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Updated: 19 min 34 sec ago

Apple keeps CEO safe at $700,000 a year

Fri, 2015-08-07 13:00

When we did the show from Aspen back in June, I stopped at a Starbucks for breakfast one morning, and sitting there having a cup of coffee and noodling around on his iPad was none other than Tim Cook.

Tim Cook. The CEO of Apple — maybe the most valuable company in the world — just sitting there all by his lonesome.

I told you that so I can tell you this. 

Apple spent $699,133 on security for its chief executive last year according to filings with the Securities and Exchange Commission, Patently Apple reports.  

Japan prepares to restart its nuclear power plants

Fri, 2015-08-07 13:00

Early next week, much of the energy world’s eyes will be on the Japanese island of Kyushu. That is the site of the first nuclear plant restart since the Fukushima disaster in 2011. Japan has since mothballed all its nuclear plants, and a lot is riding on operators flipping the switch back on successfully.

Japan’s nuclear plants have put in redundancies since the disaster, like cooling water tanks that only require gravity instead of electricity, and backup power for when the main source goes out.

But until operators fire the plant back up, they can’t be sure the reactor’s key plumbing works, including the pipes and gaskets that handle 200-plus degree water.

“There are things that you can’t test until the plant gets up and running, kind of like a car that’s been idled for awhile or in the shop for awhile," says David Lochbaum of the Union of Concerned Scientists. "It’s really when the car goes out on the road that certain things can be tested.”

At issue is not just hardware; nuclear safety culture has to restart right as well.

Dale Klein of the University of Texas is a former U.S. regulator and heads a reform panel at Tokyo Electric Power. He says pre-Fukushima, Japanese culture didn’t allow enough questions, such as, “is the tsunami wall high enough?”

“If the safety engineers would have questioned, 'Well, how high should it be? What was our margins? What would you do if one comes in higher than that?’ it would have made things different,” Klein says.

Going forward, Klein says nuclear utility companies have to self-report errors they find and regulators under a new regime that prioritizes safety have to encourage assertiveness.

If the process is bumpy, the Japanese public could question restarts at other plants.

“There’s a list of about 20 that have applied,” says Steven Kraft, senior technical adviser at the Nuclear Energy Institute, an industry group. “Once you’ve got one that’s OK, it becomes a lot easier to know what to look for going forward.”  

What’s at stake? Japanese proponents want nuclear to grow to 20 percent of its energy mix; it was over 30 percent before Fukushima.

And around the world, some 70 nuclear plants are now being built and would rather avoid more bad news out of Japan.

 

 

 

Media business gets a rough signal

Fri, 2015-08-07 13:00

This has been a rough week for media companies. Time Warner, Disney, Viacom and 21st Century Fox all took a beating in the markets. The fact is that people are canceling their traditional cable subscription plans in droves.

Marketplace entertainment reporter Adriene Hill says this is something that has been building up for a long time.

"Cord cutters have been cutting cords for a long time," she says.

Disney CEO Bob Iger also drew attention for his claim that he could spin off ESPN into an over-the-top streaming model any time he wanted.

"We all have to have our sports, right?" Hill says. "ESPN is part of the reason that we all pay way too much to have a lot of channels that we don’t watch. So when investors heard that ESPN was vulnerable, I think it made them realize just how vulnerable the rest of cable was."

Now the television industry is in trying to figure out how to make money again. Hill says networks strategies center on producing more quality shows.

"I guess when you don't know exactly how you're going to make money, all of these networks are trying to make the best television they can to get us there," she says.

Click on the media player above to hear more.

Weekly Wrap: Unemployment, the Fed and the GOP debate

Fri, 2015-08-07 13:00

Joining us to talk about the week's business and economics news are: Jo Ling Kent of FOX Business and Fortune's Leigh Gallagher. The big topics this week: Friday's unemployment report, the possibility of an interest rate hike in September and Thursday's GOP debate. 

Will last-minute work soon be history?

Fri, 2015-08-07 13:00

When Russell Miller worked at Abercrombie, one of his days each week had to be an on-call day.  He wouldn’t know if he’d have to show up to work until an hour in advance.

“You had to block out that time period as if you were working,” he says. One store he worked at was 45 minutes from his house. “We had to be ready to be there on time. With all the regulations about what we wear, how we look and how we present ourselves, I had to get fully ready for my shift and ready to walk out the door at the time I made the phone call to find out if they were even going to need me or not.”

For Miller,  this was more than an inconvenience.

