Category Archive 'Business'
17 Jun 2016

A Muddled Business

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BadBookeeping

In The Story of a Norfolk Farm (1940), Henry Williamson recounts the story of his own less-than-successful efforts to straighten out the tangled business affairs of his bumbling brother-in-laws to be.

When Papa died, the Boys, as Loetitia called them, would have some money from the trustfund of their parents’ marriage settlement. One of them had an idea, How about trying to get some of that money now? Only a little part of it, of course, about one hundred pounds. It was fatiguing work, pushing on the treadle-lathe hour after hour. Now with a hundred pounds they could buy an oil-engine, and two more lathes, and turn out more work. Keen on the idea, they went to see a lawyer.

Certainly, said the lawyer, he would make inquiries on their behalf. The inquiries were so thorough that in less than a week he gave them the good news that much more than a hundred pounds could be arranged, if they liked. Why not sell all their reversions? Then they would have nearly three thousand pounds, with which they could enlarge their engineering shops more profitably. They thought him an awfully nice fellow to have taken such trouble for them, and agreed that it would be fine to have a big Works in the garden, right by the house, so convenient for business. So they signed the document; and a few months later, when Loetitia left to share the precarious life of an unknown and unconventional author, building began. They gave the job to a small local builder, to help them. There was no contract, no price agreed between them. When the building was finished, the little builder hired a cab, bought a barrel of beer, and drove around town visiting his friends. For a whole week the little man celebrated: the dream of his life had come true: suddenly he had a lot of money.

As for the Boys, inexperience and trust in human nature had resulted in a factory being erected with walls of only a single brick in thickness. Part of those walls fell down, and had to be rebuilt. Only the roof held them together. This had cost about £1600, but when the fire insurance inspector came to look over the completed building, he said that in the event of a total loss his company would indemnify them only to the full value of the building, which was £600.

Read the rest of this entry »

14 Apr 2016

The Expert at the Business Meeting

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Hat tip to Tom Weil.

02 Apr 2016

Investment Banks Get No Respect

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BankBuildings

Robert Arvanitis explains that their utility and functions have changed.

This begins with the historical merchant banks. These were firms that helped fund the Age of Exploration, and grew along with their clients during the Industrial Revolution.

A merchant banker was knowledgeable in one or more lines of business, put his own money into investments, and gathered more investors based on his own reputation. A merchant banker was the finance department for his clients. He not only lent and invested, he advised on markets, delivered correspondent services, knew the broader economy, and participated in the risks.

That was a lot of hard work, and a lot of sincere risk taking, and the merchant bankers were well-respected. …

as government grew, it had a baleful impact on banking. Government imposed increasing regulation, it set ever more complex tax schemes, and it used capital markets for its own deficit financing. The classic “elephant in the bath tub” of economic distortions.

By the 1970s, the investment banks, starting with Drexel, responded to these new signals. Investment banks began to disintermediate the commercial banks, with high yield bonds. Here, the investment banks acted as agent, not principal. They matched borrowers to investors but took no principal risk. That removed the need for capital, but also left the investors with both the default and liquidity risk. This further detached banks from clients, and in fact made them competitors in trading.

It turned out there were more — and more profitable — opportunities in arbitraging tax and regulation than there were in actually serving businesses. …

[T]he new-style investment bankers sold bonds to investors, and then traded against both the investors and the issuers, making a relatively safe turn on each sale. Or else they read the tax code, and fabricated deals that were tax-deductible debt for the IRS, but counted as regulatory capital for the other parts of government. That’s easier and more profitable than actually building something.

In short, rather than solving real challenges, today’s investment banks work to exploit the growing incoherent web of government intrusions on the market. Profitable, yes, but not worthy of our respect.

07 Mar 2016

Trump, the Winner

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SomeWinner

Brett Arends, at Marketwatch, debunks Donald Trump’s claim to being sooo much more competent that all those professional politicians.

The Republican front-runner has made much of his supposed “success” in business and says he now wants to do the same for America.

But the only part of his business track record for which we have the full picture shows that Trump wasn’t a successful executive but an absolute catastrophe.

For 10 years between 1995 and 2005, Donald Trump ran Trump Hotels & Casino Resorts — and he did it so badly and incompetently that it collapsed into Chapter 11 bankruptcy. His stockholders were almost entirely wiped out, losing a staggering 89% of their money. The company actually lost money every single year. In total it racked up more than $600 million in net losses over that period.

Trump was chairman of the board throughout the entire time, and CEO as well for about half of it.

This is the sort of record usually associated with an Enron or a WorldCom or a Pets.com.

Meanwhile, over the same period, all his competitors were enjoying an enormous boom. Take a look at our chart. …

Donald Trump ran the worst performing casino company on the stock market. This isn’t a matter of “opinion.” This isn’t speculation or politics. It’s a matter of plain fact.

