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Archive for the ‘Business’ Category

I’ve long wondered why some big company doesn’t set up shop in Detroit. Real estate is cheap. You’ve got a major airport, freeways, a football, basketball and baseball team and a large downtown full of office space. Seems like a great opportunity.

Well we know that no one has done that yet but here’s a great article in the New York times about small businesses setting up in Detroit. A creperie is among these new small businesses. Who would have thought?

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You find out the most interesting things in articles detailing the fall of financial institutions. I found out this about failed bank Washington Mutual (WaMu):

“Someone in Florida had made a second-mortgage loan to O.J. Simpson, and I just about blew my top, because there was this huge judgment against him from his wife’s parents,” she recalled. Simpson had been acquitted of killing his wife Nicole and her friend but was later found liable for their deaths in a civil lawsuit; that judgment took precedence over other debts, such as if Simpson defaulted on his WaMu loan.

“When I asked how we could possibly foreclose on it, they said there was a letter in the file from O.J. Simpson saying ‘the judgment is no good, because I didn’t do it.’ “

Well you know, WaMu really got what they deserved.

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Founder Visas

Here’s another interesting article on Slate talking about a proposal to create an immigration classification for entrepreneurs.

He wants the government to create a new immigration class for founders of new firms. Every year, Graham’s “Founder Visa” program would let in 10,000 immigrants who’ve shown a plan for starting a new company. These people would be barred from working at existing companies—in other words, they wouldn’t be “taking American jobs.” Instead, Graham argues, they’d be creating jobs: “If we assume four people per startup, which is probably an overestimate, that’s 2,500 new companies. Each year,” Graham writes. “They wouldn’t all grow as big as Google, but out of 2,500 some would come close.”

I have to admit that the above proposal sounds good. One of the reasons I’m reluctant to embrace immigration reform in general is that usually the reform is focused on increasing the immigration numbers for desirable high-paying jobs. A lot of people assume talks of reform are focused on the undesirable jobs that Americans don’t want; that isn’t the case. It’s about keeping wages artificially lower than they would be in the tech industry and it’s about an assumption that Americans are not as capable of performing high-tech jobs as foreigners.

I have known many a Computer Science graduate in America who have not been able to find work. Is that a problem with our education system in America? I believe it almost certainly is. Again from the article:

Why do American tech firms need so many immigrant employees? Because there aren’t enough native workers to fill the jobs tech companies need. According to the National Science Foundation, about 60 percent of doctorate degrees in engineering at American universities are awarded to foreign students who are in the country on temporary visas (PDF). And foreign workers are responsible for some of the tech world’s signature innovations.

I think it’s an important question to ask why our American schools can only send students that make up only 40% of the doctorate degrees in engineering at American universities. I’m making the assumption that 60% of the foreigners are more qualified than their American counterparts, and I’m asking why that is. Can we acknowledge that our education system may have flaws.

It justs strikes me that if we give up on Americans ever fulfilling the American dream then we do our country a disservice.

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I haven’t read this myself yet, but Jake highly recommends this Rolling Stone article on the Goldman Sachs influence in various bubbles in the U.S. economy.

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With United Airlines announcing they will charge extra-wide passengers with an extra seat (if it’s available), William Saletan comes up with a pretty good solution.

Two days ago, I spent seven hours on a United flight to London. The passenger in front of me was reclining the whole way. To stretch my legs, I had to angle them diagonally.

But if your legs don’t fit, United doesn’t ask you to buy an extra seat. It offers you a deal. On Monday, I’m going to fly back to Washington. I’m sitting here looking at my return flight online, and United is inviting me to buy “Economy Plus” (“the comfort of extra legroom near the front of the Economy cabin”) for “as low as $69.00.” That’s about one-fifth the price of the ticket.

How much leg room would I get? “Up to five extra inches,” says the company.

Why shouldn’t fat people have a similar option? Most of them don’t need two seats side-by-side any more than we long-legged guys need two seats front-to-back. Like us, they just need a few extra inches.

If United can swap out a row of three normal coach seats for two wide ones, two fat people should be able to buy those seats for an extra 50 percent instead of an extra 100 percent.