“Having a second job wouldn’t work at a time when I was scheduled for an on-call shift. If they scheduled me for an on-call shift and they didn’t call me, that was real money lost and real time opportunity lost.”

On-call scheduling “means you have to put your life on hold,” says Rachel Laforest, director of the Retail Action Project, a division of the Retail Wholesale and Department Stores Union. “It becomes very difficult to lead full lives, so for example, if I’m a parent and I have to figure out arranging for child care, it’s impossible for me to do that” with such short notice, she says.

There isn’t good national data on the prevalence of on-call scheduling, but regional surveys suggest it’s widespread and not limited to retail, says Stephanie Luce, professor of labor studies at CUNY.  “We see it in fast food, airlines, beauty services,  domestic services, child care services," she says. "Smaller studies seem to suggest this practice really picked up after the recession, however, over the past couple of years, there’s been a real push back.”

After New York’s attorney general suggested Abercrombie and 12 other companies were potentially violating New York law through the practice, Abercrombie announced it would work to discontinue the practice.

The company responded on August fifth “...we understand – and share – the attorney general’s concerns about call-in shift scheduling. The attorney general’s letter helped focus our ongoing internal discussions about how to create a stable and predictable work environment as possible for our employees.”

Gap Inc. told Marketplace: “Each of our brands have made a commitment to evaluate their practices and determine where we may be able to improve scheduling stability for our employees, while continuing to drive productivity in stores.”

Gap also says it’s working on a pilot project with University of California, Hastings College of the Law “to examine workplace scheduling and productivity. Led by recognized expert professor Joan Williams, the goal of the Gap Hourly Scheduling Initiative is to use research and data to create solutions that will be sustainable and can be implemented across our company’s entire footprint and fleet."

Under pressure from a lawsuit, Victoria’s Secret discontinued on-call scheduling earlier this year. 

To the extent firms are reconsidering the practice, the reasons are both technological and monetary.  

On-call scheduling resulted from pressure to restrict the ratio of hours to sales and an attempt to more nimbly adapt to changes in demand, says University of Chicago associate professor Susan Lambert. It also results in companies “overhiring,” using many part time workers instead of fewer full time workers.  But Lambert says “the costs of managing this way do not enter the balance sheets of firms.”  Employees who work irregularly, for example, may not always be up to speed with the latest changes to the store or the layout, she says. 

“From a very engineering standpoint,...[on-call scheduling]  may look efficient but when you look on front lines of firms, you see all the opportunities costs there are in terms of people walking out because they can’t find something or can’t get help.”  

Another factor is technology. 

“New technologies give us now the ability to predict very well variations in demand,” Lambert says.

Companies don’t need to keep workers on hold; they can figure out pretty well whether they need to have someone show up to work far in advance of two hours before the shift starts, she says. Companies are so good at predicting demand that they tried to "overoptimize" down to the minute, keeping workers on call to cover even slight changes in demand.   

“You don’t need to do that micro-management,” she says. “Retailers are learning that."

So it may be, she says, that workers and firms are finding on-call scheduling is a headache for everyone.

Here are the responses from the 13 companies the New York attorney general wrote warnings to:

  • Ann Inc.: "Staffing guidelines do not include the practice of on-call shifts." 
  • Gap Inc.:  "Each of our brands have made a commitment to evaluate their practices and determine where we may be able to improve scheduling stability for our employees, while continuing to drive productivity in stores.  As part of our commitment to more sustainable scheduling practices, we are working on a pilot project with Gap Brand and UC Hastings College of Law to examine workplace scheduling and productivity."
  • J.C. Penney Co: "We do not utilize on-call scheduling, and JCPenney has always maintained a policy against the practice."
  • Sears Holdings Corp: "Sears Holdings does not use on-call scheduling for store associates. That said, we will fully cooperate with the New York Attorney General’s office’s requests."
  • Target Corp: "Target does not use on-call scheduling."
  • TJX Cos: "We don’t use on-call shifts at TJX and it hasn’t been our practice, i.e. nothing new since April." 
  • Williams-Sonoma Inc: "We actually discontinued [on-call scheduling] for the entire country."

Burlington Stores Inc., Crocs Inc., J. Crew Group Inc. and Urban Outfitters Inc. did not return requests for comment. 

 

Weekly Wrap: Unemployment, the Fed and the GOP debate

Fri, 2015-08-07 13:00

Joining us to talk about the week's business and economics news are: Jo Ling Kent of FOX Business and Fortune's Leigh Gallagher. The big topics this week: Friday's unemployment report, the possibility of an interest rate hike in September and Thursday's GOP debate. 

