Measuring Up

It's sad when credit companies haven't a clue about credit

Peppercom has always used American Express for our small business needs. The company has always given us the benefit we need. That's why it's sad that we were forced to TRY and change credit card companies recently.

You see, my business partner and I (and a lot of our other senior executives) fly a lot on Continental Airlines. AMEX had a great points partnership with Continental and we used those points to purchase free tickets or upgrade. But, to our dismay, that relationship is ending in September.

We recently switched over to a Chase Small Business Card because that's Continental's big partner now. What's sadder, and equally as frustrating, is that Chase has no idea how to service the small business market and doesn't know very much about its target customer either. That became apparent yesterday in an appalling call I had with a Chase Small Business representative.

The call only happened because Chase gave us a paltry $17 thousand limit on our cards. With upwards of 15 executives using these cards to travel for clients, we knew that at a minimum, we needed a limit of 250k. That's what we have with AMEX. The credit professionals there understand our needs, how we use it and they see how we easily pay the balance each month.

Chase told us they needed two years of our audited Peppercom financials to approve this level of credit. We told them no problem. We're profitable, pay our credit debt on time and have plenty of revenue to qualify for this amount.

Yesterday, a Chase Small Business analyst left me a voice mail telling me that our credit request was declined and we are stuck with the original $17 thousand limit. That made no sense at all. So, I called him to discuss the matter. Here was our basic conversation (paraphrased):

Ed: "Hi, you denied us the amount we are asking for. Can I ask why? AMEX has no problem approving this amount or even more."

Chase Rep: "This card is really only meant for one person. While we appreciate your business, we're not sure how you could need that much credit."

Ed: "This is a small business corporate card, right?"

Chase Rep: "Yes."

Ed: "Well then if it is, you'd understand that it isn't for one person's personal use, but instead will be used for travel, hotels, client campaign purchases, office needs, etc., by many senior Peppercom employees. Thus, we could be spending 100 or 200 thousand per month and just want to have a safe limit in case. Again, we've had a 16 year relationship with AMEX that we are now looking to transfer to you. But, you need to understand our needs."

Chase Rep: "Thank you. We do understand your needs. But, that limit is just much too high for one person doing business, sir."

Ed: "Do you understand that this is for my company’s business, not one person? Why did you ask for two years of financial records from Peppercom if you only care about my card? I am not asking for a personal credit card. This is for all Peppercom's needs."

Chase Rep: "I understand and appreciate that. It just seems that our credit analysts feel that 17 thousand, your current limit, should suffice to fill those needs."

Ed: "That's ludicrous. Do your credit people see any issues with our financials? Ok, what about if I lower the limit to maybe... 200 thousand?"

Chase rep: "Nothing on my documents shows any issues with your financial statements, Mr. Moed. That's not a problem. But, 17 thousand is all that we can approve."

Ed: "Ok. I'm getting nowhere. How long have you worked in the small business area for...because you clearly don't comprehend the difference between consumer and business needs."

Chase Rep: "This is my third week, Mr. Moed,"

Ed: "Good-bye."

Based on my experience, Chase should not be in the small business credit card market business. The company wasted my time and that of Peppercom's financial managers as well. Any bank or credit vehicle that understands small business credit would enthusiastically want Peppercom as a customer for that amount of credit.

The moral of this post is for companies to stick to the knitting they know versus trying to expand into areas where a lack of experience will only damage their reputation. I'm done with Chase and every time I see one of its ridiculous small business commercials it will remind me to tell this story again and again and again...

Bring back the Pony Express…

The U.S Postal Service (USPS) is going broke. That’s not entirely new. Throughout the last few decades, our  official government mail carrier has faced a myriad of financial woes which almost put it under.

What I find interesting this time is that a complete lack of foresight and innovation is leading to this once proud institution’s downfall. And, because Americans still depend on their daily mail, we’re also going to see the Federal Government provide yet another bail out very soon. Truthfully, it’s too bad that we can’t take a laissez faire approach, and just let the USPS die a normal institutional death like other organizations which simply aren’t able to keep up with what the market needs, or their competitive set.

