Category:

Economics

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You Must Be A Salesman!

March 22, 2013, Economics, Marketing
http://www.schoolforstartups.com/you-must-be-a-salesman/

Grant Cardone, New York Times bestselling author on what changed after Lehman collapsed….

 

“Look everything has changed the economy will be different forever, not for a short period of time but forever. And regardless of your position or your title or what you think you do, you are now a salesperson.”

They will be the most protected group of people whether you work for an organization or you work for yourself. You have to go out and sell your product and your services. I was saying in that book that there’ll be high unemployment. The only way to get a job is to sell yourself, the only way to get a raise is to sell yourself, and that book was basically saying, “Hey the world this weekend became a salesperson and you got to learn the skill now.”

grant_foxWell, for little guys like us that are scrapping and out there punching and shoving and trying to grab our piece every day, this economy – when you have this much uncertainty – I’m not going to go into the bank thing with you but when you have this much uncertainty – we’ve had uncertainty now for four five years.

This uncertainty will not go away because the moment things get better everybody – when you wake up in the morning you have to confront that there’s $17 trillion of debt that this country never had. That has exploded and everybody with just a dash of intelligence – that has to be confronted.

So that makes consumers and buyers of your products and services or even if you’re trying to get a job or a better job, it makes people uncertain. It makes them cautious. So that’s what I mean, the economy is different because we’ve never had this level of uncertainty since maybe The Great Depression.

And that means you have to be selling – you see a lot of companies going out of business right now because they went to the lowest price and that didn’t allow that company to work and then they failed. Or you see people in the middle class right now, falling off the edges into poverty. Why? Because they don’t make enough money, they don’t save enough money. There is no money for them to invest and so they fall off the edges when you see market conditions like this.

Hear the rest of this great interview on School for Startups Radio!

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Collapse of Startups

September 24, 2012, Economics
http://www.schoolforstartups.com/collapse-of-startups/

Great article in Forbes: The Economy Crushing Collapse Of Startup Jobs

Points from the article….

1. Obama administration has trumpeted the importance of entrepreneurs more than any administration in history.

  • His economic team devoted a full chapter to the topic in the 2011 Economic Report of the President.
  • That was the first Report to analyze the importance of startups.

2.  Startups are 10 percent of all U.S. firms – 500,000 out of 5 million total.

  • Until 2008, those startups create an average of 3 million net jobs every year, whereas the all the other existing companies combined lose a net 1 million jobs.
  • This undermines the traditional mission of local economic development offices to lure existing companies to relocate, a zero-sum game.
  • There were 170,000 fewer startup firms in 2010 than in 2009.
  • As for the steady 3 million annual startup jobs created in previous years, that number fell to 2.5 million in 2009, then 2.3 million in 2010, and even lower in 2011 based on quarterly data.

3. It should be easier than ever to start a company in America.

  • Fixed capital costs are much lower for a service-based business than a manufacturing shop.
  • Low interest rates means initial financing is a safer risk.
  • Government regulation holds expansion back.

 

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Entrepreneurs and Economics

August 19, 2011, Economics
http://www.schoolforstartups.com/entrepreneurs-and-economics/

Great article in this morning’s Wall Street Journal about America’s love/hate with economics. The article was written by Stephen Moore. Here is an interesting quote regarding entrepreneurs:

Consumers lined up for blocks to buy things in empty stores in communist Russia, but that never sparked production. In macroeconomics today, there is a fatal disregard for the heroes of the economy: the entrepreneur, the risk-taker, the one who innovates and creates the things we want to buy. “All economic problems are about removing impediments to supply, not demand,” Arthur Laffer reminds us.

You can read the entire article here.

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Hey Jeffrey, you hypocrite, leave me out of this!

July 12, 2011, Economics, Government
http://www.schoolforstartups.com/hey-jeffrey-you-hypocrite-leave-me-out-of-this/

Today at a US Chamber of Commerce jobs fair in NYC, GE CEO Jeffry Immelt said that we small business owners are problem! That we small businesses need to stop complaining about government and just hire people. What a jerk. In 2001, GE employed just over 300,000. Today, they employ 304,000 people, 11 years later. Oh, and they paid no taxes on five billion in income. Immelt and GE have received special care under the new health care laws. He is in Obama’s pocket.