 

 

How independent businesses kept New Orleans afloat

Fri, 2015-08-07 12:59

Panera and Starbucks are fine, but Laurel Street Bakery is something different. Hillary Guttman, the proprietor, recalls no chain coffee places opening near her in the weeks that followed the flood. First responders were a hungry market themselves.

“Just the National Guard alone could have kept me open," Guttman says. "There was no place to eat, there was no place to get groceries and people were tired of eating [rations]." Guttman was able to line up supplies from Baton Rouge, 80 miles away. Six weeks later, once the evacuation order was lifted and she got the all-clear on her water supply, she reopened, even before electricity was restored.

“I would mix by hand; I could only do things that I could make by hand, which is a lot actually," she says. "It’s how it used to be all be done.” Indie businesses like this had a strong track record finding ways to reopen. 

“They don’t really have any options; there is no safer place for them to retreat to," says Dana Eness, who runs a nonprofit in the city called Stay Local. "They can’t go up to headquarters, pull back.” These indies, Eness says, have been an engine these last 10 years, not only because tourists gravitate to cool places, but data show that indies tend to source from nearby.

“[They] hire someone locally to do the designing, the branding, the social media. So [they're] creating lots and lots of local jobs for other local businesses," Eness says. 

As you stand on Magazine Street in New Orleans, a commercial corridor filled with retail shops, it's hard to spot many recognizable brands. Roberta Brandes Gratz, an urban planning expert and author of "We're Still Here Ya Bastards: How the People of New Orleans Rebuilt Their City," says this comes from under- rather than over-planning.

"It's a miracle in its own way," Gratz says. "Not planned on any planning board, just sort of emerged organically, a mixture of small business, local ones, big ones and some chains." For such a dense commercial strip, planners didn't push suburban-style parking lots and shoppers make do with the street parking or walk.

Quentin Messer, CEO of the New Orleans Business Alliance, is a fan of the indie businesses that give New Orleans its resilience and character, but he's also working to attract national retail brands at the same time.

“New Orleans was significantly under-retailed, about 30 percent under-retailed," says Messer of pre-Katrina New Orleans, "so you had the city losing tax revenue" to regions outside the city that had the national chains. A new challenge is that indie businesses are seeing their rents rise. They blame the nationals coming in, sometimes lured with tax breaks, bidding up their leases.

But in many parts of post-Katrina New Orleans, national chains are nowhere to be seen. On the corner of Bayou Road and Desoto Street in the city's Seventh Ward, Vera Warren-Williams, founder of the Community Book Center, was part of a group of women who ran businesses along the block.

“We became known as the belles of Bayou Road," Warren-Williams says. After the disaster, her bookstore along with the hair salon, day care center and restaurant next door got back in business with a common land line, a copy machine and even shared labor. “We pooled our resources together, and we supported each other, we encourage each other to just come back and continue to develop.”

Before your hearts get over-warmed, here’s a dose of post-Katrina retail reality: Although the storm thought otherwise, this area wasn’t a flood zone, and the store had no flood insurance. When Warren-Williams scraped together the money to fix the ruined floor, a careless workman left the water on, destroying the repair. She paid upfront to fix the shattered windows, but those contractors vanished. Weeks later, she tracked them down.

“I was able to remind them who I was and escort them to the bank and got my money and was done," Warren-Williams says.

Her challenge 10 years later is digital. We all know what Amazon and e-readers are doing to booksellers. In other words, the national competition didn’t move in next door. They slid in via the internet. Warren-Williams is adapting by selling more gifts and Senegalese cloth set out in neat piles amid the bookshelves.

'Life-changing magic' of uncluttering your finances

Fri, 2015-08-07 12:30

Anyone who has read Marie Kondo's "The Life-Changing Magic of Tidying Up" would agree that imposing order on your surroundings can be an important — and satisfying — experience. In the book, Kondo shares an approach to declutter your home that focuses on neat folding and keeping only things that "spark joy," i.e., focus on the things you want to keep, not the things you want to get rid of.

Personal finance columnist Liz Weston recently read the book and shared that Kondo's method could apply to money matters as well:

Kondo recommends a definite sequence of categories: clothes first, then books, papers, miscellany and finally mementos. Dealing with less emotional stuff first helps give people practice discarding before they have to tackle the harder decisions.

"People who get stuck halfway usually do so because they start with the things that are hardest to make decisions about," Kondo writes. "Things that bring back memories, such as photos, are not the place for beginners to start."