The main storyline behind this is that those eggheads who lead the USPS never had the ability to foresee a couple of key factors that impact business:
    1) The economy eventually goes down – When that happened, Americans stopped spending so much on first class mail. That’s one of the key ways the postal service makes money. Sending out tons of junk mail is the other money maker for the postal service. Our recent recession turned the junk mail spigot off. Everything else that the USPS sends out from daily letters to big packages, are money losers. In fact, because it charges only 44 cents per letter, regardless of how far that letter has to go, when volume increases, this organization loses money.
    2) We are moving towards an email, paperless society – Yet, our postal service is in the stone age when it comes to digital products (meaning: they have none) Ever hear of e-letters? Many national postal services throughout Europe (like Sweden, France and Norway) have.  Each has modernized its product offerings, making lots of money and profit because they innovated years ago when everyone saw the writing on the wall.

What’s amazing is that if the USPS was a real company, it would be the 29th largest on the Fortune 500 list. It employs 571,566 workers as well. It also is $15 billion in debt, owing $12 billion to the Federal government. And what’s really ironic is that it spends over $25 million on advertising to promote how mail should be used as a marketing tool (i.e. bring back demand for junk mail). Unfortunately, none of that seems to have helped because all the marketing in the world won’t make a dent in the bottom line when the business model has failed.

I guess we shouldn’t be surprised. Many of the USPS’ senior management (including its current Post Master General) came up through the ranks of this governmental bureaucracy. Without any outside business training or real experience in running other behemoth organizations, it’s very difficult to bring in new ideas or perspectives that have worked elsewhere.

My take has always been to let the strong survive and the weak… well let them figure it out for themselves. Of course we know that FedEx, UPS and the others couldn’t readily step in and just take over the enormous daily mail needs that the post office provides (rumor has it that the USPS delivers 40 percent of the world’s mail). But, there certainly has to be a better solution than forcing the tax payer to pick up yet another bill to save an institution that hasn’t been right since the days of the Pony Express.

What's a college diploma truly worth these days?

… at least $23,000 of debt, according to a recent study which shows that the average student owes that amount  after graduating from a four year college or university. This same research also shows that the debt levels for graduates have increased upwards of 50 percent in the last decade.

Yahoo Finance decided to take an interesting direction in this article, asking the question, is it worth it? Should more high school kids forgo college because the return just isn't worth the debt accumulated? I say, no way Jose to that theory. Here's why...

I remember graduating more than 20 years ago with about $20,000 in loans. I worked like a dog for very little $$$ over the first few years to survive in Manhattan. I remember thinking just how hard it was to make those monthly payments when times were really tough. Back then (yes, even in the old days), going to college was viewed as a prerequisite into the white collar job market. Unless you were a complete freak of nature like Bill Gates, no diploma meant no real hope of staying away from a career in some type of manual labor.

Fast forward a few decades. Today, a college degree represents (even more) basic table stakes into the professional world.  The only difference is that the Internet has created all new opportunities for some to bypass traditional jobs that college graduates used to need to begin burgeoning careers. Although success rates are slim, entrepreneurs exist at the earliest of ages, setting up garage-based, venture projects and companies with the hopes of creating the next Facebook or Foursquare.  Even with that new reality though, most fail.

So, where is this all going? We all hate the rising price of college education. Hell, I've heard that top private schools might actually cost upwards of $75,000 a year by the time my 8-year old twins are old enough for college. That is downright scary. But, even with all of that, the right type of college education is worth far more than the piece of paper handed out at graduation. And, its benefits go well beyond just providing enough credentials to obtain an entry level white collar job.

For starters, research shows that over a lifetime career, those who have a Bachelor’s Degree earn on average $2.2 million. That's in sharp contrast to those with just a high school diploma who only take home about $1 million. It's hard to justify bypassing college because of a $23,000 IOU (versus) the $1.2 million more one should make with a college education.

Now to the actual part that really matters. As I watch, converse with and listen to so many graduates today, I see how their teachers have taught them to think creatively, in ways that just wouldn't be possible with only a high school degree. I've also encountered some pretty impressive problem solving in the most challenging of circumstances, from recent grads who've only been in the workforce for a year or two. Lastly, the maturity level and social skills that are developed through that four year period can't be duplicated through any other experience in life at that age. Take away those four years of growth, and you'll have a large part of our society who can't deal with the day to day opportunities and pressures that go along with being an adult.

