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Two obsessed guys and a radical motorcycle design

Mon, 2014-05-19 10:24

Ten years ago JT Nesbitt was one of the top motorcycle designers in the world. His picture graced the cover of magazines. Celebrities sought out his extravagantly expensive machines. But in 2005, while he was visiting a prince in the Middle East, hurricane Katrina hit New Orleans and destroyed Confederate Motorcycles, the company that built Nesbitt’s bikes. Seven years later, his career hadn’t recovered. He was about to take a job waiting tables in the French Quarter, when a stranger showed up on his doorstep and turned his life upside down.

The stranger was a fan of Nesbitt’s work. He wanted to see his latest motorcycle projects. But, Nesbitt explained, he hadn’t designed a bike in seven years, and he was broke. The stranger looked around the shop and offered to buy Nesbitt a drink. So the two of them took a walk down Decatur street, to a French Quarter bar called Molly’s .

They took a seat at a table and ordered beers. And then the stranger asked Nesbitt a question.  “He says, 'What would you do if you could do anything?'”

The stranger says he asked the question on a whim, “I just honestly wanted to know, and [Nesbitt] was momentarily dumbfounded because nobody had asked him that. But strangely, as if it were rehearsed, he had his notebook with him.”

Nesbitt always carries his sketchbook with him.  And so he pulled it out. But before opening it, he made the stranger swear on his grandmother’s eyeballs that he wouldn’t tell anyone about what he was about to show him. The Stranger agreed. So Nesbitt opened up his sketchbook.

Courtesy of JT Nesbitt

The "Stranger’s" name turned out to be Jim Jacoby and in many ways, JT Nesbitt and Jim Jacoby are opposites. Jacoby loves technology; he thinks it can be used to better mankind. Nesbitt shuns most modern conveniences. He doesn’t have phones that can text. Jacoby is soft-spoken, an introvert. “Even having a conversation like this is outside of what I would find comfortable,” he said in a recent interview. Nesbitt can be blunt and abrasive. “Dude, that’s a stupid question,” he once responded to a question I asked.

But one trait they both share is obsessiveness. “This is the only thing that I think about,” said Nesbitt referring to his design project, “and the only thing I’ve thought about for the last eight years.”

Jacoby says he asked to see Nesbitt’s sketchbook simply out of curiosity. What he saw were the drawings of a bizarre looking motorcycle. But the more he thought about them, the more began to see the motorcycle as a solution to a much bigger problem: The decline of industrial design and craftsmanship in America.

“It's unacceptable,” said Jacoby, “that somebody like JT would be sitting here waiting, unable to do what he’s capable of doing. And if we don’t capture this in people like JT and many other incredibly talented people who work with their hands first and then transfer things to computer, we’ll have lost something incredibly valuable.”

Jacoby is a successful entrepreneur who started a company in 2001 called Manifest Digital. It builds websites and does social marketing for large corporations like McDonalds. He built it from nothing and had 140 employees working for him. But he was starting to have doubts about the life he had built around his company.

“A company that needed to be profit driven and hit certain numbers... and I was trying to [save] the world... those two things are hard to square,” said Jim.

The meeting with Nesbitt pushed him over the edge. He made the decision to quit the company he founded.

And then he took his life savings and handed them over to Nesbitt to fund the building of three prototypes of this unusual machine. But the motorcycle commission is just one part of something bigger.

“The goal is to separate the drive for profit from the act of designing,” explained Jacoby. He wants to remove the corporate constraints that normally hinder industrial designers like Nesbitt.  Nesbitt doesn't have to worry about things like keeping the cost of materials down or designing for mass appeal.

One of the reasons Nesbitt was on the verge of going back to being a waiter is that he is unwilling to compromise.

“If Jim hadn't shown up I would be serving you lunch,” said Nesbitt, “and that’s OK. There’s honor in that. I’d rather be the guy serving you lunch than a guy who is building a compromised motorcycle for mass consumption.”

Jacoby has not given Nesbitt any design restrictions for this motorcycle. Nesbitt has complete and total freedom. “So I don’t have to worry about 'Will people like this or that?', which frees me up to do pure design, pure art.”

JT and Jim are trying to create a new type of patronage system. They compare it to the Medici’s, the wealthy banking family that birthed the Italian Renaissance. They call this system the ADMCi, short for "The American Design and Master Craft Initiative".

“I think we're at the beginning now of what could be another Renaissance,” says Jim. “You have more money sitting on the sidelines through private equity and venture capital and in business profits than has ever existed. My goal is to lead through example and inspiration, and say, 'Let’s believe in great craftsmen first, and put that money to work with them.' And the byproduct will create all kinds of other business opportunities.”