Similarly, going straight for the financial categories where you feel a lot of shame or fear can make you want to avoid your finances entirely. So consider starting with tasks that feel the easiest to you.

Click play above to hear more from Liz Weston on how to declutter your personal finances.

Fines, fees add up when probation services go private

Fri, 2015-08-07 12:00

Tiffany Wilson lives in a small duplex in Gurley, Alabama, population 798, two hours north of Birmingham. Wilson lives with her husband Brad, a press operator at a newspaper, and their two toddlers.

 

This time last year, the family was homeless. Part of Wilson's money problems are in this thick binder she pulls out, full of receipts from her probation company.

 

In 2011, police in nearby Scottsboro pulled Wilson over. She got one ticket for speeding and one for no proof of insurance. In a town next door, same thing — two more tickets. Her total in fines: $1,016. Wilson didn't have that kind of money. So the cities sent her to a private probation company called Judicial Correction Services. Wilson met with her probation officer every Friday.

 

“She said you have to figure out a way to come in with a payment or anything, or you're going to go back to court, and if you don't do it the judge will put you in jail,” Wilson says. 

 

Three years, one income tax refund and one week in jail later, she paid it off. But Wilson says it wasn't the fines that got her, so much as the probation fees JCS charged -- anywhere from $35 to $45 a month. 

 

The Wilson family

Courtesy Tiffany Wilson

 

“Like here, fees in arrears $450, with only owing, $103 for fine," she says. "But I owed $450 in fees. That's wrong.”

 

Sara Zampierin is an attorney with the Southern Poverty Law Center, which sued the city of Clanton for using JCS. The lawsuit was settled when Clanton dropped its contract. 

 

“What we heard in Clanton was that often, JCS employees would use the threat of jail and try and set more frequent appointments to try and give people every opportunity to bring as much money as they could,” Zampierin says. “They wanted to extort as much money out of people as possible.”

 

Asked for comment, the company issued this statement: "JCS operates at the discretion of the court system with which we are contracted. We are not a decision maker as it relates to sentencing and establishing fines."

 

Recently several other municipalities have stopped using JCS, fearing similar lawsuits. One of them was Scottsboro.

 

Ten years ago, JCS officials met with the Scottsboro City Council and offered to take probation off the city's hands. 

 

“Their pitch to us was that they were able to have the manpower that they could collect fines for us," says Rick Wheeler, the city's finance director. "And they would put people on a payment plan.”

 

At the time, Scottsboro had only two court employees. JCS has 40 offices in Alabama alone. Its services wouldn't cost a thing. So how could the city refuse?

 

“You couldn't," Wheeler says. "It was a good sales pitch. And they've done a very good job for us.”

 

City revenue went up under JCS. In 2005, Scottsboro collected $530,000 in fines; in 2014, it collected $879,000. JCS would send Scottsboro a check every month.

 

But JCS paid itself first. If a person on probation paid, say, $50, the company took its monthly fee off the top, and only $5 went to the court. And Zampierin says the poorest people paid the most to JCS; their debt is strung out over a longer period of time, so they rack up more monthly fees.

 

Wilson and her husband are still digging themselves out of another JCS debt — her husband owes more than $1,700 in traffic fines and monthly fees.

 

“We're getting close, but it seems pretty impossible," she says. "Because it's hard to pay what they expect you to pay every time, and with them keep adding to it, it's like trying to fight a losing battle.”

 

Wilson takes the kids out to a trampoline she and her husband found on Craigslist — a birthday present for their 3-year-old. She says last year, they couldn't afford to get him a gift. This year is shaping up to be a little bit better.

Finding the fairest minimum wage

Fri, 2015-08-07 11:28

Over the past few months, proponents of a higher minimum wage have won in cities like Los Angeles and Seattle, where a $15 per hour minimum wage is being implemented. 

How do you find the fairest number for the minimum wage? Drew DeSilver, senior writer at the Pew Research Center, says a nationwide minimum wage amount can be hard to install due to cost-of-living differences between cities.

If the goal were to guarantee low-paid workers everywhere in the country the same real purchasing power, that would require hundreds of different minimum wages, scaled to each locality’s cost of living. For example, giving everyone the same purchasing power that $15 has in New York City would cost $13.07 in Chicago; $12 in Fresno, California; $11.10 in Cincinnati; and just $10.43 in Anniston, Alabama.

