Misconceptions in 140 Characters or Less

I have been a fan of twitter since I begun using the service two years ago. Twitter is a a mini blogging tool that asks one question: What are you doing? Posts are short; up to 140 characters to be exact, and can be sent or received through the web, standalone programs like TweetDeck, and text message. Twitter has been used in a number of manners including posting articles, documenting trips, planning events, and letting your friends in the area know where you are. Twitter allows you to become a fan of the service’s users and allow those users to follow you in return. When the service was primarily populated by internet technophiles and web geeks, users typically followed each other to help build the community.

But as twitter has gained momentum and become populated by celebrities, musicians, and business leaders, these power users are unable to follow their hundreds of thousands of fans. This has turned the service from a two-way communication medium into one where power users broadcast messages and get real time feedback from their many fans. This has sparked what is commonly called the attention economy, where opinions have become the currency of social networks like twitter, Facebook, LinkedIn, and etcetera. The thought is that comments from everyday internet users provide more insight into the quality of a company’s product or the integrity of an individual than bulk spending on public relations. Tara Hunt, who has recently written a book on how to use social networks to build your business called The Whuffie Factor, recently blogged about the importance of the attention economy in promoting her new book.

However, of those that answered my tweet and asked for a book are actually looking forward to the book. This group is busy, too. Career and lives get in the way, so I probably will see about half of them able to actually get to reading the book in the near future. And, as blog posts fall off from reading, Maybe 5 of them will actually get around to posting something. Say, their collective readers are somewhere around 500 - and that number is really conservative, since most blog posts will see long term hits, even those with a low readership (I will also do my best to drive people to those posts). Adding this column up, I see a sum total of possible ‘eyeballs’ reading about the book being 500.

And from the test earlier, 500 is greater than 0. Therefore, I’m sending books to people who want them and are more likely to read them. Not to mention that the people who are just starting out on their blogging/tweeting/online community adventure today very possibly could be the ‘influencers’ of tomorrow. I started as a nobody. Kathy started from zero. Cory and Shel both came from being unknown to being well-known. I totally remember when Michael (TechCrunch) was just starting to write about startups - it was about 5 years ago. He went from 0 to over 1 million in less than 2 years. Like I said, today EVERYONE is an influencer.
Whuffie Math

I personally use twitter in a bubble, taking advantage of the service’s continuous flow of posts. To me, twitter offers an information buffet where I can pick and choose snippets that are important to both my career in banking and personal interests outside of work. Most recently, I have learned about XBRL; a financial markup language that promises to make financial reporting more transparent, short term investment strategies in the stockmarket through the users of StockTwits, and what promises to be an excellent Philadelphia meetup hosted by Mashable. In addition, I use the service to meet new friends in the same way I used IRC, BBS systems, IRC, mailing lists, and web forums while growing up.

But thursday morning, I had a very different experience on twitter. I was responding to Colin Ong an Economist out of Singapore who posed a question on leveraging your twitter fanbase to improve ROI.

Colin, who uses cost-benefit analysis to determine effective use of his time, limits how much of that time is spent building his twitter fan base. Based on coversations that we have had, Colin believes that time is expensive based on the formal training that he has and limited (to 168 hours per week). Colin has 2,340 followers which is substantially fewer than internet self-promoters iJustine (436,584), Gary Vaynerchuk (231,828), Robert Scoble (81,410), and Jason Calacanis (65,685). These are users who primarily do business on the internet, and do not have mainstream celebrity status such as Ashton Kutcher, Britney Spears, or Jimmy Fallon. However, iJustine and Gary Vaynerchuk benefit from being featured users by twitter itself.

Intrigued by Colin’s tweet, I brought the case of Gary Vaynerchuk to his attention.

Gary is an iconoclastic wine retailer and entrepreneur motivator who has leveraged his strong twitter fan base into a seven-figure, ten-book deal. Per TechCrunch:

The wine retailer-turned-video-blogger is cashing in his Internet fame for a seven-figure, 10-book deal with HarperStudio. That comes to at least $100,000 per book, which is decent for first-time an unproven author, but he is going to have to hustle to keep up the interest for ten books. His first one comes out in September, and is called: Crush It! Turn Your Passion into Profits in a Digital World.

