Category: Small Business Crusade

Quote of the Week: Occupy Wall Street


Protesters-in-chicago-jump-on-the-occupy-wall-street-bandwagon-which-has-spread-to-a-number-of Intro to the quote:

Observing Occupy Wall Street protesters right there by Zuccotti park, my cynic mind could not help itself to see social, rather than political event.  Guys and gals hanging around, having a good time.  Many analysts from all over the world have been trying to understand if these people have any agenda, if their protesting have some sort of intelligent purpose.  And there is nothing… Just young people with nothing better to do being upset that they cannot become rich and famous overnight.  Very few of them have attained above average complex of general knowledge and they know nothing about work ethics.  In their poorly constructed bursts of words they bring up "disappearance of the middle class," but none of them understands that you are not born into middle class – you have to work for it, and maybe after 20 years of professional excellence you can claim your rightful place among its members.  The paper wealth of Wall Street phenomenon is a perversion, no question about that.   But securities balloons are not the only reasons middle class disappears in this country.  None of the protesters want to work real jobs to earn their daily bread, or start small businesses that would keep them physically and mentally busy 24/7.  Instead they want to magically transport themselves into the very places occupied by people with million-dollar bonuses they claim to despise.

And then there was that September 30th plot concocted by the protest organizers in order to get more people on location by announcing a Radiohead appearance?!  People who supposedly oppose the concept of misleading, blatantly lied to the general public!  What's up with that?  There could only be three possible explanations why these protesters did not run away in shame after the falsification was exposed – they are either blind, stupid, or really have nothing else to do.

Meanwhile, the electronics were polluted with the false news of Radiohead's "spontaneous concert", and exchanges among some people I know have produced some wonderful pearls (I know a few very smart people).  One of my funniest friends felt sorry for the "poor hippies crawling over each other's stomped bodies." 

But the first prize definitely goes to the following quote:

"It's the perfect cherry on top of their worship of spectacle rather than substance."

                                                                                Zach Caceras

Perversity of Super-Rich: Walmart


Walmart Since Walmart and their subsidiaries (including Sam's Club) are public companies, the Waltons (Jim, Alice and S. Robson) are on the Forbes' billionaires list – numbers 20, 21, and 22 at $21 billion each.  That's their holdings in Walmart stock.  Well, let's say there is a few more billions in their private holdings.  Does not matter.  When it comes to bargaining for the Walmart's interests they come as one, so to evaluate their real power we should combine their wealth.  That puts them into competition for the first place on the world-wide list – definitely above Bill Gates and Warren Buffet.  No question – a very power family.

Many people have problems with Walmart for many reasons – they destroy local business, they discriminate, particularly against women (Funny how that class action suit was dismissed by the Supreme Court on account of women being too different to represent a class.  Well, they all have vaginas, don't they?) But you cannot deny the fact that they are the country's largest employer with a steady growth.  Remember my previous New-York-Magazine-Intelligencer-prompted post The New Economic Reality of Unemployment?  2.1 million people – where would they go, if it was not for Walmart?  Of course, most of them make very little money, but it's still more than the government's help.  

Anyway, it's a free country and I love capitalism (not the bastardy, distorted, perverted paper version we have now, but the real demand & supply model).  Then again, if they push out of business your local bakery, there is no way you will ever be able to get the same quality bread in Walmart.  So,  that's kind of sad.  But as long as they compete fairly… 

Well, that's a bit of a problem.  Look, now they are planning on coming to the place that cultivated boutique retailing for decades now, my hometown – New York City.  And there is nothing fair about the way they try to get in.  As a matter of fact, they do it in  the most perverse way  – by buying their way through resistance with charity donations.  According to Eric Benson's Intelligencer report from the last New York Magazine shown here (you can also read it here Big-Box Rolling), since they started campaigning for the location in Brooklyn, they have spent $13 million on charitable giving in New York.  Which small farm-to-table store can compete with that?

And I am sure there are plenty of people who think it's a good thing – "they are helping…"  They are helping themselves to increase those $260 billion of annual revenues – that's what they are doing.  They did not give a penny to those charities before and, I am sure, if someone told  them "No" today, the donations would stop immediately.  How sick is that?  You cannot openly bribe the officials, so you do this?  That's not charity, that perverse marketing, and they shouldn't be allowed to use it as a deduction on their tax return.

Well, what can we do?  They are super-rich.  As I said in my last post, they can do WHATEVER THEY WANT.   

Futurenomics of Higher Education


Item_3703People laugh at me when I talk about higher education in negative terms.  And I understand – it sounds hypocritical coming from someone with multiple academic degrees.  But times and environments change.  For my generation, higher education was far less expensive, more intellectually challenging and somewhat more rewarding than it is for young people today. 