The ADMCi is made up of three entities. One of them is a nonprofit called The Master Practitioner Foundation. This entity will apply for grants, and most importantly seek out wealthy donors, or patrons. JT is building three prototypes. When they are finished, JT and Jim will likely sell them for about $250,000 each. But whoever buys one won’t own it outright. They will be more like stewards of the motorcycle. In the same way an art collector might purchase a painting to be on display to the public, the motorcycle may be part of a traveling museum exhibit.

 

JT Nesbitt and Jim Jacoby.

Scott Tudury

David Lenk is an industrial design expert who also designs museum exhibits for a living. Lenk thinks the ADMCi could help reverse the decline of industrial design and manufacturing in America, which, he says, peaked in the mid 1950s: “You can walk through any flea market aisle today and find a Sunbeam blender or an Emerson fan or Bakelite Xenith radio from the late '40s to early '50s and, not only do they look good, they probably still work.”

But, said Lenk, things started to change in the mid-50s. “The Harvard MBA grads started fanning out with their evangelizing of planned obsolescence, and finance became more important than corporate traditions of design or quality. And by the mid 60s it was all gone. It’s just junk.”

Lenk believes that if the ADMCi’s first commission is a big enough success, if it makes a big enough splash, it could be a model for a new way to fund innovation and design, an alternative to traditional profit-driven investment models. It’s part of a decentralization that’s occurring, he said, “sort of an anti-corporate, structures that are like virtual teams of suppliers that come together to support efforts that will allow individuals with ideas such as JT Nesbitt to produce.”

Jason Cormier

Lenk’s involvement in this project happened entirely by chance. Nearly two years after JT first showed Jim his sketchbook at Molly’s, the two of them were back at the bar in their usual spot when Lenk happened to sit next to them. “It was a real motorhead moment. Within two sentences we were talking about French Coach work of the 1930s.”

And then JT told David about his motorcycle prototype which by this point was nearly complete. It was in his shop just a few blocks away.  The conversation ended, said Lenk, with an invitation to visit JT’s shop that Saturday, “but nothing could have prepared me for what I saw.”

Hacking won't scare U.S. companies out of China

Mon, 2014-05-19 10:11

The Department of Justice announced today that five Chinese military officers have been indicted for allegedly hacking trade secrets from U.S companies.

It’s the first time that the U.S. has charged specific foreign officials with cyber espionage, but as Marketplace's China correspondent Rob Schmitz tells us, it’s actually sort of old news.

“A little more than a year ago we learned that the People’s Liberation Army hacked into dozens of U.S. companies, stealing reams of intellectual property,” says Schmitz. “But this news and its implications were cut short: Right after it was discovered, Edward Snowden released what amounted to a nuclear bomb on the U.S. intelligence community by exposing the NSA’s spying operation.”

Schmitz says China probably wants the trade secrets to help build up its infrastructure. The hacking allegedly took place three or four years ago, when China had just announced plans to build dozens of nuclear power plants across the country.

“Of course the United States has a lot of experience building nuclear power plants. So it could be reasonably assumed that China was cutting and copying the U.S.”

Schmitz says hacking is a growing problem for U.S. companies, but that doesn’t mean they’ll abandon their operations in China.

“The companies that were hacked last year were too scared to complain about having their technology stolen by the Chinese, because they were afraid of upsetting one of their most important global markets. Unless U.S. companies stand up for themselves and start publicly complaining about this, I think the hacking will go on for quite a while.”

Cats, video games, funerals: All with video on demand

Mon, 2014-05-19 09:31

According to Variety, Google is in talks to buy Twitch, a live video game streaming service, for close to $1 billion. Yup, a website that lets you watch other people play video games may be worth $1 billion. Fans don't even have to fire up their own version of "Call of Duty." The reported deal illustrates the growth of live streaming technology. For example:

Streams that make us go Squee! Streaming service provider UStream says the market for live streaming is growing. Right now it says it gets about 77 million unique global views a month -- a year ago at this time it got just 55 million. The company says it broadcasts everything from church services, to content broadcast by citizen journalists to disc jockey lessons. Animal cams, it notes, are always popular:

1. French bull dog puppies!

2. Baby Hummingbirds!

3. Kitty rescue center cam!

Life event live streams

1. Graduations
In case you can't get enough tickets for grandma, grandpa, and grandma and grandpa.

2. Weddings

You may not catch the bouquet, but you also don’t have to shell out for plane tickets.