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The agency liquidating Bernard Madoff’s brokerage says the $2.6 billion it has on hand is enough to satisfy all legitimate claims by victims of the money manager’s $65 billion Ponzi scheme.

This is good news, right? I was flabbergasted by the following:

Some Madoff investors are up in arms about SIPC’s decision, announced by Picard at a Feb. 20 creditors’ meeting, to limit victim claims to “net equity” — cash invested minus sums taken out. That formula ignores profit reported on customer brokerage statements for the past 20 years, gains that were fictitious because Picard found no evidence Madoff had made any trades or profits going back decades.

I can’t think of any reason why the victims should be compensated with the money that never existed. Am I cold-hearted? I am not in any way saying that the Madoff victims are responsible for their victim-hood, but let’s be honest there were many people who invested and lost money in the past year from completely legitimate investment funds. Rewarding people who participated in a scheme, granted unwillingly, makes no sense. Why should they profit when many others didn’t.

A lot of people have blamed the victims of Madoff for being greedy. I think that is unfair to people who have clearly suffered quite a bit by the selfishness of this man. Now, I’m thinking that maybe they are a little greedy.

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How does such a large Ponzi scheme work without attracting attention? For insight into the inner workings of a highly functional yet dysfunctional office, this article is an amazing read detailing the Bernard Madoff scandal. I’ve worked in an office with an eccentric CEO, and I know Jake has too. What if all the weirdnesses actually add up to outright fraud? It blows my mind.

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The GFM

Over the weekend I was having a lot of conversations about the “Global Financial Crisis.” I thought the Global Financial Crisis is much like Weapons of Mass Destruction — a mouthful of a phrase that surely could be shortened like WMD. The obvious answer would be GFC, but GFM was suggested with the M standing for Meltdown. We thought that was more fitting. Which will you use?

Cartoon via David Horsey.

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Layoffs

This week several people were laid off at my work. I was spared. While I would like to think that it is because I am a good skilled worker and that my company would be unable to do without me, I know that that is not entirely true. There was to be certain an element of getting rid of low performers; however, not everyone who was eliminated fit that category. For instance, my closest colleague to be laid off was not a low performer at all.

My father says that he feels for my generation being thrust into the worst job market in decades, but I disagree. In the immediate aftermath the youth, and when I say that I mean under 40, are much better equipped to deal with the situation at hand. Who I worry about are my colleagues that were eliminated that gave 20 plus years to my company. The people whose skills are now almost entirely comprised of institutional knowledge that will do them little good elsewhere. What happens to them if they are too young (as many of them are) to retire? Where do they go? How do they begin again?

H1B Visas

And yet I do worry about the youth. This week I read Andrew Sullivan, a journalist who I suspect has never worked in the corporate world that so many of us are familiar with, talk about how the H1B Visa that allows foreign skilled workers to get green cards to work in the United States should be given out more generously rather than the Obama administration’s slight reduction. He further said that every foreign student who graduates from a American university should automatically be given permission to work in the U.S. Excuse me for saying this, but what an idiot. Here he quotes the Economist.

Chinese and Indian immigrants founded more than half of all high-tech companies in Silicon Valley. Immigrants co-founded Google, Intel, eBay and Yahoo. Immigrants contributed to more than a quarter of US global patent applications. Immigrant-founded companies employed 450,000 workers in 2006 and generated $52 billion in revenue.

Instead of trying to restrict the supply of H1B visas, why not increase it massively, starting by giving any foreigner who graduates from an American university the right to a visa. That might be exactly the long-term stimulus that the economy needs.

This is a rather rose colored view of what is happening. I suspect that these people have never had their jobs in danger of being taken by a foreign worker. If a green card was guaranteed by attendance at an American university I believe we would see a sharp increase in foreign student slots in our universities and foreign workers in our workforce.

The so-called “undesirable” jobs

When George W. Bush brought up immigration reform his speeches were colored with talk of immigrants accepting jobs that Americans did not want. I am sure there are many jobs that a typical American does not want, but I am sure a large element of why the jobs are not desirable is the amount of pay that a corporation is willing to offer. Given the expense of living in the U.S. and purchasing your own health insurance which these “undesirable” jobs no doubt require you to do, it is no wonder that many Americans do not want these jobs.

