bid

March 5, 2012

NEW HAVEN, Conn. — Former wrestling executive Linda McMahon is counting heavily on supporters from affluent Greenwich in her Senate bid, collecting more than 40 percent of itemized campaign contributions from donors with ties to her adopted Connecticut hometown. McMahon, a Republican who lost the 2010 Senate race to Democrat Richard Blumenthal, vowed to make fundraising a bigger part of this year’s campaign after taking criticism from both parties for spending $50 million of her own money on the failed bid. In the final three months of last year, she raised more than $300,000, nearly triple the amount she collected in her entire first run. Contributors with Greenwich ties provided McMahon with more than $116,000, or nearly 43 percent of her total of nearly $273,000 in itemized contributions of more than $200, according to an analysis by The Associated Press. McMahon is far from alone in tapping donors from Greenwich, which is about 32 miles from New York City and ranks among the wealthiest towns in America with a median household income of about $97,000. Her main rival for the Republican nomination, former U.S. Rep. Chris Shays, raised $96,000 from Greenwich, or 26 percent of his total of $370,000. U.S. Rep. Chris Murphy, a Democrat seeking the Senate seat, has led all candidates by raising $2.7 million in itemized contributions. He raised $223,000, or about 8 percent, from contributors with Greenwich ties. McMahon, a North Carolina native, moved to Greenwich in the 1980s and built a wrestling empire with her husband, Vince McMahon, serving as CEO of WWE, formerly known as World Wrestling Entertainment, until stepping down in 2009. As a political candidate, she has tapped wealthy supporters well beyond Greenwich. McMahon has received $5,000 from real estate mogul Donald Trump, $5,000 from retired General Electric Chairman Jack Welch and his wife, $7,500 from the chairman of Morgan Stanley, $6,000 from the president of a luxury car dealer in Greenwich and $1,000 from a high-end clothing store executive in Westport. She received $96,450 from contributors who described themselves as corporate presidents, CEOs, vice presidents, executives, chairmen or business owners. That’s 35 percent of her total. Shays received $59,000 from corporate executives and owners. That’s 16 percent of his total. While most candidates seek larger contributions from the wealthy, affluent candidates have an advantage, said Craig Holman, government affairs lobbyist with Public Citizen, which advocates public financing of campaigns. “Wealthy people tend to hang out with other wealthy people,” Holman said. “It’s just the wealthy candidates have an inside track on that because of their networks. A non-wealthy candidate very frequently does not actually hang out at the expensive country club and make the networks with wealthy contributors.” McMahon raised $6,750 from six unemployed contributors and $225 from a carpenter. She also raised $47,000 in smaller donations of less than $200. McMahon’s campaign said she raised more than $300,000 from 1,085 donors in the final three months of last year and that more than 80 percent of the contributions came from Connecticut residents. “These 1,085 new shareholders join our growing grassroots organization of Team Linda members who have contributed their time, energy and effort to spreading our positive message of getting Connecticut back to work,” the campaign said in a statement that noted some contributions were as small as $10. Richard Hasen, an expert on money in politics at the University of California at Irvine School of Law, said candidates often count on affluent donors early on to show they are serious contenders. But he said early reliance on the wealthy also poses concerns. “If you believe in leveling the playing field, there’s something troubling about the fact that what makes a candidate be taken seriously is their ability to raise money from the wealthy,” Hasen said. “That can both skew the kinds of positions the candidates might take towards the wealthy and it also gives more power to the views of those with wealth who can afford to write those checks than to others.” McMahon continues to rely heavily on her own money, loaning her campaign $780,000. She also lists contributing $642,000 of her own money in cash and campaign expenses. She raised only $5,500 from three WWE employees. But she netted more than $20,000 from 16 employees of Morgan Stanley, including $7,500 from John Mack, who retired at the end of the year as chairman of the investment bank. McMahon raised $187,550 from within Connecticut, or 69 percent of her total itemized contributions. Shays raised about $300,000 within Connecticut, or 81 percent of his total.

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Phaedra Ellis-Lamkins: Don’t Derail Transportation Jobs

March 5, 2012

Everyday, millions of unemployed Americans anxiously wait for their chance to get back to work. And as gas prices skyrocket, millions more are desperately searching for affordable, reliable ways to get to their jobs each day. Congress has a chance right now to pass a transportation bill that will do more to get Americans back to work than just about anything else they’ve proposed. They have a chance to make us all safer on our daily commutes, and to protect our lungs from the pollution that causes asthma and heart disease and leads to millions of dollars in unnecessary health care costs each year. They have a chance to give us better transit choices that will make our lives easier. America’s transportation system is in desperate need of repair. Our bridges and roads are crumbling beneath us. In fact, roughly one out of every four bridges in this country is not safe. The last thing we need is for our aging infrastructure to cause a disaster — we haven’t forgotten the devastation of the bridge collapse in Minnesota a few years ago — an accident that could have been prevented. We all know we have work to do to make sure our roads, bridges, rails and buses are safe and efficient. But if we do the job right, we can lift people out of poverty and slash pollution while we’re at it. As we rebuild and repair our transportation system, we need to make sure that all Americans have access to the jobs that are created. That’s why Green for All has designed a program that creates pathways to the middle class by helping people gain valuable construction training and experience. By encouraging the hiring of local workers for transportation projects, the Construction Careers Demonstration Program keeps dollars close to home and helps revitalize communities. It also helps rebuild the middle class by creating pathways to good careers. Apprenticeships give new workers a foothold in the industry and a chance to learn new skills. The program also creates opportunities for Americans that need them most — including young people, veterans and homemakers re-entering the workforce. It also encourages using small local businesses to do contract work whenever possible. Senator Gillibrand (D-NY) has worked to include the Construction Careers program as part of the Senate transportation bill — provisions that will go a long way towards reviving our communities. But by and large, our elected officials have failed to produce a bill that will do anything but fill the coffers of the oil industry. They’ve dropped the Safe Routes to School program — designed to help communities that want their kids to bike and walk without fear of being hit by cars. They’ve gutted funding for public transit like rail and buses, making it harder for people to find reliable, cost-effective ways to get to their jobs. If Congress is serious about putting Americans back to work — if they’re serious about reviving communities, keeping our roads and bridges safe, and protecting our kids and our health — they’ll pass a transportation bill that America needs now. If they want joblessness to keep climbing, small businesses and neighborhoods to wither, traffic accidents to rise, and more and more kids to struggle with asthma, they’ll keep on doing what they’ve been doing. We need our representatives to stand with the American people — not Big Oil — and make transportation choices that create safer, healthier, communities and pathways into middle class jobs. Tell your representative that you want a smart transportation bill that supports hardworking Americans, not Big Oil.

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