However, one person associated with Trump Hotels & Casino Resorts did make money:

Donald J. Trump.

A review of the company’s public filings show that over that period, while his ordinary investors were getting hosed, Trump himself was siphoning millions out of Trump Hotels & Casino Resorts through salary, “bonuses” — yes, really — and cozy “service agreements” or side deals with his private corporations.

In total, Donald Trump pocketed $32 million over nine years, while his public stockholders lost more than $100 million.

Follow the money. It really isn’t that complex.

Now his supporters want to put him in charge of the federal government. They actually hope he will do for America what he’s already done for his business.

Heaven help us all.

27 Aug 2015

Cheap Flights

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21 Aug 2015

Love Gov: 5 Episodes

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A series of videos from the Independent Institute depicting Alexis’s relationship with Gov, from first date to mandate.

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28 Jan 2014

Dilbert

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Hat tip to Karen l. Myers.

02 Jun 2013

Advice for Goldman Interns

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Obligatory Zegna tie.

Niccolo Machiavelli, Vice President at Goldman Sachs, offers some helpful career advice to this year’s male summer interns via the GSElevator blog:

1. If your boss smokes, smoke.

2. If your boss is Indian or Pakistani, learn the rules of cricket. He probably also smokes, so see #1. But be careful, if he doesn’t, he’s a vegetarian yogi.

3. Don’t wear Hermes ties, ever. You have to earn it.

4. Buy a decent suit or 3, but no cuffed or pleated pants. And don’t wear a tie unless you might have a meeting. No one likes that kind of kiss-ass.

5. Learn how to tie a double Windsor; just make sure the knot’s not too fat.

6. Keep your shoes shiny, but don’t let anyone see you having your shoes shined. You have to earn it.

7. If you went to a decent boarding school, subtly find out if anyone who matters went to the same school. Boom, he’s your rabbi. At this point, no one cares about college credentials; it’s a given.

8. As it relates to fellow interns, make no mistake about it – it’s war:

    Let’s be clear. It’s impossible to compete with female interns. And it’s not cool. So don’t bother trying.

    When a fellow intern leaves his desk, change his screen (or screens) to rolex.com, porsche.com, or morganstanley.com.

    Come up with dismissive nicknames for fellow interns (Chico, Bud Fox, Fredo, Bubba, etc.). Hope that it catches on.

    When a fellow intern leaves his computer unlocked at the end of the evening, change the signature on his Email settings. Using white font, add any variety of obscene words. No one will see it… except for IT and HR.

9. Don’t be too good to do the coffee runs. It shows confidence. Just don’t fuck it up. If you can’t be trusted with coffee, how can you sell bonds or manage risk.

10. Call Bloomberg and have them give you a tutorial on functions. It’s free. And most EDs and above are still using functions and short cuts from 5+ years ago. It’s an easy way to impress them. And many of the Bloomberg girls are hot.

11. Leave a jacket on the back of your chair at all times. While you are at it, keep a tie in your drawer. Zegna is a good choice.

12. Ask the secretary for the travel schedules of the senior members of your group for the week ahead. She’s dumb enough to think you are being proactive. But now you know when you can sleep in, hit the gym, or beat the traffic to Southampton.

13. Never tell racist jokes. Always repeat racist jokes in the proper company and be sure to credit ‘the other intern’ who told you.

Read the whole thing, Bubba.

Hat tip to Lynn Chu.

24 Feb 2013

Gun Companies Increasingly Refusing to Do Business With Gun-Grabbing Governments

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CNS News

A growing number of firearm and firearm-related companies have stated they will no longer sell items to states, counties, cities and municipalities that restrict their citizens’ rights to own them.

According to The Police Loophole, 34 companies have joined in publicly stating that governments who seek to restrict 2nd Amendment rights will themselves be restricted from purchasing the items they seek to limit or ban.

Hat tip to Theo.

16 Nov 2012

Hostess is Shrugging

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HuffPo:

Friday could very well go down in history as the death knell for an 82-year-old Chicago-born American classic snack cake: The Twinkie.

Hostess Brands, Texas-based maker of Twinkies and a number of other snack foods, announced Friday that, on the heels of a nationwide worker strike, it will be going out of business, closing its production plants and laying off the vast majority of its 18,500 employees nationwide. As for the Twinkie brand? It will be going up for sale.

Three of the company’s plants — including one in St. Louis — closed earlier this week as workers went on strike in response to wage cuts and new limitations in worker participation in pension plans. Now, 1,415 workers at the company’s three Illinois bakeries — in Schiller Park, Hodgkins and Peoria — are losing their jobs, the Chicago Sun-Times reports.

16 Jan 2012

Sad Remains of American Industry

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These photographs by Walter Arnold of the derelict Scranton Lace Company were recently linked on a North East Pennsylvania Genealogy list.

