Category: Business

Economic Reflections of a Traveling CFO


It's one thing to sit in front of a computer screen and intellectualize about the irreversible deterioration of financial and social climates and the necessity for people to face the truth about the new economic reality.  It's a completely different thing to get your ass off the chair, pack your bags with some walking and hiking footwear, go away from your stomping grounds, and observe downhill changes in distant places.  Even without an elaborate analysis of economic indices you can pick up a lot of signals along the way.

It wasn't intentional (after all, the primary purpose of my traveling was leisure), but the states I visited represented an interesting mix: Washington, the state with the second highest average income of $41.5K; Oregon – the sixth lowest with $30.3K; and California – the fourth lowest with $29.8K (all the wealth of Silicon Valley moguls, Napa Valley nabobs, and Malibu celebrities cannot outweigh the endless number of unemployed and barely employed aspiring creative types).  It's like I journeyed down the geographical and fiscal routes.  A year ago I stopped in most of the same places, so it was unavoidable for my mind to register the most apparent changes. 

Seattle is a very special city.  Last year I summarized my impressions of it as calm and cool.  It has this aura of serenity about it. Yet, the place gave birth to Grunge (aka Seattle sound) – that's like fucking awesome, man.  The city's most prominent artist is the master of chilled glass flow – world-renown Dale Chihully.  Even local famous graves are the coolest: Jimi Hendrix and Bruce Lee.  It's not Bangkok (#1 travel destination this year), but there are plenty of tourists here, especially in and around the iconic Pike Place market and the Space Needle.  Many of these people are about to board cruise liners and explore the even crisper climates of Alaska.

The business person in me associates Seattle with, what I call, Zen entrepreneurship: they start small, but with great aspirations.  Some succeed in building long-lasting local fixtures, reassuringly there for you every time you come – like Jack's Fish Spot that has been serving the best crab in the world at Pike Place Market for over 30 years.  Others go on to materialize their national and international ambitions: The metropolitan Seattle is birthplace and still home to the headquarters of Nordstrom, Starbucks, Sur La Table, COSTCO, Amazon, Expedia, and Blue Nile among others. 

All that happened in the relatively recent past.  Now, the enterprising endeavors here are marked by a greater than ever sense of risk and uncertainty, and the new businesses mostly struggle to stay afloat as long as they can. 

Thanks to a recommendation from a local insider, I ventured into Ballard (Seattle's Williamsburg) with the specific purpose of visiting a cutting-edge, connoisseur-targeted Slate Coffee Roasters run by Chelsea Walker, who shares the company's ownership with her brother and mother.  (Her entrepreneurship and business model deserve a dedicated post , which will be coming soon.)  Chelsea served us her signature Deconstructed Espresso and chocolate-covered orange slices, which were beyond outstanding – they were a revelation.  And it is sad that I was urged to go to Slate "like right now," because "it will not necessarily be here next time around."  And I'm not all that surprised that the business is hurting: The best advertising for the quality of their roasts is right there, in a cup prepared by an expert barista.  However, you can only go this far on word of mouth (even if it's powered by Yelp), and the location is way out of the main thoroughfares, in a residential area that doesn't look affluent at all.   

To tell you the truth, this time around the whole city looked to me less appealing, more haggard.  Even Pike Place market didn't feel too bustling – with fewer vendors and significantly reduced numbers of transactions.  Climbing onto Capitol Hill on Friday (!), you experience an eerie sensation of emptiness: there are barely any people around and most establishments, including the small art galleries, are open only for a few hours a day; so, in the early afternoon, they are either already closed or not yet open.  And walking only a few blocks up from the posh corner of Pine St. & 6th Ave. towards Broadway, I'm sorry to say, is an experience that evokes the documentary footage of Trenton, NJ.  It's just heartbreaking. 

I can't believe I'm saying this, but there is no doubt in my mind that, while Stephenie Meyer single-handedly destroyed the already low aesthetic values of at least two young generations, the movies based on her Twilight series are most definitely responsible for the economic well-being of the upper regions of the Olympic Peninsula.  Port Angeles, Forks, La Push, and the magical rainforests of the area are busy with fans trying to relive Bella-Edward-Jacob "thrills" and the genuine nature-lovers who have to see for themselves that this national treasure is for real and not CGI'ed by the filmmakers (it is real!): So, the ferries are packed, the inns are booked, RV parks are full, the backpackers are checking into the campgrounds, cyclists are devouring Thriftway's garlic bread, espressos are flowing, and by 8 pm the Mexican eatery with a pinned above the register photo of Robert Pattison embracing the staff is out of all proteins.  Good for them!  Since the monster has been unleashed from the cultural hell anyway, I hope local small-business owners milk this cash cow as long as they can.