But while he touted the undesirable jobs, the real meat of his proposal was increasing the skilled H1B visas. These are jobs that Americans do want. These are jobs that a Computer Science college graduate would kill for. These are the jobs that are instead going to foreign workers while our college graduates become baristas at the nearest Starbucks.

I think the H1B visa is largely about keeping wages low. The H1B visa requires that any foreign worker make the same amount as their American citizen counterparts. Yet when you increase your job pool by two-fold the wages are not going to be as high.

The desirability of the foreign tech worker

There is no doubt that foreign workers are highly desirable for a reason. Let’s take the educational system in India and China (the largest recipients of H1B visas). These countries are churning out skilled tech industry workers who are ready to begin on day one. I presume (and I could be wrong) that their education is more practical and less theoretical than an American education in computer science. I once met a computer science major here who didn’t even know that the file extension of the code I was writing was significant.

America should be modeling our educational system on the education found in India and China, at least in technology, so that we can guarantee our youth also will be able to be part of the American dream. That they can become skilled laborers too and share the wealth.

Should we eliminate the H1B visas entirely? I think we all know that the H1B visa workers contribute amazingly to this country. Any mass elimination would be highly detrimental. And yet, I think that reducing the number of skilled foreign workers – especially in a time of mass unemployment – is the right move to make. I think an investment in our educational systems and a focus on boosting the skills of the American worker has to be our priority over increasing limits on H1B visas.

I welcome any respectful opposing arguments to the above. Feel free to tell me your story.

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In light of UBS’s decision to pass on data about secret Swiss bank accounts, I thought I’d post this excerpt from Jamaica Kincaid’s A Small Place, a book about Antigua. I always think of this passage when I think of Switzerland. Cuckoo clocks be damned.

(These offshore banks are popular in the West Indies. Only tourism itself is more important. Every government wants to have these banks, which are modeled on the banks in Switzerland. I have a friend who just came back from Switzerland. What a wonderful time she had. She had never seen cleaner streets anywhere, or more wonderful people anywhere. She was in such a rhapsodic state about the Swiss, and the superior life they lead, that it was hard for me not to bring up how they must pay for this superior life they lead. For almost not a day goes by that I don’t hear about some dictator, some tyrant from somewhere in the world , who has robbed his country’s treasury, stolen the aid from foreign governments, and placed it in his own personal and secret Swiss bank account; not a day goes by that I don’t hear of some criminal kingpin, some investor, who has a secret Swiss bank account. But maybe there is no connection between the wonderful life that the Swiss lead and the ill-gotten money that is resting in Swiss bank vaults; maybe it’s just a coincidence. The Swiss are famous for their banking system and for making superior timepieces. Switzerland is a neutral country, money is a neutral commodity, and time is neutral, too, being neither here nor there, one thing or another.)

The cuckoo clock scene starts at 1:35 from The Third Man.

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Impressive

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Germany, Britain, China, and India, Spain, South Korea.

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It’s always a surprise when I travel to see American fast food restaurants in places like France and Germany. Perhaps it is even more of a surprise to find them in Asia, a place with plenty of cheap food available that is superior in taste.

I love the Asian food bar. A place where you can get good food fast, cheap and you don’t have to worry about tipping. This article shows the Chinese are losing interest in American fast food.

Reporting from Shanghai — Down an alley from a KFC, McDonald’s and Pizza Hut in Shanghai, Li Hong sat inside a dingy little storefront that serves full-course dinners for a dollar.

Her tray was filled with cabbage, carrots, potatoes, a chicken leg and rice, plus soup. A Western fast-food meal would have cost her three times that much, said the young woman, who works as a sales clerk. “Why should I go there?” she said.

In the U.S., fast-food chains often thrive in tough times. But not so in China, where Western quick-service food isn’t the cheapest stuff in town and, in target markets like Shanghai, there’s too much competition. Plus, a growing number of consumers see it as unhealthful.

“Western fast food is still not cheap enough,” said Yee Mei Chan, a group-account director at Millward Brown’s office in Beijing.