Now colleges lower their educational values, so that the degrees seem more intellectually accessible.  The individual thinking is not cultivated anymore and slowly disappears together with independent studies.  It became all about mechanistic skills of test-taking instead of true intellectualism.   

Except for a few institutions still adhering to their academic values, most colleges' coursework does not require any reading beyond the textbooks.  This is how we end up with scores of degreed "professionals" who never read.  My famous pet peeve is having young subordinates with accounting degrees who don't understand the fundamental principles of double-entry bookkeeping. 

So, for $200,000 you get a low-grade minimal intellectual input and the promise of… What?  Nowadays, nothing.  Ok, so wealthy parents may be willing to pay this kind of money in order to delay their children's exposure to the doldrums of the adult life – as far as I am concerned, not a bad idea if you love your children and can afford to do so.  But other than that – it's really just nothing but a bad investment.  

Yet, more and more children continue entering colleges, ending up with unbearable debts.  Some are locked forever in terrible jobs, others are not capable of getting a job at all.   And people still insist that the degrees open some highly desirable doors?  Why is that? 

Because, of that stupid club mentality that pollutes every aspect of our lives.  Hiring managers and recruiters, themselves college graduates, will look down on those without the degrees, regardless of their abilities and knowledge.  This idiotic pattern has to change.  Not to boast or anything, but I always look for a spark of an intellect in a candidate's eyes before I look at the Education section on his resume.     

At the same time, we cannot deny the fact that having graduate and post-graduate degrees inhibits entrepreneurial potential of many bright and capable people.  I have been saying for years that the possibility of being paid good wages prevents people from entering the entrepreneurial route.  It's too scary to gamble on your business success if you have a steady job.   Thus, instead of building small and midsize businesses that could revive our economy, kids "all go to the university, and they all get put in boxes, little boxes, all the same." 

But this point becomes even less relevant now: those highly paid jobs opportunities will not be there in the near future.  Young people, please, you don't have to follow the rest of the sheep.  Think for yourself; let your creativity take you on the self-fulfilling journey.  And you don't have to strive to be rich and famous overnight either – not everyone is meant to be Gates or Zuckerman.  There is nothing wrong with building your own small business that will provide you with middle-class living, while creating jobs for other people on top of that. 

 

 

The New Economic Reality of Unemployment


Hiring Gap A couple of weeks ago New York Magazine used  The Hiring Gap chart (see picture) as their Intelligencer topic.  It compares domestic employment powers of ten "most valuable" ( in terms of their market capitalization) public companies in America in 1964 (converted into 2011 dollars) and now.  Even though the numbers on their own are very striking and Andre Tartar's few-lines of commentaries and footnotes cut right through the fact that 

"being a top American business no longer… means employing lots of American workers,"

the data left my calculating mind somewhat unsatisfied; it begged for further interpretation.

First of all,  it's the damned "market capitalization" crap, which nothing more than a perceived value of the company by investing public – the very same public that cannot evaluate companies on its own and follows the leads of their brokers, WSJ analysts, CNBC (especially if they are doled out by sexy Maria Bartiromo or engaging Jim "Mad Money" Cramer), etc.  Thankfully, there is an instrument we can employ to make these numbers somewhat more real – Price-Earnings Ratio:

  PE Ration Here is the new ranking of the 2011 listing, based on the companies' earnings.

  The Hiring Gap Only three giants retained their places in this modified view: Exxon, Berkshire and Google.  And, by my standards, those three are overpriced anyway: any stock with P/E ratio higher than 11 is overpriced.  Google with 20 – ridiculous.  Of course, it's not as bad as some other stocks, like Wynn Resorts, for a example, with a preposterous 60.  It always shocked me that people buy stocks like that and then act all surprised when their savings go, "Bye-bye." 

Another interesting angle of the chart is its reflection of the fundamental changes in industrial mix of Large-Cap companies, which speaks volumes about this country's economic and social environment.  The only two companies present on both lists are GE and IBM.  In 1964 we did not have any financial institutions big enough to claim not just one, but two spots in the top 10.  The three tangible goods manufacturers that drove the US to its economic dominance in the 60s are gone off the list – GM, Dupont and Kodak.  So, is the telecommunication super-power of the time – AT&T.  Now, we have Apple and Microsoft, dividing the world into two camps of PC vs. Mac users.  And isn't it comforting to know that as far as our OIL-dependence is concerned, we are still at the same point as we were nearly half a century ago?