But while state-level minimums can address cost-of-living disparities between states, they’re still subject to disparities within individual states, which can be significant. In California, for instance, the priciest metro area (San Jose-Sunnyvale-Santa Clara) is 33.2 percent more expensive than the least costly (El Centro). The Virginia suburbs of Washington, D.C., are 37.5 percent more expensive than the Kingsport-Bristol metro area, which straddles the state’s border with Tennessee. And the Chicago metro area is 34.6 percent more expensive than Danville, Illinois.

While minimum wage increases would impact about 3.3 million workers, there's also a group of employees who would be exempt from any potential increase — even if they make below that amount. "The vast majority of workers who are exempt from the minimum wage are tipped employees, such as servers in restaurants. There's about 1.1 million of them, according to the Bureau of Labor Statistics," DeSilver says. The BLS lists 11 minimum wage exemptions on its site.

 

What presidential candidates are not saying

Fri, 2015-08-07 11:04

One of the things that was very striking about this week's GOP debate was how a lot of the candidates skated by with just the minimum response when asked about the economy. David Lazarus speaks to Lisa Desjardins, the political director of PBS News Hour, about the trend of minimizing details. 

 Click the media player above to hear the full interview.

Should congress rein in airline fees?

Fri, 2015-08-07 03:00

A report from minority Democrats on the Senate commerce and transportation committee is critical of airline fees. It recommends a number of steps, including limiting certain fees, making fees more transparent and adopting a credit-card like, standardized disclosure chart of all airline charges.

Seth Kaplan, who runs the industry publication Airline Weekly, is skeptical of the need for more government oversight. "Airlines have started [modifying their fee practices] on their own. The good thing is that consumers will push back," Kaplan says.

Fees have become an important component of airline profits. One estimate of revenues from airline fees placed the global total at $38 billion.

Airline industry consultant Mike Boyd says fees can benefit passengers, because they lower ticket prices. But, he says airlines do need to do a better job information passengers.

"There is a lack of transparency," Boyd says. "That, they're failing on."

PODCAST: Going Indie for summer

Fri, 2015-08-07 03:00

Jobs for July, and the summer of Indie films.

Betting on an indie darling doesn't always pay off

Fri, 2015-08-07 02:00

The independent film "The Diary of a Teenage Girl," which opened this weekend, was one of the standouts of the Sundance Film Festival. In fact, Sony Picture Classics bought it, hoping it would be a box office smash.

But this summer has seen similar gambles flop, with several independent films making very modest sums at the box office.

Marketplace's Adriene Hill says it's tough for independent films in a summer when blockbuster movies also received strong reviews. But as filmmakers think about how best to distribute their content, the future of these films may not be in movie theaters.

Click the media player above to hear Marketplace's Molly Wood in conversation with Adriene Hill.

Summer slowdown for jobs

Fri, 2015-08-07 02:00

Economists, Fed-watchers, job-seekers, and anyone looking to leave their job and find a better one, will find useful indicators in the closely-watched monthly employment report out on Friday from the Department of Labor.

The consensus among economists is that employers added 212,000 jobs in July, and the unemployment held steady at 5.3 percent. Unemployment has declined from 6.2 percent in July 2014. But, since mid-winter, job-growth has slowed — from approximately 290,000-jobs-per-month on average for the six months ending in December 2014, to 210,000-jobs-per-month from January-June 2015.

Bernie Baumohl at the Economic Outlook Group says the economy is simply not growing fast enough to encourage employer confidence in future sales and expansion. “A lot of businesses are still apprehensive about ramping up hiring,” he says, “until we get faster growth on a sustained basis.”

The global economy isn’t helping. Growth is slow in Europe, China and Japan, and the strong U.S. dollar further depresses export sales abroad. That in turn has hurt manufacturers, which have cut back on hiring. Low oil prices have hurt employment in the U.S. oil fields.

Baumohl also believes that a combination of globalization, labor-saving technology, and the deep shock of the financial crisis, have precipitated a paradigm shift in employment. “Companies have changed the whole calculus that goes into deciding how many people to hire and when to hire,” says Baumohl. Companies now try to get by with fewer employees for longer, turning to temps, domestic and foreign contractors, and robots rather than hiring new full-time workers.

Wages have also been stagnant in the past year, in spite of the unemployment rate declining steadily to 5.3 percent, close to the level considered to be full employment. Labor economist Michael Strain at the American Enterprise Institute says orthodox economics predicts that wages will rise as unemployment falls this low, because employers will face labor shortages as the pool of unemployed job-seekers dwindles. That's not happening, though. 