3. Funerals

Mark Krause of Krause Funeral Homes says he started offering a streaming service in 2009, charging consumers about $195 on top of  regular costs. While Krause notes that the stream wasn’t meant to replace the ceremony itself, he says it was  helpful for family members who weren’t able to physically attend. Unfortunately Krause notes that just a few years ago, the technology was too unstable to provide a seamless experience for consumers: "It's more on the bloody edge, than the cutting edge," he says. "I'm always about trying innovating things but funeral directors won't provide it if they can’t rely on it."

Other

1. 2014 Rope Skipping National Championships

BrightRoll, a tech platform that powers video advertising on the web says sports make up a massive, disproportionate share of streamed video. Tim Avila, Senior Vice President of Marketing Operations at BrightRoll says there was a 176% increase in live video ad views between 2013 and 2014.
http://www.ustream.tv/channel/sctv18

2. Bigfoot cam.

Do you believe? Watch this stream and maybe you'll finally spy proof for your theories.

3. London Bridge

Like bridges? Like London? You will love this.

Tap dance your way into the White House, kids

Mon, 2014-05-19 07:25

From the Marketplace Datebook, here’s a look at what’s coming up Tuesday, May 20:

On this day in 1873, Levi Strauss and Jacob Davis are given a patent to create work pants with metal rivets; you may know them as blue jeans.

And in 1932, Amelia Earhart became the first woman to fly solo across the Atlantic.

In Washington, the Senate Health, Education, Labor, and Pensions Committee will hold a roundtable on economic security for working women.

And First Lady Michelle Obama and the President’s Committee on the Arts and Humanities will host the first-ever White House Talent Show.

PODCAST: AT&T bids $48.5 billion for DirecTV

Mon, 2014-05-19 06:57

AT&T is buying satellite TV company DirecTV in a $48.5 billion deal. Like so many other media mergers, the news has executives and Wall Street analysts tossing around corporate buzzwords. There’s the old favorite “synergy,” of course. But “bundle” is the key word for this proposed combination.

And we're reporting from London this week, and what London market report would be complete without a visit to Smithfield Market? Where even at 1:30 in the morning you can buy wholesale bits of cattle. Michell Hucks, who works at Abslom and Tribe at Smithfield, gives us an inside look.

Banks, brokers, markets -- London has it all. Add to that a sturdy legal system and you can begin to understand why it's the financial capital of the world. The city is loved by its locals and foreigners seeking a safe -- and profitable -- haven.

 

AT&T’s $48.5 billion bid for your everything

Mon, 2014-05-19 05:16

AT&T is buying satellite TV company DirecTV in a $48.5 billion deal. Like so many other media mergers, the news has executives and Wall Street analysts tossing around corporate buzzwords. There’s the old favorite “synergy,” of course. But “bundle” is the key word for this proposed combination.

“They can bundle this with a broadband product and offer a bundle of voice, video and broadband, which they haven’t been able to do in a lot of their footprint up until now,” says Jonathan Chaplin at New Street Research.

Grabbing America’s biggest satellite provider allows AT&T to expand its move to sell more services on one bill nationwide.

If the deal goes through, AT&T would be the second largest American pay TV operator. Its 26 million customers would be just behind a combined Comcast-Time Warner Cable, which would have 30 million if its own proposed merger goes through.

AT&T is already offering significant concessions, enough that Wall Street expects regulators will let its deal go through.

Mark Garrison: Media mergers tend to be heavy on corporate buzzwords. Synergy is an old favorite. Bundle is popular these days and Jonathan Chaplin at New Street Research says this deal is bundle-icious.

Jonathan Chaplin: They can bundle this with a broadband product and offer a bundle of voice, video and broadband, which they haven’t been able to do in a lot of their footprint up until now.

AT&T wants to sell you everything on one bill. Grabbing America’s biggest satellite provider lets them do that nationwide. If all goes through, AT&T will be the second largest pay TV operator. That means regulators will take a close look. Chaplin and other analysts believe AT&T’s offer to make concessions will be enough.

Chaplin: This is a deal that’s gonna get through.

DirecTV’s Latin American business is also a factor, says Macquarie senior analyst Amy Yong.

Amy Yong: That is a clear growth opportunity for AT&T over the next few years.

The companies expect the deal to close within a year. In New York, I'm Mark Garrison, for Marketplace.

Russia and London: The ties that bind

Mon, 2014-05-19 03:31

Banks, brokers, markets -- London has it all.

Add to that a sturdy legal system and you can begin to understand why it's the financial capital of the world. The city is loved by its locals and foreigners seeking a safe -- and profitable -- haven. 