One simply can't measure college debt as a straight pass through investment, like most do after 10 years of medical school. The comparison is truly apples to oranges.  The rising cost of college will become a more acute issue in the decade to come because at a certain point, there will be very few parents who can actually afford to pay full tuition without any financial assistance. But, that's a completely different issue to be taken up in another post. The college experience cannot be replaced.  That is just reality.

How smart is this man?

Donald Trump is front page news. 

This businessman filled with bravado has us all wondering whether he's really going to make a Presidential run. Or, is this simply a giant ruse that he's created to promote his still popular ‘Apprentice’ show on NBC, while also serving to prop up the value of the Trump brand for a host of other business dealings.

My personal opinion is that this began as a very creative publicity stunt to build TV ratings. But, as media began to listen and widely report about him, ‘The Donald’ saw that a bona fide opportunity existed. Amazingly, the political polls have him steadily rising in popularity to the point where he is now a front runner on the Republican ticket. Some (like this blogger) view this as a sign of just how weak the Republican candidate list is. But, Trump could just play this out until he needs to declare his official run for the office (or not) just to see what options he has along the way.

Donald Trump is arrogant, shows a complete lack of humility and certainly rubs many the wrong way with his outspoken and often controversial viewpoints. His personality and character would be more suited to a third world nation dictator, than the president of any democratic nation. But, he is also very smart.

That's because it really doesn't matter what candidate Trump says. The masses are going to listen and there is almost no downside to what he does and says at this point.

Take as an example his laughable rhetoric on the birther issue surrounding Obama. Only the far right chooses to believe that this could be true. But, by peddling this nonsense to anyone who will listen, Trump now has minted a new loyal base of followers.

How about the Libya issue and what to do with Qaddafi? He was asked this question on ‘The Today Show’ last week. His answer was so comical, yet also refreshing because in stating that he only wants "the oil" or “let's stay out of that mess,” he did something that no real politician would ever do. He spoke the truth. At the same time, this comment served to fan the flames of melodrama around him, serving to create even more exposure, while his new loyalists flocked to watch ‘The Apprentice’ because they need to soak up his energy whenever possible.

Yes, this is what we often call a win/win scenario for Mr. Trump. And, I have to respect how he's created a reality in which his go or no go presidential decision falls squarely around the last and most important season finale of his hit show.

Most blogs and stories on this topic focus around whether this is a big hoax, or if Mr. Trump's views/comments give him a legitimate chance for the nomination. To me, that's all background noise.

Personally, I can't ever see him choosing to run because that means opening up his finances to the world. I could be wrong, but just believe that there are far too many skeletons in his business closet to open up to the world. The negatives far outweigh the positives on this one.

Instead, what I find really interesting is just how long he'll milk this enormous opportunity along the way and the entertainment value that I can take in every time he speaks.

When bankruptcy meant failure

Chapter 11 used to have a shameful and negative connotation in corporate America. Quite simply, it meant failure through bankruptcy.

That was the past, though. For decades, many companies have willfully utilized Chapter 11 protection laws to gain a second chance. We've seen it over and over again. Those over their heads in piles of debt, or companies that simply come close to running out of cash use these bankruptcy laws to erase most (if not all) their obligations and problems.

Even though Chapter 11 filing is used as a business strategy now, it's fair to say that most in the business world still view it as a failure to succeed. That's why I find today's news of Sbarro's bankruptcy filing to be so comical. More to the point, specific comments made by its CEO about this news are just plain odd.

Let's state the facts first. The company is suffering from a serious liquidity crisis. In its current state, it couldn't afford to keep paying off loads of debt, while operating its 1000+ restaurants. What pushed it into Chapter 11 is when Sbarro's financing options died. All of this happened because of recessionary matters which also forced the company to shutter 150 stores.

The bankruptcy will allow Sbarro to shed 195 million in bad debt, coming out of bankruptcy relatively quickly, but not unscathed and certainly not completely healthy as it will owe 175 million to debtors and creditors still.