One thing Vay•ner•chuck has going for him is a built-in audience he cultivated one e-mail at a time, starting with his his popular video wine blog, Wine Library TV. Then he started branching out beyond wine into marketing, motivational speaking, other Web video shows, wine-review site Corkd, and even T-shirt search (because everyone is always looking for a good T-shirt).

What sets Gary apart from other internet business people who receive book deals (including Tara Hunt who was earlier cited), is that he does not maintain a traditional blog. He maintains a video blog with brief synopsises of each video’s content and has over 5,000 twitter updates. Both take inordinate amounts of time and work to maintain, but neither highlight Gary’s ability to pen a series of books. Which is what made his deal a positive outlier in my mind.

However, I didn’t proofread the tweet and said Gary didn’t “read books” instead of Gary didn’t “write books”. If this were any other day, I likely wouldn’t have noticed and the internet would have continued to churn along with no ill effects. But soon my BlackBerry began vibrating to no end. Gary had posted a part-defensive, part-sarcastic response to his followers.

And their responses reminded me that despite the age of the internet, users are quick to flame — or send messages filled with fervor.

I have been using the internet long enough, that electronic barrages such as the one demonstrated above roll off my back with ease. Especially when they are mild and stem from a minor misunderstanding. But with the internet becoming mainstream and users posting under their real names instead of pseudonyms, what happens when someone takes their threats to the next level? If I had engaged in a heated discussion with Gary’s fans, the situation could have escallated into a real-world disaster. In this hypothetical example, a disgruntled fan could attempt to track me down via phone or in person and make physical threats against me. This would generate a huge personal relations disaster for Gary if blogs and mainstream media outlets caught wind of what happened. And because information is readily available on the internet it would be when, and not if, the story was picked up. And I am certain this would have a negative impact on Gary’s self-proclaimed $60 million business.

How I Use Credit Wisely

Last week, economist Tim Harford wrote an article for Forbes discussing the behavioral economics behind using credit. It is Harford’s premise that the human brian is wired for immediate gratification especially if we can postpone the consequences. It is for that reason, that we are unable to properly comprehend the complex financial instruments that have driven the current economic crisis. Per Harford,

An indication of this comes from looking at savings rates over time and compared with other countries. Looking at the G-8–eight of the world’s leading economies–the two countries with the biggest and most exciting range of retail financial products, the U.S. and the U.K., have also been the ones with the lowest savings rates. Countries like Japan and Italy, with a back-to-basics range of products, have higher savings rates.

With today’s negative economic climate portraying consumer credit in an unfavorable light, it is easy to forget the benefits of responsible credit use. I have discussed at length on this blog how my irrational spending hurt me while in college and how I pulled myself through, but I haven’t told the complementing story about the everyday benefits of using credit. This is mostly attributed to my need to put a few months of spending under my belt. I have had my first post-repayment credit card for nine months and have found the niche of how to use it.

Without credit, my spending was limited to the cash I had on hand from biweekly paychecks. This was an excellent lesson in budgeting because it put me in the habit of spending only what I could afford, and not overextending myself with easy money from credit cards, loans, or other consumer debt. In a perfect world, my core living expenses such as rent, utility bills, and student loan payments would match up perfectly to my paychecks. But paychecks typically come in biweekly intervals while core living expenses are billed monthly. For most months, my income would exceed my core expenses providing me with marginal leftover cash for other living expenses and luxuries such as groceries, nights out with friends, new clothes, and a modest savings. But some months, my expenses would exceed my income, requiring me to cut back on other living expenses and luxuries, or liquidate my savings. With this formula, I was spinning my wheels.

With credit, my ability to pay core living expenses, other living expenses, and luxuries has drastically changed and allowed me to save at a higher rate than I could previously imagine. It began with a change in my philosophy of how I pay everything but core living expenses. Previously, they would be paid with cash on hand through using my bank debit card which required me to exercise absolute precision. If it was a month where my extra cash would be thin, I would have to cut back — which meant I would have to eat on an extreme budget. But now, I set a monthly budget for how much I want to spend on those expenses and put all of them on my credit card. Instead of worrying about thin margins, I can pay those expenses on a monthly basis as part of my credit card bill. In addition, I use an online financial manager called Geezeo to track and categorize all of my credit card spending.