Jamison Firestone, an American lawyer based in London, has years of experience helping American and European companies do business in Russia. Firestone, who previously lived and worked in Russia, fled the country after his law patner Sergei Magnitsky died in Russian custody when he was arrested on tax evasion charges. Magnitsky's supporters say he was beaten and killed by Russian authorities for calling attention to corruption, something Russian officials deny.

The whole affair is just one example of why Russians are looking to take their money out of Moscow and park it elsewhere, according to Firestone. Click on the audio player above to hear more.

 

Russia and London: The ties that bind

Mon, 2014-05-19 03:31

Banks, brokers, markets -- London has it all.

Add to that a sturdy legal system and you can begin to understand why it's the financial capital of the world. The city is loved by its locals and foreigners seeking a safe -- and profitable -- haven. 

Jamison Firestone, an American lawyer based in London, has years of experience helping American and European companies do business in Russia. Firestone, who previously lived and worked in Russia, fled the country after his law patner Sergei Magnitsky died in Russian custody when he was arrested on tax evasion charges. Magnitsky's supporters say he was beaten and killed by Russian authorities for calling attention to corruption, something Russian officials deny.

The whole affair is just one example of why Russians are looking to take their money out of Moscow and park it elsewhere, according to Firestone. Click on the audio player above to hear more.

 

Robots, the space program and innovation

Mon, 2014-05-19 02:39

A robotics competitions gets underway on Monday at NASA's Kennedy Space Center. College students have to build and design a robot that can dig lunar solid, for example, to be used during a mission to Mars.

Experts say competitions like these help foster innovation and can even help bring ideas to market.

 "That's one area where I think you might be getting neat ideas on the cheap," says Ross Mead, a doctoral student studying robotics at the University of Southern California. 

He says the competitions are exciting and also give companies, or NASA, the opportunity to see problems solved in different ways.

Given the deep budget cuts to NASA, competitions are an especially good idea for the space agency. 

"NASA's leveraging the budget they have with trying to stimulate people working outside of NASA to come up with things that could be really helpful to them," says Tom Kinnear, who teaches entrepreneurship at the University of Michigan. 

But perhaps the greatest reason competitions work Kinnear said, is that people love to win.

Campaigns versus coding

Mon, 2014-05-19 01:00

Congressional candidates sometimes come from surprising backgrounds. Former comedians. Former American Idols. Now, thanks the current race being held in New Jersey's 2nd district, you can add programmer to that list of resumes.

Dave Cole is a former techie who grew up in New Jersey before graduating from Rutgers University. After a stint in the White House, where he helped build whitehouse.gov, he moved into the private sector to work for a startup that specialized in online maps called MapBox. According to Cole, it's a move that helped him see what government could learn from startup culture:

"Working in the private sector gave me such an opportunity to see the contrast to the way things get done, but also, how there really are good solutions out there to some of the problems that the government is facing."

 Cole says his background in coding, and the transparency of the coding community, also has a strong influence on how he thinks Congress can be more effective:

"One of the ways running for Congress can be more open is if people who are running are just completely transparent about their platforms. It’s exactly the way the best software is built in the open source community."

Part of his belief in the values of technology comes from exposure at a young age; Cole says his mom bought him a computer when he was eight years old. It's a privilege that he wants to extend into the school system, teaching coding to kids at a younger age:

"I think of it like a foreign language -- It enriches your life, and it’s something that once people are encouraged and they can see all the creative possibilities that come from it, that creates jobs."

The British have solved unemployment, once and for all

Mon, 2014-05-19 00:47

I am anchoring Marketplace Morning Report from London this week. While on the road, I am scouting for big ideas and I may have found a doozy.

Some iconoclastic economic thinkers just over the river in the Vauxhall area of London have constructed a device that wipes out unemployment.

Roll this baby out into the economy and everyone who wants to have a job would get a job. If it works as promised, not just Britain but the rest of the developed world including the U.S., could have full employment.

Outsourcing of jobs to poorer parts of the world? No problem. Robots and algorithms taking away human jobs, not to worry. And what is this device that would solve what is one of the greatest and most persistent economic problems?

Well, it is not a device in the sense of an electronic contraption. But it is a mechanism, a policy mechanism that is being put forth by experts at the New Economics Foundation here in London, among others. The idea is quite simple (although implementation will be tougher; I'll get to that in a moment).

Here is the idea: the 21-hour work week.

The NEF's proposal allows people to choose to work fewer hours. For the purposes of my discussion, let's do it by official decree: the order comes down that people can only work about half the hours they work now. That means it would take two people to do what is now one job. I do six shows a day as we roll through the time zones, including our ever-popular podcast.