“Firms don’t feel like they need to bid up wages in order to attract and retain employees,” says Strain, “because there’s still a lot of slack in the labor market.”

Strain speculates that there are still millions of potential prime-age workers — in their thirties, forties and fifties — who aren’t actively looking for work now, but are ready to do so if job prospects improve. That shadow labor pool increases employers’ market leverage and negotiating power; it holds down entry-level wages; and it makes people who have jobs hesitant to ask for a raise, fearful they’ll be replaced by someone who will do the job for less.

What will stop the dangerous algae in Lake Erie?

Fri, 2015-08-07 02:00

Last year’s toxic algae bloom in Lake Erie was so bad it shut down the water supply of Toledo, Ohio. This year’s is expected to be worse, and Congress has ordered the EPA  to work on a solution

The EPA can’t do much about one factor driving these algae problems: Climate change. Algae like it warm. However, people could give the algae less to eat, according to Timothy Davis, who studies harmful algae blooms for the National Oceanic and Atmospheric Administration. 

"If you limit the nutrition, you limit the size and toxicity of these blooms," Davis says.

Most important is to limit the phosphorous hitting the lake. According to Laura Johnson, a research scientist from Heidelberg University's National Center for Water Quality Research, the biggest problem is a form called "dissolved phosphorous," which comes from farms.

"It’s really yummy stuff for algae to use," Johnson says. "They grow explosively when they have dissolved phosphorous."

One possible remedy would be to inject fertilizer into the soil, instead of spreading it on top, where rain can wash it away. Injecting fertilizer would require new expensive gear, but Johnson says there might be some compensatory savings for farmers.

"If you’re losing phosphorous off your soil, you’re losing something that you applied," she says. "And anything that’s running off is lost money."

However, she admits the savings might be small. Studies show that in the most critical region, around the Maumee River, only about one percent of the phosphorous applied shows up as runoff. "That's pretty efficient," she says.

What will it take to stop killer algae? (It's back.)

Fri, 2015-08-07 02:00

Last year’s toxic algae bloom in Lake Erie was so bad it shut down the water supply of Toledo, Ohio. This year’s is expected to be worse, and Congress has ordered the EPA  to work on a solution

The EPA can’t do much about one factor driving these algae problems: Climate change. Algae like it warm. However, people could give the algae less to eat, according to Timothy Davis, who studies harmful algae blooms for the National Oceanic and Atmospheric Administration. 

"If you limit the nutrition, you limit the size and toxicity of these blooms," Davis says.

Most important is to limit the phosphorous hitting the lake. According to Laura Johnson, a research scientist from Heidelberg University's National Center for Water Quality Research, the biggest problem is a form called "dissolved phosphorous," which comes from farms.

"It’s really yummy stuff for algae to use," Johnson says. "They grow explosively when they have dissolved phosphorous."

One possible remedy would be to inject fertilizer into the soil, instead of spreading it on top, where rain can wash it away. Injecting fertilizer would require new, expensive gear, but Johnson says there might be some compensatory savings for farmers.

"If you’re losing phosphorous off your soil, you’re losing something that you applied," she says. "And anything that’s running off is lost money."

However, she admits the savings might be small. Studies show that in the most critical region, around the Maumee River, only about one percent of the phosphorous applied shows up as runoff. "That's pretty efficient," she says.

Women, venture capital and bias

Fri, 2015-08-07 02:00

Entrepreneurs face many challenges. Getting people to buy what they’re selling and running a business are hard enough. They also need to convince investors to risk their money on their dreams. That requires a great idea, talented team and a fantastic pitch.

Many female entrepreneurs find the path can be trickier for them, and research into the topic backs that up. Even some of the smartest investors in the world are vulnerable to the same kind of unconscious biases that affect us all. Imagine two groups of investors asked to judge an entrepreneur’s pitch. In separate rooms, each group watches a different video presentation for a startup. But the videos actually aren’t all that different. In fact, they’re practically identical: Same idea, same numbers and same slide deck. The only difference is the speaker’s gender. 

The scenario comes from a series of experiments by researchers from the business schools at Harvard, University of Pennsylvania and MIT. The key takeaway from their research is that the investors preferred male entrepreneurs to the females, even when the pitches were exactly the same.

That experiment adds context to existing hard data that paints a picture of a uniquely challenging fundraising environment for female entrepreneurs. A 2014 analysis by the Diana Project shows that of $50 billion in venture capital invested during 2011-2013, only 3 percent went to companies with female CEOs.