Hey Jeff, until you pay some taxes, hire some people, and face the same health care the rest of us do, SHUT UP! You know as much about small business as a brick does.

I avoid all GE products, refrigs and nuclear power subs. Jeff, think welch agrees with you?

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I Still Love Nuclear Power

April 12, 2011, Economics, Energy and Oil
http://www.schoolforstartups.com/i-still-love-nuclear-power/

There is no doubt that the Fukushima nuclear disaster is Titanic is scope.  Except that no one died, yet.  One crane operator died, but he was killed in the tsunami.  Thousands will die from radiation poisoning, or we will be told that they did.  But, still the worst nuclear disaster ever died kill anyone.  Nor did Three Mile Island.  And no hole to China was to created, as the movies predicted.  Wait, a hole from Japan through the center of the Earth wouldn’t hit China anyway…..

Airplane wreaks and other horrible things happen when two systems fail.  Usually, when one system fails, you can recover.  At Fukushima, there were 5 independent catastrophes, and the plant did not blow a hole to Africa.  First, Japan was crazy to allow this plant to remain open.  Like Chernobyl (where people did die), authorities knew in advance it was old technology and old parts.  Second, the earthquake.  Third, the tsunami. Fourth, the backup power lines to keep the place safe were destroyed.  And, fifth, human error.  Having withstood all that, the plant remains a mess, but not the worst case scenario.

We must continue to use all forms of energy, even nuce

And this great article…

 

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Jobs lost a despairing time or a time to start a business

September 9, 2010, Business Ownership, Economics, Government
http://www.schoolforstartups.com/jobs-lost-a-despairing-time-or-a-time-to-start-a-business/

We are currently at 14.9 million people unemployed (this is right at the population of New York, Los Angeles, and Chicago combined); In January of 2007 we were at 7.1 million unemployed.  In 3.5 years we’ve lost 7.8 million jobs; on a per month basis that’s 176,000 jobs per month lost. Its a staggering number.  More staggering is the realization that if we started adding 176,000 jobs a month at this point in time we would then have 3 years 8 months to get back to where we were in 2007.  2014 here we come.  Keep in mind that the prognosticators are still forecasting net job losses for the months ahead.

I’ve had a number of people ask me my thoughts about things going forward.  Being in real estate most people are anxious to learn about the market and its impact on their house.  My answer mostly centers around jobs.  Without jobs individual housing markets don’t increase in value.  We currently lack a market or industry that will be a jobs leader.  Looking forward there isn’t a single person who can point to a market or industry that will aid in adding 176,000 jobs a month back to the labor markets.  It just doesn’t exist.  For the longest time housing was a job leader.  The problem with housing was, is, and will be the government v. private markets debate.  We’re mired in it and it has created a very messy market.  There’s enough disagreement on the web, in newly published books, and on TV if you would like to educate yourself on the various arguments for each side.  My thing is housing will not be the job leader going forward.

My fear is that without a jobs leader we will continue to stagnate.  There is much that feeds into this conversation just as there was so many factors that got us into this mess.  Anything from the finance markets and their natural profit motivation to government intervention or deregulation, to  tax breaks, tax increases, government incentives,  new technology, debt driven consumer purchases and many other factors all feed into how we move forward.  But nothing answers the question of a true jobs leader.

The great thing we still have in our country is the ability to work for oneself.  We celebrate that fact at The Entrepreneur School as we are built on that premise.  My job, company, and industry were obliterated 2 years ago.  After a few despairing months (mostly October and November of 2008 – we all remember those pictures see below to be reminded) I devised a plan – 1. look for a job 2. apply for an MBA 3. Go out on my own and start my own thing.

The 3rd option so far has won out.  Trying to find a job in real estate development and/or finance was impossible.  Applying for an MBA was something every 20 somethings in business was doing as we were all being laid off and the third option of going out on my own had the most appeal.  It has been a very tough 2 years but thus far a very rewarding experience.  Making money has been a little more lean but every dollar that comes in is mine and is a result of my work.  This is a great feeling as well as addicting.