You head 200 miles further down the coast to Cannon Beach, OR (via never prosperous Aberdeen, WA) and the picture changes completely.  Even its reputation as one of the most beautiful beaches in the world, the famous sand-castle competition, and the high popularity with the movie-location scouts are not able to create sufficient pull to attract more tourists – the place's sole source of revenues.  There are simply less people who can afford to travel now, and those who can, would rather go to more buzz-worthy places.  While the efforts of Cannon Beach's Chamber of Commerce to bar big-name hotels, stores, and restaurants out of the area do protect local businesses from the hard-core competition, nothing can be done about the evaporating bank balances.  And the chain reaction is unavoidable: In the absence of sufficient revenues, the hospitality proprietors  start cutting corners and provide the still-paying guests with shabbier living spaces and lower quality food, thus drastically reducing the plausibility of customer retention.  I was glad our plans called just for an overnight stay there.   

To my sensibilities, Portland, OR is a paradox.  In comparison, let's say, to Seattle, it's simultaneously simpler and more pretentious.  On one hand, there are no passing-through cruises or world-famous attraction icons and, therefore, less touristy hustle.  (Even though, the hotel I stayed in, the famous Heathman with its library of over 2000 autographed books, is definitely getting a fresh influx of new tourists, thanks to another set of the literally trash soon to crawl onto the silver screen, Fifty Shades of Grey – what with the book's multiple seedy scenes actually taking place in one of this wonderful (truly!) establishment's suites.)  On the other hand, Portland has an unmistakable independent spirit and everything that comes with it – both good and bad. 

The city counts the bona fide indie filmmaker Gus Van Sant and the late indie-rock singer-songwriter Elliott Smith among its local celebrities, even though neither was born here.  The enterprising here is more of a boutique nature as well: there are definitely less Starbucks per capita than in other prominent cities, but you can find a small coffee shop practically everywhere you turn. 

There are plenty of tiny start-ups here, including chic eateries, and, of course, they are struggling.  One of the ways the survival efforts manifest themselves here is the "open to close" trend, which for someone from the city that never sleeps and has famous restaurants open until 2 am seemed novel and strange. (And fucking annoying, since we actually had to turn away from closed doors of establishments that were supposed to be open according to their posted hours of operation).  At the same time, I have to admit that it does save a chunk of money if you shut down an empty store or a restaurant – turning off the equipment, making all employees clock out, etc.  It's possible that we saw the future there.

Unfortunately, the flip side of the indie culture is the profusion of hipsters.  Fred Armisen can continue telling everyone that Portlandia could've been placed anywhere, but I'm not convinced – it couldn't, not even in Brooklyn.  The hipster details are too specifically Portland, including the lightless intersections conundrum.

Uninitiated people associate the hipster phenomenon with a certain level of affluence.  And in a lot of cases that's correct.  But it's also a good cover up for border-line destitute situations.  The difference is not easy to recognize, though.  You may pass two people on the street looking exactly the same to an untrained eye: skinny jeans, boots, checkered shirt, green or brown hoody, cross-body messenger bag, glasses, long scarf, carefully disordered hair – you know what I'm talking about.  It takes the knowledgeable eye of a fashion devotee to distinguish an $800 Japanese hoodie from a $60 Urban Outfitters' one, or a $10 Kohl's bargain.  

Here, in Portland, the balance between hipsters with steady income and those who have lost their jobs and rentals a while ago seems to be tipping towards a larger percentage of impoverished individuals.  They feed the increasing contingent of pervasive drunks and bums, which are a big problem and the primary concern of the local law enforcement.  It is obvious to the naked eye that in one year the situation got worse - now they are everywhere.

Eureka, CA is a small town (population 27K) with its one side overlooking the ocean and the other side bordering Humboldt State Park, the home of the Pacific Northwest Redwood giants.  It has campuses of two higher education institutions – College of the Redwoods and Humboldt State University, whose professors and students contribute into the consumer pool.  However, the main attraction here is the proximity to the Trees and, just like in Cannon Beach, Eureka's economy relies on tourism.  And, just like in Cannon Beach, it doesn't look too good.  

The town's only member of the Select Registry of North American Distinguished Inns, Carter House Inn has been considered a premium B&B for almost 30 years, and last year we found our accommodations here pleasantly quaint.  I remember the place was practically full and even at 11 pm (late by the local standards) the lobby was busy with guests partaking in complementary tea-and-cookies service. 

