National / International News
It's closing in on Halloween, so we're going to get financially spooky.
We want to hear your stories of the scary side of finance. Have you ever fallen victim to a scam? What was that like for you? What did you learn?
The number of year-round public schools is small, but growing fast, according to a report by the Congressional Research Service.Which region of the United States has the most year-round schools?
IBM just announced that it’s no longer making its own chips, a part of its business that it was losing money on. IBM is paying $1.5 billion to GlobalFoundries Inc. — a company based in Santa Clara, California but owned by an Abu Dhabi sovereign wealth fund — to take over its the division.
GlobalFoundries has a lot to gain by acquiring IBM’s chip division. The company will get access to IBM’s engineers and intellectual property.
“GlobalFoundries will also pick up some semiconductor process technology expertise that hopefully makes the company more competitive going forward,” says Needham analyst Quinn Bolton.
Fewer and fewer tech companies make their own chips. Apple, Dell, Qualcomm all rely on outside manufacturers. It makes sense economically because chip companies have the advantage of scale, says Gartner analyst Sergis Mushell. “If you are making ten of something vs a million of something from a price point perspective it’s more attractive when you make millions.”
The largest contract chip maker, Taiwan Semiconductor Manufacturing Company, quadrupled its capital spending in the last five years from $2.5 billion to $10 billion. If you are a company like IBM you have to look at those numbers and ask yourself, does it make sense to take a loss in chip making when you could just buy them from someone else?
IBM’s answer as of today is no, it doesn’t.
Four college students came together to create a social network that does not collect users' personal data. They wanted to build something better than Facebook or an alternative to Facebook. They did end up building that site, but it's by no means a rival to Facebook. That site is called Diaspora.
Author Jim Dwyer documents the start-up story in his latest book, "More Awesome Than Money." He says that Diaspora is supposed to be a decentralized social network focused on privacy, while giving users the sense of connection they crave.
"What they did that was important — and will continue to be worked on — is to look for ways to keep the web a democratic institution where people have authentic control over what they share and who they share it with," Dwyer says.
- Not compromise people's privacy: What drove the project from the beginning was the idea that you didn't really need to compromise your privacy to have a good social experience on the web.
- Keep it decentralized: The entire project of the web as invented was not intended to be in the hands of giant corporations. It was sort of a democratic, decentralized setup.
- Put control into the user's hands: You can take your data off of Diaspora. Facebook now says you can take your data off of their servers although that takes a while and they don't really want you to do that.
Why it didn't succeed, as planned:
- It lacked organic networks: Users' real life friends weren't using it, that causes people to lose interest in using it.
A super PAC is sometimes born out of a strong sense of mission – maybe its founder cares about gun control or education reform. But other times, says Stefan Passantino, a partner at McKenna Long & Aldridge, “part of that mission is to create a client for their own consulting firm.”
Political consultants can create super PACs or political nonprofits to raise money, Passantino says, and then they can use that money to pay themselves.
“Yeah, I would say it is the new growth industry,” says Trevor Potter, former chair of the Federal Election Commission and general counsel to John McCain’s two presidential campaigns. “If you are a consultant who is part of the control group that forms a super PAC or one of these nonprofits, then you get to figure out how you are going to compensate yourself, and it is not always a matter of public record.”
Inside a ‘black box’
There are a few ways this can work. A super PAC can pay a fee to a consulting firm that is run by the same consultant who started the super PAC. That firm could charge fees on ads the super PAC buys. According to Potter, this happens in what he calls “a black box.”
“It’s actually pretty hard to figure out how much administrative costs many of these groups have, and then, how much of that is ending up back in the consultant’s pocket,” he notes.
A super PAC’s founder can be an employee of his own super PAC. “Under election laws, there is nothing improper about taking a salary out of your own super PAC,” says Ken Gross, who spent most of his career as an FEC attorney. That money is taxable, however. He notes there is also nothing improper under election laws about taking money you have raised and spending it on personal items.
“Right now, there are 109 super PACs in our data that reported spending money but have made no independent expenditures,” says Sheila Krumholz, who tracks political spending at the Center for Responsive Politics. All they are doing, Krumholz explains, is paying staff and consultants to help them raise more money. “They are capitalizing on political interests in order to siphon off money that would otherwise go to support candidates and parties, and instead, they are using it for their own personal enrichment.”
Krumholz worries that is weakening civic engagement and making the electorate even more cynical.
Easy to set up
Super PACs have only been around since 2010, and according to Potter, one reason they have proliferated is they are so easy to set up. “It has an incredibly simple one-page form you file with the FEC,” he says. “You need a treasurer and a bank account, and that’s it. You’re off and running.” And creating a political nonprofit that doesn’t have to disclose donors is not much harder.
There are, according to the FEC, about 900 active independent expenditure-only committees, commonly called super PACs, and on top of that, there are hundreds of political nonprofits that have registered with the Internal Revenue Service as 501(c)4s and 501(c)6s.
Potter says that, because there are so many super PACs and nonprofits, political consultants are busier than ever. “The good ones used to just have a campaign or a party they could work for,” he points out. “Now they have all these super PACs; so, people end up bidding for their services.”
Of course, every cycle, some super PACs whither on the vine. Richard Briffault, an election law expert at Columbia Law School, says this highlights something eve the savviest consultant should keep in mind: “At some point, they do have to get donations.”
You can start your own group, hoping it will become a steady source of income, but you have to make sure there is money in the coffers.