The State of the Auto Industry

Auto industry brett fingerhutThe decline of the American auto industry is something that’s fresh in the minds of many Americans.  It’s what turned eastern Michigan from a thriving industrial center into the buckle of the Rust Belt.  You can argue that Detroit is making a gradual comeback, but that’s in spite of, rather than because of, the auto industry.  While the European auto industry was going strong for a long time, I recently read an article that discussed how a plunge in sales of diesel cars in two of Europe’s biggest markets could drive down the value of used vehicles, and in turn hinder the lucrative financing plans that major carmakers use to sell millions of automobiles.

After Volkswagen’s emissions scandal, authorities across Europe are trying to raise taxes on diesel vehicles that are polluting more than previously thought, and in some cases restrict or even ban them in some cities.  This has decreased demand, with new diesel car registrations this past month dropping in both Germany and the UK, in turn weighing on used car prices.  In addition, the shift to cleaner vehicles doesn’t hint at any sort of recovery.

In Britain, where car sales hit a record high last year thanks to finance packages accounting for 90 percent of sales, this is particularly disconcerting.  Customers under “personal contract plans” pay a small deposit toward a new car, then make monthly payments for the next two to three years.  They can then choose to either buy the car outright or return it to be sold second-hand, then use the equity to take on a new car and start this cycle of monthly payments over again.  The finance company then determines how much they can borrow by determining how much they think the vehicle will be worth at the end of the payment period.  If it falls more than expected, then customers won’t have as much money to buy a new car, hurting demand for all new vehicles.

In recent years, the US has seen a sharp fall in residual values as demand decreases and automakers try to keep up by slashing prices.  Both leasing and finance contracts are priced through an assumption of stable residual values, and a similarly sharp fall across the Atlantic could trigger a spike in leasing prices that in turn could hurt demand and increase defaults.  A mere 5 percent cut in residual values in Europe could equal 1.6 billion Euros.  This would hit the “big three” German carmakers – Volkswagen, BMW and Daimler – the hardest.  Concern about how finance packages are sold has led to the UK’s Financial Conduct Authority to conduct a review due to a potential “lack of transparency, potential conflicts of interest and irresponsible lending”.


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Why Entrepreneurs Make Great Employees

An entrepreneur“Entrepreneur” isn’t what typically comes to mind when people are thinking of a great hire.  It almost feels counterintuitive to bring somebody into the workplace who works outside of a traditional “workplace”.  Nonetheless, some people with an “entrepreneurial” mindset might want to work with an established business.  Not only could established businesses be the right choice for some entrepreneurs, but entrepreneurs could be right for some established businesses!  I recently came across an article about the upsides of hiring an entrepreneur, and here’s what they had to say:

They take risks: Entrepreneurs are natural risk-takers; it comes with the territory.  While this isn’t always a good thing, it is a huge plus if you know how to use it to your advantage.  Risk-taking, while it does often include failure, can also yield a high return on investment, which could occur through increased market channels, new product lines or exciting investment opportunities.

They have a unique perspective: An entrepreneur can see potential opportunities that other people in a traditional “business” might not be able to.  Entrepreneurs are able to look beyond operational structures, policies, procedures and product lines.  They can envision something not yet in existence, and then bring that to life.  Even though not all of these ideas are (or can be) implemented, but it’s still important to foster the continuous growth of ideas.

They can solve problems: In addition to taking risks, many entrepreneurs are natural problem-solvers, working to resolve any problems that may arise from their risks.  Problem-solvers serve as natural moderators who are good at discussing controversial topics.  This can help your company through times of crisis by finding a middle ground in situations.

They don’t need handholding: If you need somebody who can take the initiative, then look no further than an entrepreneur.  A self-responsible employee is both coachable and intelligent, making them a valuable and lasting asset to your company.

They don’t quit: It’s easy to get discouraged by failure, but entrepreneurs are used to it.  Entrepreneurial employees, if they stay happy at your company, will stay for the long haul.  Be direct, honest and positive in your feedback to keep this employee happy.


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How Lego Saved Itself

Pile of LegosAs one of the most recognizable toys, Lego has been in operation for nearly 70 years.  From their base in Denmark, they’ve expanded to the entire world.  While they’re now extremely successful, there was a point in recent history that they were facing annihilation.