Having credit allows me to put large chunks of money every month into an interest baring savings account. What this does is change the mentality of me spinning my wheels without getting ahead to wow, I am saving a LOT of money. And as my savings account continues to grow, I challenge myself to spend thriftier on a monthly basis. But it is important to note that this philosophy only works if you pay your credit card bill in full every month. If you don’t, interest charges from your credit card company will more than negate any interest on your savings account.

Teaching America’s Youth about Personal Finance

When I graduated college with $13,645.22 in credit card debt on top of approximately $90,000 in undergraduate student loans, I was crushed. At a time when I should be enjoying financial freedom afforded to a young professional with consistent pay, I was saving pennies in an effort to reclaim my credit. My wastrel spending habits were a product of growing up in a consumerist household where the benefit of saving was never taught. While I don’t fault my family for their spending, had they had better financial discipline I am certain I would have chosen a different path. But I was fortunate to have mentors that guided me through the procress; praising me when I paid off a credit card and acting as a sounding board when the frustration of being broke would get to me. What they refused to give me was a handout, confident that the lesson of pulling myself up on my own would go much further than a personal check. And when I made that last payment, I saw their point.

I have touted my success to everyone willing to listen, most of whom had the benefit of growing up with better financial habits. I receive the congratulatory comments I expect, but desire to help people correct the same mistakes that I have made — or teach them to avoid those mistakes in the first place. Since I have elevated myself, I have helped two family members begin to realize their own financial freedom. Their situations were completely different; one had a history of wastrel spending such as myself and the other found themself facing tough times due to today’s economic uncertainty. For the former, I helped them join the same counseling program that put me on pace to repayment in three years, taught them how to stretch their income across an expense and savings budget, and act as the same sounding board to them that my mentors were to me when they face tough times. The latter already had the budgeting skills, but I helped them secure a job that would generate income without spending that money on expensive childcare costs. Both have a long way to go, but are on pace to pull themselves up much like I have.

That said, I have been presented with an excellent opportunity to teach and mentor innercity Philadelphia high school students on personal finance. This will be an exciting challenge for me, because I won’t have the immediate benefit of trust that I had with my family. In order for this to work, it will be imperative to build a rapport with these students so that they are honest with me about their finances. These students’ education, work, and social experiences are likely to be different than my own, and may find it difficult to relate to the topics and suggestions that I discuss. My goal is to be open and transparent with these students, freely discussing my personal experiences, what I learned, and what I would do differently if I had an opportunity to start again.

Leading up to this opportunity, I will be researching and writing on the issues that are specific to the demographic I am teaching. Do these students use a bank account or do they use check cashing facilities? If these students use the latter, are they opposed to using a bank account? Do these students use the internet and mobile phones? If so, would they use online financial software to track their spending? Where do they spend their money and why are those spending habits important to them? This will provide me with insight on how I can translate my personal experiences into topics that are most beneficial to them. As a reader, if you have any experience on these issues or others not listed above, I would sincerely appreciate your thoughts.

Keeping Facebook Locked Down

I am a fan of Facebook. This is part nostalgia for the service I joined within hours of it arriving at my alma mater’s campus, and part appreciation for foresight turning it into one of the World’s largest social networks. The strategy was simple; build buzz for a new social network by restricting access, and slowly release those restrictions as the service evolves. In September 2006, Facebook announced two changes that altered the scope of its service.

On September 5, 2006, Facebook introduced two products; the news feed which highlights events within a user’s entire social circle, and the mini-feed which highlights events focusing on any specific user. These two products were created to help users stay current on their friends lives, but have also created a voyeuristic aspect because they automatically post social actions within the service to a users’ profile. These actions include public messages between friends, newly formed social connections, plans to attend events, and the addition of new photos and videos to the service. And on September 26, 2006, Facebook opened its doors to everyone allowing students, parents, grandparents, cousins, and colleagues to connect with each other. This altered Facebook from a niche social network for students to a multifaceted website serving over 120 million global users.

Driving Facebook’s changes was the Company’s long-term monetization plan, using the news feed and mini-feed to push targeted advertising to its users. But broadcasting profile changes and personal actions to unanticipated audiences proved to be problematic. Nearly two months after the launch of news feed and mini-feed, North by Northwestern; an online publication of Northwestern University, wrote an article discussing how the products were changing interpersonal relationships.

One thing I absolutely adore about Facebook is how it has championed subtlety.