With a 21-hour work week, I might do three of them a day and leave early. That means we could hire one more anchorman. Two people have jobs instead of one. Sure, the boss might try to cut my pay nearly in half, but if every working woman and working man was being paid less, prices should eventually drift downward to compensate.

Think of the benefits. If I were only working 21 hours in a week, I would have more time to do volunteer work, write a book, read a book, ride my bicycle, clean the basement -- more time to be a more balanced human being.

Yet, what might employers say about this 21-hour work week device to rid the developed world of unemployment once and for all? They generally don't like the idea much. You see, if there are two people doing the work of one -- that means two health care plans, two company pensions -- which could be a huge expense.

This suggests the 21-hour work week is more likely to come first to countries (like those in Europe) that have universal health care.

Another criticism that comes to mind about chopping the work week down the middle in order to produce full employment? Possible effects on income inequality. People who live off their wages and salaries as their hours are cut would find their incomes dropping (and their free time rising). People who live off their assets, their investments, might not see the same kind of decline in income. This might widen the gap between the richest and everyone else.

It is not just the New Economics Foundation here in London pushing a voluntary version of this. Up the road in Scotland, a policy group called the Jimmy Reid Foundation is trying to make the case for Scots working few hours. And, with all due respect to our UK hosts this week, the idea has a tradition in the U.S. as well. Not a glorious tradition, but a tradition. In 1933, President Franklin Roosevelt apparently put a stop to a bid to cap the American work week at 33 hours.

Even with the mass unemployment of the Great Depression, shorter work weeks were seen as just too radical a notion.

One rich Londoner unconcerned by wealth gap

Sun, 2014-05-18 23:45

What is the collective noun for plutocrats? A plethora, perhaps? If so London has a plethora. And a big one.

According to the Sunday Times newspaper, the British capital is now home to 72 billionaires – many of them foreigners. Indian steel magnates, Russian energy oligarchs and Greek shipping tycoons. 

With 72 of them, London has more billionaires  than any other city on the planet. New York has only 48. That  abundance of rich people is not exactly fueling national pride in Britain. In fact it's stoking fresh concern about growing income inequality – especially in London.

Not that wealthy London residents see themselves as part of the  problem.

Yvgeny Chichvarkin – reportedly worth around $250 million -- does not even regard himself as a member of a  metropolitan elite. 

"Compared with people on the Forbes rich list, I'm rather poor," he says, while sitting in his business premises  in London's exclusive Mayfair district.

Chichvarkin made his fortune from the sale of the cellphone business he built from scratch in Russia before he settled in London. He claims that he does not flaunt his money.

"I drive an eleven-year old Porsche," he says. "And although I love good food and wine, if I'm busy I will buy a hamburger for lunch."

While he plays down his own wealth, the 39-year old entrepreneur is more than happy to cater to the extravagant needs of the super-rich. His main British business is an exclusive wine store called HEDONISM; located just off Berkeley Square.

It stocks some of the finest and most expensive vintages in the world. Chichvarkin is particularly proud of his Chateu d’Yquem 1811 Sauternes – for $160,000.  Yes, that's $160,000 for one bottle.

"I'm sure we will sell it," he says. "We have - two different customers – who are thinking about buying it."

Running a business in London’s richest neighborhood, rubbing shoulders with the wealthy, surrounded by opulence, Chichvarkon is not worried about London's growing inequality.

"It's not so terrible like in Russia or Venezuela," he shrugs. "Poor people in the UK have hot food, clear water, and a TV. And a mobile phone. They're not really poor, like Russian poor people."

The Russian begrudges paying what he calls "crazy taxes" to fund the benefits of Britain's "idle poor."

"A lot of them do nothing. But our shop creates a lot of taxes for them to do nothing," he says.

He says he's ticked off that if he sells that one bottle of Chateau d’Yquem, the sales tax alone will keep two or three people on welfare for a year.

Public college presidents get big paychecks

Sat, 2014-05-17 23:20

College grads might be having a tough time landing jobs these days, but college presidents are doing pretty well for themselves. That's according to a new survey from the Chronicle of Higher Education on executive pay at public colleges.

"Their pay seems to have been more or less impervious to the recent downturns we've seen in the economy," says Jack Stripling, lead reporter on the Chronicle's college president pay report.

The media group says the typical college president pulled in about $480,000 in total compensation in the 2012-2013 fiscal year. Nine presidents of the 256 public college leaders surveyed by the Chronicle had total compensation packages that topped $1-million. The highest-earning president was E. Gordon Gee, who ran Ohio State University during the period in question. His total compensation exceeded $6-million. Gee is now president at West Virgina University.

