Interview with a family helped off the street by Compass Family Services
Interview with a family helped off the street by Compass Family Services
With a renewed national dialog about gun safety (I am adopting James Fallow’s nomenclature; let’s focus not on controlling guns, but on improving gun safety), I want to point out that stupidity and aggression are not constitutionally protected, and when you combine them with guns, bad things can happen. Things like:
No 2nd Amendment exegesis here. Just noting that people can do a lot of awful things, and when you put killing devices in their hands, those awful things can get even worse.
Of course, 60% of my examples took place in Florida, so maybe the answer is to have tougher gun laws in that state, but leave the rest of the country alone.
As tax reform is discussed in preparation for our upcoming leap off the fiscal cliff, among the topics has been corporate tax reform, in particular how American companies are taxed on their overseas income. As the system currently works, as long as US companies keep their cash offshore, they don’t have to pay US taxes. Once they bring that money back, it’s a flat 35% tax rate. So, not surprisingly, US companies with multinational operations have a lot of cash stashed overseas. Read all about it here, here, here and here.
The thing is, some of these companies have so much cash overseas, and so little here in the US, that they’re borrowing money to fund their operations here, or to fund dividends and stock buybacks. But they (the companies and the reporters covering this topic) are making it seem like the companies CAN’T bring the money back to America. Let’s be very clear: they CAN bring the money back, it will just cost them 35%.
For example, here is how the WSJ described it:
Each of these companies is grappling with a growing problem that comes from keeping Uncle Sam away from their foreign income: How to round up enough cash in the U.S. to cover items like dividends, share repurchases, debt repayments and pension contributions.
And here is how a CFO described it in the WSJ:
“You end up with the really peculiar result where you are borrowing money in the U.S. while you show cash on the balance sheet that is trapped overseas,” said Bruce Nolop, former chief financial officer of Pitney Bowes and E-Trade Financial and now a director at Marsh & McLennan. “It is a totally inefficient capital structure.”
Now I understand why companies are keeping their cash overseas: it’s their job to minimize taxes. And I can certainly see why they would rather borrow at historically low interest rates (like 5%) than pay a 35%. No complaints from me on either front. But for the companies to act like it’s just impossible for them to bring the cash home annoys me. They choose not to bring the cash home, for good reasons, but if they really wanted to they could. It’s like saying that you can’t get Justin Bieber to play at your daughter’s bat mitzvah. You can, but it’s going to cost you a boatload.
Come on, people! At least try to make your apps more than punch lines for blogs like mine. Just days after posting about the shakeout among mediocre consumer technology companies, I see a review of three apps designed to help you split the bill with friends/roommates: Billr, SplitWise and OpnTab. As regular readers know, I think that any company with a name like Billr is destined to fail. When it’s an app that does nothing you can’t do with a calculator (which is built into your phone), then its chances of success are even lower. In addition, despite the savage failure of Blippy, the app that shared with your social graph the details of all your purchases, here we have the launch of Mine, which shares with your social graph the details of all your purchases. Venture-backed technology is at its best when it solves big problems. Three apps that help you divide by seven are not solving problems at all.
The press is going crazy here in Silicon Valley with pieces about the coming shakeout in startups. The basic story is that over the past few years, the growth in angel investors led to a lot of mediocre ideas getting seed funding, and now that the froth is off the market, those mediocrities are finding it difficult to raise additional money from venture capitalists.
For the past few years we’ve had people calling themselves “investors,” who have no experience investing, swanning around the Valley, slinging money at people calling themselves “entrepreneurs” who have never held an actual job, let alone run a company.
My view is that this shouldn’t surprise anyone. The current social/mobile bubble has been obviously following the trajectory of the 1999-2000 dot.com bubble (see my prior posts on this topic here, here, here and here), and any rational observer could see how it was going to end. Just like a decade ago, the promise of quick riches drew hordes of young, aggressive tech wannabes who launched me-too companies, features posing as companies, or simply bad ideas. And just like a decade ago, huge amounts of capital desperate to be put to work meant that bad ideas got funded. But bad ideas become bad companies, and bad companies start to fail, and VCs don’t put more money into failing companies.
Ten years ago, the mantra was “let’s dot.com category X.” Now it’s “let’s take category X social. Or mobile. Or both.” But either way, good ideas with good execution get traction, and bad ideas don’t. PandoDaily looks at the travel space and explores it as a microcosm of everything that’s happening. Bad companies with bad names ( Dopplr, Tripl, Gtrot) are all going away, because they never should have existed.
This is really a standard Silicon Valley cycle; it’s just getting worse. There was once a time when VCs funded one hundred disk drive companies, which also ended poorly. Now it’s that the cycles are stronger and draw more wannabes from further away. More press and more billionaires mean more people coming to enter the lottery. I mean, now we have a reality TV show about good-looking young entrepreneurs (or perhaps I should say “entrepreneurs,” since the folks on that show are exactly the people Dan Lyons savaged). Back in the 1980’s nobody made a reality TV show about 45 year old engineers starting disk drive companies.
Here is an interesting take from economist Dean Baker, pointing out that while US immigration policies let in lots of low-skilled workers, driving blue collar wages down, our policies make it very difficult for skilled workers (doctors, lawyers, economists) to enter the US and work, keeping white collar wages high. Coincidence?
VentureBeat ran an interesting article today about how startups are learning that the “Dropbox Effect” is a myth. That is, corporate IT departments will not adopt a consumer-driven solution just because users like it. There are too many issues around security and support for CIOs to be swayed by consumer products, no matter how sexy they are.
In this article, CEOs from very hot Silicon Valley startups are talking about the need to add executives with enterprise experience, from established companies like IBM and EMC. My question is whether, if going after the enterprise requires traditional enterprise approaches — security, support, sales & marketing — does that mean that we’ll see a move away from the 25 year old entrepreneurs who are currently the rage in Silicon Valley? I don’t know; part of the reason young folks can make good entrepreneurs is that they are willing to break the product mold, and that can be just as valuable in the enterprise as in the consumer market. But as the VentureBeat article points out, and as our QWERTY keyboards remind us on a daily basis, the best products don’t always win. If the way to sign enterprise customers is to have an enterprise-ready organization, maybe entrepreneurs will need to have enterprise experience.