Photo via my flickr photostream. Taken in Japan.

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Ultra-Pasteurization

Since we started to make cheese and butter, we pay more attention to whether the dairy products we buy are pasteurized or ultra-pasteurized. In Seattle, the organic brands tend to be pasteurized while everything else is ultra-pasteurized. This excludes Horizon Organic, a dubious organic brand in the first place, which unsurprisingly ultra-pasteurizes their product. So what’s the difference? As a cheesemaker it makes a big difference. Here’s Rikki Carroll’s take from her book Home Cheesemaking:

Scientists working for large coporations have figured out if you heat-treat milk to ultrahigh temperatures, you can keep it for a very long time prior to opening. This allows large milk companies to buy out the smaller ones and transport your milk all across the country and still get it to your table in all its dead glory.

This means it [ultra-pasteurized UP] is heated to 191 degrees F for at least 1 second, which destroys all organisms in the milk. It also gives milk a slightly cooked taste, like that of evaporated milk. The purpose of UP treatment is to give the product a greater shelf life. UP milk and cream will last at least 28 days, as long as they are refrigerated and not opened.

UP milk is less than ideal for home cheese making; the protein structure is damaged and the enzymes are destroyed. It has no real advantage as a fluid milk for the consumer but is convenient for the processor, who can buy less milk, transport it farther, and keep it on the shelf longer. It doesn’t even taste good. UP cream is nasty stuff that leaves a greasy film on coffee and is difficult to whip. Large processors market UP milk by pandering to people’s fears about food safety, though conventionally pasteurized milk and cream are perfectly safe.

I notice that pasteurized cream is even more difficult to find than pasteurized milk. I left a complaint with our local supermarket, which I love, because when I stopped by last week the shelves were filled with ultra-pasteurized product while all the pasteurized creams were completely bought out. I encouraged them to notice that their customers clearly prefer the pasteurized product.

Photo: Guernsey cow or calf lying on the ground from the Library of Congress flickr site.

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Bullshit

bs

Still spinning.

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Is it bad to enjoy this?

Fraudulent investor Bernie Madoff may have made his worst enemy of all when he stiffed screen legend Zsa Zsa Gabor in his $50 billion ‘Ponzi’ scam.

The National Enquirer is reporting in its new issue that the 91 year-old Gabor and her husband, 65 year-old Prince Frederic Von Anhalt, have lost a fortune.

“We’re mad as hell and we want our money back!” said Prince Frederic. “We might be forced to sell our Bel-Air home, cars, artwork and even our jewelry because of this sick man.”

He added:

“This scam artist should be dragged through the streets and flogged!”

Zsa Zsa is said to be understandably heartbroken over the loss, which amounts to roughly $4.5 million.

“I feel really bad, because Zsa Zsa shouldn’t have to worry about the financial mess I’ve gotten us into,” says Frederic. “We are taking legal action to recoup some of the money.

“I’m going to have to make back that money somehow or we’re going to face financial ruin.”

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Pure Ponzi?

This article at the Boston Globe is absolutely unbelievable. I recommend reading it in full. The two points it seems to be making are:

1. Bernard Madoff wasn’t trading.

As investigators try to untangle the scheme that Bernard L. Madoff hid from investors and regulators for a decade or more, one basic fact is emerging: He may not have been making any trades at all.

A federal agency that regulates brokerage firms says there is no record of Madoff’s investment funds placing trades through his brokerage operation. That leaves only two options – either he was placing trades only through other firms, which would be highly unusual, or he was not placing any trades.A federal agency that regulates brokerage firms says there is no record of Madoff’s investment funds placing trades through his brokerage operation. That leaves only two options – either he was placing trades only through other firms, which would be highly unusual, or he was not placing any trades.

2. His customer statements were phony.

The statement [he sent a custsomer] also says he bought and sold shares of the Fidelity Spartan US Treasury Money Market – a fund Fidelity Investments said had been renamed back in 2005.Moreover, Fidelity, the Boston investment firm, says Madoff was not a client of the firm. That is, Madoff’s firm did not interact with any part of Fidelity that deals with investment advisers and other intermediaries that ordinarily make investments for their clients through Fidelity.

