Topic: legal

Most people are aware of the concept of check kiting.  A person uses a number of banks or other institutions to in effect give himself a loan.  He rights a check on bank one and then deposits a check into his account at bank one drawn on bank two.  He then deposits a check in his account at bank two drawn on bank three.  If you can find institutions that are sufficiently slow at presenting the checks, you can give yourself a loan for several days until you get money to cover the checks.  You can also get yourself a criminal record, as check kiting is illegal.

The word kiting is also used to refer to domainers who use the five day trial period to acquire and use domain names.  Someone with good software can repeatedly register domain names without ever having to pay for them.  The domain names are referred to add farms and hopefully make the domainer $20-50 per year in add revenue.  It does not sound like much until you see that some domainers are grabbing thousands of domain names per day. 

This brings me to what I call business kiting.  In business kiting a purported "investor" gets to try out a business without really investing in it.  For example, an investor shows interest in a company and enters into a contract to invest in the company.  In exchange, the investor gets an equity stake.  The only problem is that the investor never really makes the investment.  The company, thinking that it now has funding, moves ahead with expansion, acquisition or other expenses.  It is often several months before the company's founders realize that the investor (who often offers to handle the finances) has not actually invested the money.  Bills go past due and into delinquency.  If the business does not look promising after a few months, the investor simply walks away and allows the business to go bankrupt.  The investor is out little, if any, money.

So where is the upside?  It is all owned by the investor.  The investor will often get a substantial stake in the business for his or her investment.  If the business does well, the investor may claim that the remainder of the investment was not needed - but will still retain their full ownership.  In the best case scenario, the investor will invest the promised money once it is sure that the business is going to take off (drastically changing the risk/reward calculation to the investor's advantage).   If other investors appear, the purported investor will often insist on taking a piece of the action or on selling out the equity stake that he should not have received in the first place.  The founders have little choice but to buy him out, as litigation with the investor will send other funding sources running.

 Regardless of the scenario, the founders of the business do not get what they have bargained for and the phony investor gets a windfall.  The phony investor shifts the risk to everyone else, but is front and center for the reward.

One key to avoiding business kiting is to make sure your agreements are reviewed by an attorney.  Yes, attorneys are expensive, but a thousand dollars today can save hundreds of thousands spent on buying out the phony investor.   One provision that should be seriously considered is a provision that clearly sets forth that receipt of the funding is a condition precedent to the investor receiving equity.   This may be staged if necessary (i.e. 3% ownership for each $10,000 received up to X percent).  This way the investor cannot lay claim to equity that he or she does not deserve.

Another possible provision is to cap the equity interest of the investor based on funds received prior to receipt of further funding commitments or other bench marks.  For example, if the investor was to invest $100,000 within six weeks for a 40 percent equity share and has only invested $20,000 by the end of the period, the founders can freeze the investor's interest at 8 percent.  This prevents an investor from watching to see if the company lands an important contract or otherwise shows signs of growth prior to investing the rest of the money.

Most of the "angels" in Utah are honest and will make the experience a win-win.  However, there are a few who want to "invest" without putting their money at risk.   Founders beware.

 

Just when you think that one of the presidential candidates has a good idea, they keep talking and ruin the momentary connection with reality.

Recently Mrs. Clinton proposed a summer holiday from the gasoline tax.  That sounds pretty reasonable.  Most Americans would appreciate a 18.4 cent drop in gasoline or a 24.4 cent drop in diesel prices.  Now the rub, Clinton has proposed that the oil companies will pay the tax out of their record profits.  Lets assume for a moment that Clinton can accomplish this legally - what would be the effect.

The average profit margin for the oil companies is currently running about 7 percent of revenues.  Clinton's plan would require the oil companies to pay the gas tax (5.5 percent of revenues).  For diesel it would be about 6 percent.  This leaves the oil companies with a profit rate of 1 to 1.5 percent.  Do you know many businesses who would agree to operate on that kind of profit margin.

Of course, the oil companies have an alternative.  India and China are hungry for oil.  Europe would be happy to get more.  If you sell the oil oversees, you do not have to pay the U.S. gas tax. 

Some day the American people are going to realize that if you keep punishing people for success, they will simply stop succeeding or they will take their ideas, businesses, etc. elsewhere.  Why do you think we have so many skilled engineers and scientists from India?  Could it be India's historically anti-business laws (which are rapidly changing and are drawing talent back home).  Why is business booming in Utah and other states that are business friendly and suffering in business unfriendly states like Michigan?   

Perhaps we should make ATLAS SHRUGGED mandatory reading for all politicians.

Most Utahans are attempting to stay as far away from the events in Eldorado, Texas as possible.  Members of the LDS church are concerned about being confused with their fundamentalist offshoots that still practice polygamy, were dresses that look like they are from the 1800s and live more in a compound than in a subdivision.  The events in Texas, however, should cause anyone who actually believes in the Constitution serious concern.

The fact that some members of the FLDS church practice a pretty sick form of polygamy is well known.  For years 50 year old men have been marrying 13 and 14 year old girls.  Unfortunately, Utah and Arizona have done an embarrassingly poor job of prosecuting these pedophiles.  The man who was allegedly at the center of the abuse is serving probation for marrying an underage girl in Arizona.  (Marrying may be a generous word since many of these girls have little choice in the matter.  Being traded may be a more appropriate term.  "Here, brother, you can have my 13 year old daughter and I get your 11 year old in a couple of years.")  This conduct is despicable and should be vigorously prosecuted.  No probation - just lots of jail time.  I personally think the prosecutions should extend to the mothers as well.  What kind of woman would allow a 50 year old pervert to have her 13 year old daughter and allow her sons to be kicked out of the community to keep a high female:male ratio.

All of that said, there is still this pesky thing we call a Constitution, which Presidents and judges are sworn to uphold.  The events in Texas show that the Constitution and the accompanying amendments are very fragile.   Police in Texas raided the FLDS compound based on an unverified telephone call from a supposed 16 year old girl who was being abused by her husband.  The only problem, the alleged abuser was in Arizona - serving probation for being a pervert - and it appears that the caller was in Colorado and is not a member of the group.  

That, however, has not stopped the Judge in Texas from taking more than 400 children away from their parents - likely a very traumatic event for children who have always been kept close to home.  They have warehoused them in a gym and three weeks later they have yet to provide reasonable foster care for them.  Of course, all of that overlooks that the State of Texas has made no showing that the children they took into custody are being abused.  (I recently heard an analysis that the teen pregnancy rate at the FLDS compound is 1/2 the teen pregnancy rate in Texas generally.)  Of course, if under age marriage is the issue, why did they take all of the boys and all of the girls below, say, 10?

The Fourth Amendment to the Constitution states:

    "The right of the people to be secure in their persons, houses, papers and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized."

Apparently the Judge in Texas hearing the matter skipped that part of law school.  The State of Texas conducted a raid based on bogus information.  As soon as it was learned that the search was based on a false police report, the children should have been released.  To date, the State of Texas has not put forward meaning full evidence that the children are being abused.  Rather, they are relying on "experts" who claim that the teachings of the FLDS church amount to emotional abuse.  Once you start down that road, you better look out.  There are "experts" that believe that any type of parenting amounts to abuse.   Did you abuse your children by giving them a curfew - by telling your daughter that she cannot sleep over at her boyfriends house - by forcing your children to do chores - or by being a global warming denier?

Ironically the Judge in Texas also skipped the day they taught the First Amendment to the Constitution as well.  The First Amendment, in addition to protecting free speech and religion, also protects your right "to petition the government for a redress of grievances."  The Judge in Texas has instructed attorneys for the FLDS and for the children not to file any more motions.  In other words, she is saying "Gee, I have made a huge mess by violating your Fourth Amendment rights, so now I will violate your First Amendment rights because I can't deal with the mess I made."

So why should you care?  Because the same Constitution that the Judge in Texas is violating is all that guarantees you your rights.   LDS people and many other religious minorities need only look to their histories to realize what can happen when the Constitution is ignored.   While you may think you are now well accepted in society - this should provide little comfort.  Jews were well accepted in Germany and Italy in the 1920s. 

