Category: Social & Political Issues

CNN Breaking News: President Obama Is Elevating SBA to a Cabinet-Level Agency


Get-attachmentIn my book "CFO Techniques" I praised the U.S. Small Business Administration agency (SBA) for its role in supporting small businesses, particularly with their loan-backing program, and the amazing informational gold mine that is SBA.gov site – literally, the best resource out there. It's no surprise that when CNN's news flash quoted in the title of this post has arrived into my mailbox last week, it immediately caught my eye.

You've got to admire the skills of the public relation specialists in Washington (I wish my publisher's PR department was as masterful, or at least as industrious)! Look at the words selection: "elevate to a cabinet-level." Wow! Sounds like the president is going to take the "lowly peasant" (never mind facilitation of over $30 billion in loans per year and $570-million budget) and magically transport it to Mount Olympus to reside there with gods. And how democratic! The whole agency is being "elevated," as if all of its 2000 employees can be members of the cabinet. Some people may even think that this will empower the small businesses and their interests will become "special" – just like the ones of pharmaceutical giants, auto manufacturers, big oil, and mining conglomerates.

In reality, the only person who immediately benefits from this move is the SBA's Administrator, Karen Mills. She has become a member (already listed on www.whitehouse.gov/administration/) of Obama's cabinet and now will rub shoulders with the likes of Hillary Clinton and Janet Napolitano.

Whether Ms. Mills' accomplishments at SBA (or credits she takes for her subordinates' accomplishments) justify her new status could be a subject of an investigative journalism exercise. If it's White House's conclusion that she is the best candidate for providing the President with the advice on the only opportunity to save this country's economy, i.e. cultivation and support of the small-business environment, then be it.

I am more interested in the actions that will follow this first step in what being hailed as a program for raising "international competitiveness of American companies." You see, SBA is not meant to remain a cabinet-level agency for too long. In fact, it's not meant to stay a government agency at all. The intention is to "merge" SBA, along with the Export-Import Bank (ExIm), the Overseas Private Investment Corporation, the Trade and Development Agency, the Office of the Trade Representative, into the Department of Commerce (already a member of the Cabinet).

Whether they will continue calling this newly formed government Chimera the Department of Commerce or find it a new name (the way it happened with the Homeland Security), it is obvious that the already existing ministry will absorb all those other entities and, as it always happens, with the loss of independence, their functionality will be stunted.

Look, what happened when HMOs started swallowing far more flexible smaller health insurance providers and formed such giants as Aetna, CIGNA, Health Net, and United Health? Did it make anything better for members? Of course not, we all know this: the premiums went up and the coverage got worse.

Do consumers and businesses benefit from the crazy wave of bank mergers we have experienced in the past 25 years? Again, no. The services get worse and the fees get higher (plus, the process contributes to unemployment).

Any type of consolidation cannot be considered an improvement. It's done for a show – to demonstrated that something cardinal is done. The results? Who cares?

In case of SBA, this is really a shame, because they have made already and could've continued making a significant positive impact on the struggling entrepreneurial business sector. Now, their good initiatives will be drowned in public policies, fiscal regulations, national directives, and all that other country-wide crap. Their micro-level approach will be gone forever.

I find it incredibly ironic that the entity dedicated to help small businesses will be remodeled as a part of a large-scale program.

Why Amy Jellicoe (Laura Dern) from “Enlightened” Drives Me Mad?


Enlightened10I like whatever Mike White (a friend of Jack Black) does. Ever since "Chuck & Buck," "Orange County," "The Good Girl," and "The School of Rock" I've been a fan of his writing, which is always quirky and amazingly original. And his new series on HBO "Enlightened" is fantastic: honest, insightful, filled with an incredible array of complex and realistically fucked-up characters. On a human level, it makes me laugh, cry, sigh in recognition, squirm from awkwardness, nod and shake my head – all within the same episode.

Yet, the economist in me cannot stop being constantly mad at the show's protagonist, Amy Jellicoe (played by always fabulous Laura Dern, who shares the show's executive-production credits with Mr. White). And it's not because I don't believe in the phony enlightenment through expensive retreats and self-help books. It seems that the creative team shares my opinion on this issue - the persistent cracking of the artificial facade exposes the impossibility of achieving peace in the realm of contemporary American existence, plagued by social and monetary fights for survival. What really makes this CFO frustrated is the fact that this woman DOESN'T PERFORM ANY WORK, BUT STILL GETS PAID.