Yet, its CEO Nicholas McGrane, said in court papers earlier this week, “Sbarro is a strong company that will quickly emerge from Chapter 11 and remain very competitive."

Huh? Is that comment just a tad too optimistic considering the company's current predicament? I mean the company has run out of cash.

It also makes the company's senior management come across as pathetically too optimistic, out of touch with what readers will believe and just plain silly.

Does the company have a bright future? I'm not sure anyone knows that answer. More to the point, if this CEO wants to be taken seriously, he needs to understand an important communication strategy— choose words and tone that are both believable and fit within the current scenario he is dealing with.

We often advise clients on this very issue. I've witnessed many cases where executives just didn't understand that their overly positive statements wouldn't come across well. Often, they were edited or changed to more acceptable language. Clearly that didn't happen in the case of Sbarro's CEO. Unfortunately, it's an egregious mistake.

Obama says: Everyone can’t own The American Dream

There are a number of fundamental reasons why the housing market bubble burst a few years back.  To me, it all starts with one basic truth- owning a home should not be a God given right for all Americans.

Thank you, President Obama. Late last week, his administration’s much anticipated report on redesigning the government’s role in housing finance was published. While the report largely takes aim at replacing dysfunctional lenders Fannie Mae and Freddie Mac, it also goes further into pushing homeownership beyond the reach of many American families. In my estimation, that is a very good thing. Our economic system should always have realistic checks and balances, or it breaks down. Mortgages are nothing more than loans.  And loans should only be given to those who can show that there is an extremely good chance that they can be paid back.

Unlike his recent predecessors, this president just made a big statement through this report. He’s concluded that our country can no longer afford to sustain its commitment to minting homeowners, regardless of their financial status. The exact quote is, “the government must help to ensure that all Americans have access to quality housing that they can afford. This does not mean our goal is for all Americans to be homeowners.”
The report doesn’t offer any final measures. Instead, it provides three options that the administration could take. But, the bottom line is that this reform takes a bold step in reversing the policies over the last two decades which have allowed Americans with little to no income, very few assets and/or even bad credit, to purchase homes. This will happen because many federal programs that guarantee mortgages for lower-income families will be eliminated and even the Federal Housing Association (the largest government sponsor) will not be allowed to guarantee more than 15 percent of mortgages moving forward.

Of course, many dissenters exist. Some are angry and have actively spoken out against this bill. Representative   Dennis Cardoza, a Democrat from Central Valley, CA says, “How is Joe Six Pack ever going to be able to afford a home now?” And, John Taylor, president of the National Community Reinvestment Coalition said, “For those who are working their way up the economic ladder, there is going to be a narrower opportunity for them to enter homeownership.”

To me, this debate is pretty simple. But, like most politicized issues, creative minds have designed a multi-decade old fictitious storyline to make consumers believe that they can only be living the American Dream if they indeed own a home.  This fantasy looks like a beautiful Norman Rockwell painting that they’ve carefully air brushed for us- three kids, a dog, two cars and the nice split family ranch with a patio. The problem is that Joe Six Pack (as Mr. Cardoza refers to) might actually be better off renting in the long run, than living this reality. But, he has been led to believe that anything less than owning a home is failure.

Ironically, we all now know that one’s house should not be viewed as a primary investment that always increases year after year. That combined with school and town taxes (which only continue to rise) and steady costs associated with keeping one’s house/ property in good shape, might weigh heavily on Joe’s wallet forcing him to make tough decisions. Instead, that same month to month investment could be saved to put his kids through college. Or maybe, Joe could just take more vacations, buy things he cares about and save a little more for retirement. All of those benefits would probably allow Joe to live life at a higher standard and experience the “American Dream” just as he had always hoped to. And of course, he’ll never have to worry about that nasty word ‘foreclosure,’ again.

Has this media empire out Foxed the rest?

Yesterday, Rupert Murdoch announced his next big media move. News Corporation introduced 'The Daily,' a digital-only daily newspaper.

Delivered as a news application designed for the iPad, Murdoch is taking a bold step forward by charging a monthly subscription rate of $39. According to his comments, he believes that this new venture will position News Corporation as the digital newsstand of the future.