My answer to the 14.9 million people unemployed is to find work for yourself.  Start your own business.  Take half the time spent looking for nonexistent jobs and start a business.  If your using unemployment benefits consider it payment for trying to start a business.   If you don’t know how get on The Entrepreneur School and learn.  If 14.9 million people started thinking creatively and looking for problems to solve and opportunities for profit I’m sure a fair number of profitable ventures would be created.

Citations:

Labor Stats: http://www.bls.gov/data/#unemployment

City Populations:  http://en.wikipedia.org/wiki/List_of_United_States_cities_by_population

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The Economic Uncertainty

September 9, 2010, Business Ownership, Economics, Government, Health Insurance
http://www.schoolforstartups.com/the-economic-uncertainty/

Let’s say I’ve been saving my money lately to add a new wing to my house.  At this moment in time, I could take the savings and completely pay for the new addition.  However, the only piece of land I have to build on happens to fall on a small fault line.  In fact, at any moment, a tremor could come and destroy any new addition I make to my house.

Or, let’s say I’ve been wanting to purchase a new bike that would really help me in my ability to get around, but none of the roads in my area are paved, and I’m really not sure when they’ll be paved.  I would likely hold off on the home addition until I knew for sure the fault line would not affect my property.  And I surely wouldn’t purchase the bike just yet.

So, what would happen if the government came in and offered a 100% tax break incentive if I went ahead with the new addition to my house or the purchase of the new bike?  I still wouldn’t do it because of the uncertainty of the fault line and the unpaved status of the roads.  For me to purchase that new wing or bike, I would need more confidence in the surrounding environment.

We find ourselves in a similar situation with our current economic uncertainty.  Obama promises 100% tax write-offs for new equipment purchases for businesses.  Many companies are sitting on large amounts of cash, but due to the economic uncertainty, they are choosing not to spend it.  The companies that have saved a lot of money have done so because the government has not provided any clear direction on where we are headed.  When you don’t know what to expect in the future, you hoard.

How will ObamaCare affect small businesses and entrepreneurs?  The administration says it will lower costs.  Many companies and health insurance providers are talking about hikes in the 7 to 20%+ range.  How will the financial bill add or lower costs?  Will Obama let the Bush Tax Cuts expire, or will the debate last until December?

Small businesses are unlikely to invest in new equipment until they know the answers to these questions.  Take the Bush Tax Cuts.  The administration paints the Bush Tax Cuts as a tax cut for millionaires and billionaires.  In reality, these taxes affect small business owners across the USA making over $250k with their business.  If the tax cuts expire, the small business will see tax hikes of 13%+.

If you as an individual knew that your taxes, health care costs, or other business costs might go up 13% next year, would you spend your extra money on tax-deductible new equipment?  Would you add a new tax-deductible wing to your house on a fault line?  Would you buy a bike for roads that you’re not sure will ever be completed?

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Tony Blair on the Role of Government

September 3, 2010, Economics, Entrepreneurship Quotes, Total Entrepreneurial Activity
http://www.schoolforstartups.com/tony-blair-on-the-role-of-government/

This quote comes from Tony Blair’s new memoir:

“Ultimately the recovery will be led not by governments but by industry, business, and the creativity, ingenuity and enterprise of people. If the measures you take in responding to the crisis diminish their incentives, curb their entrepreneurship, make them feel unsure about the climate in which they are working, the recovery becomes uncertain.”

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The Mortgage Conundrum

August 30, 2010, Economics, Financial Concerns
http://www.schoolforstartups.com/the-mortgage-conundrum/

How does this mortgage crisis play out at the individual level? We often hear about the near collapse of the economy due to bad mortgages. But what does this mean for one family who purchased a home in 2007? Let’s look at a specific example I heard from a real estate broker friend of mine.

One family purchased a home in the Atlanta area in 2007 before the housing market really took a turn for the worse. In 2009, they needed to sell their house in order to move to another city. The house did not sell until this past month, and it sold as a short sale.

In a short sale, the home owner is trying to get rid of the house as quickly as possible usually at a heavily discounted price. It is then the choice of the bank that issued the mortgage whether or not to forgive the difference in sale price vs outstanding mortgage.