Pastor Martin Neimoeller is credited with the following:

They came first for the Communists,
    and I didn't speak up because I wasn't a Communist.
Then they came for the Jews,
    and I didn't speak up because I wasn't a Jew.
Then they came for the trade unionists,
    and I didn't speak up because I wasn't a trade unionist.
Then they came for the Catholics,
    and I didn't speak up because I was a Protestant.
Then they came for me,
    and by that time no one was left to speak up.

And I didn't speak up because I am a ___________.

To the State of Texas - please vigorously prosecute those who abuse children, but do so without eviscerating the Constitution.  Its a old piece of paper I am kind of found of.

One of the most frightening things about the impending presidential election is how little the three major candidates still in the race seem to know about economics.  McCain acknowledges it is not his strong suit (at least he is honest).  Clinton and Obama seem to be in a race to see who can promise the most new government spending and the most socialistic policies.  Yes comrades, the USSR may have folded, but we are winning on the western front.

The latest in frightening statements is from Clinton.  She is now proposing to confiscate the "windfall" profits of the oil companies to fund new energy technologies.  (Drilling where we already know there is oil is too pedestrian and we would rather wait for 10 years for new technologies come on line).  Aside from the socialist implications of penalizing companies who are making a profit, Clinton's plan is horrible from an economic point of view.

Just as an aside, the "windfall" profit these evil corporations have made amount to a profit rate of about 7% - How dare they?  Out of that has to come dividends, reinvestment to find new sources of energy and making up for the years in which they had losses.  Few investors would consider a 7% profit to be a windfall.  The only reason that the gross amount is so high is that energy prices are high - something that Clinton will certainly escalate.

In case anyone missed out on business law 101, companies are not people.  Corporations, LLCs, etc. are fictional entities; creations of law which allow groups of people to function together.  Because they are fictional entities, corporations do not really pay taxes.  Oh yes, the check may have the company's name on it, but the money really came from one or more of the following sources: 

1)  The money may come from the shareholders of the company.  While some Americans have bought into the idea that shareholders are just part of the super rich who are stealing money from working people, the reality is that most American workers now have IRAs, 401Ks and mutual funds.  Any money the company does not pay in dividends is money that does not go into the IRAs, 401Ks or mutual funds of any of us who own stock directly or indirectly.  In other words, we have all paid an investment tax.  (This is in addition to the double taxation already paid on dividends.)

2)  The money can come from the company's employees.  This may mean lack of raises or even pay cuts.  It can also mean lost jobs if the company has to divert those resources to Clinton's success penalty.

3)  The most common source for companies to get the money to pay the success penalty is from consumers.  Yes, you and I will be paying the "windfall" profits tax by higher prices at the pump and utility bills.  The company has to pass the tax along or its shares will drop like a rock.

Of course, there is another option.  Companies can become ex-patriots.  Yes, numerous traditional U.S. companies have moved off shore to avoid the taxes which the U.S. levees on them.  The U.S. has one of the highest corporate tax rates in the world.  How do you compete with foreign corporations who do not  have to pay these taxes - they do not have to lower their returns to investors, lay off employees or charge customers higher prices.    A few years ago Stanley Tools looked to Bermuda.  Not for a vacation, but to reincorporate to save $30 Million a year in U.S. taxes.  A host of other companies have done the same thing.

The U.S. is driving off our good companies at the very time when they can least afford it.  European countries are increasingly becoming market oriented and U.S. tax laws make our companies less competitive.   When our economy tanks at least we can feel good that we stuck it to those even oil companies.  Well, at least until we learn:

we have met the enemy - and it is us.

It is not often that a high school orchestra gets to premier a piece of music by a well-known composer.  The musicians at Brighton High School got that honor earlier tonight when they got to perform BRIGHTON PROCESSIONAL, Op. 115, written for them by Dr. Crawford Gates.  The students did a wonderful job with the piece and Dr. Gates indicated that to have children of that age perform one of his pieces was a highlight of his career.  (Dr. Gates wrote one other piece for a high school orchestra - his own - but it was too advanced.) 

To have a commissioned work from a composer of Dr. Gates' reputation would normally cost quite a bit.  Dr. Gates, however, graciously did the work for a small payment to a charity of his choice - the Perpetual Education Fund of the Church of Jesus Christ of Latter-day Saints.

The students were also provided with the treat of performing for some of Utah's musical greats.  Not only was Dr. Gates in attendance, but Robert Cundick (former Tabernacle Organist and well known composer) and the widow of Maurice Abravanel were in the audience.   The students repaid the compliment by performing Dr. Gates' work beautifully.

Congratuations to Dr. Gates on his work, to Brighton's music guru Mr. Madsen and all the students of the Brighton Orchestra.

As a side note, one of the questions that continues to face public education is how to reward teachers that go above and beyond and inspire their students.  Five years ago Mr. Madsen came to Brighton High School.  He had 18 students in the orchestra.  Today, Brighton's Orchestra is 85 strong and receiving awards both in Utah and out of state.    

Most of us would expect that our employers would want us to be able to defend ourselves if our life was in danger.  Apparently Pizza Hut doesn't care.  Recently one of their pizza delivery men in Iowa was held up at gun point.  The driver, however, was legally carrying a concealed weapon and shot his assailant.  What was Pizza Hut's reaction?  They fired him.   Carrying a weapon was against company policy.

They were mighty gracious and gave him two months pay (what is 30 hrs/wk at minimum wage) and offered counseling.

It kind of makes you wonder why someone would want to be a pizza delivery man (or woman) for Pizza Hut.  You get minimum wage, burn miles on your own car and get to choose between defending yourself or getting fired.  Of course, it you get shot, you are on your own.  I am sure that is great for esprit de corps.

Nothing quite like a company policy that makes your employees easy targets.  

Engadget tells the story: “So last week Deutsche Telekom, owners of the global T-Mobile brand, sent Engadget a late birthday present: a hand-delivered letter direct from their German legal department requesting the prompt discontinuation of the use of the color magenta on Engadget Mobile. Yep, seriously.”

If you read the legalese, the company says it “holds trademark protection for this use of this color in connection with its products and services around the world.”

Since when could you copyright a color, even in connection with a product or service? Ridiculous — otherwise Apple could sue any computer-maker that used the color white (though white’s not really a color, so that opens another can of worms).

Atta way to exploit legal muscle, T-Mobile. Nice form. Really. This totally makes me want to stay with you instead of jumping to AT&T’s iPhone.

One of the keys to success in most businesses is maintaining credibility with your customers.  One of the most damaging things one can do is appear to be a hypocrite.  Poor service is particularly likely to incur the wrath of customers if you criticize the service of your competitors in your advertising.

I think this is one of the reason people do not like politicians.  They love to point out the warts on their opponents, but forget the warts of their own.  Remember a year or two ago when "culture of corruption" was the buzz word repeatedly over and over by Nancy Pelosi and her friends.  They were happy to point out the questionable emails of Representative Foley and a number of lobbying and bribery scandals that involved Republicans.

Ms. Pelosi has suddenly gone silent now that one Democratic Governor has resigned after blowing $80K plus on prostitutes.  His replacement has admitted to mulitple affairs.  The Democratic mayor of Detroit is under indictment for perjury and a Louisiana Rep. has a freezer full of $100,000 in cash (aparently anticipating a banking crisis).  Yes, the culture of corruption continues - Act II simply has new actors from the other party.  How can Ms. Pelosi have any credibility when she does not condemn the same conduct by Democrats that she condemned when committed by Republicans.  (There are several Republicans who likewise rationalize the conduct of their cohorts while condemning Democrats).

The lesson for business - say what you mean and mean what you say.  The lesson for politics - term limits.

When you are looking for a Job, Jason is the sage.  Thus, I normally leave things to the experts.  However, since I have been off topic a lot lately, I might as well add a few thoughts about job hunting from an employer's perspective.  Over the last couple of weeks, we have been looking for a new legal secretary and a new law clerk.  After wading through 50+ resumes and a bunch of interviews, here are a few of my thoughts:

1.  Do not just email your resume -
I am a little old fashioned and like to see paper resumes.  However, I have come to realize that the hours I spent sending resumes in law school have given way to the convenience of sending hundreds of resumes with a few clicks of the mouse.  The convenience, however, leads some to get a little sloppy.  Not sending a cover letter is bad form and may lead to a resume being deleted before being read.