Such big pay packages may raise hackles at a time when schools are charging more for tuition and using cheap, adjunct faculty. Stephen Joel Trachtenberg, president emeritus at the George Washington University, says college faculty likely do need a pay bump. But he says that's a separate issue.

"You don't have to make the case that presidents are overpaid in order to make the case that faculty are underpaid," he says.

Trachtenberg argues that college presidents earn their big paychecks by bringing in lots of money in tough fundraising environments.

But Michael Dannenberg, director of higher education and education finance policy with the Education Trust, says public college presidents should have some relationship to graduation rates.

"We have pretty high compensation levels at many institutions with disturbingly low performance when it comes to student success," he says.

The Chronicle of Higher Education's survey reveals that in many cases, presidents are not the top earners at public colleges. Its analysis finds that of the public college faculty earnig more than $1-million in fiscal year 2012-2013, 70 percent were coaches.

The new rules of internships

Fri, 2014-05-16 14:25

Summer's almost here, the traditional season of the internship.

 

But interns beware: in the last few years a series of lawsuits against employers offering unpaid internships have changed the rules of the apprenticeship game.

 

Rachel Feintzeig is a management reporter for the Wall Street Journal, and has been writing about the plight of the new internship.

 

In recent years, internships have become a near-necessity for college students trying to stand out in a brutal job market. And while some positions can provide valuable work experience and a glimpse into corporate life, critics maintain that the stints often amount to little more than unpaid labor.

 

A survey last year from the National Association of Colleges and Employers suggests unpaid internships don't help students land full-time jobs. Alums of unpaid internships had full-time job offers at nearly the same rate as those who had no internships at all—about 37%, compared with 62% for those with paid internships.

To read more about how internships are changing, read Rachel's article for the Wall Street Journal

Final Note: Peak Embarrassed

Fri, 2014-05-16 14:04

In our Final Note for Friday, May 16, I've flashed back to my teenage self: those awkward days when we felt we could do nothing right and mortification lurked at every turn, complete disgrace only a heartbeat away. For me, anyway.

Researchers apparently found the exact age when we're most likely to be embarrassed. "Peak embarrassed," they call it.

17. 2 years of age is that peak point when you're more likely to feel embarrassed by your own actions, according to a 2013 study in the journal Psychological Science.

And that's probably good news for adults, or at least anyone over the age of 17.2 years.

Who's at fault for credit fraud: Company or consumer?

Fri, 2014-05-16 14:04

We all know we're supposed to check our credit card statements every month to look for fraudulent charges.

But let's be real, we're supposed to do a lot of things.

We're slip up once in a while. And when we do, what safeguards are in place to catch these sneaky charges?

David Lazarus, columnist for the LA Times and frequent Money guest host, has been examining credit cards, and told the story of one woman's unidentifiable credit card charges for the LA Times.

When Kearns fell for AutoVantage's bogus check, the annual fee for the service was $119.99. Over the years it rose to $129.99 and then to $139.99.

Each time it appeared on Kearns' bill, it showed up in a cryptic fashion, usually "TLG*AutoVtg" and a phone number.

"Everything else had a name — CVS, Stater Bros., Best Buy," she said. "This was the only one that didn't."

Kearns mistakenly took the charge as auto maintenance paid for by her husband — an oil change, say, or tire rotation. It wasn't until this year that she finally realized she'd been paying over and over for something she couldn't identify.

To read more from David about credit card fraud, read his column for the LA Times

The Wrap: Keep chuggin' along

Fri, 2014-05-16 13:43

Things are generally well in the economy (key word = generally). Still, many people are leaving stocks and buying bonds behind, which is what they do when they are nervous about economic prospects. Why?

"The thing which is the risk to bonds -- which is inflation -- doesn't seem like it's going to turn up anytime soon," says Fusion's Felix Salmon.

We have to consider the relationship with inflation to better understand the bonds market. Here's the second question we want to know the answer to: Why is there no inflation in this dragging economy? 

"There's still so much slack in the labor market. People aren't getting hired. That's not pushing upward pressure on wages, the things people buy," Catherine Rampell from the Washington Post. "I think you really need to see a lot more activity in the economy before you really need to worry about inflation."

Inflation holding at low levels. People not getting hired. We've got that covered. We turn next to housing -- a key indicator of growth.