It begins nudging your friends two days in advance to wish you a happy birthday. It shows you just how many of your friends are attending that party you weren’t invited to. And when you break up with the love of your college life in the middle of exam week while all your friends are out of town and your beloved dog, Mr. Waggles, just died, Facebook showcases your heartbreak via 37 mini-feed alerts, 26 of which are attached to a broken-heart icon. I believe the other 11 feature Nelson from The Simpsons pointing and laughing.
North by Northwestern - Why you should break up with your Facebook relationship status

The article continues on to cite the Facebook relationship status, and how it muddles the obscure world of collegiate dating. But the concerns outlined in the article transcend to users of all ages. My first lesson when joining the workforce, was the essentiality of protecting my personal brand. In corporate America, the light that your managers, peers and suborniates view you weighs equally in importance with your performance. An errantly posted comment meant to vent frustration with your friends, could generate serious complications in your professional life. A teacher in Charlotte, NC was fired after she commented about the poor economic condition of her school, on what she thought was a private Facebook profile.

A teacher at Thomasboro Elementary School also could face termination after writing on her Facebook page that she was “teaching in the most ghetto school in Charlotte.” The teacher met Monday with Superintendent Peter Gorman, who recommended she be fired.
news-record.com - Charlotte school employee fired over Facebook post

But personal responsibility is only half of the battle. Your friends have the ability to post social actions independent of your own, which may portray you infavorably. One of Facebook’s most popular features is its Photos application, which allows users to upload pictures and connect them to friends who have been photographed. An unsuspecting user may not use the Photos application themself, but a friend may post a candid photo involving alcohol that all those user’s friends see. And as this picture circulates throughout the network, it may be inadvertantly delivered to that user’s boss. A police officer in Washington State was dismissed after images of him dressed in uniform, were intermixed with images of him under the influence of alcohol.

“Everybody’s got their right to privacy, but when there’s an intermixing of images of the state patrol and state patrol cars … with less than professional-type comments, images of drinking or conversations surrounding things that might not be moral, it doesn’t present a good image for the state patrol,” said state patrol Capt. Jeff DeVere.
PoliceOne.com - Two Wash. officers fired over Facebook indiscretions

Examples such as those cited above highlight how important it is for young professionals to be cognizant of their actions and responsibly use Facebook in a post-collegiate environment. To mitigate the risk of Facebook interfering with my professional life, I use the following tools and procedures to limit how the information it shares with my friends.

Friend Lists:
Settings>Privacy Settings>Profile>

Facebook offers its users the ability to assign friends to specific lists, which can be used to limit what information is displayed to your friends. I personally use three lists; a list for family members, a list for friends with whom I am comfortable sharing my social actions with, and a list for my remaining friends with whom I want to minimize my visibility to. The preceding picture shows a sample of my Profile Privacy settings and how I limit what people can see. Low-impact actions are open for everyone including the existence of my profile, basic information and my status updates. While status updates pose the potential to create problems, that can be managed by responsible use. High-impact actions including the display of pictures linked to me that were not taken by me, have been limited to my friends and family.

News Feed and Mini-Feed Actions:
Settings>Privacy Settings>News Feed and Wall

To limit the impact of profile changes, comments made on mine or my friends profiles, and new connections forged on the news feed and mini-feed, I restrict what information Facebook publishes. In my post-collegiate years, the necessity of displaying these actions has waned. Plus, I do not want loose Facebook acquaintences to know if I ended a relationship, commented on pictures of a close-friend’s child or became friends with someone new.

Application Settings:
Settings>Application Settings

Changing the settings for individual Facebook applications combines friend lists and news feed and mini-feed settings, to further tweak how users see your profile. In the preceding picture, I set my preference for how I want Facebook to share newly published notes to my news feed and mini-feed. Because many of my posts on Facebook are imported from this blog, I like having the option to share the action with my friends.

Furthermore, I can limit the number of users that can actively find my posted notes. In the preceding picture, I set my preference to exclude the notes application from my profile and limit viewing of all my notes to my the members of my friends and family.

View Mode:
Settings>Privacy Settings>Profile>See how a friend sees your profile

To ensure that your privacy settings have been properly tweaked, Facebook offers a view mode that allows you to see your profile through another user’s eyes.

In the preceding photo, I show my profile through the eyes of a user who is on my general friend list. The information that this user sees is limited to what I would feel comfortable being broadcast on the general internet.