A cover letter is also necessary if one is applying for a position which requires communication skills (about 90% of all jobs).  The cover letter provides an opportunity to demonstrate that you can communicate in writing.    Resumes are usually little more than bullet points and do not let an employer know how well a person can write.  A short cover letter - 6 to 8 sentences - at least gives an employer some idea.  I have had several situations in which a well written cover letter got an interview for someone who had relatively little on their resume.  

ps.  A one liner does not count as a cover letter.  I received one recently where the entire cover letter was "I need $36,000 a year".   I deleted the email because the person showed poor form.  Translated, the sentence said - "I can't be bothered to write a letter or inquire about the pay rate - so call me if this pays enough." 

Money is an awkward for everyone in job hunting.  I think it would be best to place salary requirements at the end of the resume if you want to state them.  A salary demand higher than I was planning on paying may not disqualify a candidate if the resume is interesting.  Likewise, I would have no problem with a person who has provided a well written paragraph or two adding "I would like to discuss the possibility of working with your company.  However, my salary requirements would be at least $36,000. "   It lets me know that the person understand business etiquette and will be able deal with clients without offending them.

2.  Proof Read
Always take time to proof read both the resume and the cover letter.  Listing attention to detail as a skill does not cut it if there are typos galore.  Have a friend proof read it too.

3.  Align your objectives with the job
I have never been a big fan of objective statements on resumes.  Most of them sound a little cliché.  "I want a job where I am valued and can use my skills to benefit the company."   Hopefully, that is everyone's objective.  What will be a negative, however, is when the objective on the resume does not match the job.  If the applicant's goal is to be in management or sales - why is he applying for a legal secretary position?  Make sure that your objective statement and the job are consistent.

4.  Be prepared
One of the best things is to be prepared.  An applicant should always bring extra copies of her resume and other things that might be of interest to the employer.  If she is interviewing with a group of people, this ensures that everyone has one.  If the last person she interviewed with forgot to pass your resume on to the next person, voilà - here it is.  Looking prepared is always a plus.

Last week I interviewed law students at BYU.  Due to a rush project the night before I did not get the resumes printed off and was using my laptop to review them during the interviews.  Each the BYU students I interviewed had a spare resume and offered it when they saw me looking at my computer.   It left me with the idea that each would be well prepared if asked to work for us this summer.

5.  Be a little formal
We have become very casual country.  If in doubt, error on the side of formality.  Being a little over-dressed is better than being under-dressed.  Don't walk in chewing gum.  Avoid using short names - or first names for that matter - unless you have been properly introduced.  Some people like formality and it is a little embarrassing when you call Edward "Ed" when he goes by Edward. 

When the economy was on steroids bad job hunting manners may not cause much harm.  However, with the economy cooling down, it is unwise to do anything that might lead to being overlooked.

There are some things I just do not understand.  I know that if I had an affair, my clothes would be on the front door step by the time I got home.  So why is it that so many political wives seem unfazed when their husbands get caught cheating?  Hillary Clinton seemed to get over her husband's extra-presidential activities pretty quickly.   Throughout Pres. Clinton's campaigns Hillary denied the allegations of her husbands philandering.  You would think that the revelations that he continued doing so while in the White House would finally be enough.   Apparently, the lust for power is more important than the integrity of one's marriage.

Now Mr. Ethics himself - Gov. Elliot Spitzer of New York has his wife standing dutifully beside him as he admits to indiscretions.  The man who went after prostitution rings as a prosecutor in New York is paying high price call girls to travel to Washington, D.C. for a rendezvous.  $4300 for two hours.  And you thought attorneys were expensive.  It may be even more expensive as Gov. Spitzer may be indicted for violating federal law on interstate prostitution rings.

The thing I do not get is why the wives of these guys put up with it.  It is one thing for a women to deal with a husband who as been unfaithful.  I can understand a woman putting up with it if she believes she has no alternatives and cannot support herself.  It is another to go through it where the entire country knows that your husband has repeatedly cheated on you - especially if you are well to do and can easily support yourself.   It makes you wonder if the perks of being the wife of someone who is powerful is more important than your self respect.

I guess there is no such thing as shame anymore.

One of the biggest problems we have in our political discourse is that there are many people who simply have no interest in hearing what other people have to say.  Rather, they will take any sentence out of context and run with it.  It happens at both ends of the political spectrum.  Sometimes it even gets picked up by the mainstream media.

A recent example was a discussion that radio talk show host Glenn Beck.  During an intereview with conservative evangelical Rev. John Hagee, Glenn Beck mentioned that there are some people who think Clinton is the AntiChrist, and asked Rev. Hagee if Obama was the AntiChrist.  The question is clearly asked in jest - as Beck is laughing.  Ironically, at the end of the discussion, Beck predicts that some of the left will actually take his question seriously and claim that Beck believes OBama is the AntiChrist.  (Anyone watching or hearing the exchange for what it was understand that Beck was actually making fun of such views).

A bunch of liberal bloggers and even some of the mainstream media jumped on the story, going on how Beck believes Obama is the AntiChrist.  Such conduct shows exactly why our political discourse is breaking down.  There are groups of people on both sides of the political isle who are so bent on getting the otherside that they will do anythng - including deliberating taking items out of context and misreprenting facts to make the other side look bad.  Such people include those who swear that George Bush lied to get us into the was in Iraq, but conveniently forget that Bill Clinton, Hillary Clinton and a host of other democrats made the exact same allegations as Bush.  Was Clinton lying?  Was Kerry lying?  Of course not - only Bush.

I am no fan of Bush.  He has done some things well and he has really messed up others.  However, it is disingenuous to assert that he was lying but give a free pass to those of the opposite party who said the exact same things.

It is really getting to the point where you cannot believe anything without going to the original source. The public should reject dishonest reporting - whether by bloggers or the media - on both sides of the debate.  Once people have been shown to be dishonest, they should be ignored.  Unfortunately, now days they are exalted and given speaking engagements, their own shows, etc. 

It seems like the major airlines are either making tons of money or losing it just as fast.  While some issues like jet fuel and labor costs may have something to do with it, another could be the bizarre way that the airlines get people from point A to point B. 

Recently I was trying to book a ticket from San Jose, CA to Salt Lake City, UT.  They are not that far apart and the flight down is direct.   My first three options were San Jose to L.A. to SLC.  No too bad, but a little out of the way.  Option 2 - San Jose to L.A. to Oakland to Salt Lake.  Why would I fly to LA only to come back to an airport 50 miles from where I started?  I would leave at 7am CA time and get in at 7pm UT time - 13 hours of bliss on flights that had no food service.  Option 3 was just as bad - San Jose - to L.A. - to San Francisco - to Salt Lake - another 13 hour escapade.  Option 5 - SJ to LA to Boise to Salt Lake at least got me into the mountain time zone in less than 6 hours and resulted in a trip of less than 12.

Maybe renting a car would have been a better idea.  I could make it home in less than 12 hours and I would be able to get something edible along the way.  Besides, they wouldn't search me every time I got in the car.  A mediocre meal would cost  less than $12, and I wouldn't have to share three small seats with two other guys who are both bigger than I am.

American are looking for change.  All of the polls seem to indicate that Americans think that our country is headed in the wrong direction.  President Bush has low approval ratings.  Those of Congress are even lower.   Obama is promoting "change".  Clinton is advocating change.  So is McCain.  So why are we all so hip on change?

The French are an odd lot.  They live in a beautiful country.  They have great food and one of the highest standards of living in Europe.  There are few countries in the world who have things better.   Ironically, they are one of the most discontented peoples in Europe.  They are unhappy with their standard of living, their politics and just about everything of importance.

Americans actually have life pretty good.  We have an unemployment rate below 5% (theoretical full employment).  Even industrial states which have been "hit hard" like Ohio (6%) and Michigan (below 8%) have unemployment rates which are below those of many countries in Europe.  Yet, the polls show that most American think that the economy is in bad shape.  While the greed and lack of common sense have created problems in the housing market, there is nothing which indicates that the Great Depression part II is right around the corner.

America remains a land of opportunity where even a poor person with moderate education can become wealthy.   Poor Americans on average live in larger apartments than the European middle class.  While the middle class is shrinking, the bottom tier is not getting larger.  Rather, more Americans are moving into the upper class.  Even well educated people from around the world are trying to get into the U.S.