If you don't already know his name, Mr. Mel Watt is the director of the the Federal Housing Finance Agency, and this week, the oversight agency of Fannie Mae and Freddie Mac said they are going to make it easier for people to make mortgages and take out loans to boost the  housing market.

The third question on our minds at the end of this week: will the housing market ever recover, and how does that help the overall economy?

"I've always been suspicious about the U.S. government trying to boost the economy by making houses more expensive," says Salmon. "If you live in a country with 60-something percent home ownership, those policies always become very popular politically because people like to see the value of their houses go up."

But Watts wants to make Fannie Mae and Freddie Mac smaller: reform them, and maybe get rid of them.

"The administration has thrown its support behind a bill, that's kind of dead at this point, to wind down Fannie and Freddie. To replace them with something else. Hopefully something more permanent that would encourage more ownership. But it doesn't seem like that policy goal has turned around at all," says Rampell.

Are we stuck in the past? We ended our wrap with a callback to the past, as former Secretary of Treasury Tim Geithner released a memoir on his role supervising President Barack Obama on the Great Recession. Something which we're very slowly recovering from.

What Apple and a convenience store have in common

Fri, 2014-05-16 13:40

There’s a new study out from eMarketer that measures how much profit stores squeeze out per square foot.  Apple leads the pack, at $4,551 a foot.  Most of the retailers at the top of the list sell expensive stuff. 

“Clearly the high-end consumer has more discretionary dollars to spend, driving strong sales per square foot," says Ken Perkins, president of Retail Metrics. "You don’t see many discounters on here, or department stores.”

But you do see Murphy USA, which runs a chain of gas station convenience stores.  It came in second.  Weird, right?  Maybe not, says Gary Rosenberger of EconoPlay, who follows these kinds of trends. We spoke while he was on a roadtrip and had, ironically enough, filled up at a Murphy location in Dillon, S.C.

Rosenberger says the place was packed, with about ten people in line ahead of him.

“And everybody there was in line basically either to buy lottery tickets or cigarettes,” he says.

Rosenberger says Murphy sells lots of people lots of stuff, but there’s another reason the retailers on this list are profitable:  Most of them don’t have to worry about online competition, and they’re making their stores a destination.   Take Restoration Hardware, for example. 

“They’ve been fairly explicit about that saying we want people to come in, spend time here, hang out here,”  says Nicole Perrin, the executive editor of eMarketer.

They’re adding restaurants and rooftop gardens to some stores. Anything to squeeze out one more dollar, per square foot. 

 

Why Darden ditched biscuits and not breadsticks

Fri, 2014-05-16 13:38

Red Lobster is getting tossed overboard. The parent company, Darden Restaurants, announced that it’s selling the seafood chain for $2.1 billion. Both Red Lobster and Darden’s other big chain, Olive Garden, have been losing customers for years.  

Casual dining faces two problems, says David Henkes of the food-industry consultancy Technomic.  “It’s certainly getting squeezed at the higher end by more of a ‘polished-casual’ as we would call it,” he says. Think Cheesecake Factory. “And then at the lower end, you’ve got an extremely high-quality fast-food segment that we call fast-casual.  You think Panera, Chipotle.”

Panera and Chipotle give consumers two things, says Harry Balzer, who looks at food and drink for the consumer-research firm NPD. “It’s time and money,” he says. “Save me time, save me money. And this country has been under pressure, for its income, for a number of years now.”  

Consumers have been eating out less often, he says, to save money. Minding the size of the bill counts, too: An average check at Red Lobster is about twice the average tab at Chipotle.  

Increased global demand for seafood has made it harder to contain costs, says Andy Brennan, a restaurant analyst at IBIS World. "Seafood is one of the foods that you can't substitute out for cheaper products," he says.

That's the money side. With time, casual-dining restaurants like Red Lobster fare even worse, compared with their fast-casual competition, says Alex Susskind, a professor of food and beverage management at Cornell University’s School of Hotel Administration.

Compared with fast-casual, an average party spends more than twice as long at a Red Lobster: 45 minutes to an hour. Even for family dining, that’s a stretch. “When I go out with my family— I have two young kids,” he says, “And if we could get out in 35 minutes, that’s better.”

Olive Garden has all the same problems, but Susskind says Red Lobster has an additional burden: demographics.  “It’s still perceived as a restaurant your grandma went to.”

Even attempts to update the decor— like putting the bar front and center— haven’t helped with that. "It's just that older demographic— that is the bread-and-butter, I guess, of their existence— that prevents that younger demographic from moving in," he says. "In terms of problems, they probably saw that as something insurmountable, given the number of years they've been trying to adjust it."

