Category Archives: Economics

Shocking Post-Recession Economic Bar Chart

Economics,

The great recession, it seems, goes on. While I don’t like statistics as morality, and I hate how much this stuff lends itself to inane talking points in politics, this was just striking. I saw it on CNN Monday: Family net worth plummets 40%. The illustration is by CNN, and sources are cited in the small print. 

The piece says:

The stunning drop in median net worth — from $126,400 in 2007 to $77,300 in 2010 — indicates that the recession wiped away 18 years of savings and investment by families.

I’m not an economist so I don’t draw conclusions. I am a skeptic so I question the statistics, always; but this seems hard to dispute. 

And we see it, don’t we? Aside from the politics? People out of work, people looking for jobs, people sticking to jobs they hate. The great recession of 2007-09 dropped 10 or 12 millions out of the economy, out of work. Millions of them are still down looking up. No wonder growth is down and sales sluggish. 

These are hard times. 

Is There a Tech Bubble? We’ll Know If It Pops

Business Financing, Economics, Technology, Venture Capital, , ,

Earlier today I posted disruption vs. revenue and the tech bubble on the gust.com blog. I’m suggesting in that post that some special-case web-based startups have to choose between disruption or revenue, because they can’t have both.

That may or may not be true, but I’ve been guilty of suggesting it is to a couple of startup software companies recently. I think both were special cases. They had a real chance to go really big and generate spontaneous buzz based on the product itself.  But locking their wares behind pay walls might slow their growth and dampen their success. 

That may or may not be true. After the tech crash in 2000, I never thought I’d see that happen again, much less me recommending not covering expenses with revenue. Still, though, there’s Facebook and Twitter and Instagram and, oh my.

Bubble? Las Sunday the NYTimes’ bits blog published Disruptions: With No Revenue, an Illusion of Value. Author Nick Bilton says yes there’s a bubble and tells why he’s sure.

When this next bubble pops — and it will pop — the idea to make no money can finally pop, too. Then investors can start working with companies to build businesses that have long-term financial goals, instead of just building a short-term mystery.

But on the same day Chris Dixon (smart person) asked Is It a Tech Bubble on his blog and answered with some convincing analysis, “no.” And the second comment on that post is Fred Wilson of AVC (another smart person) saying: 

[Zynga price] certainly doesn’t seem like a bubble valuation either. I do think there is more money sloshing around the tech/internet/mobile sector now than there has ever been. and that is impacting valuations across the board. The question is if this is temporary or the “new normal”. I guess we will find out.

So I’d like to answer this tech bubble question here, but as I was writing this, on Sunday, those other interesting and contradictory posts, from smart people, kept rolling onto the web. I ended up tweeting my conclusion to this post last Sunday, with the following tweet. 

What To do When Business Research Collides

Business Research, Economics, , , ,

I follow two reports on small business employment, one done by Intuit, the king of small business accounting, which also has a payroll service, and the other by SurePayroll, which is a small business online payroll service.

But here’s the rub: reporting on small business jobs in April, the Intuit index has good news … and SurePayroll has bad news. And both are doing the same thing, reporting on a survey of their small business payroll customers.

Here’s the key data from the Intuit report for April:

Small business employment grew by 0.3 percent in April, equating to an annual growth rate of nearly 3.6 percent. This translates to approximately 60,000 new jobs. Based on this latest data, the employment growth rate for March was revised slightly up to 0.3 percent, equating to 65,000 jobs added for the month. Since the hiring trend began in October 2009, small businesses have created 845,000 jobs.

And here’s the summary, from Inc.com, of the  SurePayroll report.

The small business economy has shifted into neutral, with hiring and wages virtually flat month over month (both down 0.1 percent from March), according to the SurePayroll Small Business Scorecard.

So who has the truth? Probably both. Most likely there is some difference in the composition of the two user sets. Here’s Intuit’s detail about the data:

The data for the Index is pulled in aggregate from approximately more [SIC] than 57,000 employers across the country that use Intuit Online Payroll and is published monthly on a close to real-time basis.

