Tag Archives: Wal-Mart

APPLESAUCE AND APPLE

THE FINANCIAL MINDSET OF A NEW GENERATION

Tom McBride and Ron Nief

Light Bulb

The students who began college this past fall have a forty percent chance of graduating in four years, and a seventy percent chance of graduating in six. Having grown up in the Great Recession they can rarely take money for granted. They are more interested in money than in love, unlike their parents, who may have grown up as hippie advocates of free love during the far more prosperous 1960s.

But it’s possible that the old hippies are their grandparents: yep, that much time has passed.

They expect to graduate from college in debt, but they must also worry about what sort of job they can get to pay it off. They are all too keenly aware of how easily a sophisticated algorithm can replace human beings in the performance of even high-tech tasks. They know that jobs—maybe including one that has their name on it—can be outsourced cheaper overseas. Some of them are growing up in states like Florida where governors are pressuring universities to explain the financial prospects of their various major fields. They might love philosophy but decide to major in Geriatric Studies—perhaps the United States will run out of articles on Aristotle sooner than it runs out of old people living longer and longer.

Since they were about twelve years old the stock market has run a gamut of about twelve thousand points. The most precarious roller coaster at the nearest amusement park seems tame in comparison. They wonder if they will have the guts for investment in this sort of market when they aren’t risking whiplash in their necks (unlikely with the roller coaster anyhow) but cavities in their pocketbooks. Yet at their young age it’s silly to worry about the long-range future, right?

Still, they know they are coming of age in a world where pensions are becoming as infrequent as desktop computers, and where they may have ninety-five year old great grandparents still vacuuming up Social Security and Medicare. They’ve been told that a member of the generation just behind them may live to be 140 years of age. Where will the money to sustain so many geezers come from? Well, it’s too far off to panic now.

The financial hero of their generation is not old Bill Gates but young Mark Zuckerberg, who came up with Facebook. They dream about formulating some high-tech enterprise that will make billions of dollars for them, too. But what might it be? Replacing passwords with high-tech facial identifications? Nah: it’s too late for that—the research is already underway. When they were having their baby food applesauce, Apple seemed to be a company that had seen its best days. Well, look at how that turned out, so for them fantasies of high-tech riches spring eternal.

Rather anxious about money, they are frugal. There’s only a six-in-ten chance they have a credit card. They go debit, thank you. They’d rather have a new tablet or phone than new car. Autos are more expensive and not so necessary. They know a lot more about chips than about carburetors. They tend to congregate after graduation in cities with public transport, and they are a keen ride-sharing generation.

Besides, with Skype who needs actually to go there? One thing they don’t expect if and when they do get a job: lots of face-to-face conversation. It wouldn’t surprise them to learn that they will spend most of their working careers in their apartments—and of course in cyberspace.

They may become the first generation for which there will be scant old-age welfare, and yet also the first for whom it is largely unnecessary to leave the house for anything. Graphic virtual vacations to Venice may be on their way two decades hence, and they’ll be at lot cheaper than going there.

During their lifetimes the price of a first-class stamp has risen 65%. Maybe this has something to do with decreased demand for them. Theirs is a generation that rarely “writes” letters placed into envelopes with stamps attached. Going to the P.O. is hardly a ritual for them.

In their lifetimes K-Mart and Target have always been going in opposite directions. They expect similar corporate unpredictability in a world where popular websites can change every five minutes. They do not expect to stay with one company for long.

They hear about income inequality constantly and may cynically conclude that a rising tide lifts all yachts. Yet both the libertarian Republicans, who appeal to their sense of entrepreneurship, and the progressive Democrats, who promise to close the gap between rich and middle-class, appeal to their economic instincts, however unformulated as yet.

The one thing they should not give up on is education. One study concludes that if every high school student had the skills of every college student, the former would make $28,000 more per year. A Harvard study says that having just one good teacher for only one year can increase lifetime income by $80,000. In a time of gyrating stock markets, rising inequality, and scary high-tech chaos in the job market, it is easy to become cynical about an assigned term paper on the Thirty Years’ War.

But it would be foolish not to complete it, and get a high mark for doing so.

Tom McBride and Ron Nief are co-authors of the annual Mindset List® and of two books: The Mindset Lists of American History (Wiley, 2011) and The Mindset List of the Obscure (Sourcebooks, 2014). For their Financial Mindset List for the Class of 2018, go to http://themindsetlist.com/2014/10/financial-mindset-list-class-2018/

Photo credits – MS Office

Adapted from News From Heartland – the Journal of the Heartland Angels

Chicago Venture Magazine is a publication of Nathaniel Press www.ChicagoVentureMagazine.com Comments and re-posts in full or in part are welcomed and encouraged if accompanied by attribution and a web link. This is not investment advice. We do not guarantee accuracy. It’s not our fault if you lose money.