This year, our arrival coincided with a police drug bust: At the entrance, I literally had to give way to four cops in rubber gloves removing a resisting female junkie from the premises.  As bizarre as that scene was, I don't think anybody can blame the inn's severe underbooking on it.  It seemed eerily empty.  Again, signs of the funds' shortage could be clearly seen: There is obviously not enough money even to clean, let alone repair or replace, the soiled or chipped furniture and fixtures.  And now, all chamber-maid staff is let off before 2 pm.  So, if you linger in your room in the morning trying to clear your backlog of emails, there will be no housekeeping for you.

Of course, no economic troubles can stop people from coming to the Redwoods for a glimpse at what Earth should've looked like, but the preferences presently lie with camping and RV-renting rather than with $300 a night inns that don't live up to their rates.  

If I could avoid going to San Francisco I would, but it was the easiest route for my return trip.  Traveling through that city is like visiting a third-world country, or going back in time to the area's gold-rush origins.  We talk a lot about the national phenomenon of a disappearing middle class, but out there it had vanished some time ago: There is a handful of incredibly rich high-tech tycoons, and everyone else is barely getting by, or worse – San Francisco has the second-highest concentration of homeless people per capita in the country (first place belongs to Los Angeles). 

At this point, the monetary disparity has started taking its toll on the city's social atmosphere.  I don't like geographical generalizations: for instance, not everyone in New York is pushy.  And my experience shows that everywhere you go in the world, the local population represents your regular bag of mixed nuts: assholes, bullies, helpful individuals, etc.  But in San Francisco, it seems like most people, regardless of their personalities, are covered by some sheen of general nastiness.

And that, my friends, is pure social science: Sour economies always result in the deterioration of social values, civil discord, harder policing, and so on, and so forth.  We live in a very large country and things develop at different rates depending on the specific area.  But eventually the downturn will catch up with the 99.9% everywhere.    

The Distortion of Bill of Rights in Small Business Environment


Regardless of your position – CFO, Controller, operational staff, CSR, janitor -when you accept “employment at will” arrangement in a privately-held company, you inadvertently give up the majority of your rights granted to you by the US Constitution.  Since the Bill of Rights is automatically presumed, it is not necessary to include freedom clauses into Employee Handbooks, Rules of Conduct and other such documents.  Look through them again whenever you have a chance:  they primarily describe what the company expects of you, not the other way around.

Closely-held companies are not democracies.  They are owners’ kingdoms, absolute monarchies.  And most of the time there is nothing you can do about it.  Let us look at some of the Amendments.

1.  Free Exercise of Beliefs.  Having been always based in NYC precluded me from ever witnessing open discrimination of employees for their religious believes.  At the same time on many occasions I’ve observed explicitly expressed irritation about people’s taking their PTO to celebrate religious holidays.  Quite a few times I saw the candidates being rejected based on the unspoken possibility  of their observance.

2.  We do not have Freedom of Speech as employees.  We try to keep our political, social and cultural opinions to ourselves if we know they contradict those of our bosses. Frequently we are not even given an opportunity to retort abusive, accusatory, or unfair verbiage directed at us or at our subordinates.

3.  We cannot exercise Right to Assembly.  I myself as a supervisor is pretty strict about people congregating for reasons not related to their jobs during work hours.  At the same time I am not as obsessive about it as some business-owners who throw tantrums every time they see people talking.

4.  The Protection from Unreasonable Search is violated time and again in the workplace.  The business files, emails, etc. are rightfully belong to the company you work for, and if you are openly asked to follow established policies of information sharing, files locations and full disclosure, you should willingly comply.  But many employers use System Administrators to secretly look through their employees’ emails, files, etc.  They open doors with spare keys and look into draws containing personal affects.  They use special programs to record IM communications, etc, etc.

5.  Not a single right guaranteed by the Fifth Amendment (due process, double jeopardy, self-incrimination) is considered when you are judged, persecuted and punished by your boss.  Fairness is laughed at in business environment.  A lot of CEO’s, with whom I dealt over the years either as an employee or through business and social networking, considered my personal determination to be as fair as possible and judge people on their merits in all situations as one of my “strange” qualities.  

One right we, as employees, can enjoy under “employment at will” arrangement is the very special freedom it guarantees you: just as your employer can fire you without warning, you can quit on a moment’s notice.   That, of course, if you can afford to do so.

Quote of the Week: More on Economics of the Moviemaking


Barton Fink"Barton Fink is a 1991 American film, written, directed, and produced by the Coen brothers.  Set in 1941, it stars John Turturro in the title role as a young New York City playwright who is hired to write scripts for a movie studio in Hollywood, and John Goodman as Charlie, the insurance salesman who lives next door at the run-down Hotel Earle.  The Coens wrote the screenplay in three weeks while experiencing difficulty during the writing of another film, Miller's Crossing.  Premiered at the Cannes Film Festival in May 1991, Barton Fink won the Palme d'Or, as well as awards for Best Director and Best Actor (Turturro).  Although it was celebrated almost universally by critics and nominated for three Academy Awards, the movie grossed only $6,000,000 at the box office, two-thirds of its estimated budget."

