How do you pay at the checkout line? Between checks, credit and debit cards, and online payment services like Paypal, it’s sometimes surprising when we see someone pull out actual cash these days. The way you pay may seem to be of little importance, but in truth, the money doesn’t all spend the same.
Particularly if you’re under 30, you probably use – and grew up using – a debit card for a lot. It just makes so much sense; less bulk in your wallet, less for a pickpocket to lift, less chance of getting caught at the store five dollars short. Plus, it’s trackable – the money that you spend on a debit card no doubt comes with online banking, allowing you to look back at the end of the month and determine why the grocery money ran out so quickly.
The trouble with this idea that debit cards are more trackable than checks or cash, according to Hong Kong researcher Dilip Soman, has to do with the fact that humans, not computers, have to do most of the work involved in that tracking on a day-to-day basis. According to his research, we have mental “pools” for how much money we’ve spent on broad categories of purchases – housing, food, entertainment, and so on – and each time we complete a transaction, we subtract the transaction price from the appropriate pool, mentally.
Regardless of your mental faculty with basic arithmetic, doing this mental juggling requires that you remember the transaction. As it turns out, debit and credit card transactions leave very little in the way of a mental imprint. If you consider the process of a card transaction, it’s easy to see why: with a card, you swipe, sign a slip, and you’re done – you don’t even have to look at the total. (Today, if the transaction is small enough, you don’t even have to sign, most places; new technology has also removed the physical contact of the swipe, opting instead for touchless systems like PayPass.) If you write a check, on the other hand, you have to take the time to write out the full transaction amount in words and numbers, cementing the exchange in your mind. Cash would seem to provide the lowest imprint – nothing to write, nothing to sign – but with cash, a physical exchange occurs. You can tell how much you’ve spent from moment to moment simply by checking the amount remaining in the wallet.
On top of this, social and behavioral researchers Morewedge, Holtzman, and Epley recently described a broader phenomenon related to card use, called the “accessible account effect.” They suggest that people perceive the sting of a financial transaction as a fraction – the cost of the good being purchased versus the amount they have to spend. If the pool of money is the $100 in your wallet and the season box set of The Wire is $50, that’s half of your money gone. With the increasingly common setup of a debit card linked to the checking account where your paycheck direct deposits, however, the pool of money you have to spend becomes an arbitrarily large number compared to the amount of cash you would reasonably be carrying, so that $50 is a very small fraction of your available funds.
A month later, you’ve spent that $50 ten times over, easy as a wave of the card-hand. All of this stealth spending can add up to one big, painful blow to your finances. Fortunately, the research says you won’t remember it, anyway.
Small business is often referred to as the job-growth engine of the US. Particularly at times when the country is rebounding from recession, persistent innovators emerge as the next business cycle leaders.
An area’s laid-off workers frequently are just the catalyst for innovation, says Paul Jerde, executive director of the Deming Center for Entrepreneurship at the University of Colorado. In a recession, “A lot of that talent gets thrown into the marketplace,” he says, “the vibrancy and talent of innovators turned loose is large.”
One place this is playing out today is in the Bay Area of California where major tech firms have cut jobs, but promising young companies have accelerated their business plans in order to add positions and grow market share.
For example, Lithium Technologies which creates online communities for its clients’ customers, almost doubled its staffing levels in 2008. It further grew its workforce by 15 in Q1 of this year and plans to hire another 30 to 40 staff by year-end. Last year’s revenue, in the range of $10 million to $20 million, doubled from 2007’s gross.
Another fast-growing bay area firm is Responsys, an email marketing service from San Bruno. The employer, with 240 staff, plans to hire 45 more workers by the end of the year. “We’re looking at this market as a real opportunity to invest big.” says CEO Dan Springer.
And the Bay isn’t the only place where board rooms are planning to win in today’s market. Atlanta-based Cbeyond focuses on the voice and data network needs of small business. The firm expects 2009 revenue to grow about 20 percent. It recently invested tens of millions of dollars and added more than 600 jobs in an aggressive headquarters expansion — a extremely bullish move in the face of a big bear. “We’ll likely double the size of our business over … the next three to four [years],” says CEO James Geiger. “We’re not just surviving in this economy, we are thriving in this economy.”
Mark Lupa is a managing partner for High Country Venture, an investment firm focusing on early stage Colorado-based technology startups. “The nature of people in these startups is that they’re innovators and they persevere,” Lupa says. “If they’ve got really good technology and good people, they will eventually get funding and they will survive.”
I always get a kick out of people – like the author of this week’s “Buttonwood’ column in The Economist magazine – who say that tax revenues to government are suffering because they spent all the inflated tax revenues they got all these years, and now the revenues are gone, gone, gone but all the programs and government-paid employment remains! Hahaha! Another downside of acting like idiots.