We live in a country that has relatively little corruption.  Our biggest burden is often choosing between too many options.

Overall, we have things pretty good.   Of course some things can be changed for the better.  However, it is important in the process of trying to change things that need to be improved that we do not ruin the things that are going well.  Often government passes laws with good intentions but bad results.  In the recession of the early 1970s, the Nixon administration implemented price controls and other laws designed to help the public.  The results were just the opposite.  

We should be careful as we call for change that we understand just what the change entails.  The next time you want to hop on the change bandwagon, ask yourself?   Are things really that bad?  Or am I simply being French?   

Thanks to Good Morning America, we now know that the popular Airborne cold remedy is nothing more than an “extraordinarily expensive Vitamin C delivery system.” A placebo.

The Alka-Seltzer-like mixture originally claimed to be the “miracle cold buster” that could “get rid of most colds in 1 hour.” The company has since watered down those claims, obviously to avoid further litigation.

(more…)

In our office we give a hard time to anyone that has bad computer chi.  You know, when everything seems to be going wrong with every computer a person touches.  Right now I am waiting for a call back from Dell so I can get a new motherboard for my laptop.   I am currently get 10 times the speed over my wireless broadband card as I am through ethernet.  The speakers also are not working.  Due to scheduling errors, Dell's rep showed up on the one day I had the laptop at our Orem office last week.  When we called to reschedule, it took an hour to again convince Dell that the motherboard was bad.  (This was after more than 2 hours the first time.)

As bad as my computer chi has been lately, my auto chi has been even worse.  Two weeks ago my engine seize up in my convertible.  Unbeknownst to me, the 2.7l engine in Chryslers apparently have a problem that causes failure of the oil pump - and thus the engine.  It would have been nice for Chrysler to have informed its customers of a problem it has apparently known about for several years.  I can get partial compensation for the new engine if I can produce every oil change receipt for the last 7 years.  If you have a Chrysler with a 2.7l  try changing the oil weekly if you want it to last past 75K.

Bateman family auto chi continued on the decline when a few days later a new driver took his dad's new car and ran a red light, thus arranging a sudden meeting with my wife's Yukon.  He lost.  However, it did mess up my wife's bumper and lights.  

But bad chi had just begun.  On Monday an unlicensed driver managed to back into my wifes car while it was parked at our children's elementary school.  The thought of a 15 year old driving in an elementary school parking lot at the end of the school day is pretty terrifying.   I could not believe our luck, as my wife's car now has boo boos on both ends.  

A few hours later I was sitting at a red light.  How would I get my wife's car fixed, since my convertible would be in the shop for the next two weeks.  Yes, I have my new car but - what was that - a pick up truck rear-ending me.   So yes, I have three cars.  All damaged.  What else could go wrong.  Needless to say, I park my new car with the front end in.  I hope the concrete wall doesn't collapse. 

     

Over the last decade Utah and its various cities have ranked highly in numerous awards.  Sandy was recently named the 23rd best place to live.  Last year Utah was ranked as the nation's most dynamic economy.  The list of recent awards is has to make working in the Governor's Office of Economic Development (GOED) a pretty easy job.

Well Salt Lake City has recently received a slew of awards from Forbes Magazine - a few of which we might not want.  In a special report called "America's Most Sinful Cities" Salt Lake City ranks high.  Based on the seven deadly sins, Salt Lake gets:

1st Place - Vanity (based on the number of plastic surgeons per capita)

5th Place - Lust (based on over-the-counter contraceptive usage)

7th Place - Jealousy (based on property crime)

We could take the mature approach and simply blame all of this on the California transplants that have invaded our state, or on the culmination of Rocky Anderson's reign.  On the bright side - at least we are better looking than everyone else.

Last week I received the email from Dennis Wood at vSpring that I had been nominated for the vSpring 100.  While my firm has always tried to be entrepreneurial and most of our clientèle are entrepreneurs, I was surprised because I had never thought of a lawyer being nominated.  The list is impressive.  Thank you to whoever nominated me.  It is an honor to be listed among the semi-finalists. 

The vSpring 100 provides a good reference of those who are likely to lead technology in the next decade.  Because Utah's economy is increasingly tech oriented, the list will be valuable both to the individuals who are honored and to the state as a whole.  I would encourage all of the nominees to look over the list and participate.

I guess it is never safe to have my blog open when the presidential candidates are giving speeches.  Well, Hillary Clinton has just advocated that anyone working full time be guaranteed at least $9.50 per hour.  (I presume this is in addition to the employer providing full benefits).  While I am all for people being paid well, such guarantees can be counter-productive and actually harm younger workers.

If a high school drop out or a new high school graduate goes out to get a job, what skills do they have to create at least $15 per hour in value to a company? ($9.50 per hour plus taxes and benefits).  Some may have those skills, but many won't.  In fact, most people earning minimum wage are newer employees and receive raises within six months.  Allowing a lower wage allows employers to hire low skilled workers and train them without a substantial loss.  As their value increases, so does the wage.  Otherwise, they go elsewhere.  In Basic Economics, Thomas Sowell makes a compelling case that living wage laws actual create higher unemployment rates in the very people who such laws are intended to help.   

Anyone who does not believe the negative impact of high costs for low skilled workers should look at France.  In France the taxes paid on employees are very high, making the labor cost of hiring new people high, even if the actual wage paid is modest.  Additionally, it is difficult to fire under-performing employees.  Thus, French companies avoid hiring until they absolutely have to.  The result - an unemployment rate which is three times that in Utah.  Most of the unemployed are young workers - with the unemployment rate exceeding 20 percent in some areas.

The government finally realized that the only way to get companies to hire was to give them the ability to fire young employees for the first two years.  The result - riots in the streets.  I guess the young people in France would rather be unemployed than face the risk of being fired.

The best way to encourage high wages is to create competition for employees.  The only way to create competition for employees is to have a vibrant economy - something that mandating high wages for all full time employees (regardless of experience) is likely to prevent.

P.S.  I have a couple more copies of Basic Economics on CD.  If you would like to listen, I will send them to you on the condition that you pass them on.

Recently the U.S. Court of Appeals for the Federal Circuit upheld a $140 Million verdict against Microsoft for patent infringement.  So what's new?  Microsoft has a long string of patent infringement lawsuits, that often end up with Microsoft purchasing the plaintiff.  The irony in this case is that Microsoft was apparently violating intellectual property rights of another to protect its own intellectual property rights.

Z4 Technologies, Inc. sued Micosoft and Autodesk for infringing U.S. Patent Nos. 6044471 and 6785825.  The two patents cover methods for preventing software piracy by monitoring registration information.  Z4 claimed that Microsoft's Office infringed the patents in its attempt to prevent unauthorized copying of the software.

A jury in the Eastern District of Texas found Microsoft liable and awarded $115 Million.  The Judge tacked on an additional $25 Million for alleged litigation misconduct on the part of Microsoft.  On appeal, Microsoft argued that is did not infringe because a computer could not be a "user" as defined by the patents' claims.  It also argued that Z4's patents were invalid.  The Court of Appeals for the Federal Circuit was apparently unimpressed with the arguments and upheld the award.

So next time you want to prevent others from violating your intellectual property rights, make sure you are respecting the intellectual property rights of others.

Once again the media is desparate to have Romney drop out of the race.  While Romney did not do quite as well as expected.  As of the writing of this Romney picked up six states.  McCain picked up nine and Huckabee has five.  (Interestingly Huckabee claims that it is a two man race - and he is in it).  Someone needs to tell him that Romney has won more states and has more delegates.   In fact, but for some quick thinking by McCain's people in West Virginia, Romney would have won nearly twice as many states on Super Tuesday than Huckabee.  Interestingly, only one of the media suggested that Huckabee ought to drop out.  In fact, a look as the numbers suggests that Huckabee would have a hard time winning anywhere outside the bible belt.

All night long I heard reports talk about what a disappointment the night was for Romney, even as the partial results from most of the Western states showed Romney with good leads.  When Romney did win a couple, the media would talk about how they were only small states.  (For some reason New Hampshire was not small when McCain won it). 