 

An end to vulgar bankers

Fri, 2014-05-16 13:25

Exec to bankers: stop being jerks

I always read All Staff emails.  Especially the ones about a misplaced umbrella somewhere on the West Coast (I’m in NY) and definitely the ones about free cookies in the lunch room in Minnesota (I’m still in NY).

Some people ignore all staff emails.  So Colin Fan, co-head of Deutsche Bank’s investment banking unit, made his into a video.   

“This is an important message. You need to pay close attention,” he begins. 

“You may not realize it, but right now, because of regulatory scrutiny, all your communications may be reviewed.  This includes your emails, your conversations, and your conduct.  All of this is open to scrutiny.  Some of you are falling way short of our established standards. Let's be clear.  Our reputation is everything. Being boastful, indiscreet and vulgar, is NOT OK.  It will have serious consequences for your career.  And, I have lost patience on this issue.”

Fan concludes ominously with “Think carefully about what you say, and how you say it. If not, it will have serious consequences for you personally.”

So why the... gentle reminder?  Because a lot of financial firms have an enduring problem. 

Text not lest ye be judged. And email not. And gchat not.

“We’ve seen time and time again these  emails, which are meant to be private, don’t stay private,” says Kevin Roose, author of Young Money

As investigation after investigation has turned up documents and texts and even recorded conversations, these communications have not been flattering.  Some were illegal, others crass, plenty were both and ALL made the firms look terrible.    You can see some juicy ones here.  

“Not just during the financial crisis but also things like the LIBOR scandal last year,” says Roose.  “Traders were emailing back and forth about fixing a key interest rate in exchange for bottles of champagne and calling each other nicknames.”

“What’s astounding,” says Roose, “is that people are still doing this kind of thing.”

In part, it’s the same mistake that anyone can make: what you put in writing can come back to haunt you.  But it’s also cultural.

A culture of high stress and hyperbole?

Henry Blodget is currently the editor of Business Insider, but he spent a decade working on Wall Street

“On trading floors in particular, and among people on Wall Street in particular, there’s a lot of tension, a lot of jocular communication, yelling and screaming, gamesman ship.  It lends itself to the very colorful emails and texts we have seen,” says Blodget.   It’s akin to other hyper masculine cultures, like that of the military.  “As an analogy, if you were to put a microphone on the side line of a football team, you would hear many things that in isolation would sound terrible – ‘our coach is an idiot!’ and  ‘That’s the dumbest play ever’ – imagine that in a deposition.  Imagine a prosecutor asking you on the stand ‘so clearly, you think your coach is an idiot?’  It’s hard to explain yourself later.”

And yet, says Blodget, in the case of the financial industry, the jocular, aggressive culture is increasingly subject to withering scrutiny: “Because even conversations are recorded on the trading floor, you can’t even engage in normal banter that you normally would.  It’s hard because you want to talk to people who you want to be friends with, you want to talk the way people talk.”

...Or a culture that promotes recklessness?

That scrutiny is well deserved, says Karen Ho, an anthropologist at the University of Minnesota who has spent years studying, working, and socializing within the finance industry and on Wall Street in particular.  “These folks have undue influence in our social economy, in our institutions, on interest rates.”

Moreover, the jocular culture is far from harmless, argues Ho. “The boasting and vulgarity help to create a perverse motivational environment where traders through their talk their texts their emails their yelling are egged on” to be more transgressive.

Transgression and aggression become “a sign of not just one-upmanship, but masculine achievement,” Ho says.  Blaming Wall Street excesses on greed lets culture off the hook.  Ho is basically saying that Wall Street culture as it stands reinforces an unholy marriage between masculinity and prowess, and aggression and transgression.  “We need to delink these things, which I think the Deutsche Bank video begins to do,” says Ho.

 “The good news is that if it’s cultural, and folks are socialized into it, then hopefully they can be socialized out of it,” she says.  Canadian bankers don’t seem to have the same problems.

Cultural shift is easier said than done

“I think it’s extremely challenging to imagine that people closely working every day on the phone and instant messaging and email will ever be able to communicate in the boring stilted corporatese that sets lawyers at ease,” says Blodget, regarding the effort to reign in distasteful communication. 

But some financial firms are nevertheless trying very hard to do a la DeutscheBank.  Goldman Sachs installed a filter to prevent people from sending emails with cursewords.  “You can’t even send ‘wtf’” says Roose.  “They installed willpower via software.” 

Roose says a shift in culture has to come from the top.  

And to really make its mark, it will probably require people getting fired.  From the tone of that Deutsche Bank all-staff memo - that sounds pretty likely.

 

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