In the case of the family in discussion, the house sold for roughly $80,000 less than the outstanding mortgage. The bank then forgave that $80,000.

That’s great news for the family. They had $80,000 in debt miraculously wiped off of their family balance sheet.

But what does this really mean? How can $80,000 just disappear?

When the bank issued this family the original mortgage, the bank quickly turned around and sold this mortgage to a number of financial companies that turned them into securities. So the bank wasn’t really out $80k. These companies that purchased the mortgage from the bank were out $80k.

Who are these people who purchased the mortgage? The biggest portion of the buyers were most likely Fannie Mae & Freddie Mac. For the bank to forgive $80k in debt, they need the approval of the biggest owners of that mortgage.

Fannie & Freddie likely approved the mortgage forgiveness of $80k because they have received billions in bailout money. Where has this money come from? Taxes and in borrowing from our international neighbors.

So, this family was forgiven $80k in debt and Joe Taxpayer ended up footing the bill. Multiply this times the thousands of similar situations playing out across the country.

The bank really didn’t have much choice though. If they made the family responsible for the $80k, they likely would have filed bankruptcy, and the bank wouldn’t have received the money back anyway. They would have just caused more financial ruin on this family.

But here’s the problem. This family shouldn’t have purchased this house in the first place. They purchased above their means, as did nearly everyone else from 2002 – 2007. Because they and countless others did this, the government is now bailing these people out through the forgiveness of debts. So, this family received a lucky break. But what about all of the other families who faithfully pay their mortgages each month, taking 2 & 3 jobs to make ends meet? Don’t you think they will be a little angry paying their mortgage as well as this family’s mortgage?

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USA Wages

August 20, 2010, Economics, Global Trade
http://www.schoolforstartups.com/usa-wages/

There were a few interesting news stories the other day regarding wages in the USA. The first story dealt with call center employees and the second story dealt with the apparel industry.

If you’ve had any sort of problem with your computer lately, chances are, when you called the help hotline, you were magically transported to India where a call center employee took your call. With the advent of decreasing phone costs, rapid Internet expansion, and a rising Indian employee base that spoke English, U.S. corporations flocked to India to outsource their menial tasks. The biggest motivator in this shift was cost.

Well, news from this week shows that employee cost in India is rising (10% this year) and call center workers in the USA are becoming cheaper to where they are almost equaling out.

Will we see a mass exodus of these types of jobs back to the USA? Possibly. But what I predict will happen is that these Indian companies will set up shop in the USA. They have grown in their expertise of what it takes to run an efficient call center and will seek to open up offices in the USA. This has already been happening with higher-end outsourcing (BPO – Business Process Outsourcing, Accounting tasks, etc.) So these offices will be Indian-owned, and local workforce run.

In other news, the USA-based apparel company American Apparel announced serious financial woes. American Apparel set themselves apart as having their entire production process located near LA. That’s not Latin America, but Los Angeles. Yes, they were one of the very few USA-based apparel companies that didn’t offshore their production capabilities. They paid USA wages, included health care, and

The advantage was that American Apparel could respond quickly to changes in the marketplace due to proximity. They also appealed to consumers such as college students who were conscious about the working conditions of employees who made their clothes.

In this case, the USA wage is too high. If someone in Los Angeles is making $7/hr to make a t-shirt while someone in Bangladesh is making $0.50/hr, these costs must be recouped in the price of the t-shirt. In a time of economic hardship, consumers will choose the less expensive t-shirt, regardless of where it was produced.

Now, American Apparel has been known for shady management decisions, so this recent news may not be completely about high employee cost, but it has something to do with it.

So, with the call center employees, we are seeing reduced wages bringing price equality with India where wages are rising. But in the case of American Apparel, USA wages are still too high for that industry.

The other interesting component of this topic is the increased minimum wage requirements for the USA and USA territories.

My big question here is – if some of these jobs begin returning to the USA, will there be people willing to work in these positions? When I worked for an apparel company and visited factories in the USA, I heard plant managers saying they had job ads in the paper and no one lining up for the jobs because the job was below them. Perhaps immigrants would take the job, but that’s a whole other can of worms.

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