And I sent an email to SurePayroll’s person in charge, asking for similar information, but that hasn’t been answered yet, so I don’t really know what’s up and I don’t have enough background information to guess. Different kinds of businesses, perhaps? One is driven by payroll data and the other is asking people what they think? Is it politics, maybe? One group supports the current administration, the other doesn’t? I sure don’t know.

And here’s the other rub: what if your business depends on this data. Which picture do you believe? (Hint: both and neither?) And what if there’s a critical business decision to be made, based on this research, and you get only one or the other. Will you entertain an educated guess?

Do you think that ever happens?

Quick Dollar View of National Priorities

Current Affairs, Economics, , ,

Andrew Sullivan posted this as Infographic: Tax Breaks vs. Budget Cutson his Daily Dish blog on The Atlantic. He traced it back to this possible origin, which has a lot of detail at the bottom about sources and assumptions. I apologize for politics, not my normal fare on this blog, but it’s such an eloquent chart; I couldn’t resist.

I had to ask myself: is this what our priorities are?

Small Business Labs on Trends for 2011

Economics, Social media, Technology, , ,

Sure, there are lots of trends pieces going around these days, but Steve King of Emergent Research is the best expert I know on researching trends and putting them into sensible pieces. His company does some really good trends research that is often published by Intuit. , so I’d like to share his Top 10 Small Business Trends for 2011, some of them with my comments.

First, four major economic trends:

1. The small business economy recovers from the great recession.

From your lips (or keyboard), Steve, to God’s ears. May you be right on this one.

2. Variable cost business models:  Small businesses will continue to focus on cost containment, bootstrapping and business flexibility in 2011.  More small businesses will shift from fixed cost to variable cost business models, adopting a pay-as-you-go approach to minimize cash requirements and increase business agility.

3. Small firms reinvest U.S. Manufacturing

That’s a surprise to me. I thought U.S. manufacturing becomes less competitive. But Steve points to the weak dollar, technology, growing world markets, and the web giving more worldwide access to smaller companies.

4. Alternative financing

He cites “merchant advances, micro lending, community lending, crowd funding, and factoring.” I bet alternatives like crowd funding take longer, though, because of securities law, fraud, and those worries.

Second, five social and social media trends:

5. Social media moves to the small business mainstream.

6. Social commerce: the amazing growth of Groupon and other social commerce sites in 2010 …

7. Small businesses friend Facebook. …. small businesses are embracing and adopting Facebook as a key part of their web presence, and in growing numbers using Facebook as their primary website.

Myself, I’d like to see more examples.  Is this proving to be good business?

8. New localism continues to flourish

9. Freelancers realize they’re small business owners

It’s about time.

Finally, one technology trend:

10.  Working in the Cloud: No trends list would be complete without mentioning mobile, cloud, local and social computing.

No surprise there.

So I give special attention to Steve’s trends posts because 1.) that’s what he does for a living, mainly; and 2.) he’s good at it.

Helping Women Fight Poverty With Entrepreneurship

Economics, Entrepreneurship, , ,

I don’t know much about this, but it certainly impressed me, so I decided to share it here. I assume the video here speaks for itself, but, just in case you’d like a summary, it’s about an organization called FITE, for Financial Independence Through Entrepreneurship, that is powered by Kiva.org and focuses on  microloans for women.

If you don’t see the video here, you can click this link to go to the source site.

I’m assuming nobody can deny that there is a real need here. I’d like to see an organization like this grow, and help the people it’s trying to help.

2011 As Good Times for Entrepreneurs?

Economics, Entrepreneurship, ,

So, on last day of the year, eve of a new year and (I think … correct me if I’m wrong) a new decade, Steve Blank posted his optimistic 2011 may mark the beginning of a golden era for entrepreneurs on VentureBeat.

He cites several reason, all of which make sense to me:

  • Compressing the product development cycle.
  • Startups Built For Thousands Rather than Millions of Dollars.
  • The New Structure of the Venture Capital industry.
  • Entrepreneurship as Its Own Management Science.
  • Consumer Internet Driving Innovation.

Interesting: thoughtful, and well reasoned. Let’s hope he’s right.

Does the Kindle Tell You Something About Your Pricing?