The revenues, of course, came from the stock market bubble and the bond market bubble and the housing bubble and the consumer spending bubbles, instead of “storing up surpluses in the fat years so as to cushion their finances in the lean ones” which makes me laugh a big ol’ Mogambo Laugh of Scorn (MLOS) – hahaha! – at the idea of a government “storing up tax surpluses”, like money is corn or something! Hahaha!
You can tell he doesn’t want to get into an argument with me, and says that “governments were sorely tempted to spend their inflated revenues” which makes me laugh, too, at the sheer simplistic childishness of the remark because I can’t think of any government or entity of any kind, anywhere in space and time, in any sector of the universe, which was never “tempted” to spend extra money on something!
Even the idea of it makes me laugh in a cruel and sardonic way that could only come from the Cruel And Sardonic Mogambo (CASM), who has been known to enjoy this very “extra money” phenomenon when he “accidentally” lets it slip at dinner that a whole handful of change fell out of my pocket in my car, just to watch them scramble and fight each other for a chance to feel around the driver’s seat, fighting each other off, pulling them away and taking their place, escalating the violence, driven to acts of aggression by their greed and the mere suggestion of “extra money”!
That’s when I yell out, “Hey, kids! Since you are bent over like that and your face is down there, how does the seat smell where I sit on my Fat Mogambo Butt (FMB)? Is it as sweet as I think it is? Hahahaha!” proving that some things are just naturally funny!
If you, too, think that the government can stash away excess tax revenues, then please wait until I have stopped laughing and then tell me how, and where (but mostly how) they could do such a thing, and I will make you famous! The government can “save up” a trillion or so dollars? Hahaha!
Then this Buttonwood guy said, “As countries try to eliminate the shortfall, it is tempting to hope that they will do so purely by cutting waste in public spending” which is another concept that I don’t understand, because whether the spending is wasteful or not, spending is spending and income is income.
And so it is not so much the waste as it is the Sheer Freaking Size (SFS) of government spending that makes me crazy with fear and outrage that such a thing is allowed to happen just because some cowardly Supreme Court weenies ruled in 1933 – and upheld at every challenge since then by every subsequent cowardly, traitorous Supreme Court – that the dollar did not have to be gold, as literally required in the Constitution, but could be made of paper and electronic digits backing up IOUs and just about any silly crap the government wanted, and now we are going to pay the price for being such idiots as to have let that happen.
Of course, he did not get into this kind of pessimism, where I figure people are this close (hold up thumb and forefinger almost touching to indicate “almost”) to digging up and eating the dead, the FDA has to establish new dietary guidelines on recommended maximum daily intake of formaldehyde and embalming fluid, and where necrophiliacs are alarmed and pushing for “protected minority” status and all those attendant luscious government benefits.
However, and perhaps thankfully, he does not go quite that far, but ominously adds that, in all honesty, cutting government spending is going to be hard because “they won’t (and probably can’t). So they will find other things to tax.” Yikes!
I say “Yikes” because if there is one thing you can say about a tax, it makes prices go up for the final consumer by at least 100% of the tax, which is inflation in consumer prices, which is The One Freaking Thing (TOFT) that you DON’T want! TOFT!
But we got it anyway, and in a recent study by Florida International University Center for Labor Research and Studies, they found that the cost of living, in Florida, is up 25% in six years! Unforgivable!
But you will be surprised (as in the top of your head blowing off and you begin to bellow, like The Mogambo, “We’re freaking doomed!”) to know that this compounds out to what sounds like a piddly 3.8% inflation a year, but which obviously isn’t piddly, or I would not get so upset, and then people (like me) would not start yelling in fear and panic, and there would not be a big commotion, and things would not be said, like, “Buy gold, silver and oil right now because your government is acting like monetary and fiscal idiots, or else you are an idiot and you are as stupid as you look!”, and then you try to, you know, calm the guy down by complimenting him by telling him that his wife has a nice butt and I have the hots for his teenage daughter, and then he gets all upset about THAT for some reason, and then threats are made and blah blah blah. You know… The same old thing.
But this is not a question of ancient animosities originally involving, as far as anyone remembers, a barbecue grill, or even the continued heated argument about the definition of “warning shot”, but that 3.8% annual inflation is a horrible, terrible thing, as it compounds to a 25% increase in prices in six short years, which is just about what the horrible Ben Bernanke (with his “targeted inflation” crackpot idea) actually wants: To inflate away the burden of debt by, astonishingly, everyone going farther into debt so as to increase demand to make prices rise! Gaaahhhh!
I know that you, because you are a Junior Mogambo Ranger (JMR), have a brain that hurts in trying to comprehend the economic enormity of what the Federal Reserve, with the blasphemous blessing of Congress, is doing, and what Ben Bernanke proposes to do which is to purposely cause inflation in prices of about 3.8%, and your fevered brain that recoils in horror at such an idea is cooled only by knowing that you own gold, silver and oil, and so whatever happens, you are going to be OK, and will make money on these chumps… Maybe (and probably) a lot of money without doing any thinking whatsoever, which is why I say, “Whee! This investing stuff is easy!”
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