There is nothing wrong with coming to realization that there are important things in your life beyond the job. Take if from me, most people work for a paycheck, not for self-realization, including those at the very top of the business hierarchy.   That's a sad truth about our lives. However, "WORK" is an operative word. Coming to the office whenever, occupying yourself with personal matters throughout the day, and then waltzing out smiling before anybody else, like Amy does - there is only one word to classify that kind of an attitude: STEALING.

If the job heavily bears on your psyche and you feel that you will not be able to tolerate the meaningless work for one extra second, leave and quit getting paid. That's the honest thing to do. And Amy does find a job, which agrees with her newly-acquired outwardly predisposition. Guess what? It pays only $25K a year and she "cannot survive on that!" If only she could continue getting the regular direct deposits from the bad-wolf corporation, while contributing her time at the shelter – that would be a blissful combination!

Amy seems like a person who wouldn't be toiling for eight hours in front of a computer screen even for the most noble purpose – it's just too much for an "enlightened" person. But she especially despises the fact that her department analyses the employees performance metrics. I am not going to judge here what the corporation does with the results – there is not enough information in the show to do so, only vague hints. Yet, I can definitely say that there is nothing wrong with productivity analysis per se. Companies of all shapes and sizes must to do that, if they want to survive and prosper.

Socialist countries provided most people with work (albeit at incredibly low salaries), regardless of their efforts. Many people there would come to places of employment without any impulse to attend to their jobs. Look what happened to those economies! It's people like Amy Jellicoe who end up at Zuccotti park hanging out and screaming about the disappearance of the middle class, while the real members of that class continue going to work, doing their jobs, helping their businesses to survive. Those, who don't want to work are the reason why the quality of products and services continuously goes down, why the economy deteriorates right in front of our eyes.


Apple’s iAd Division Celebrates Christmas


Get-attachmentDecember is still with us and so are the corporate X-mas parties. The holiday cheer is inescapable for the dogged blogger like me.

Did you know that large public corporations, with their in-house event planners working schedules way in advance, always manage to have their parties as close to Christmas Day as possible? I guess it signifies how "family-like" those organizations are.

Apple's latest branching out child, the iAd division, held its party just six days before Christmas – on Monday, December 19th. Constructed out of the body parts of a mobile advertising start-up Quattro Wireless, acquired by the maker of iPhones and iPads in 2010, iAd was not moved to Apple Campus in Cupertino, CA. Instead, it stayed in the advertising capital of the world – New York City, albeit swapping the original small office in SoHo for a 45,000 square-foot expanse on Fifth Avenue at Union Square.

Everything needs to project an intended image! And so, they celebrated the traditional combination of year-end holidays in a semi-trendy restaurant in Chelsey, which is themed to alleviate nostalgic pangs of transplants from more humble regions of the US, while entertaining other patrons with a taste of Americana not found on the streets of Manhattan.

The spirit-lifting intent, customarily reserved for such parties, acquired a somewhat militant hue as iAd's execs came to the microphone, each with his own discourse on the same topic: "They all want to see us fail! But we will show them! We'll distroy them all!" Underneath all that bravado, however, there were unmistakable notes of fear. It's understandable, of course. iAd is locked in severe competition with Google for the $630 million market of ads streaming through smart phones directly into the sensory system of general public, incapable of ungluing itself from the beloved devices. The things are not going too well, though.

Apple first lost the edge when it couldn't outbid Google in acquisition of AdMob and had to settle for Quattro Wireless as a less desirable second choice. Advertisers have already rejected the original requirement of $1 million minimum commitment, which now has been slashed by more than 50%. And October departure of Quattro Wireless's founder Andy Miller, who originally accepted an Apple's VP position to lead the iAd team, only intensified the apprehension. This is public-company world – everything is about perception. The execs know their plight: today you are a big shot, but if you don't perform, you are out.

Booze and abusive behavior are traditional fear-drowning remedies for insecure males. The former was thoughtfully accommodated by the party organizers via the open-bar arrangement. Most attendees took advantage of the limitless supply; some with an enthusiasm of newborn calves, who need to be taken away from the udder lest they drink themselves to death. There was this one high-echelon specimen (let's call him The Boss's Boss) who was especially determined to stupefy himself, knocking down one gin after another. As he reached a certain condition, the desire to abuse could not be contained.