I’m just a caveman lawyer and all, but this is nuts. How on earth did no one figure out this scam right away? Didn”t someone say to themselves, you know that Bernard Madoff he’s so successful but I don’t really know anyone who trades with him. If he was creating phony statements there must have been someone helping him. Why did no one say anything?

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The Edukators

A statue of Bernard Madoff’s was stolen and left elsewhere with this note from the Edukators. No mention from CNN of who the Edukators are? Not very hip, guys.

Here’s a link to the film The Edukators on IMDB. It’s a really great film about three anarchists who break into rich people’s homes in order to rearrange their furniture. What I liked about the film is that it doesn’t go in the direction you expect to. There’s nothing feel good about it even though I think it is a comedy. It’s a movie written by a realist. The clip has no subtitles, but you get the point.

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When the story about Bernard Madoff first broke, I immediately thought of the Nineteenth Century Playwright Harley Granville Barker. His play The Voysey Inheritance begins with a son finding out from his father that the family business is no more than a Ponzi scheme. The son is asked by the father to inherit the business and perpetuate the ruse. If you have the time to read the rather long excerpt from the first act, I highly recommend it. You can find it below. If not, here is the link to Google Books. Print it out and take it home. It’s worth it and very timely. It’s a comedy, I think.

I haven’t used block quotes in order to put more text on the page. I’ve done some editing to make it easier to read than what I copied and pasted it from. The scene begins in Mr. Voysey’s office.

Just after Act I begins:

———————————————————
MR. VOYSEY. Good morning, my dear boy.

EDWARD has little of his father in him and that little
is undermost. It is a refined face but self-conscious-
ness takes the place in it of imagination and in
suppressing traits of brutality in his character it
looks as if the young man had suppressed his sense
of humour too. But whether or no, that would not
be much in evidence now, for EDWARD is obviously
going through some experience which is scaring
him (there is no better word). He looks not to
have slept for a night or two, and his standing there,
clutching and unclutching the bundle of papers he
carries, his eyes on his father, half appealingly but
half accusingly too, his whole being altogether so un-
strung and desperate, makes MR. VOYSEY ‘s uninter-
rupted arranging of the flowers seem very calculated
indeed. At last the little tension of silence is broken.

EDWARD. Father . .

MR. VOYSEY. Well?

EDWARD. I’m glad to see you.

This is a statement of fact. He doesn’t know that
the commonplace phrase sounds ridiculous at such
a moment.

MR. VOYSEY. I see you’ve the papers there.

EDWARD. Yes.

MR. VOYSEY. You’ve been through them ?

EDWARD. As you wished me . .

MR. VOYSEY. Well ? [EDWARD doesn’t answer. Refer-
ence to the papers seems to overwhelm him with shame. MR.
VOYSEY goes on with cheerful impatience.] Come, come,
my dear boy, you mustn’t take it like this. You’re puzzled
and worried, of course. But why didn’t you come down
to me on Saturday night? I expected you . . I told you
to come. Then your mother was wondering, of course,
why you weren’t with us for dinner yesterday.

EDWARD. I went through all the papers twice. I
wanted to make quite sure.

MR. VOYSEY. Sure of what? I told you to come
to me.

EDWARD, [he is very near crying.] Oh, father.

MR. VOYSEY. Now look here, Edward, I’m going to
ring’ and dispose of these letters. Please pull yourself
together. [He pushes the little button on his table.]
EDWARD. I didn’t leave my rooms all day yesterday.

MR. VOYSEY. A pleasant Sunday! You must learn
whatever the business may be to leave it behind
you at the Office. Why, life’s not worth living else.

PEACEY comes in to find MR. VOYSEY before the fire
ostentatiously warming and rubbing his hands.

MR. VOYSEY. Oh, there isn’t much else, Peacey. Tell Simmons that if
he satisfies you about the details of this lease it’ll be all
right. Make a note for me of Mr. Grainger’s address at
Mentone. I shall have several letters to dictate to At-
kinson. I’ll whistle for him.

PEACEY. Mr. Burnett . . Burnett v Marks had just
come in, Mr. Edward.

EDWARD, [without turning.} It’s only fresh instruc-
tions. Will you take them?