According to business analyst Michael McQueen, the rise and competition of video games and over-innovating were what almost killed Lego.  Innovation is great, but too much of anything can be a bad thing.  And Lego was over-innovating, with only six percent of their new ideas making any money.  For example, in the early 21st century Lego stuck their beak into the video game market, yet it came at a massive cost; Lego was stretched too thin, and the company began to over-produce without making much of a profit.  There was also a huge amount of manufacturing costs, with Lego toys expanding their number of colors from six to 50.

By 2004, the new Lego CEO saw the writing on the wall, and focused on a back-to-basics run, returning to Lego’s core products.  This shift ultimately saved the company’s life; by the end of 2005, the company rebounded from a $292 million loss the previous year to a pre-tax profit of $117 million.  Profitability has more than tripled, and just two years ago Lego overtook Mattel to become the world’s biggest toymaker.  Thanks to strong demand in Europe and Asia, Lego’s sales show no sign of stopping.  The company’s extensive networks of factories churn out an impressive 500 Lego bricks a second.

Such momentum, however, only comes from the fact that Lego was willing to adapt sensibly, as opposed to pursuing senseless over-innovation.  While innovation is necessary for success, you want to do it intelligently, and be ruthless with what you’re good at.

If you’d like to learn more, you can click here!

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Habits That Foster Success

Success victoryIf you want to be wealthy, you need to cultivate daily habits.  Maybe you’ll get lucky and you’ll become rich by accident, but most people need to commit to habitual wealth-building actions if they have any hope of building wealth for themselves.  Here are some tips for accomplishing that, based off an article I found online:

Evaluate your habits: A lot of our financial habits have been ingrained in us since childhood.  This can be a good thing if you grew up running a lawn mowing business every summer, but it will be a bad thing if you weren’t that responsible as a child.

Think critically: Hacking a life problem or changing your habits means distancing yourself from the issue and thinking about it critically.  Experts say the best way to unlearn a habit is to critically analyze its structure, and once you understand that you’ll be able to find something better that provides the same benefit.

Surround yourself with smart people: Your financial decisions will benefit more from intelligent feedback and informed perspectives, so surrounding yourself with smarter people is better than being around rich ones.

Save: You need to save and invest more than you spend if you want to become richer.  You can try prioritizing investing in your financial goals, then focus on bills, and spend the remainder.  This lets you keep your financial goals at the forefront of your cash flow.

Stay healthy: Creating wealth takes energy, and being out of shape takes away from energy.  With physical health increasingly correlated with other measures of well-being, the image of the “fat cat” businessman is a thing of the past.

Simplify your possessions: Don’t buy what you don’t need, and toss what isn’t necessary, helpful or inspiring.

Take risks and look forward: Look towards opportunity instead of focusing on damage control.

Wake up early: People who wake up early tend to be both more productive and proactive.  Take, for example, Tim Cook and Richard Branson, both of whom start theiSuccess victoryr workdays before 6am.


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Lessons From Seoul Taco

Korean tacoWhen he started “Seoul Taco”, David Choi had just $18,000 to his name.  Five years later, Seoul Taco turned into a $4.5 million Korean-Mexican fast-casual chain with four restaurants and a food truck.  How did he do it?  I came across an article that explored this, and here’s what it had to say:

Navigate your beginnings: Choi started Seoul Taco at the peak of recession.  He sold his car and cashed out his bank account before raising $18,000, then found a food truck for sale in Philadelphia for $40,000.  Even if this was more than twice Choi’s net worth, he was able to buy it at an affordable price, and then drove it from Philadelphia back to St Louis.

Sell what you know: Of Korean descent, Choi grew up eating Korean food prepared by his mother and grandmother.  He started making these recipes in taco form for his friends, who helped him raise $22,000.  The first day their food truck opened, there was a massive line, and they ran out of food.  Choi then used his experience in food service to learn how to replicate dishes at a fast pace.

Improvise: Starting out as a food truck, Choi needed to improvise as much as he could, whether that meant navigating the weather or running out of gas.  This allowed Seoul Taco to beta test its proof of concept.  Since overhead was so minimal, Choi was able to recoup his initial investment within a few months.

Grow wisely: If you want to grow, find leaders who can take ownership.  A great cook won’t necessarily be a great manager.  Everybody at Seoul Taco starts entry-level, so that they can learn all aspects of the business.

Be creative about setting up shop: All four of Seoul Taco’s brick-and-mortar locations took over spaces of former restaurants, making it easier to get favorable terms on a lease.  Since Seoul Taco started out in a truck, it’s been easier to adapt to various spaces; revenue increased by 52 percent in 2013, a number that went to 153 percent in 2014.