Findings like these are anything but academic to people like Jocelyn Leavitt, co-founder and CEO of Hopscotch, a New York startup founded by women in 2013. Hopscotch has a popular app that makes programming visual and easy for kids. With 2 million downloads and counting, Hopscotch has enough young users to merit attention of investors.

“We raised $1.2 million initially, and then we raised more afterward, so we’re now at about $3 million,” Leavitt says. “Where we’ve grown from where we started has been remarkable.”

That kind of money is a strong vote of confidence for what she and her co-founder have built. Leavitt can go on about the many ways that starting a company with a woman is great. But when it comes to fundraising, she sometimes wonders what it would be like if she and her co-founder were males. She remembers a situation where an investor passed, questioning whether the team could meet technical challenges.

“We didn’t know, but it felt a little bit like if we had been guys, maybe we wouldn’t have gotten that kind of feedback,” Leavitt recalls.

Like many female founders, Leavitt stresses that all entrepreneurs—men and women—face challenges, and that she’s grateful her company has had fundraising success. Talking about investor bias is a difficult topic for entrepreneurs. There’s a lot of pressure on startup founders to put a positive image forward. Those who talk about bias worry about being branded as complainers. So many of the conversations about the fundraising challenges women face take place in private. Leavitt says female founders talk to each other about the perils of raising money, wrestling with issues male entrepreneurs rarely have to consider.

“Sometimes women will be like, ‘I should wear a wedding ring to make sure that this investor doesn’t hit on me, versus, I should not wear a wedding ring because I don’t want to have to deal with questions about whether I’m gonna be having kids anytime soon,’” she explains, adding that she opted to wear her own wedding band when pitching.

No one is saying all venture capitalists are sexist. They ultimately want to back people who’ll make them rich, regardless of gender. They believe they make the best possible choice given available information. But they almost certainly don’t. None of us can, because we all fall victim to any number of unconscious biases. To get a sense of how they can get us, think of a startup founder. For many, what comes to mind is the Facebook guy, the Google guys, but typically guys.

“If we see someone who looks like Mark Zuckerberg, let’s say, we may think they’re more likely to be successful because they fit in with that idea of an entrepreneur based on what we see in the media,” says Elizabeth Webb, who teaches a class on decision making at Columbia Business School. “All of that kind of works together at a very unconscious level to inform our judgments and our evaluations.”

People are especially vulnerable to the influence of unconscious biases when judging risk, what venture investors do every day. And the level of risk is high in that field. Even very successful investors still lose piles of money on companies that fail. Melissa Bradley has been an entrepreneur and investor who has backed female and minority businesses. She says the risk involved in venture investing can push many investors to stick with what they know, which favors men.

“Venture funds raise their money based on the performance of prior portfolios, and so if it ain’t broke, don’t fix it,” she explains.

Whatever the situation may be, awareness that an unconscious bias is at play doesn’t necessarily make things easier for women working to fund their businesses.

“There’s not really a lot that you can do besides just really wowing people,” Leavitt says. 

Reducing the impact of unconscious bias is challenging, in part because few people can admit to being vulnerable.

“People often just think, 'Well, I’m not this type of person. Other people fall victim to this, but I don’t,'” Webb says.

But that isn’t the case, Webb explains. Anyone can fall under the sway of decision biases, which means they need adjust for them. Like so many other issues, the first step is often just admitting you have a problem.

Mark Garrison: Imagine yourself in a conference room, considering a risky investment in farming technology. You’re gonna judge clips from two video pitches to decide who gets a million dollars. Here’s the first.

And here’s the second, which is quite similar.

Who do you risk a million on? Take a moment to decide.

The clips came from a recent entrepreneurship study from Harvard, Wharton and MIT’s business schools. And actually, the pitches aren’t just similar. They’re identical.

Same idea, same numbers, same slides. The only difference is the speaker’s gender. Yet in the experiment, men and women preferred the male to the female. And in fact, of $50 billion in venture capital invested during 2011-2013, only 3 percent went to companies with female CEOs.

We’re in a whiteboard meeting at Hopscotch, a New York startup founded by women in 2013. Hopscotch has a popular app that makes programming visual and easy for kids. That means user testing sessions are lively.

With 2 million downloads and counting, Hopscotch has enough of these young users to merit attention of investors. Jocelyn Leavitt is co-founder and CEO.

Jocelyn Leavitt: We raised 1.2 initially and then we raised more afterward, so we’re now at about three million.