But above all else, there is no substitute for using prudent judgment when posting to the internet. If you are concerned that what you put on the internet may be misconstrued or used inappropriately, it is best keep it offline.

How to Negotiate an Automobile Lease

Last week I had an unexpected opportunity to negotiate an automobile contract for a client who was in need of a new vehicle. Following a five (5) year financial plan developed based on my experience repaying personal debts; we are reducing their reliance on consumer credit and helping them save for retirement. My client’s current vehicle was paid-in-full, but began developing nuances common to aging used cars that are no longer under warranty. And unexpected costs can be detrimental to a financial plan that relies on consistent execution. For this particular situation, we looked for automobile financing options that would guarantee a payment of less than $300 per month for five (5) years, and provide the client with a reduced risk of unexpected automobile maintenance expenses. Our client required a mid-sized vehicle because of height restrictions that would cause uncomfortable driving conditions in a smaller vehicle. In addition, prior maintenance experiences had adversely affected their perception of American automobiles’ reliability and sought to acquire a vehicle from a Japanese automobile company. This left three options available to our client; the Honda Accord, the Toyota Camry and the Nissan Altima. We encouraged the client to test drive models of all three vehicles that had an approximate $24,000 price tag.

Excited to start their journal into financial solvency, our client called me on a Sunday afternoon informing me that they were at a Toyota dealership ready to acquire a new Toyota Camry. They had received a quote of $3,200 for their current vehicle and selected a new vehicle with a $24,000 price tag. But the only options presented by the dealership, a three (3) year lease option and a six (6) year purchase option, were generating payments above their requirement of $300 per month. In addition, neither of these options fit the mold of their financial plan.

To negotiate a fair lease price, I asked to speak with the financial agent who was providing my client with the leasing terms. My first request for the agent was to run payments for a five (5) year lease option on the vehicle my client had selected to gain a base payment to begin the negotiations. We selected a lease option because it divides the price of the car into two parts, the residual value that anticipates the vehicles future value at the end of the lease, and the non-residual value, which is the cost to use the vehicle for the duration of the lease. The non-residual value is then multiplied by a money factor to determine a monthly payment on the lease. Residual values and money factors are set by Toyota and provided to the dealership as a matrix but provide a slim opportunity for negotiation based on expected annual mileage. With a $24,000 price for the vehicle, a $3,200 trade in value on the clients’ car, $1,500 in tax, title and documentation fees and Toyota’s predetermined metrics, the monthly payment on a five (5) year lease came to $329 per month.

We reduced the non-residual value of the vehicle by negotiating the price of the vehicle. We began by discussing the trim level that my client had selected, what options were standard with that trim level, what option packages were selected and if costs could be saved through a combination of selecting a different trim level and different option packages. Our client had selected the fuel conservative four-cylinder version of the LE trim level which included a multi-adjustable powered driver’s seat, which was required by the client. A different trim level would have saved the client approximately $3,000 on the price of the vehicle, but they would not be provided with an option to add the multi-adjustable powered driver’s seat. But the client had added an option for alloy wheels, a feature which only added purely aesthetic value and approximately $900 to the cost. Our next step was to build additional cost savings by negotiating a discount from the retail price of the vehicle. Although we were unable to do proper due diligence into the profit margin of this particular vehicle, the dealership was amenable to our blind estimate of $2,000. We also asked the dealership to provide an additional $400 on the trade in value of our client’s current vehicle. This reduced the overall cost of the vehicle to approximately $20,700 providing the client with a monthly payment on the five (5) year lease of $291 per month.

To further reduce the monthly payment to our client, we inquired how many miles were being provided annually on the vehicle. Prior to getting involved, our client had selected an option for 15,000 miles annually or 75,000 miles over the duration of the lease. They chose this option because their current vehicle was owned for five (5) years and had accumulated 63,000 miles. The client was concerned about exceeding their mileage allotment. We suggested that they choose the option for 12,000 miles annually or 60,000 miles over the duration of the lease because minimal changes to their driving habits would keep them within that allotment. And by selecting the lower mileage allotment, we negotiated a monthly lease payment of $282 for our client, a $47 or 16.7% reduction from lease payments of $329 per month.

Through negotiation, we will save our client $564 per year in vehicle expense and $2,820 over the duration of the lease. Moreover, the three (3) year all-inclusive and five (5) year power train warranty, historic reliability of Toyota vehicles and favorable fuel economy has reduced the risk of unexpected maintenance expenses over the next five (5) years and makes the client less sensitive to rising fuel costs.