One bizarre thing was how differently the different states tabulate their delegates.  Guliani apparently convinced most of the Northeastern states to have winner take all primaries.  This helped McCain get a large number of delegates in a few states where McCain won by a small margin, while McCain was able to pick up delegates in numerous other states even where Romney or Huckabee won by substantial margins.  I do not really care if it is a winner take all or a proportional system.  However, I think everyone ought to play by the same rules.  


Finally, the message from Utah appears to be that we want change.  Both Romney and Obama - the two who apparently have a real desire to change the way things are done in Washington - came out big winners. 
 

A little more than a week ago I wrote about When Pandering Takes the Place of Basic Economics.  Sen. Clinton has indicated that if she gets elected she will place a five year moratorium on interest rates.  Does she have any economic advisers?  I thought maybe this was a spur of the moment statement from which she would quickly retreat.  Not so.  Sen. Clinton again proposed the "solution" for the mortgage crisis. 

Tonight I read about how the credit crisis that is now upon us.  Credit card companies are requiring a higher credit score to get a card.  They are raising fees and tightening policies for repayment if there is any indication that the borrower may be in trouble.   (A big change from a year ago when even your dog might get a VISA).   Small businesses are having trouble borrowing to finance operations.  So lending institutions are raising the bar - even though the Federal Reserve has been lowering interest rates.

Imaging what will happen if banks are forced to lend at artificially low rates.  We will quickly return to the days where only people with high credit scores, lots of collateral and 20 percent down will be able to get a loan.  In otherwords, a large percentage of potential home buyers will be out of the market.  That means fewer houses will get sold, which means more foreclosures, etc., as houses sit on the market.

I am sure that Sen. Clinton means well and it is sad to see people losing their houses.  However, governmental quick-fixes usually end up prolonging the agony and end up hurting others.

Likewise, Sen. Clinton claimed that she can provide universal health care for $100 Billion annually.  Does anyone really believe that you can cover every man, woman and child in the United States for less than $300 per person per year?  I guess its possible, you just don't get to see a doctor, have any tests or get any medicine.  Sen Clinton has even suggested that her program will garnish the wages of those who elect not to participate.  I remember reading this guy named Lenin who suggested the whole - we will compel you to join the workers Utopia - thing.  Last I heard it did not turn out so well.
 

Last week I commented on the excellent post about RipOff Report done by Sara Bird.  She had a great follow-up this week.  RipOff Report's attorney tries to explain how the headlines allegedly written by its users are so packed with keywords and why the posts could not have been created by RipOff Report's employees.  The explanations for the keyword laden headlines - 1) its users are SEO experts, 2) thats how people write then they are mad, and 3) its users are uneducated and just write like that. Does anyone find these arguments hard to believe and/or inconsistent?

ROR's attorney also argues that the posts could not have been written by RipOff Report employees because the IP addresses don't match.   Seems a little lame coming from an attorney who works for an Internet based company.  There are times when some attorneys make you want to deny your profession.  Fortunately others like Sara Bird make up for them.  I recommend Sara's follow-up.

Yesterday the Deseret MORNING News editorial board criticized a legislative proposal to not grant illegal aliens instate tuition.  Rather than attacking the merits of the proposal, however, the DesNews editorial board stooped to attacks on  Rep. Donnelson, the sponsor.  It is the sign of a poor journalist (or anyone for that matter) who cannot make their argument without personal attacks against the opponent.  I have written a letter to the editor, but I doubt it will get published.  Thus, I am repeating it here.

        To the editor:

Once again the Deseret News editorial board has come to defend the right of “undocumented students” (“illegal aliens” for the rest of us) to get instate tuition. Those who disagree with them lack “compassion,” are “wrong-headed” and have “small minds.” (Nice personal attacks to discredit Rep. Donnelson). These students ended up here “through no choice of their own.”

< p>I know numerous students who grew up in Utah but spent their high school years in other states "through no fault of their own." Why should they have to pay out of state tuition while people who are violating our laws get their education subsidized by the tax payers? Why doesn't’t the Deseret News editorial board show compassion for them? How about the numerous other American citizens who are paying out of state tuition to attend Utah colleges and universities? Could it be that their parents are unwilling to work for five dollars per hour and aren’t a readily labor pool for certain unethical businesses?

Those of you who know me know that I have not been a big Romney guy.  However, I am getting more and more amused/frustrated with the mainstream media.  It seems that they are desperate to minimize Romney's success.  For example, Romney has won more states, more delegates and more votes than McCain.  Yet every television station I have seen claims McCain to be the front runner.

Today an interesting thing happened.  One of the television stations identified newspapers that had endorsed McCain.  Lets see, the Philadelphia Inquirer, the St. Petersburg Times and the New York Times are all endorsing McCain either outright or for the Republican nomination.   The Philadelphia Inquirer endorsed - John Kerry.  So did the St. Petersburg Times.  New York Times?  Can anyone guess?

So why are the television stations and newspapers backing McCain?  Could it be that McCain sponsored a bill that essentially gives illegal aliens amnesty?  Could it be that he frequently votes against tax cuts?  Or could it be that McCain sponsored the bill that gave new life to groups such as moveon.org, while robbing many groups of their First Amendment right to challenge candidates? 

I am still unsure that Romney will really implement conservative economic policies.  Rather than passing laws that try to protect jobs in the U.S., will he change the tax laws so businesses no longer find it necessary to move overseas to remain economically competitive?  Will he actually attempt to control illegal immigration, as most Americans want?  Will he control spending on entitlements so that we do not continue to build an economic train wreck for our children?  I do not know.  But I am pretty sure McCain will not.

Anyone who likes old mob movies understands the protection racket.  Pay protection and you don't get hurt.  Don't pay and bad things start to happen.

On Monday Sarah Bird, general counsel at SEOMOZ wrote a great blog entitled The Anatomy of a RipOff Report Lawsuit.  I highly recommend giving the article a read.  It is short on legalese and raises some possible defenses to what some believe is SEO driven extortion.

A friend shared with me a fun sight. alexa.com allows you to put in a website and see how it it ranks (at least according to Alexa users).  My blog ranked 3,623,109.  My firm's site ranked 4,189,207.

Alexa is an quick way to see how you compare with your competitors.  I plugged in the sites of several of my competitors.  One ranked 2,389,319.  Another ranked just over 10 millionth.  Three others did not even make the list.

Some of our local bloggers have done well.  Jordy's mybloglog.com came in at an impressive 790.  connectblogs.com came in at 609,983.  Blake Snow comes in at 815,989.  Chris Knudsen  came in at 734,442 and  Paul Allen comes in at 229,749. 

Its fun to look up your favorite sites and see how they rank.

One of the most frightening things about our country is that many of our politicians either do not understand basic economics or they realize that they can get votes by making promises that are economic disasters waiting to happen.  It occurs on both sides of the political isle.

Tonight in the debate Hillary Clinton said she was going to solve the current housing crisis by 1) a ban on foreclosures for three months; and 2) freezing interest rates on home loans for the next five years.

First, why is the Federal government interfering with private mortgage agreements.  It sounds nice to stop foreclosures.  However, as soon as the government intervenes, the risk for banks goes up.  (If you make a bad loan, it will take nine months before you can sell the property and get some of your money back).  There is pretty good evidence that banks will stop lending.  The current problem is a credit crunch.  Banks that made subprime loans are having difficultly placing commercial paper - making it hard for the banks to lend more money. Giving banks a reason to further restrict credit will only exacerbate the problem.

Second, freezing interest rates for home loans will further the damage.  If a bank can only make home loans at a government set rate, the bank will simply make loans in other areas where it can get the market rate for loans.  That means less money for home mortgages.  With less money available for home loans, it becomes harder to sell your house because potential home owners have a hard time getting a loan.   This will ultimately lead to even more foreclosures and a further weakening of the housing market.

Finally, some politicians in each party seem intent on blaming the banks that made the subprime loans for taking advantage of poor people.  Of course, anyone who understands bankings understand that banks do not want foreclosures.  They lose money - especially when the home owner has no other assets.  The banks made stupid loans hoping to get high interest rates.  But what about the home owners who bought homes that they clearly could not afford, hoping to ride the rise in property values?  When the economy slows down and they cannot make their payments, it is the bank's fault for lending them money. 