One of the waitresses serving the party was a remarkably attractive young woman (let's call her The Striking Girl). She had that star quality about her that causes double takes; something Nora Ephron once described as magnetism that makes a man across the room go, "Get me that!" An obvious target for a drunken bully.

He started by shoving a decorative tree onto her as she was passing. "I am pushing bush on bush," he sneered to other men around him. The Striking Girl didn't say anything – he was a customer. She remained poised and diligently went about her job.

You see, the thing about the hospitality industry in New York City is that a significant portion of waiting, bar-tending, catering, etc. staff consists of struggling writers, artists, actors, musicians – the creative hopefuls. Service jobs are usually divided into shifts and one can combine them into a flexible schedule that leaves time to attend to the true calling. The Striking Girl, as it turned out, happened to be an aspiring writer and a filmmaker, with her first short recently accepted to one of the New York's indie festivals. It explained her composure: she prepares herself to dealing with Hollywood and getting her ego bruised on daily basis.

So, she continued being friendly and pleasant to other attendees. When someone spoke with a Russian accent, she mentioned that she was born in St. Petersburg and was brought to New York as a baby by her political-refugee parents. The Boss's Boss, now never far away from her, heard that. "I have a friend," he said, "he just loves banging Russian pussy."

Next time he caught her in the tiny space of the service station. "Did you come to apologize?" she asked calmly. He thrust his drunken mug into her fragile cheek and responded with,"There is no need for apologies. It's that St. Petersburg love, baby."

Hey, I am a middle-aged broad. I know only too well that chivalry is dead, buried, its corpse rotted into dust long time ago. Still, it's shocking that not a single so-called "man" felt an urge to speak up on behalf of the young lady.

Is this the type of culture Apple Inc. cultivates? Of abusively unrestrained bosses and silent yes-men?

I wonder, how the parents of the Striking Girl felt, when they learned of this incident? Is this the type of democracy and liberty we offer here, in the United States of America, now? Any corporate honcho is free to behave like a dirty animal, while everyone else acts as if their mouths taped shut?

By the way, did you know that corporate execs in public companies get stocks as part of their bonuses? Well, I've sold my Apple stock after that party. The thought that my holding on to them may contribute to the further rise of share prices and one day make the Boss's Boss richer made me sick.

The Lopsided View of Corporate Taxation


Corp TaxesIn October 24th issue of New York Magazine, Andre Tartar's Intelligencer column featured a black-background Darth-Vader-sinister entry, disdainfully called The Freeloading Playbook (see the page's image to the left).  It presented four "tax-dodging" schemes employed by international corporations.  I have quite a few problems with the piece, but will focus on the misleading interpretations that I believe to be the most damaging to the education of general public on such important subjects as political economy and corporate taxation.

First of all, as far as an average reader is concerned, the implications are that the corporations are engaged in unpunished tax-evasion practices.  This is a gross distortion of truth.  We can argue for years about the nature of trickery, but the fact is that the Internal Revenue Code had deliberately created these loopholes to accommodate the international expansion of the US business, and the companies simply utilize the opportunities the tax laws allow them.  I assure you that there are other ways to reduce taxable income, including transfer-pricing of inter-company transactions (between the US parent and foreign subsidiary, or other way around).

Secondly, "freeloading" by definition means living off somebody's generosity.  Way to further confuse clueless Zucootti-Park affectionadoes!  Whose generosity we are talking about here?  Those who get the biggest chunks of the revenue derived from corporate taxation?  The military complex?  Government-subsidized industries like automaking and agriculture?  Chinese bankers (the interest on their loans to the US government must be paid)?  Welfare recipients?

Also, I am absolutely appalled by the fact that the companies that reinvest their earnings into their international value chains are thrown onto the same page with actual schemers who creatively avoid taxation (still legitimately, though) through M&A transactions and intellectual property licensing.  Notice how for "Double Irish," "Killer B," and "Deadly D" Mr. Tartar came up with singular examples – Google, IBM, and Eli Lilly respectively, while for earnings reinvestment he chummily states, "like, everyone." 