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The Keys of Corporate Innovation

The Keys of Corporate Innovation by Brett FingerhutBusinesses need to innovate if they want to learn how to survive.  Yet as these businesses grow larger and more comfortable, new ideas and agile processes don’t come so easily.  Enterprises need to leverage available assets both quickly and effectively if they have any hope of capitalizing on innovation opportunities.  This calls for senior management to look towards transformation, enabling the conditions that allow innovation to happen organically.  I recently came across an article with the five “crucial ingredients” for corporate innovation, and this is what they had to say:

Free innovation leaders from “typical” requirements: The miles of bureaucratic red tape all have their place in the corporate world, but for the innovative it just stifles progress.  Senior management should free innovation leaders from typical requirements so that they can form their own methodologies better suited to rapid idea implementation.

Reward risks, don’t punish mistakes: Innovation isn’t going to be perfect, and will require plenty of small steps and experimentation.  Even failed experiments offer insight, so large enterprises need to be tolerant of mistakes if they want to cultivate innovation.  Mistakes made during innovation aren’t actually failures, but important sources on improvement.

Support and protect from the inside: Ensure that innovation leaders are fearless and resilient, who know how to get things done and match the innovation program leader with an executive-level sponsor who can run interference and smooth things over when problems arise.

Unlock access to enterprise assets: Over the years, enterprises develop various connections and experience to their names, giving them a clear advantage over “startups”.  Yet established enterprise assets tend to be compartmentalized, and the clannishness of different departments can serve as a major obstacle to successful innovation.  Therefore, senior management should balance the needs of the asset owners and innovation leaders so that none hinder the other.

Pave the way to customers: Innovation leaders need to strive to get their first customers quickly, which will provide unparalleled value.  Yet access to the existing customers of an enterprise is often blocked by the sales team, who could be threatened by somebody else trying to sell their customers.  Here senior management can stress the importance of cooperation.

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Unemployment in Japan

Unemployment JapanEven though labor demand has been at the highest level in two decades, Japan’s unemployment rate has been steadily rising, going from 3.2% in January to 3.3% in February, despite expectations that it would remain unchanged.  However, analysts said that Japan could see a fall in unemployment in upcoming months.  Economist Marcel Thieliant has suggested that the unemployment rate could fall below 3% in the upcoming months, and official numbers from Japan showed that household spending rose 1.2% last month compared with the same month last year against expectations for a 1.5% decline.  Retail sales rose .5% in February from last year, lower than expectations for an increase of 1.7%.

Elsewhere, Hong Kong’s Hang Seng index ended .1% higher at 20,366.30, while the Shanghai Composite fell 1.3% to end at 2,919.83.  The one bright spot in the whole region was South Korea’s Kospi index, which finished up .6% at 1,994.91.

Further south in Australia, stocks hit near one-month lows as banking shares fell on continued investor concern around bad debt.  After opening lower after an extended Easter break, Sydney’s S&P/ASX 200 closed down 1.6% to 5,004.5.  The country’s largest lenders dragged on the index, as ANZ lost 3.4% and Westpac closed 3% lower.  Leading up to this Easter break, ANZ has said that its exposure to mining-related firms suffering from lower commodity prices would most likely lead to an increase in bad debts.  If you’d like to learn more, you can click here!


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Comparing Fiorina and Trump’s Careers

Donald Trump and Carly Fiorina

At the GOP debate last night, Donald Trump and Carly Fiorina came to blows over their respective professional careers.

Even if it’s still 2015, and the primaries don’t seem to be done any time soon, the 2016 Presidential Race has already revealed some huge personalities coming from both the left and right.  Yet more than any other recent Presidential campaign, the more unorthodox, anti-politician candidates seem to be gaining ground, most noticeably business executives Carly Fiorina and Donald Trump of the GOP.  Both candidates have boasted that their business careers make them strong presidential candidates, although both of them have gone through some rough patches in the corporate world.  After the two exchanged blows in the GOP debate last night, I came across an article that compared the business experience of the two candidates.

Once a secretary for a temp agency, Fiorina became the first female to run a Fortune 20 company, Hewlett-Packard.  Yet Trump has said that her management of HP led to the company’s “destruction”, pointing at mass layoffs.  Fiorina headed the company during its $19 billion acquisition of Compaq, a bet on computer hardware that caused shares to drop more than 55 percent and the loss of some 30,000 jobs.  When she was ousted in 2005, Fiorina received a severance package worth $20 million, which many were critical of.  Fiorina also rose within the ranks of telecom giant Lucent to become president in 1997.  The next year, Fortune Magazine called her the “Most Powerful Woman in Business”.  While sales were high during her tenure, the company ran up debts that contributed to Telecom’s 2001 crash.