While the subprime crisis is of concern, of greater concern is the government interfering with the market.   The proposed fixes will contract the credit supply, will make it harder to sell homes prior to foreclosure, and will negatively effect real estate for years to come.  Its simply basic economics.

Over the past two weeks, I have been surprised by the political talk shows.  I have not been a Romney backer to date.  I have been surprised, however, the extent to which large parts of the media seem like they are trying to ignore Romney's successes.  Today Romney won Nevada by a wide margin (51%) and John McCain won Sourth Carolina by a narrower margin (33%).

To date Romney has the best record.  Three firsts, two seconds and a fourth.  McCain has two firsts, a second and two thirds.   Romney has more delegates (78) than McCain (38) and Huckabee (29) combined.    Normally one would consider the person who had won the most states and had the most delegates to be the front runner.  Most of the major media, however, is treating McCain as the front runner.  When they do mention Romney's wins, it is almost always preceded by some statement that the other candidates had not really contested those states.  For the last two weeks many in the media have repeatedly discussed how Romney will need to drop out if he did not win.  Unfortunately for them, he has won three of the last four.

Why candidates would ignore Nevada - the fastest growing state in the nation - is a big question.  Nevada is a state that could very well go either way in November.  It also has more delegates than South Carolina.  Somehow, however, Romney's overwhelming victory in Nevada is belittled while McCain's victory in South Carolina makes him the front runner.

The position is also odd in that in that all of the polls show that in the last two weeks there has been a marked shift in what is important to Republican (and Democratic) voters find important.  The economy is now the number one issue for both parties.

With the economy taking center stage, Romney would seem to be the canidate for the moment.  Whether you like or dislike Romney, you have to acknowledge that he knows alot about business and how to fix financial messes.  McCain in contrast, was one of only two Republicans to vote against the Bush tax cuts.  Now, all of the sudden, McCain is talking about tax cuts and smaller government.  The question is will voters ignore his record for his new found retoric.

Whenever the media seemed determined to brush a candidate out the race, it makes me wonder why.  Maybe I will have to vote for Romney, not that my vote in Utah will have much acces.
The media's apparent effort to

Twenty two years ago, Dave McNally, Phill McStots and Dean Constantine started ZEVEX.  The company originally made sensors for other companies.  (If you every want to hear a great entrepreneurial war story - ask Dave about how they landed their first contract).   ZEVEX soon branched into its own medical products and released one of the first ambulatory enteral feeding pumps which allowed children and adults with certain gastrointestinal disorders to lead more normal lives.  ZEVEX now makes a number of medical product lines, all of which make patient's lives better.

Yesterday was Dave McNally's last day at ZEVEX.  Last spring ZEVEX was purchased by MOOG.  At the time, Dave was serving as CEO and Phill was CFO.  Not only were both top notch in their positions, they were also two of the most enjoyable people to work with that you will ever find running a company.

In addition to being the CEO, Dave s also an engineer and is an inventor on 12 of ZEVEX's patents.  He is also a named inventor on several pending applications

After a well deserved vacation, Dave will face the question of what to do next.  Hopefully he will follow the example of many of Utah's top entrepreneurs and reinvest his wealth of knowledge into new technology ventures. 

Several months ago I attended a discussion for entrepreneurs.  One speaker, who was an experienced entrepreneur, noted that successful startups often depend on the ability to build the company with other peoples money.  He suggested getting your attorneys, accountants, and other service providers and suppliers to do work now for the promise of payment later.

This has become a common theme with many entrepreneurs.  If done properly, it can help a quickly growing business maintain cash and avoid imploding.  If it is done wrong, however, it can cripple the business and lead to an early exit.  Few purchasers or investors will be impressed if the business is being sued by its suppliers or if it learns that the business has negative relationships with them.  You would surprised how often an investor knows the accountant, attorneys, or other suppliers to the business.  If the investor asks about the company, the last think the entrepreneur wants is a reply like "Oh, those deadbeats."

If you are going to leverage your suppliers - either service providers or suppliers of goods, here are seven important rules.

1.  Be upfront.  Many suppliers are willing to work with cash starved startups as long as it is clear what the terms are going to be.   Is the company going to pay in 90 days instead of 30?  Is the company paying costs, but getting discounted fees?   Whatever the arrangement, make sure both sides know.  If the company unilaterally decides to string out its providers, it should not be surprised if the providers make them ex-clients.   A company may finally get the big contract only to find its providers unwilling to deal with them, or requiring cash in advance.

2.  Be a low maintenance client.   Many entrepreneurs are looking for a deal on services.  The entrepreneur may get a good deal if the work can be performed quickly and efficiently and he/she respects the service provider's time.  If, however, entrepreneurs consume a large amount of time for the fees generated or otherwise are difficult to work with, they will quickly become former clients.

    a.  Provide the information, etc. requested.   An advertising agency may be willing to give a deal to a startup.  If they have to call repeatedly to get the art work, the photographs, the copy, etc., the cost benefit of representing the startup quickly shifts to the negative.  Give service providers the information they request promptly or the good deal will go away.

    b.  Respond to communications and deadlines.  Starting a new venture can be very time consuming.  However, one should prioritize to ensure timely responses are made to inquiries and deadlines.  If a law firm has to call the owner of a small company four times to get instructions before a pending deadline, the company will probably see a change in the discounted terms or bills for the additional time.  Clients who respond promptly and completely are viewed as good clients and are more likely to get good service in return.

3.  If you cannot pay - call.  One of the most aggravating situations is when a client asks for payment terms after being delinquent on a bill for a number of months.   Payment plans are best worked out while the supplier still views the company as a good client.  After four or five months of no payment, a company has used up most of the good will it may have had.   Asking for six months to pay a bill that is already six months past due may result in being sent to a collection agency.

If a company cannot pay anything one month, the contact with the provider should call and explain the situation.  It will at least demonstrate that the company is aware of the bill and has enough respect for its supplier to advise them that a payment will not be coming that month.  If possible, a company should pay something, along with a note apologizing for the short payment and explaining that the company is working on getting the account current.  A client who is making an effort will get much more leniency than a client who has not paid for 6 months with no explanation.

4.  Do not make false promises of payment.  Some startups will make promises of payment just to keep a supplier at bay and to continue to receive its products or services.  Not only are false promises of payment annoying, they may amount to fraud if the company truly does not have the resources to pay.   Some entrepreneurs get a rude awaking if when they get named personally in a lawsuit by a creditor who learns that it has been extending credit based on misrepresentations. 

5.  Show some love.  If a supplier has treated a company well, the officers, etc., should show some love by recommending the supplier to others who may be in need of the products or services.  A client who has lead to other clients will be viewed more favorably and will get better treatment when the chips are down.  The company can casually let the supplier know that they may be getting a call from so and so to make sure the supplier knows the source for the new client.   DO NOT, however, act as if this compensates for not paying the bill.  (It will subconsciously, but not if it appears that it is expected).  Additionally, it is best to do this during good times, so the good will is high before problems arise.  

6.  Make sure the supplier gets taken care of.  Sometimes, businesses go under.  Everyone understands that.  Some entrepreneurs attempt to take care of themselves first, getting everything they can before the company goes under.  It is best for the entrepreneur to make sure suppliers get taken care of - at least partial payment.  If it looks like the officers were protecting themselves first,  or making false promises of payment, they will get a chilly reception in their next venture.  If the individuals have multiple failed ventures in a row, suppliers may not only elect not to deal with them, they may also advise other suppliers to avoid them as well.  

An entrepreneurs reputation is important.  Future investors will run if their accountants, attorneys, or other suppliers tell them to be careful of so and so.  Taking care of yourself first can be penny wise and pound foolish.

7.   Be loyal.  If a supplier has treated a company well, the company should be loyal when the business is successful.  When a company gets a deal early on from a supplier,  there is an expectation that the supplier will benefit in the long term by continued business.  If the company takes its business elsewhere the first time it gets a lower price, the company may get a chilly reception if it ever has to go back to the original supplier. 

It is not uncommon for the low bidder to not come through, leaving the company no choice to go back to its original supplier.  Loyal customers usually get better treatment when times are good and more leniency when the chips are down.

Remember, allot of business success is relationships.  Be good to those who have been good to you and it will pay off in the long run.

The stock market no longer moves based on sound fundamentals - it swings on the emotion of fund managers, media opinion, politics, and the average Joe’s paranoia. 

