Category Archives: Economy

Income Inequality – Top 20 States in 2010

Occupy your state?

Wondering how your area ranks for income inequality? One way to objectively measure it is the Gini coefficient, named after Italian statistician and sociologist Corrado Gini. The Gini coefficient is a statistical tool to measure income disparity in a geographic area.

The American Community Survey calculates the coefficient yearly. How does it work? A coefficient of 0 represents perfect income equality, and a 1 perfect income inequality.

The top 20 in 2010:

Can’t find your state? View the interactive map in full screen for a better experience.

Rank State/Territory Gini Coefficient
1 District of Columbia 0.53
2 New York 0.49
3 Connecticut 0.48
4 Massachusetts 0.47
5 Louisiana 0.47
6 Florida 0.47
7 California 0.47
8 Alabama 0.47
9 Texas 0.46
10 Tennessee 0.46
11 South Carolina 0.46
12 Rhode Island 0.46
13 Pennsylvania 0.46
14 North Carolina 0.46
15 New Mexico 0.46
16 New Jersey 0.46
17 Mississippi 0.46
18 Kentucky 0.46
19 Illinois 0.46
20 Georgia 0.46

Market volatility feeds fear and greed

Domestic and international financial markets are are in uproar, causing selloffs and deep concern among investors. The US lost its top-level credit rating, equating its creditworthiness with Belgium and New Zealand, but below 13 other countries: the Netherlands, Switzerland, Finland, Norway, Sweden, Hong Kong, Germany, France, Canada, Britain, Denmark, Austria, and Australia.

Many Americans are wondering, “What should I do?”

Two reactions are common:

  • Fear
  • Greed

These two reactions can be powerfully motivating and are prompting some very irrational behavior. First, let’s look at an extreme example of fear: In 2008 when the market dropped significantly after the real estate crisis, many fearful Americans called their broker, liquidated everything, then went to the bank and withdrew all their money. Those strongly held beliefs about the end of America & fear of losing everything caused many others to stop investing and simply hang on to cash. It seems silly now, in retrospect, given the continuity of our American way of life that anyone would have acted so irrationally. Still, from a behavioral perspective, people are terrified of losing their security. One this is clear: when facing economic uncertainty, acting from a basis of fear is risky.

Greed is the other common reaction to the fiscal calamity. Some investors are using the volatility to profit from the downturn. Short-sell strategies and derivitives can enrich a portfolio as the market goes down. Without insider information, betting on the downturn is risky.

A conservative approach

Speaking with local financial advisor, Greg Melia, I learned about the “rule of 100.” The rule of 100 is simple:

100 – Your Age = Maximum % of Your Portfolio in Stocks

The basic idea behind the rule of 100 is that the closer you are to retirement, the less risk your portfolio assumes. What are other investment alternatives to stocks? Consider more conservative alternatives like bonds, annuities, CDs, even Gold.

Michael Porter on Corporate Social Responsibility

Michael Porter seeks to redefine capitalism.

Porter, whose theory has shaped much of what business schools teach about competitive advantage and business strategy, is a cornerstone in B-schools as well as the boardroom. His work simply cannot go unnoticed.

Even if Porter’s work could go unnoticed, current events like hedge fund manager John Paulson earning a $5 billion profit are tough to ignore. Society is asking if business people are responsible with their profits.

In response, Porter is now asserting that business must seek to build “shared value” as an alternative to maximizing SHAREHOLDER value. He believes there is a missing link between a company’s success and social progress, making statements like:

“Companies are widely perceived to be prospering at the expense of the broader community.”

Because Porter is such a widely renowned and widely accepted thinker in business, this message from Porter in an era where such strong political tension lies between the left & right will lead to a violent split in business theory.

Two outcomes seem possible:

-Traditional businesspeople will categorically reject Porter’s “shared value” and defend profit.

-Progressive businesspeople will embrace “shared value” and levy it in to regulate profit.

Read Porter for yourself and find out where you stand:

Cheers to the star entrepreneurs… for now.

Article review:

Reinvent Your Business Before It’s Too Late
by Paul Nune & Tim Breene – Harvard Business Review

“Sooner or later, all businesses, even the most successful, run out of room to grow. Faced with this unpleasant reality, they are compelled to reinvent themselves periodically. The ability to pull off this difficult feat and to jump from the maturity stage of one business to the growth stage of the next is what separates high performers from those whose time at the top is all too brief.

The potential consequences are dire for any organization that fails to reinvent itself in time.”

Even in this tough economy, many businesses are thriving.

This review is for you, top producing, star performing business owner.

If the status quo of your business seems great to you, cheers. Remember the good times, because they won’t last long.

Michael Gerber’s “E-Myth Revisited” describes the three roles every business owner plays: Technician, Manager, & Entrepreneur. Technicians are skilled at executing the daily affairs of the firm, while managers oversee and plan in an orderly fashion. If the manager and the technician live in the past and the present, respectively, the entrepreneur lives in the future. He is responsible for working “on” the business, not in it. Gerber strongly believes a true entrepreneur craves change.

And change is the essence of what every organization must do in a business world where entropy is the law, not the exception.

While many businesses perform well during periods of economic expansion, others return performance that is negatively correlated to periods of economic recession. In other words, the recession has done a lot of good for some businesses. If that business is yours, let your celebration be short lived. The economy will change soon, be sure your firm is ready to accommodate that change.

Regardless of how your business is performing today, there is a strong case to be made for implementing a strategic plan for change tomorrow. If you are one of many business owners feeling very optimistic about your firm’s current position, be on your guard against complacency.

The market always demands change.