Microsoft Advertising Campain Evokes Nostalgia; Apple Still Catering to Consumers

Thursday night an old friend and NFC East football foe were watching the Washington Redskins and the New York Giants kick off the 2008 NFL season. We watched the contest at my neighborhood pub, St. Stephen’s Green, where the background conversation overshadowed the match’s in-game commentary. During one of the commercial interruptions I glanced at the screen and noticed comedian Jerry Seinfeld and philanthropist Bill Gates eating churros and trying on shoes. Unable to hear their conversation, the purpose of the commercial puzzled me until the Windows logo briefly flashed at the end of the commercial. Intrigued by two icons I envied during the nineties, I sifted through the internet to discover where Microsoft was heading with their commercials. After watching the advertisement online later that night, I found a conversation started by Michael Arrington of TechCrunch about the advertising campaign in an article titled Microsoft Ads: First Phase To “Engage Consumers, Spark Conversation”. Arrington, and other vocal leaders of the tech web, feel that the commercial was confusing and not funny. Arrington continues to say that the advertisement is“[...]mostly content free, with just one mention of Microsoft near the end. It’s a far cry from the brilliant Microsoft v. mac ads that Apple has run over the years.”

It was the mission for “a computer on every desktop and in every home” that allowed Windows to take its stake as the dominant operating system on home computers. Most of us, including the Apple-biased Michael Arrington, have spent considerable time using Microsoft’s operating systems on IBM-cloned personal computers over the past twenty five years. The new Microsoft campaign will not pit Windows versus OSX, but will nostalgicly remind its customers how Windows has changed their lives over the past two and a half decades. As Bill Veghte, Senior Vice President, Online Services & Windows Business Group at Microsoft states, “The first phase of this campaign is designed to engage consumers and spark a new conversation about Windows – a conversation that will evolve as the campaign progresses, but will always be marked by humor and humanity.”

I personally found the commercial to be filled with Jerry Seinfeld’s signature observational comedy with a hint of subtle humor. I find it particularly humorus that Bill Gates; one of the world’s wealthiest men, is shopping in a discount shoe store. It goes against our perception of the world elite who have staffs to handle such menial tasks, but here is Bill Gates being fit for new shoes in a store where he has been a long-time loyal customer. In addition, the use of Gates’ signature mugshot as the picture for his Shoe Circus Clown Club membership card is absolutely priceless. This demonstrates the humility that is Bill Gates.

On the contrary, I feel that Apple’s advertising campaign showcases their consumer-focused products and encourages their loyal fanbase to purchase each new-generation iPod, iPhone and iMac as they are updated. These commercials cater to a distinct subset of the American consumer that watch frequent Steve Jobs keynote addresses and read the weblog of a self-proclaimed “member of the cult of iPhone”. It is Arrington’s right to be biased towards one product over another, but it impedes his objective judgment on Apple’s advertising campaign. As one of Arrington’s readers, @TCCritic states;

The Apple ads are funny but they don’t appeal to the masses. They create lots of noise but they by now alienate people more than anything else. They’re about being sophisticated and “better” than someone else. But the average person in Ohio or Texas doesn’t necessarily want to be walking around with a hip iPhone. He or she is probably closer to the PC boy and hates the fact that like in high-school, they’re referred to as nerds. Most people don’t want to feel that they’re better than other people but that’s all that the Apple ads are about. Funny enough, Apple Macs are primarily used by geeks who want to think they’re not geeks. So Apple comes around and tells them, you’re not geeks, you’re cool. And then they buy a Mac or an iPhone.

Apple’s advertising campaign works tremendously well when the economy is booming because there are a higher percentage of consumers with disposable income to buy new hardware every six months. But rising energy costs and an economic hangover from last year’s subprime mortgage fallout, has lead to unemplyment exceeding 6.1% and the percentage of consumers who have disposable income to spend on flashy Apple hardware is diminishing. Those hardest hit by our current economic state are suburban and rural Americans who fled dense urban areas in the 1970s because of rising crime rates, desegregation, and the near-completion of an interstate highway system that funneled homeowners to cheap and abundant housing. Left without the benefit of dense housing patterns, high concentration of jobs and well-developed public transportation systems, these Americans are at an exponentially higher risk of limited disposable income due to rising energy prices than their fellow Americans living on the East and West coasts. And when these Americans have to stretch already limited funds to feed and furnish their families, it is unlikely that he will rush to purchased the Apple-du-jour.