On that note, Apple’s stock sunk yesterday when Steve Jobs didn’t announce any new ground breaking products at MacWorld. Fundamentally the company couldn’t be doing any better.

Hillary Clinton sheds a tear and the Democrats in New Hampshire hand her the primary vote.

Mike Huckabee promotes his “Christianity” and Iowa voters hand him the primary vote.

A prankster says “I’m going to blow you up” over a radio and the president almost goes to war with Iran.

A candidate says “were on the verge of another terrorist attack” to get himself more votes.

WalMart announce a new store in Heber. Some citizens assemble and protest against the plan but ignore the Walgreens and Lowe’s that come to town with it.

A person gets insulted by something said at church and gives up their religion over it.

A lawyer gives a passionate closing argument and a jury sets a guilty man free.

A business partner gets insulted by an email and drops a promising startup.

A police officer gets mad because a person won’t sign a ticket so he ends up tazzing the dude over it.

A stock gets sold short so a CEO goes on a “Jihad” that almost destroys the company he initially set out to protect.

“Experts” judging a business plan competition pick the worst plan out of the bunch because they want to give the guy a chance.

A powerful teachers union uses the media to lie to the people of Utah causing them to vote down sound legislation. 

I am often asked about funding for small companies.  Many individual inventors and small companies believe that venture capital is the way to go.  Venture capital is a great method for growth - for some companies.  It is completely wrong for others.

How good is your management team?  Most venture capitalists like to see an experienced team.  I have heard several VCs state that they would take a mediocre idea with a team they know and trust well before they will take a great idea with a questionable team.  If your management team does not have successful ventures behind it, venture capital probably is not for you.

How fast will your company grow?  Most VCs are looking for rockship growth curves.  Will your company grow 10X in the next three years?  If not, VCs probably will not be interested.  That does not mean that your idea is bad or that it is not worth pursuing?  No.  Some great companies got their on the long road.  However, they probably did not get allot of VC interest.

How much do you need?  If you need $500K or less you are probably not worth a VC's time.  They manage large amounts of money and it takes less effort to invest $2M - $5M at a time.  Some VCs just are not interested unless it is at least a $1M.

Is your business tech?  While there are numerous VCs which deal outside of tech companies, most of the emphasis in Utah VCs seems to be in tech companies.  You may have a great retail chain in mind, but a tech oriented VC probably will not be interested.

How much of your company do you want to give away?   Many companies want investors to put money in, but do not want to give much equity away.  If you are sure that the company is going to be in the black quickly and will not need substantial amounts of growth funding, VCs may be a very expensive option.

One place to look is for angel funding.  Successful businessmen and women who have investment money may be willing to invest.  While angels are typically more flexible than VCs - investing lower amounts and looking less skeptically at an unproven team - they will still want a chunck of the company to justify their risk.

Another option is debt financing.  Your local bank may not finance your venture, but if you need $100K-$500K, one great option is  InnoVentures Capital Partners.  While debt financing places more risk on the entrepreneur, it also preserves more of his or her equity and lets the business owner have more say in how fast the business grows.  If you haven't heard of InnoVentures before, it is because the company is in the process of rebranding.  Known for years as UTFC Financing Solutions, the company decided to change its name to emphasize that it is not just for tech companies.  In fact, a substantial part of its portfolio are service and manufacturing companies.

In addition to the ability to lend, InnoVentures has a very solid bank (pun intended) of start-up know how in Steve Grizell, Damon Kirchmeier and Scott Stenberg.  While InnoVentures is not the only debt financing firm in town, they are definitely one to consider.

As I am busy trying to get caught up after vacation, I really wondered if I should attend the Utah Valley Entrepreneurial Forum luncheon today.  The title "Online Viral Marketing & Public Relations in Web 2.0 Time" sounded interesting, but you never know.  Occassionally these types of presentations devolve into geekspeek and you do not get anything meaningful out of them if you are not in the business.

I was pleasantly surprised to see an all star cast.  Cydni Tetro of NextPage, Dave Bascom of SEO.COM, Paul Allen of (World Vital Records - at least for today) and George Wright (Will It Blend?).  Still would I get anything meaningful out of it.

Well my biggest mistake was leaving my laptop back of the office.  (I write like a snail)  The luncheon went  more than 15 minutes over and not a single person left the room.  The only down side was that each speaker had a relatively short time period to discuss matters.  A podcast of the discussion will be up soon at www.uvef.net.  However, I think Utah Valley Entreprenuerial Forum should have a 1/2 day seminar and ask each of the speakers to take an hour. 

I’m changing my tune on PayPerPost and dumping TechCrunch

I consider myself a HUGE John Galt capitalist. So recently when reading some ridiculous commentary on TechCrunch (which has consistently gone downhill over the last year) it dawned on me that my views on PayPerPost (PPP) directly contradicted my strong belief in Capitalism. Bear with me.  

I don’t like PayPerPost. I don’t care for Ted Murphy and his self-promoting antics. I don’t like their business model. I wish they would go away. However, after watching PPP over the last year its apparent that there is a strong demand for their service. That means they are probably here to stay.

That’s capitalism.

PPP supplies a need in the marketplace and they’re making money doing it. What’s wrong with that? Oh the people at TechCrunch hate it because it doesn’t live up to their standard of what the Internet ought to be. Who cares? Its not illegal and whether or not its ethical is highly debatable. I think that manufacturing cigarettes is unethical but its legal and there’s a demand. Complain about it all you want but that’s how free markets work.

All along its been about disclosure but now that PPP requires disclosure that still isn’t good enough for guys like Mike Arrington. I have to applaud Ted Murphy for telling Mike Arrington where to go. If PPP were my business and I had investors and customers I’d do the same thing only I’d be more vocal. Ted must love all the free publicity that Mike Arrington has sent his way. While Arrington has been complaining about PPP, Ted has been riding the free publicity wave and signing people who couldn’t care less about TechCrunch. Who do you think is the smarter of the two?

Its time for Mike Arrington to stop assailing PayPerPost for doing exactly what TechCrunch is doing - filling a need and making money. I think its funny that TechCrunch and Mike Arrington hassle PPP but they won’t come down on companies like Apple for their blatant lies and unethical advertising. The hypocrisy makes me sick.

That goes for a couple of other things as well.

I’m not a fan of multi-level marketing and I don’t like the alternative “education” call center businesses that have popped up all over the place, but they exist because there is a demand for what they offer. They exist because their businesses are legal and people desire their services. So let stupid be stupid. Someday - I predict in the next 10 years or so - demand for MLM’s will finally burn out. The personal improvement, alternative education, and training space is huge and its only getting bigger. Let it. If it doesn’t live up to its promises then it will burn out too. That’s how free markets work.   

Personal injury attorneys have a bad reputation. Believe it or not there’s a strong market need for personal injury attorneys. Sure, some people are stupid and abuse the system but a lot of people legitimately need personal injury attorneys. I worked with a guy whose wife was maimed when a truck owned by a municipality ran a red light and hit her. After multiple surgeries her foot is still not healed and the city’s insurance company refused to pay for the accident. My friend’s only alternative was to hire a personal injury attorney. He did and the city ended up settling. What would they have done otherwise?

Right or wrong, that’s how the marketplace works. We love to bag on attorneys but no one ever bags on the people who hire them just to get some quick cash or the insurance companies that constantly screw people over. Why not?

At any rate…

I want to thank Mike Arrington and the staff at Techcrunch for being the arbiters of the Internet. Thanks for gracing us with your superior presence and knowledge. Thanks for helping Ted Murphy build PPP with all the free publicity you’ve lumped on his ridiculous company. Good work, team. Good work…

Just remember, Bay Area liberals hate capitalism except when it works in their favor. Right, Mike?

Update. Several months ago, Mike Arrington took Ted Murphy to task over a video on Rockstartup regarding a PPP company retreat that featured some debatable racist behavior. Yesterday, CrunchGear posted an interview with Penn Jillette that features so many bigoted anti-Mormon hits that the video ought to be removed and Mike Arrington ought to make a public apology to the LDS Church.

Mike, this is a real scum bag move. Is this what TechCrunch is really all about? Does your hypocrisy know no bounds?

Figure it out!