.Copyright © 2015 John Jonelis – All Rights Reserved

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FAMILY FIRST

The Story of Ray Markman-Part 11

by John Jonelis

Ray MarkmanFriday, 4:30 pm

I’m trying to gathering material on Ray Markman’s assertion, “I never worked a day in my life,” before time runs out. This very afternoon, my two colleagues—Loop Lonagan and Alexander Harbinger—will fight a duel over this, and one of them may not live to tell about it.

Lonagan paces the worn oak planks of my office floor in the back room of Ludditis Shots and Beer. “I wanna say somthin’ about dis new business Ray starts. Him and his partners is already makin’ a bundle, so why should he try’n change the way people buy things? But that’s just what he does.

“Ray gets this new idea about retail distribution. So he runs a test.  He takes that Jane Fonda tape and puts it into Wal-Mart, K-Mart, Dominicks.  He gets into these stores ‘cause he offers the tape on consignment and gives ’em the displays.  In other words, he’s takin’ all the risk!  So they go along.

“Turns out, Dominicks outsells K-Mart and Wal-Mart by far on a per-store basis. A food store!  Who woulda expected that?”

Hanna-Barbera Video Cover

Hanna-Barbera Video Cover

Lonagan steps over to my desk and grabs his notes: “So Ray says this to his partners: ‘Let’s start another company and just go into supermarkets. There’s nobody there.  We can pre-empt the competition.  Here’s the idea:  We go to Disney, Hanna-Barbera, Warner Bros, and get their children’s animations.  We price “em at $9.95.  And we put displays in the stores and sell it like soap.  We’re gonna blow ‘em out of the stores.  We’re appealing to another audience.  It’s women and it’s for their children.  They’re gonna buy it.’  Now if you know Ray, you gotta know he says all dis in a real soft voice.  To me that gives da words even more punch.  Hey, I can buy into that idea myself.  All his partners is galvanized into makin’ the move right alongsida him!”

Lonagan’s pacing speeds up and in this big back room, he ranges from the crates on one wall to the bottles on the other. Seems like there’s not enough room in my backroom office to hold him.  “‘Course, they can’t run both companies—it’s way too much. So they merge the first one into another company and get their money out.  Then they start a new company called Magic Video.  Don’t know why they call it dat but it seems to catch on just fine.”

Dominicks Foods

He stops in front of my desk. “And how d’ya think they distribute to the food stores? The usual way—by themselves?  You can forget that idea.  They do it with food brokers.  Food brokers!  These outfits don’t know video from a slab o’ meat, but they’re in the stores and the stores know ‘em and they got carte blanche to put up displays.  Dis is brilliant!”

I nod and he resumes his pacing. It always tickles me when phrases like “carte blanch” slip out of Loop’s mouth.  Such a contrast to the streetwise front he puts on.  Loop is highly intelligent.  Besides his experience as a futures trader in the pits, and the many private equity deals he’s made since then, he sports a masters in finance from the University of Chicago.  So I know a lot of his old neighborhood accent is a put on.  I’ve learned not to fall into the trap and underestimate him.  He’s quick.

Lonagan continues: “The way Ray works it, he goes with his food broker to a major supermarket chain and sells the idea to HQ. After that, the brokers put the product in.  They do all the housekeeping, the displays, all the details. 

“It works out great. They’re buildin’ a fantastic business.  In 2-1/2 years their run rate is 250 million bucks!  Tell me that ain’t good business.  And Ray knows he can grow it into a billion!  But it don’t turn out that way.”

Now he has my full attention. I want to know the rest of the story.  What’s Loop waiting for?  Pausing for some big effect? “Yeah?” I say, trying to egg him on. “And?”

“His first grandchild gets born. A little girl.  Big deal for Ray.  He’s traveling 90% o’ the time so he can’t see her.  He decides family comes first. 

“His partners whine and complain, ‘Ray, you can’t quit, you’re the whole company.’ So he makes an agreement with dem guys.  He sticks it out fer six more months while they get a new president settled in.  After that, da new guy’s supposed to do the day-to-day business while Ray keeps the relationships going with Disney, Hanna-Barbera and Warner Bros.  He says, ‘Okay but if you screw around with the time, I’m gonna be gone.’  He’s not waitin’ around for his granddaughter to grow up without him. 

“Of course, six months pass and they ain’t done nothin’. Don’t even hire no new guy.  So Ray sells his share o’ the company.  He makes out real good but he gives up the chance o’ buildin’ a billion dollar company.  Family first!  And I say, he’s right!”

 

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Copyright © 2012 John Jonelis – All Rights Reserved

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