Economics, Technology,

While I tend to think pricing too low is one of the most common mistakes in small business, there’s still something to be said for finding the pricing sweet spot.

Sometimes elasticity works. For example, in Amazon says it has sold millions of Kindles This Quarter, Business Insider notes:

Amazon [says it] has “already sold millions of our all-new Kindles.”

That suggests that Amazon has sold at least 2 million of the devices this quarter, and perhaps many more.

That’s “more Kindles than we sold during all of 2009,” Amazon’s supposed rep also writes.

Which proves once again, I suppose, that pricing is still magic. If you search for  Amazon Kindle is overpriced on Google you get a flurry of blog posts and business pundits saying just that … but almost all of them from 2007-2009 when it came out at $399 and then sold for a long time at $299. Now that it’s down to $139, nobody is saying that.

In standard economics, elasticity has to do with price and volume: the more elastic a product is, the greater the increase in sales volume for every unit of decrease in price. Pretty obvious, right? But no, actually, at least not always. Some things are more elastic than others. Think for a second about cheap sushi, for example. Would day-old sushi sell well? How about discount dentistry?

And then there’s this: theoretically, to break even on the price drop, amazon.com has to sell 2.15 kindles at $139 for every one kindle they would have sold at $299.  What do you think? I think they’ve hit a price sweet spot, low enough to attract a lot more buyers. Also, I think there’s another factor in the equation, because those higher-volume Kindles get manufactured for a lot lower unit price.

What do you think? Does this tell you anything about your business?

Do We Give a Damn About Public Schools?

Current Affairs, Economics, , ,

Last Thursday I attended an evening meeting at a local public school that’s on the close-down list as our school district (4J in Eugene, OR) reels in shock over massive budget cuts. I have a 7-year-old grandson in first grade at that school, so I joined his mom at the meeting.

It was a sad meeting. There isn’t enough money. Schools are getting closed, kids and teachers getting shuffled around, we’re heading towards fewer schools with more kids in every classroom, less support, fewer school days, more decline in public education.

The public schools have already jammed more kids than ever in classes, and cut the hours, and the school days, and given up everything they think they can.

I hesitate to write about this in this blog because it is so hopelessly political, outside my normal areas of discussion, and just plain doomed to frustration and, sadly, predictability. Complaining about public education in this country is trite. There are choruses of articulate and well-educated voices crying out against what’s happening to education in this country.

You can find lots of statistics, and lots of research, and lots of people ready to blame somebody: one political party or another, parents, teachers, politicians, teachers’ unions, administration, coddling the kids, equality through mediocrity, and on and on.

If we really cared, as a society, we’d make it a priority. Do we really care?

When I was a kid, in the 1950s and 1960s, education was an accepted national priority. Sure, maybe it was because we were afraid of the Russians, or worrying about the space race … but it worked. And maybe it was because we were comparatively wealthier then than now, in the aftermath of World War II, as competing nations’ industrial base had been destroyed. And maybe we weren’t so polarized politically.

And while we’re bickering over whether it’s Democrats or Republicans or liberals or conservatives or too many administrators or teachers’ unions or voter revolt or government waste, teachers and kids are stuffed together in impossible situations already, and public school budgets decline further.

Do you relate to national pride? How does it feel to live in a country whose public education is second or third rate?

Do we care? Or is politics more important? Or is good education just too expensive for this society?

(Photo credit: Paul Carter/The Register Guard)

Graphic Evidence of What We Value Most

Current Affairs, Economics, Technology, Web/Tech, , , ,

Like it or not, your real priority, my real priority, our society’s real priority shows up not in what we say but in how we spend our resources, including, of course, how we spend our time. Time is the scarcest resource.

Author David McCandless at Information is Beautiful called it Cognitive Surplus Visualized in honor of Clay Shirky’s Ted Talk.  I don’t love the phrase “cognitive surplus,” but I do get the point. And this chart speaks for itself. Well done.

Business Chart

When I see those two boxes, I can’t help thinking how huge the effort of Wikipedia; how much is there, information on how many different topics, how many people it took, and how many hours it took. Then I compare it to the big box next to it.