From Wikipedia's front-page featured article on 08/13/2013

The Frustrated CFO commentary:

You see, it has always been like that in the cinema production  - you either make art or you make money.  Sometimes, you go for art and hit the gold vein, e.g. Pulp Fiction ($8 million budget, $213 million gross).  It's rare and  you have to take big risks.  But no one has better economic instincts than Hollywood honchos: they feel in their guts that the money wells are drying out, and they will do anything to keep their mansions, jets, and trophy wives.  So, forget risks and forget art; hello meaningless 3D bullshit easily digestible by the billions in China, Russia, and Middle America.

“Passive-Aggressive” CFO


One of my former CEO’s contacted me after reading my post on Bill of Rights in Small Business Environment (who knew they would be looking?). He’s been in business for 27 years with many employees passing through. Listening to his opinion on the Freedom of Speech, I came to realize that his point of view might be typical for a lot of business owners and should be shared here.

According to him, employees, including his current CFO, choose not to voice their opinions as a manifestation of a passive-aggressive attitude. In reality, he says, he would not mind listening to what they have to say on variety of business issues.

My first impulse was to laugh. I used to work for this person and, to put it mildly, he is not the friendliest of bosses. My policy, nevertheless, was always to express my judgement on all professional issues. This, I must say, received mixed reaction, depending on whether my opinion was in agreement with his or not. It was fortunate that our commercial views were nearly identical and we rarely had disagreements. However, on those occasions when my opinion differed, what I got back was the cold silent stare that could have discouraged someone less straightforward.

But I didn’t laugh, because I wanted to know more about the reasons he has classified his new CFO as passive-aggressive. So, I asked more questions. Actually, this was not the first time I asked these questions. Over the years more than a few senior execs have used that term to describe some of their employees to me. It always puzzled me how these business people recognized a behavioral (i.e. psychological) trait.

Let me tell you, most of the time, including in case of the CFO in question, it amounts to “sulking.” Instead of speaking out, the employee shows a “bad temper”: he is morose, with disappointment and annoyance written all over his face. In other words, unreleased frustration (my favorite subject), jumps from inside onto his face. And yes, that can be classified as a passive expression of aggression.

Yet, at the same time the CFO still works hard, diligently performing all his duties and making sure that the business continues to survive and prosper. And that’s actually the opposite of passivity.

Sulking on its own is not a sufficient symptom to diagnose someone as passive-aggressive. There are far more significant and damaging, especially in business environment, manifestations: procrastination, obstructionism, chronic tardiness, tendency to blame others for one’s own failures, making excuses for non-performance, deliberate creation of chaotic situations.

If you keep catching your employee shuffling papers on his desk every time you walk by, or even if he appears to be busy but never delivers any results; when a deadline of a project gets pushed further and further back, then you may have a passive-aggressive person in front of you.

However, if the employee does his best, but looks upset, maybe you should just let him exercise his constitutional freedom to speak his mind.

Business News Flash: Jeff Bezos


Jeff_bezosYesterday, the Washington Post (the oldest periodic publication in D.C.) reported that Amazon's founder and CEO Jeff Bezos was buying the flagship newspaper and other properties for $250 million. 

Oh, boy, this makes me laugh so hard!

  Not because the newspaper famous for its almost exclusive focus on the national politics is now owned by a person, whose political stance is not very clear: all we know for a fact is that he is a strong supporter of gay marriage (who in the entertainment distribution isn't, especially in Seattle?) and the Internet sales tax (because it will wipe out his small-size competition in the online consumer-goods marketplace).  After all, his first priority has always been the expansion of his business, and this might be a good complement to his empire.

These news make me laugh, because I still remember how I was one of the first people I knew to set up an account with young Amazon in 1995.  I can recall everyone telling me that I shouldn't rely too much on them, because "the logistics" will never work.  And I will never forget how the Wall Street Journal and the New York Times both predicted Amazon's doom in the late 90s (it already went public by then), because the company was in red year after year.

Guess what, it still posts losses ($39 million in 2012), but nobody seems to be concerned anymore.  It's a conglomerate that owns 17 brands, including Amazon itself, which  became a global source of… pretty much everything.  Most importantly it made Jeff Bezos a billionaire ($25 billion evaluation as of this year), who doesn't mind dropping a mere 1% of his wealth to buy himself a "little rag" like Washington Post.  It's like if you decided to take $5K out of your $500K (if you are lucky) savings and treat yourself to a nice weekend in Paris.  Not a big deal!