Incorporated in 1897, the Scranton Lace Company in its heyday employed 1400 people, and was the world’s largest producer of Nottingham lace. It possessed the largest looms ever built, each of which stood nearly three stories tall, was 50 feet long, and weighed over 20 tons. During World War II, the company expanded its production line to include mosquito and camouflage netting, bomb parachutes, and tarpaulins. After the war, the company returned to producing cotton yarn, vinyl shower curtains, and textile laminates for umbrellas, patio furniture, and pool liners.

Its factory complex boasted “bowling alleys in the basement, a fully staffed infirmary, a staff barber and a gymnasium, and owned its own cotton field and coal mine. Its clock tower was a city landmark. U.S. Sen. Hillary Rodham Clinton’s father and grandfather worked there.”

The Scranton Lace Company closed abruptly in 2002 with an announcement from the company’s vice president, in the middle of the daily work shift, that the company was closing “effective immediately.”

The photo essay is a moving testament to the scale of everything that has been lost as the American economy changed in recent decades to a postindustrial era and manufacturing in most cases moved overseas.

15 Jan 2012

The Saga of Trader Joe’s

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When I was living a few years ago in the Bay Area of Northern California, I often divided shopping expeditions between Draeger’s (a sort of West Coast Zabar’s, a high end butcher shop-cum-gourmet food store) in San Mateo and Trader Joe’s in Foster City.

No matter how little I bought at Draeger’s, I marveled to find that the cash register receipt never came in under $100, while two or even three times the volume of purchases from Trader Joe’s often came in under $40. “These things even out.” I used to assure Karen.

Just the other day, I finally got to a Virginia branch of Trader Joe’s in Centreville. We residents of the real Northern Virginia make a point of avoiding entering the soul-destroying, built-up, suburban areas outside the District, referred to around here as “Occupied Virginia,” but Centerville is just at the edge of the suburban Erebus, and cases of Two-Buck-Chuck (priced on the East Coast at $3.29 a bottle) will definitely justify the occasional expedition.

Los Angeles Magazine has a long feature this week revealing the mysterious origins of the Counter-Culture’s favorite grocery store (which even some of us conservatives like).

Coulombe guessed he had less than a few years to think up a concept that could compete. Luckily, he was an avid magazine reader. In Scientific American he learned that a new class of overeducated, underpaid adults was being produced by the burgeoning college system. Sophisticated shoppers were not necessarily wealthy shoppers, Coulombe theorized; they were educated buyers trapped in economic stasis. He decided to mate the convenience store with the liquor store, and that was Trader Joe’s, “Phase I.” His customers would be the classical musician, the journalist, the teacher, the young doctor. In a different article Coulombe read that the more education a person had, the more they drank, so he stocked 70 bourbons and about 100 scotches. (“I had penciled out what a union journeyman made to figure what I would pay my employees,” he says, “and adding liquor was the easiest way to fund those wages.”) Coulombe read about a jet known as the 747 that promised inexpensive air travel to Europe; Trader Joe’s would need to broaden its tastes to match the new traveler. In another magazine Coulombe discovered that the earth’s biosphere was threatened. Overnight, he says, he became a self-professed “Green” and spliced the health food store and the gourmet store onto Trader Joe’s. This was “Phase II” of Coulombe’s company.

Finally, Coulombe gave Trader Joe’s something most grocery chains didn’t have: a personality. It would have its own take on the world—cultivated but casual, spontaneous, moderately liberal, and smart. When you walked into a Trader Joe’s, you would know the store’s tone and its attitude. The personality that Coulombe conceived remains to this day the company’s voice: The Fearless Flyer.

Coulombe continued to tinker with Trader Joe’s. In 1972, he devised what he calls “Trader Joe’s, Phase III.” At that time the trend in grocery merchandising was bigger. Throughout the ’70s, supermarkets were headed toward becoming the 40,000-square-foot behemoths of today that can carry 50,000 items. Yet such steroidal markets would encounter drawbacks to their muscled dimensions. Eighty percent of supermarket shopping time is spent moving from product to product. Half of all store trips are for five purchases or less, and customers on such trips aren’t searching for sale items—price does not alter the behavior of someone looking for only a handful of things. What did this mean for supermarkets? As their floor plans expanded, their sales volume per square foot shrank. They were forced to invent new schemes to compensate for lost profits, charging fees to manufacturers for store placement and “floating” cash (earning bank interest on the daily take).

So once again Coulombe thought small. Instead of 50,000 shelved items, he would drop his number from 6,000 to 1,000. If supermarkets sold 20 kinds of cat food and 40 detergents, he would sell one of each. In doing so, Coulombe maximized the velocity of dollars entering his registers. Shoppers moving 5 feet between purchases instead of 50 pass through a store more quickly, leaving more cash behind. The average supermarket brings in $10 million to $30 million annually in sales. A Trader Joe’s one-fifth the size of a supermarket can make $1 million in a week’s time. Square foot for square foot, that Trader Joe’s outperforms an average Walmart, which would have to do $30 million in business to match it during the same period.