Leavitt says there are great things about starting a company with a woman. But when it comes to raising money from investors:

Jocelyn Leavitt: I wish that we weren’t. I wish that we were two guys building it. Just because it just seems like everybody’s more willing to jump on board.

Leavitt gives us a window into how female founders talk to each other about the perils of raising money.

Jocelyn Leavitt: Sometimes women will be like, ‘I should wear a wedding ring to make sure that this investor doesn’t hit on me, versus, I should not wear a wedding ring because I don’t want to have to deal with questions about whether I’m gonna be having kids anytime soon.’

She fiddles with her own band as she talks. Leavitt wore it when pitching. She shows me how she even sits differently in those meetings.

Jocelyn Leavitt: The way I’m sitting right now, you know, instead of crossing your legs, which I sometimes do because I’m cold, you just sort of sit with your legs sitting apart and you put your elbow on the table as opposed to sitting there hunched over and small.

There was this one rejection where an investor questioned whether the team could meet technical challenges.

Jocelyn Leavitt: We didn’t know, but it felt a little bit like if we had been guys maybe we wouldn’t have gotten that kind of feedback.

No one is saying all venture capitalists are sexist. They wanna back people who’ll make them rich. But like all of us, they can fall victim to unconscious biases. Think of a startup founder. For many, what comes to mind is the Facebook guy, the Google guys. But typically, guys. Elizabeth Webb teaches a decision making class at Columbia Business School.

Elizabeth Webb: If we see someone who looks like Mark Zuckerberg, let’s say, we may think they’re more likely to be successful because they fit in with that idea of an entrepreneur based on what we see in the media. So all of that kind of works together at a very unconscious level to inform our judgments and our evaluations.

In the end, we all need to accept our tendency to have these biases.

Elizabeth Webb: People often just think well, I’m not this type of person. Other people fall victim to this, but I don’t.

But that’s just not true. Like other issues, the first step, is admitting you have a problem. In New York, I'm Mark Garrison, for Marketplace.

Silicon Tally: The hitchhiker robot's guide to the galaxy

Fri, 2015-08-07 02:00

It's time for Silicon Tally! How well have you kept up with the week in tech news? 

This week, we're joined by Dave Pell, a startup investor in San Francisco who writes the NextDraft newsletter.

Click the media player above to play along.

Shell starts drilling for oil in the Arctic

Fri, 2015-08-07 02:00

Russia has just staked a claim to a big chunk of the Arctic. A big reason is the oil under the water. Several countries and companies are betting on this, and first out of the gate is Royal Dutch Shell. It is one week into exploratory drilling there.

In oil company speak, the Arctic is one of the last "elephant fields." Some 20 percent of the world's untapped oil and gas is there. And for big companies like Shell, their stock price depends on proving the energy is there.

"Ten years ago, Shell in particular felt that it was going to be very hard to find oil," Steven Kopits of Princeton Energy Advisors says. "And so they looked around the world to see where they could go. And one of the very few places you could add oil in big quantities was in Alaska."

Specifically, the Alaskan Arctic just north of the Bering Strait. A Shell rig is doing early exploring now.

If oil is struck, it may take a decade to flow. Kopits considers that good timing. By then, American oil fracked from shale may be fracked out.

"The U.S. shale revolution is slated to last probably through 2020, maybe through 2025," Kopits says. "But it doesn't last forever."

For all the challenges, drilling may be the easy part. It's low-pressure drilling, in shallow waters of less than 150 feet in depth.

What's hard is logistics, hauling 20-some vessels to frigid waters far from the Coast Guard, hospitals and other help.

In one attempt two and a half years ago, a Shell rig named the Kulluk separated from its tow boat.

"The cable snapped," McKenzie Funk, author of "The Wreck of the Kulluk," says. "And this giant rig drifted until it slammed into the rocks near Kodiak Island. And it was just a total loss."

The towing disaster came after challenges encountered during the drilling process. Ice flows proved to be unpredictable.

"Suddenly an ice flow the size of Manhattan came drifting and they had to pull up everything and basically run away," Funk says. "Having been up there a few times and studied this, that's what I think people don't understand, how entirely remote this is."

These problems concern environmental critics, who also argue there's no good fix for a spill. Shell and industry groups counter that machinery to cap leaking wells has a proven track record.

All the interested parties are watching: environmental groups, regulators, and other major oil companies who also have their eyes on the Arctic prize.

"It's a multi-year process," says Rice University business professor William Arnold, who once worked in Shell's government relations department. "This year just about has to be error-free in order to get to next year and years of development following that."

If not, $7 billion in investments to date may be lost.

 

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