Thanks in part to his father’s work before him, Trump has had a number of successful real estate ventures in such cities as Chicago and New York, although his performance has been far from perfect, as Fiorina was quick to point out last night.  While Trump himself has never filed for bankruptcy, his Trump Entertainment Resorts company has filed for bankruptcy four times, most recently in 2014.  Not surprisingly, Trump has tried distancing himself from the firm, even if he owned 28 percent of the company’s stock.

In the corporate world, failure helps teach us how to better perform our job in the future.  While both Fiorina and Trump have had experience with hardship and failure over the course of their professional careers, they’ve nonetheless emerged as noticeably successful professionals.  Yet running a business is ultimately not the same as running a country, and while both have had success as politicians so far, it remains to be seen if that success will stay with them, or if they have the ability to successfully run a country.

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YouTube Famous, Not Rich

Brett Fingerhut YouTube Famous
15 years ago, the phrase “Internet famous” was almost some sort of a joke, that nobody ever took seriously.  Yet with the rise of social media, such people have since become much more famous, gaining huge amounts of stardom and, in the case of some, actual dollars.  While nobody unironically used the phrase “YouTube famous” 10 or 15 years ago, well-known YouTube personalities can net in some huge amounts of cash.  About a month ago, there was an uproar after it was revealed the Felix Kjellberg, better known to the net as “PewDiePie”, earned $7.4 million from his YouTube channel last year.

While it might seem ridiculous to pay somebody who simply takes videos of himself playing video games such a huge amount, PewDiePie and his fellow YouTube stars don’t end up keeping the majority of the cash they get.  YouTube keeps a 45% cut of any ad revenue gathered by videos before taxes and your own operating and editing costs.  StatSheep, which generates statistical estimates about YouTube channels, estimates that based on traffic, PewDiePie actually earns an ongoing $3.5 million every four months, which adds up to about $10.5 million per year.  That’s an awful lot of money, but when you take out YouTube’s 45% cut, and taxes, that $10.5 million becomes $4 million.

While $4 million is a good amount of money, PewDiePie is definitely one of the more popular YouTube stars; not every star is that successful.  Michelle Phan, wildly popular on YouTube thanks to her makeup tutorials, is estimated to earn $378,000 a year, which after taxes and YouTube’s cut becomes $145,530.  Hundreds of other people have built up huge audiences on YouTube, yet none of them are nearly as successful as PewDiePie or Michelle Phan.  Olga Kay is one personality known for her self-deprecating monologues on female American life.  In the past three years, she’s earned $100,000 to $300,000 in each of the past three years.  Every week, she makes 20 videos, which altogether costs $500-$700 on editing costs.  If Kay were to earn $100,000 in a year, she would have to give YouTube a 45% cut, followed by a 30% cut to the IRS.  If you subtract editing costs, which equals to $25,000 over a year, Kay ends up netting a low $13,500.

If you’d like to learn more, click here!

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Oil Taking a Nosedive

Brett Fingerhut OilFew saw the oil crash coming, and few have been spared as it erased some $1.3 trillion, or the equivalent of Mexico’s annual GDP, in just over a year.  State pension funds and insurance companies are among those who have been hit hard.  Investment advisers, who manage the mutual funds and exchange-traded products that serve as staples of many retirement plans, had $1.8 trillion tied to energy stocks in June 2014.

The California Public Employees Retirement System (Calpers), a $303 billion fund that provides benefits to 1.72 million people, owned a $91.8 million piece of Pioneer Natural Resources Co. in June 2014.  At that time, Pioneer was a $33 billion company, and one of the biggest shale producers in Texas.  Yet today, Pioneer is worth just $19 billion, while Calpers’ stake has lost about $40 million in market value.  Since June 2014, the combined market capitalization of 157 energy companies listed in the MSCI World Energy Sector Index or the Bloomberg Intelligence North America Independent Explorers & Producers has lost some estimated $1.3 trillion.

If crude were to rebound, investors could end up making some of their money back.  However, values might not be able to recover nearly as quickly as they fell.  After the tech bubble burst in 2000 and erased $7 trillion from the NASDAQ Composite Index, it took nearly 15 years for the market to return to its pre-crash level.  According to a median estimate compiled by Bloomberg, oil will rise less than $20 through the first quarter of 2016 after losing more than half of its value in the previous year.


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