The concept is quite interesting and controversial because it runs counter to how people consume their online news today. Instead of the ever popular push model where free RSS feeds and subscriptions allow any and all relevant news to be pushed on a 24/7 basis, this model literally creates a digital version of the USA Today model.

Murdoch believes that a more general interest, high- resolution color digital newspaper that offers readers news and gossip on dozens of topics will greatly entice them. He also claims that 'The Daily' will be the first to seamlessly bring photos, video and interactive features together, in this new “all in one place" format.

Murdoch's initial costs for this venture are purposely low. He hopes to build sales through subscriptions over time. No doubt the partnership with Apple will help. And if he's able to build circulation numbers, then advertisers should naturally flock to his outlet as well.

Yet, I wonder if 'The Daily' is still a few years ahead of its time. I do believe that many (including this blogger) would happily subscribe to this app if it was free. But, with so much other free content available at my finger tips, what motivating factor will compel me to want to offer up my credit card for this content? Thirty nine dollars isn't a lot. It's just the difference between having to go that extra step with a payment for content, versus continue to use my favorite model– free.

In the end, I believe that 'The Daily 'will need to provide some incredible value to generate mass subscriptions in this day and age.

I applaud Murdoch's moxy and continued innovative mind set. He failed big time acquiring soon to be 'has-been' My Space a few years back. This time, he's done a complete 180 degree change by establishing a first mover status. I just believe that unless 'The Daily' is offered as part of a larger package (i.e. buy an iPad and receive a six month subscription for free), with Apple consuming the cost, it will be a long and difficult climb to grow sales for News Corp.

NBA = National Bankruptcy Association

Everyone’s heard hundreds of stories about professional athletes going broke. They spend as if money grows on trees. And, they trust far too many friends, managers and agents. Many eventually steal or betray them behind their backs and suck them dry.

Sports Illustrated’s Rick Reilly wrote this interesting, tongue-in-cheek post highlighting many more sad realities on this topic. One startling and sobering statistic got my attention, though. Over 60 percent of NBA players go broke within five years of retirement. Wow.

The first question that runs through my mind is… why won’t they ever learn? The stories are always in the news. So, how many rags to riches to rags examples do these stars need to see or read about before they actually change their behavior? Then it occurred to me that one’s behavior can only change if that person understands he is doing something wrong/harmful and then is taught how to do it better (or not at all).  Understanding that point, I wonder if the NBA needs to step up here and take more of a leadership role with its players.  While the league has no legal responsibility to make sure its employees don’t throw away their lives, I think an ethical example still needs to be set.

I did a little research on the NBA. This league does some great work helping kids become more educated about staying in school and away from drugs. And, it also plays a pivotal role helping players with various maturity and emotional issues they inevitably encounter as they jump from high school or college into a celebrity life in the NBA. But, I’ve yet to find any literature, information or media coverage about how the league helps on the financial literacy front. That’s really a shame.

The image of this league has consistently fallen over the last decade or so for a variety of reasons. Attendance at games and viewership has also greatly waned as the fan base demographics are now limited to more inner city, lower income consumers (versus a healthy mix of middle class and more affluent fans as well.) It’s clear that this fan base still admires these talented basketball players and views them as bona fide heroes because of what they can do on the basketball court and the image they personify. Here’s food for thought: If the NBA actually took a position by teaching its players how to save the millions of $$$ they earn, then just maybe this new found personal financial responsibility would be emulated by the fans and spill over to a part of our society that really needs this help the most. 

Nothing more than organized gambling…

For those who haven’t figured it out yet, our financial markets are laughable. The last collapse, that began in 2007, scared many away. But, it’s actually the recent rise over the last 4-6 months which has me more concerned. You see, there’s no rhyme or reason as to why the Dow Jones Index and others continue to climb steadily.

Sure, jobs are coming back slowly. And, there seems to be a more optimistic view that our economy will become a tad healthier in 2011. But, none of this was apparent in the third and fourth quarters of 2010 when the Dow Jones Average jumped from a miserly low of 9,500 points to over 11.500 by the end of last year. And, every day we still see plenty of negative indicators largest public companies and state and local governments that all isn’t well from a growth standpoint.