Only time will tell if the new Windows advertising campaign will succeed or fail but I am enouraged to see how well Bill Gates has mind-melded his magnum Jupiter brain into those other Saturn-ring brains at Microsoft.

Now Leaving, Debtors Prison

Prior to its abolishment on the Federal level in the early 19th century, citizens could be placed in prison for failure to repay their debts. Debtors prisons were cold and unwelcoming buildings with no heat, cramped living quarters, and overcrowding. This made for unbearable and nausiating living conditions for citizens that owed as little as fifty cents, sharing their misery with criminals and mentally ill patients.
Today, citizens can still be jailed in the traditional sense for debts owed, but are traditionally limited to those that do not pay alimony and child support, and those who have committed fraud.

But the rest of us who have trouble repaying our consumer and business debts face a different type of debtors prison. One that allows us to freely walk the streets and shop the wealth of consumer goods found in the United States, but only if we bear enough cash to make the purchases. Credit reports and representative FICO score tells potential creditors in three numbers if they should lease an individual a place to live, provide an individual with monthly working capital, and offer an individual larger debts for capital expenditures. With strong credit all of these options are feasible but become limited as an individual’s credit rating declines. I have spent the past three years in nouveau debtors prison watching as my friends elevated themselves into new cars, new homes, and new lives while I put all of my efforts into erasing $13,645.22 in consumer debt. But today marks the end of my tenure here, after my final payment of $1,198.98.
————————
American Express - $0
Best Buy - $0
Circuit City - $0
Chase - $0
Target - $0
Total - $0
————————
This experience has taught me that taking responsibility for my mistakes, continuous hard work, and patience can lead to unexpected dividends. First and foremost, I have become accustomed to living effectively within an urban environment on a strict budget. My automobile and the associated insurance, maintenance, and gasoline expense has made way for walking, biking, and taking public transportation. And within walking distance, I have access to restauraunts, retail shopping, doctors, grocers, and many other services that I have needed or may need in the future. This experience has also driven me how to set goals, maintain focus on those goals, and attain them sooner than expected. Three years ago my goals were to repay old debt and build a small amount of savings. Today my goals are to buy a house, save for retirement, and build bootstrap | economist into a viable business. And finally, it has taught me how to be a better banker. My experience has provided me with first-hand insight into the warning signs of an over-leveredged customer, and the understanding to work with at-risk customers to provide them an opportunity to repay their debts.

As I journey through the entrance gate of debtors prison, the self-gratification of fully repaying my debt in an expeditious manner is a gift that I will own for my entire life.

Mergers and Acquisitions

My first opportunity to learn the banking industry came while I was searching for my third, six-month cooperative education experience while attending Drexel University’s LeBow College of Business. My first two cooperative education experiences had placed me with large corporate companies and I was seeking a localized experience. I chose to work at Roxborough Manayunk Bank (RMB) because the position allowed me to gain exposure to the loan underwriting process and work directly with the Bank’s Chief Credit Officer. At RMB I learned how to calculate industry standard ratios and underwrite basic commercial loans, but RMB’s sale to Citizens Bank within my first week of working is what solidified the experience for me.

The merger provided me an opportunity to learn first hand how employees of a small community Bank act as their employer is merged with an international banking conglomerate. I watched as employees slowly left the company, seeking oportunities with other community banks. I observed managers tried their best to keep loyal employees motivated while workload dwindled and decisions were being made elsewhere. And I remember the sinking feeling I had when I left the basement office of RMB’s main branch for the last time.

But the acquisition and merging process is not entirely cold. My colleagues from the credit side of RMB that stayed throughout the acquisition, were all offered positions with Citizens Bank. I personally served out the remaining month and a half of my cooperative education experience at one of the Bank’s regional offices in Center City Philadelphia, where I learned the difference between offering customers small mortgages and credit lines and offering customers industry-specific loan products and interest rate risk management products. And as my cooperative education experience neared its end, I moved into a teller position so that I could continue my banking industry education.