Now, the focal point of the piece – the dwindling number of the jobs infused by these companies into American economy.  In accordance with proper statistical rules, let's explain away the two companies with the highest and the lowest number of workers.  Walmart employs 2.1 million of people, but it is irrelevant, and not because their average salary rate is one of the lowest in the country, but because their expansion put out of business smaller chains and thousands of independent retailers.  Google, on the other hand, generates the majority of its revenue without any human participation, so I am surprised even by the 24K number.

Look at our beacons of stability, though – GE's number practically did not change and IBM employs nearly three times more people now than they did 47 years ago.  Holla to that!  The rest of them… well, we all know the story – there are three reasons for jobs going away and never coming back:

  1. Technological advancements contributing into increased efficiency.
  2. Outsourcing = jobs going abroad.
  3. Globalization of manufacturing and support services = jobs going abroad.   

At the time this issue of New York Magazine came out, the unemployment rate was at 8.8%.   Now it's 9%, and I believe that unless something changes fundamentally in our economic structure, it is only going to get worse.  The new reality is that we cannot look at the giants whose operations financed through their publicly-traded stocks as the source of new jobs.  

As long as investors listen to analysts' opinions and follow the "trends," the large companies' executives will continue applying their hardest efforts to minimization of costs in order to preserve their multi-million compensation packages.  The workload will continue being exported abroad and jobs will disappear.

At this point, we can only rely on small and midsize American business for the influx of new jobs.  That's where the efforts must be concentrated: helping the existing smaller companies' survival and stimulating creation of new entrepreneurial businesses.

Those who read this blog consistently know that I am developing a product that will help small and midsize businesses in their daily struggle for success, assuming I manage to solicit sufficient venture capital.

Objectivism, Part 2: Lynn Tilton – the Matriarch of Patriarch


Jessica Pressler provided the second mentioning of Ayn Rand, in her long-titled article What Does it Take For a Female Tycoon to Get Noticed Around Here? , which she contributed to New York magazine's issue on the post-crash Wall Street.  It profiles Patriarch Partners' CEO Lynn Tilton and, according to the author, this is how the powerhouse of private equity investment sees herself: as "an Ayn Rand heroine in six-inch heels."

Rightfully so.  This woman is not simply concerned with the state of American capitalism and the future that awaits us ("…I believe that there will… be violence in the streets in America," she says.  "And I think the only thing we can do to stop it is by creating employment."), but she is actually doing something about it – working very hard on trying to rebuild American manufacturing.  Moreover, she is doing that without any regard for the conventions of the phony propriety that has saturated our existence. 

Lynn Tilton destroys the stereotype of a "powerful man" as a world-savior.  A true standard-buster,  just like Ayn Rand wanted women to be, she does not make herself look like the androgynous creatures in buttoned-down suits who are allowed to enter "little boys" clubs from time to time.  She does not let herself to fit into the designated for business tycoons box either.  She refuses to hide her wealth into over-priced art rubbish other billionaires stash in their unseen drawing rooms.  Her conspicuous consumption is honest, because that should not define her.  It has nothing to do with her achievements.  

It is incredibly important to me that Ms. Tilton's  business focus lies in the same field as mine does: the proverbial backbone of the US economy – small and midsize companies.  And it makes the refusal of others to look beyond the outfits, the hair, the jewelry, the mannerism, far more painful.   Once again I am exposed to the violation of my personal absolute truth – MERIT.

Why can't people break out of their constricted mentalities? 

At art fund raising minglings, when I dissect a movie or a play, impressed people, who are paid to be in the know of those things, inevitably ask what I do for living.  I just love seeing their faces when I say, "Accounting and finance."  You see, number-crunchers are not expected to understand the high art.  It does not matter that I know more about it than they do.  On the other hand, when I was entering Economics PhD program, my wild jewfro was diminishing my scientific credibility, even though I came with 50% of my research and modeling already completed. 

Always those fucking labels, those stupid boxes.

I can easily visualize Lynn Tilton going to Harry Winston or Van Cleef & Arpels for some fabulous $250,000 necklace and people in attendance there thinking that she is some mogul's wife.  She must relish the opportunity to tell them, "I am the mogul, bitches!"

It's too bad that Ms. Tilton deals only in private equity acquisitions of distressed businesses and does not diversify into venture capital start-up investments.  I am developing a product right now that has a great potential of contributing into survival of smaller companies and complementing her quest for preserving the true capitalism.  I think we would get along handsomely.  We both know that it's what's inside your head that counts.  She is having trouble getting the respect she deserves, because we lost our meritocracy to "club membership" long time ago.