PEACEY. All right.

PEACEY goes, lifting his eyebrow at the queerness of
EDWARD’S manner. This MR. VOYSEY sees, re-
turning to his table with a little scowl.

MR. VOYSEY. Now sit down. I’ve given you a bad
forty-eight hours, it seems. Well, I’ve been anxious about
you. Never mind, we’ll thresh the thing out now. Go
through the two accounts. Mrs. Murberry’s first . . how
do you find it stands?

EDWARD, [his feelings choking him.] I hoped you
were playing some trick on me.
(more…)

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I want to say two words to you. Just two words. Are you listening? Postal Coupons.

Ponzi eventually found his way to get rich quick using a vagary of the postal system. At the time, it was common for letters abroad to include an international reply coupon — a voucher that could be exchanged for minimum postage back to the country from which the letter was sent.

The article is a great read.

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How Madoff did it

This BBC article tells how a man like Madoff defrauded people in what amounts to a Ponzi scheme.

What made Mr Madoff unusual was the manner in which he recruited his investors.

For that he relied on a powerful but elementary piece of human psychology: the more someone tells you that you cannot have something, the more you want it.

Membership of the Madoff fund was very strictly by invitation only – merely being rich was not enough in itself.

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We can all relate.

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An interesting post from Matt Yglesias full of gems like this:

And Iceland is a very small country with an economy that revolves more-or-less exclusively around fish, tourism, Bjork, and banking so a banking collapse amidst a global economic slowdown leaves them in bad shape and facing national bankruptcy.

A Canadian solution?

But David Hayes in a letter to Canada’s National Post suggests a Canadian solution:

Iceland, in the words of its President, is facing the “very real danger” of national bankruptcy. If the situation deteriorates, Canada should invite the small island nation to join our confederation, just as we did 60 years ago with another island in the Atlantic facing bankruptcy.

The island in question, for those not up on their Canadian history, would be Newfoundland which until 1949 was a politically separate element of Britain’s evolving empire-then-commonwealth.

Now that would be a tragedy. I read the book Collapse by Jared Diamond a few years ago. It talked a lot about the fragility of Iceland, both environmental and economical. Back then I thought the book was overstating things in the world a bit. Now I wonder if I should pick it up again.

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We are conducting interviews at work for a position that I used to hold. Sitting through a question and answer session for three different people has given me some interview tips that have a lot of crossover with the Vice Presidential candidates’ ability to answer questions.

1. Be specific. Interviewers often ask for specific examples of work. This is not for the purpose of stumping an applicant. It’s a way for the interviewer to see what role the applicant had in their work experience and what thought processes they used to come about a resolution.

It’s very noticeable when an applicant is not specific. All three applicants had moments where they generalized their experience. If an applicant never delves into specifics it’s a red flag that perhaps the person’s experience isn’t what s/he would have us believe. That could be a problem.

2. People want to work with someone they like. When you have applicants with similar qualifications, personality could be the deciding factor. We had one applicant who was extremely lighthearted and cheerful. She told us a couple things about her personal life which allowed us to relate to her. I think this is why the hockey mom factor of Sarah Palin is so powerful. An applicant also shouldn’t diss his/her competition or past employers. It’s uncomfortable for the interviewers and again it’s unlikable. A likable person is a strong trait.

3. If you don’t know the answer to a question don’t fake it. As long as you haven’t faked your resume, you are at the interview because you are qualified for the position. If you are asked about something that you don’t know it is better to answer honestly that you don’t know the answer. Give a comparable example of something else that you do know. Honesty goes a long way. A rambling lie goes a long way into diminishing your credibility.

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Quote for the day

Sometimes you read something that you just can’t believe.

The real estate industry expects more weak news Wednesday, when the National Association of Realtors releases existing home sales for August.

The housing agency’s director, James Lockhart, suggested Tuesday that mortgage finance companies Fannie Mae and Freddie Mac could loosen lending standards to help more home buyers qualify for a loan and stabilize the market. The government took control of Fannie and Freddie earlier this month.

Uhhhm Mister National Association of Realtors, you don’t read the news much do you?

Photo via musicblog.

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