My feeling is that for the average Joe, investing in our financial markets is no different than playing craps or blackjack in a casino.  The only real distinction (and positive) with playing blackjack or craps at a casino is that a player can actually understand what his/her odds are to win (even though those chances might be ever so small). For the average investor, the belief that a level playing field existed used to provide a lot of comfort. Most felt that they would be taken care of in the long run if they invested in fairly safe and conservative bets over their working lives. We all know now that this belief is nothing more than a mirage. The reality is that huge institutional forces can (and will) coerce excess and greed into almost any investment marketplace. Because of this, no one individual investor can ever truly feel confident that his/her portfolio will be safe, or far worse, when the markets might simply crash again.

Yet, it’s pretty ironic that most of continue to operate in a mindless sheep-like fashion. We herd once again in packs to these same stocks, bonds, mutual funds and other investments. We all seem to have incredibly short memories because everyone is feeling pretty darn good now. Why not…the markets and our investment portfolio values continue to grow each and every month. So, on paper, everything looks wonderful again.

So, what’s a person supposed to do?  Most working Americans use their 529 and 401k plans as the number one vehicle to save for college and retirement. I’m no financial expert, but it is easy to see that without year to year gains in tax free (or tax deferred) investments in these types of products, it would be almost impossible to save enough money for critical long term needs. Of course, this is a double edged sword because all that money invested may not be worth much of anything in three, five or nine years when the market quite possibly crashes again.

This reality is truly an untenable enigma (at least in my mind). The only seemingly rational move I can think of is to diversify whatever wealth/money one has into a variety of different investments (like real estate and plain old savings accounts) and to become that much wiser to any situation where our markets are rising too quickly for no apparent logical reason. Apart from that, we all need to never forget that anything that looks or feel too good to be true, is just that. So, don’t get hoodwinked again into believing that our financial markets are anything more than organized gambling.

Where everyone knows your name…

That line from the title song of the 80s sitcom “Cheers,” represents such a positive feeling to most who remember it.  It means something entirely different to me, though.

Saturday was my birthday. I had a really nice day. But, I also received about a half dozen emails like the one in  this caption all wishing me a happy birthday. Ecommerce sites, web vendors and other  service providers are just so sweet. They all must have really caring customer service people who spend their days writing down customers’ birthdays just to send us e-cards with a smile, right? Not. Instead, the reality is that they’ve acquired every bit of data and information on our personal lives and habits. Thus, sending me a birthday email probably takes very little effort. But for some marketers, it’s a smart way to establish closer bonds with audiences they care about.

Here’s the rub about this specific one. I hate Quicken Loans. Quicken wasted my time for over four months this summer when I tried to refinance my primary mortgage. Quicken deceived me and Quicken lost me forever as a customer or someone who will ever recommend its service because at the 11th hour, this banking intermediary told me that the type of mortgage I had been accepted to receive, was now dead and buried. That’s right. I had a closing basically scheduled, when Quicken pulled the rug out from under me and said it could no longer finance this product.

I’m pretty busy. The only care I have when doing anything like this, is that the service provider is dependable and makes it simple, quick and, ultimately, shows me the money. In the end, Quicken did none of that. Ironically, one month later, I chose another mortgage broker who promised me much of the same. You know what? This time the promise was realized in just three short weeks. I had a new mortgage. It was so easy, very quick and I got the money… at a much reduced rate.

What’s the point of this post (you might be wondering)? I had put the distasteful Quicken experience behind me. Then, I received this email. Some idiot there never took me or my private information out of the Quicken database, even after I ranted and raved for a few days at them when the fiasco happened. So, because this company has reengaged me, I’ve decided to now let everyone know that I hate Quicken.

Of course there is a marketing lesson in this tale.  Mass marketing without any quality control can have some very real consequences to a brand. Problems always exist when a company promises one thing in its marketing messages but delivers a totally different user experience?  I think it's such a huge problem that we're actually beta testing a possible solution.

I am not a fan of this company. Many people there heard my roar. Someone should have removed me from this smiley face database before this automatic email went out. Before, I was simply done with Quicken and the brand was no better or worse for it. Now, I’m actually an anti-fan who is passing on a negative experience to anyone else interested in hearing about it.