“I took her down to the rocker arms,” says Coulombe, describing the work he did in the late ’70s. “That’s the Trader Joe’s you know today.”

02 Jan 2012

Movie Theaters: A Dying Industry

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Two boys debate attending the American Theater in Greenpoint, Brooklyn in 1938.

Roger Ebert explains why movie theater revenues are in free fall. Only blockbuster movies are currently keeping the whole system afloat.

I guess that’s just how things work.

You have the movie theater business, an industry whose pioneer days were a century ago. That business prospered and bloomed, but for decades now what was once a luxurious escape experience has been subjected to the careful ministrations of bean counters and corporate optimizers who have turned movie theaters, once palaces, into cheap industrial warehouse spaces operated robotically and understaffed with inadequate contingents of the bitter and indifferent working for the minimum wage.

It takes hundreds of millions for special effects, movie star salaries and blowing up all those expensive cars, but at the actual delivery end the industry has whittled every possible penny out of quality of service.

Their problems are compounded by the aging US population. Even hard-core cineastes like myself (I ran a film society at Yale) today feel out-of-place in today’s theaters. Adults buy videos or watch films on cable or the Internet these days. Teenagers go to movie theaters for the same reasons teenagers always went to movie theaters.

The film industry is being confronted by the same kinds of changes in technology and the arrival of handier and more competitive methods of product delivery that confronted the music industry, and it seems that these dinosaurs are no more able than the other dinosaurs to cope positively with new challenges and opportunities.

Old industries wind up being run by rentiers, but dramatic innovation requires visionaries and risk-takers. The motion picture industry today is run by corporations, what changing times need are the equivalent of the aggressive businessmen, recently off the boat from Poland and Lithuania, the Warners, the Zukors, the Goldwyns, and the Mayers, who created the studios and the industry in the first place. But that kind of leadership is not going to come from inside today’s industry establishment.

25 Aug 2011

Classical CDs Beat Other Genres in Sales

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Variety has some good news.

The classical recording industry is managing to experience sales growth despite the recession, and capitalist enterprise is gradually excavating the enormously valuable recorded repertoire lost to contemporary humanity in the cataclysmic media transition which eliminated the long-playing record.

Nielsen SoundScan’s report for the first half of 2011 indicates that classical music had the biggest gain in sales of all genres, 13%, over the first half of 2010, for a total of 3.8 million albums.

Granted, that’s still a small percentage of the total market (about 2.4%), but it shows that classical is holding its own and then some, with other genres up slightly or slipping.

Moreover, the majors are being supplanted by a swarm of activity from other, smaller, nimbler sources.

Many orchestras increasingly take matters into their own hands, no longer relying on the majors for exposure. The Chicago Symphony has its own label, CSO Resound, so do the Boston and St. Louis symphonies, as well as the London Symphony, London Philharmonic and several other foreign orchestras. With Telarc reduced to a shell of its former self after the takeover by Concord, its two once-regular orchestras, the Cincinnati and Atlanta symphonies, have just formed their own labels.

Probably the most successful and luxuriously packaged inhouse orchestra label is the San Francisco Symphony’s SFS Media, which in 2010 completed its decade-long Mahler project on 17 SACDs and just issued a capstone documentary, “Keeping Score: Mahler,” on DVD and Blu-ray. SFS Media claims to have sold more than 130,000 Mahler CDs worldwide at premium prices — a roaring success for a classical series.

Likewise, individual artists and small ensembles now routinely bypass the majors and minors alike in favor of their own boutique CD labels — like New York new music collective Bang on a Can’s Cantaloupe, pianist Wu Han and cellist David Finckel’s ArtistLed, plus composer Philip Glass’ Orange Mountain Music.

Free of the old restrictions, these labels can offer as many choices to their fans as their markets will bear. In the prolific Glass’ case, Orange Mountain Music has issued at least 75 releases since its launch in 2003, and the Music@Menlo festival in Silicon Valley exhaustively documents its concerts in massive annual boxed sets.

Naxos, the budget label that upended the classical record industry in the 1990s with its no-frills, high-quality recordings, has turned itself into a big distributor of small labels, with 148 of them (mostly classical) now under its umbrella. Harmonia Mundi, once and still a specialist in early music, also distributes a long string of small labels.

If the majors don’t want to keep their rich classical catalogs in print, others are happy to step into the breach. The online retailer ArchivMusic, now owned by piano manufacturer Steinway, has been making deals with the majors that allow it to press custom copies of out-of-print classical CDs and sell them on its website (the titles now number well in the thousands).

Hat tip to Adam Krims.

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