I love to travel and see the world.  I also love returning to the U.S.  Every time I come home, I find something about the U.S. to be thankful for.  Usually it has to do with the little freedoms that we take for granted that many other countries lack - like true freedom of speech, personal property rights, or effective tax rates of less than 50%. 

As I drove home from the airport Saturday, I thought of a few less profound but meaningful things to be grateful for.

1.  Wireless broadband.  I am addicted to being able to connect just about anywhere at any time I want.  No looking for a cyber cafe.  No trying to configure my computer to work with the wireless system in the lobby of the hotel.  No paying 6 pounds 50 pence ($13) for an hour of access.  Pop in the card and I am good to go.

2.  Wide streets.  Driving a 9 passenger van with a stick up and down the side of a mountain is bad enough.  However, when the road is only about 15 feet wide and there is a three foot deep flood control channel on one side and a 50 foot drop on the other, driving can get pretty stressful.  At one point I had a 600 foot drop on one side and a 70 degree slope for 600 feet on the other side.  The road was eactly two feet wider than the van on either side.  I truly enjoyed driving the Yukon XL home from the airport on a four lane freeway - each lane having plenty of room.

3.  Paying in dollars.  With the unfortunate slide in the dollar, it was best on the trip to simply view Euros as dollars and go from there.  Somewhere in the back of my mind, however, it was understood that AMEX and visa will not convert them straight across ($1.48 to the Euro last I checked).  Sometimes it is best to not know what things really cost until later.

Anyway,  we had a lot of fun, ate a lot of good food and spent enough time in planes to lose any desire to travel - for a couple of months.

In his book, The World Is Flat, Thomas Friedman gave most Americans a wake up call about the impending competition that it coming from Asia. China does not want to be our cheap production outlet. They want to be us - i.e. the world's dominant economy. By now most people view China and India as real competitive threats - particularly the working class in industries that can be shipped overseas. However, the threat is much more multifaceted that most presume.

I am winding down my last few days of my trip to Europe and La Reunion. Every time I come to Europe (typically about every 2 years) I notice that things have become a little more “American.” No offense to my European friends - I actually mean this as a complement. 

I had the occasion to spend a couple of months in Europe in the 1990s. It was my observation at the time that (generally speaking) Americans and the French (and probably most Europeans) had a basic disconnect in a principle core value. In France, security was the premier value. If you had a good government job, you were at life's peak. Americans, in contrast, value opportunity over security. The middle class does not hate the rich because in America some of the the middle class become the rich. We will trade security for opportunity. It is probably inbred because most of our ancestors took pretty big risks and came to the U.S. with the hope of opportunity.
 
A prime example of the different values is when I left my first law firm. I was a partner making pretty good money. My friends and family in the U.S. thought it was great to take the risk and start a new firm. My wife's family in Europe wondered why I would do something so crazy.

Over the last 16 years there has been a marked shift in European mentality. Instead of nationalizing industries, many European countries and their citizens are becoming more entrepreneurial, reducing the role of government in everything from manufacturing to health care. The French even elected a conservative president.

While it is good news for us that European youth like U.S. clothing styles and U.S. music, they also like the idea of creating something new in the business world.  I had a discussion a few days ago with a late 20s Frenchman. He has already started one company.  He is currently raising capital for a new venture and has two additional businesses already in the queue. Unlike most Americans, he is fluent in three languages and is willing to move wherever his businesses need him to be.

The next time you think about the competitive risk from Asia, remember that there is a generation of young Europeans who are more than willing to out compete us in the world marketplace.

My apologies for not blogging more frequently over the last month. I knew late November and early December would be busy as I tried to get ready for three weeks out of the country. Then the problems began. We had three different clients who each had business deals go sideways. (One had two go bad within a week of each other). Thus, much of my time was spent trying to get the deals back on track before I left. Unfortunately, two of the deals involved agreements that the client had not run past us before signing. Another showed us the agreement, only after the terms had been agreed upon – thus allowing only minor editing. Many of the provisions that we would have included in the agreements were not there to address very foreseeable issues.

The only reasons I can find for not telling your attorneys about business deals prior to reaching agreement as to terms is an attempt to save on costs or a fear that the attorneys may raise issues that would make the deal look less attractive. In each of these cases, it cost many times to get the deals back on track than it would have to simply do them correctly in the first place. Thus, my suggestions for using your counsel more wisely include:

Let your counsel know what deals are in process. Even if final terms are up in the air, counsel can identify certain trouble spots before hand. For example, what are the termination provisions? While everyone would like all agreements to have happy endings, many do not. I am always amazed at the number of agreements which have no express mechanism to terminate even when the other party fails to perform. This is particularly bad if the other party has exclusive rights in some territory, or can inhibit the client from doing deals with others while the agreement is in force.

Let counsel review agreements prior to reaching an agreement as to terms. While terms often sound reasonable when discussed between potential partners, they can look very differently when on paper. This is particularly so when all of the representations made in the negotiations do not make it into the contract. That exclusive license sounds great when the prospective licensee represents that they will sell 1000 units a month.

Tell counsel when agreements are complete. One of the issues we had related to a client selling a group of IP assets that had been acquired. We were unaware of the agreement when he client called us to get copies of the documentation a few days before they were obligated to provide the documents to their new owners. The client did not send us a copy of the contract, nor did they tell us the actual documents that were required. Then, after providing copies of the documents, it was learned that the agreement required originals of all the documents, some of which the client had misplaced. While we were able to get the other side to agree to certified copies, it still took a couple of weeks to get the agreement and to obtain all of the certified copies of the required documents from the U.S. Patent and Trademark Office. This delayed payment from the new owners and ended up costing several times what it would have cost if we had known about the agreement before it was signed.

Finally, to keep attorneys’ fees down while getting a good agreement, it is important to give all of the relevant facts without unnecessary detail. Fixing one of the deals was difficult because the client persisted in giving long explanations of factual background that had little or nothing to do with the deal at issue. Then, as we started into negotiations, we learned that there were several pertinent facts of which we had not been informed. How often the opposing party beats his dog or fails to pay child support is usually not relevant to a license of intellectual property. On the other hand, that a side deal had been reached between the parties that arguably changed the underlying agreement is pretty relevant.

The best way to do this is to simply answer the questions asked by counsel and provide anything additional which you believe to be directly relevant to the contract at issue. While clients sometimes do not want to give details which could make them look bad, it is better to have counsel know up front. I recently sat in a summary judgment hearing on a case involving an amount of money owed. During the oral argument the defendant’s attorney finally discovered the letter from his client acknowledging the amount owed (after it was pointed out by the Judge). The attorney was simply speechless as the Judge asked him why judgment should not be entered against his client. (This was actually combination of lack of candor on the part of the defendant and very poor legal work on the part his attorney. The letter had been produced during discovery and had been attached to the summary judgment pleadings. Had the attorney simply reviewed the evidence, he could have saved his client the embarrassment of the summary judgment hearing and the attorneys fees of the plaintiff that will follow.)

While all attorneys enjoy getting paid, most would rather make their living helping clients avoid problems than doing damage control after things have gone bad. As with many other things, an ounce of prevention is often worth a pound of cure.

At one point in my life (early 2000’s) I was set on the idea that I was heading off to law school. Then I got sued. It was an experience that I will never forget. I’m not going to go into all the details of what happened except to say that in the end I won and the victory was so sweet!

Going through the experience took all the desire I had to go to law school right out of me. Our company had in-house attorneys but we decided to hire an outside firm to handle the case. The lawyer from that firm was a freaking jerk. Yeah, sure the guy “defended” me but the whole time he thought I was guilty. When my opponents admitted in so many words that they had lied to get out of a contract with our company my lawyer was shocked (I could see it in his face).

Yes, I did tell my lawyer what I thought of him and that was sweet too.

During that ordeal I realized that I would not be happy as a lawyer and I decided not to go to law school. Then tonight I came across this article on why you shouldn’t go to law school. It was a great read. I really don’t have anything against lawyers and they definitely have their place. If you went to law school or you are my lawyer more power to you but I’d love to hear your comments on the above noted article.

I ended up going to MBA school and lots of people have directly and indirectly bagged on me for that. In the next couple of weeks I’m going to post on why I think Seth and Guy are wrong (well mostly wrong) about MBA school and why I am glad that I went.

More to come…