Yes, everyone, including  thousands of international  small businesses who set up foreign subsidiaries as their distribution arms to sell US products abroad.  (These structures are so common that I used one of them as a typical example in my book CFO Techniques– see the illustration below.)  So, they don't repatriate all of their money because they incur operational expenses overseas in the normal course of business.  That doesn't mean that they should be compared with the 500 super-rich companies.

Figure 5-1     M. Guzik, "CFO Techniques," Apress, 12/02/2011; Figure 5-1.

What exactly Mr. Tartar and others like him would like to propose?  That establishing foreign subsidiaries for the sake of running more efficient businesses should be prohibited altogether by law, like it was in the Eastern bloc countries during the communist rule?  Or that we allow double-taxation?  Guess what?  Business super-powers will survive anyway, but the small businesses exposed to such treatment would cease to exist. 

And why nobody questions the incredible fact that in this supposed bastion of free-market economy we have practically the highest corporate taxes in the world  – up to 38% federal, plus up to 12% state?  So, in some localities there are companies who end up paying 50% of their income to the government.  We have over 6 million companies with less than 100 employees in this country, and they are suffocated by these rates.  Why don't we approach the taxation problem from that side? 

Those who have at least rudimentary understanding of commercial principles and really care about our economy should be arguing for the protection of small businesses every chance they get, instead of throwing around meaningless and confused statements like the ones in the "Intelligencer."       

Marc Cenedella Freaks Out: “Privacy is for old people says LinkedIn founder”


Linkedin_2-300x206Marc Cenedella is upset! He is so upset he is lashing out at something Reid Hoffman said nearly a year ago at World Economic Forum in December 2010 (the Ladders' researchers must have been working on digging something up on him for months):

Privacy for Old People Says LinkedIn Founder

And I understand – LinkedIn went public and made X amount of millions in cash for Mr. Hoffman (I hope my readers understand that, like the rest of the public-stocks billionaires, he cannot really turn the $1.6 billion of his shares into liquid assets overnight). Mr. Cenedella, who started The Ladders barely two months after LinkedIn was launched in 2003, had wet dreams about being exactly in Mr. Hoffman's position by now.

I have no fucking clue why would he be dreaming those dreams. It's not that he created anything original. There were already other job boards with premium memberships and listing fees before The Ladders. The only differential he had was the $100K+ executive appeal (which, as you know, they just dropped – see my September 24th post). Did he think that those minute bells and whistles would be sufficient to build his value as an attractive investee?

You didn't really think that Marc was upset about your personal privacy, did you? Well, he did at some point – he was a man of ideals. When he started his company he did the right thing – he declared in the Terms & Conditions that he will not share, sell, etc. members' information. And indeed, I don't know anybody who gets spammed because of their usage of The Ladders. It's the other job boards that got their emails too: Monster, CareerBuilder, HotJobs, etc.

But big bucks are big bucks – they manage to bend out of shape the purest of idealists. And now, when Marc is alone in his office or his kitchen writing his blog, he is jealous, devastated, and desperate to kick himself in the nuts for not doing what all other amoral Internet moguls do, namely selling every single shred of your privacy in exchange for a golden bonanza Hoffman experienced on May 19th this year, when LinkedIn's IPO closed at the double of the entering price. (By the way, now it's at four times of the initial offer.)

So, he is upset and the post linked above is his way of letting the buildup of negativity out. Well, Mr. Cenedella's motivations aside, Hoffman's remarks in Davos are wrong on so many levels, it would take me several more posts to break it all down( don't worry, I am not going to). This is exactly what I would expect from someone who "made it" in the way Mr. Hoffman did, though. What's the implication here? Even if you are 18, but is concerned with your constitutional rights for privacy, you are "old" and square? And if you want to be perceived as young and hip, you should disregard all privacy concerns?

Statements like that don't upset me because they are "politically incorrect," as Marc Cenedella claims – I don't care about that shit! They upset me because they are politically dangerous and stupid. How intellectually limited one should be to mix up the teenagers' exhibitionism with privacy issues? Are you that confused? You don't see the difference between people, on their own accord, making decisions to disclose information about themselves and your selling their connectivity and interests profiles to third-party predators for an enormous gain? This proves once again that nowadays success, even in business, has nothing to do with intellect.