Personal Branding

In banking, it is often touted as part of the four (4) C’s of credit that repayment of our loans comes from the character of the individual(s) who operate the businesses that we lend to. This requires banks to perform their necessary due dilligence including but not limited to how the company has historically handled their accounts payable, handled their prior debt obligations, and how the principals have historically handled their personal expenses. These factors plus market trends in the industries that the business serves and the overall economy are combined to form a risk profile for our potential customer. This provides a snapshot for the Bank to weight two decisions, whether or not to lend to the potential customer and the appropriate fees and interest rate to charge the customer to compensate for the risk.

When I was using my credit cards to finance fancy dinners, flashy cars, and expensive gifts during college, I knowingly jeopardized my personal brand. Mesmerized by America’s buy now and pay later philosophy, my credit card companies considered me a high-risk customer as evidenced by late payments and interest rates that rivaled batting averages. Coupled with my lack of a savings account, my personal brand became a rubber stamp with the word “DECLINE” in bold block letters. Although my friends had the foresight to maintain their financial solvency in college, there were many of my colleagues that graduated with similar debt levels as myself. But the difference lies in how we handled the challenge. Unfortunately, success stories such as my own are often overshadowed by those who refuse to take responsibility for their spending habits. About a month ago, I ran into a former colleague of mine from college who discussed his personal situation with me. Hampered by high-balance credit cards and student loans from college with a humble annual salary, he decided to neglect the credit cards altogether and maintain his consumerist lifestyle. Having a blatent lack of ownership for wastrel spending will ultimately hurt his personal brand when it is time to purchase a house, apply for new credit, and find future employment.

But the beauty of America is that it favors those who work hard and I have a hard-earned opportunity to try again.

Mint Misses on Data Privacy Protection

My marketing and technology infrastructure advisor, Roman, recently sent me an e-mail inviting me to try Mint. For those who may be unfamiliar, Mint is a personal finance management application available free on the internet. Mint allows its customers to centralize their banking, savings, credit card, and brokerage accounts to get a snapshot of where and how they are spending their money. And one of Mint’s most discussed features is that the application will search those transactions, and provide its customers with opportunities to reduce credit card interest rates and improve savings account interest rates.

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Mint goes way beyond just reporting and budget tracking. Using a patent-pending search algorithm, Mint constantly searches through thousands of offers from hundreds of providers to find the best deals on everything from bank accounts to credit cards; cable, phone and Internet plans; and more. Mint’s suggestions are “unique to you” based on your individual spending patterns. For example, if you have $20,000 in a bank account that’s earning no interest, Mint might recommend a high interest rate savings account from ING or HSBC. Acting on that suggestion would give you an extra $900 in interest income over a year.
Mint.com - About Us

I originally tested Mint while it was in private beta, and while I liked its sleek interface, I was concerned about identity fraud risk from how it calculates opportunities to improve its customers’ interest rates. The application searches its customers’ financial transactions and uses that data to offer services from its partner organizations. To address these concerns, CEO Aaron Patzer states:

I’ll make a bold statement: You’re safer on Mint then with online banking. On Mint, you’re completely anonymous. We never ask for a name, address, or SSN - just an email. We know about your finances…but not about you. We’re also independently verified by Verisign, TrustE, and several outside agencies.
Aaron Patzer
Founder & CEO, Mint.com

What Patzer has not addressed is how a company operating for less than three years; Mint was founded in November 2005, can provide its customers with more security than long-standing financial institutions that have substantial risk management procedures in place. Personal financial data is extremely sensitive which is why financial institutions go to great lengths to keep it protected. Data security within a financial institution starts with website encryption, continues with intricate password management, and finishes with barring employees from accessing personal e-mail websites and social networking websites from behind the corporate firewall. This mitigates the risk that employees will inadvertantly disclose sensitive customer data. Additionally, financial institutions are regulated by a number of Federal and State regulatory agencies to ensure that they are maintaining sound data privacy procedures.

The U.S also has one of the most highly regulated banking environments in the world; however, many of the regulations are not safety and soundness related, but are instead focused on privacy, disclosure, fraud prevention, anti-money laundering, anti-terrorism, anti-usury lending, and promoting lending to lower-income segments. Even individual cities enact their own financial regulation laws (for example, for usury lending).
Wikipedia - Bank Regulation

In my humble opinion, it would be irresponsible to trust personal financial data to a company that does not follow the same data privacy precautions.