Poor California

According to the latest US Census report, California has over 20% of it’s citizens living below the poverty level, more than any other state in the nation.  Think about this the next time you find yourself in line at Costco.  If there are four people ahead of you, statically, one of them will be living in poverty.

Yet California also one of the richest states in the nation.  We have the most billionaires (131) living here than any other state. The top 1% of Californians pay 54% of all the income tax collected in the state and the top 20% pay 89% of all state taxes.  That means, if you reported more than $134,000 in adjusted gross earnings this year, you’re paying the tax for 9 out of those 10 people in that Costco line.  And 4 of those 10 people in line don’t have to pay any state taxes at all.  California has a huge discrepancy between the rich and poor.

Over the past 25 years the State of California has collected over $980 billion in tax revenue to pay for welfare programs.  There are more than 880,000  government bureaucrats working in California who’s job, in part, is to help people get off of welfare.  For all that money and all those people you’d think we’d be making progress, but in fact we’re going the opposite direction.

Over the past 6 years the number of people on welfare programs in the City of Los Angeles has increased 75%.  There are now more than 58,000 people in our city living under in poverty.  And there are 60% more recipients on food stamps now than there were just six years ago.

Yet in states like Wisconsin, Michigan and Virginia the number of people living in poverty has plummeted over the past 6 years.  Millions of their citizens are off government programs and are now working to support themselves.

So what did Wisconsin, Michigan and Virginia do different over this period than California did?  To start with those states instituted work-for-pay programs.  Programs designed to get people off welfare and back to work.  California, on the other hand, resisted work-for-pay programs. Instead, we opted to pay welfare recipients cash, goods and services with “no strings attached”.

One reason may be because the bureaucrats and politicians who are charged with reducing poverty in our state have an incentive to increase the funds allotted to them in order to retain their power, clout and employment.  In fact there is a built in “disincentive” for these government employees to succeed in reducing the number of welfare recipients because in doing so, they will be putting themselves out of a job.

This was illustrated to me by Eddie Flores when I sat down with him last month for lunch.  Eddie owns Linesman Clothing in the City of Commerce where he employees 60 people.  Most of them work 40 hours a week for minimum wage sewing garments.

Maxine Waters, Congresswoman for the 43rd district, approached Eddie a few years ago and encouraged him to move his garment company to her South Central LA district.  She said that a great number of her constituents were unemployed and wanted jobs.  Eddie challenged her saying he didn’t believe the people in her district would be willing to work all day for minimum wage.  But he agreed to do a survey of the citizens in her district to see if this was true.  What was discovered is that those unemployed citizens were not willing to give up the benefits they were receiving in exchange for a minimum wage job in Eddie’s garment shop.

19% of voters in the 43rd district were living below the poverty level when Maxine approached Eddie, today that number is over 20%.  A central theme in congresswoman Waters campaign has been to promote aid to the poor.  She has succeeded in that and her constituents have kept her in office 27 years for it.

I have a close friend who is among California’s top 1% wage earners.  He has two boys, both now in their 20’s.  He and his wife have spoiled their boys their entire lives.  They gave them everything they ever wanted and never asked them to do a chore or to get a job.  They now live in a house, rent free, that my friend bought for them and they spend their days “making art”.

My friend and Maxine Waters have a lot in common, they are both loved by those they give stuff to and they don’t ask them to contribute anything in exchange.

If we want to move “Poor California” out of poverty we need to stop electing officials who are spoiling their constituents and we need to stop spoiling the children we are raising.

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Don’t let a flock of geese, or bad masa, take you down

On January 15, 2009, US Airways Flight 1549 took off from LaGuardia Airport.  Shortly after takeoff, the plane struck a large flock of geese and lost power in both engines.  Quickly determining he would be unable to reach any airport Captain Chesley “Sully” Sullenberger piloted the plane to a water landing on the Hudson River.  All aboard were rescued by nearby boats.

On December 22, 2016, Carlos Galvan Jr. found a long line of unhappy customers when he arrived at work that day.  Mr. Galvan owns and runs Amapola Deli and Market, a local grocery chain catering to the Mexican American population around the Los Angeles area.  One of their specialties has been the store’s famous masa, the ground corn meal used in making tamales.

Amapola was known for their high-quality masa and enjoyed a loyal following that was growing every year.  Their best sales came in the month of December and 2016 was going to be no exception.  The problem was that beginning around December 22nd of that year, customers lined up to demand refunds for the poor-quality masa that they were sold.

The tamales that customers were making turned to mush and were ruined from the masa they purchased at Amapola. Some unhappy customers went so far as to replace their traditional tamales with spaghetti and nachos for their family celebrations that year.

Word got out through local TV stations and the Los Angeles Times that the inferior masa purchased from Amapola had ruined Christmas for hundreds of Mexican American families. This was what Carlos Galvan Jr. was facing when he pulled up to work a few days before Christmas 2016.

Immediately, Carlos instructed his staff to issue full refunds to anyone who had purchased the spoiled masa.  He went on the air that evening and issued an apology and offered full refunds to anyone who had purchased masa from his store.

The day after Christmas, Carlos posted a statement which said how saddened and he and his 350 employees were that their loyal customers were disappointed in their product and had a bad holiday experience with their masa. The statement went on to say that for 55 years Amapola stood for quality.  He admitted that this past weekend they had sold food that did not meet their standards and assured them that the food did not pose a health risk, it just didn’t taste good.

 

The statement said that the company immediately began investigating the problem and soon found that it came from one of their long-time suppliers who used a corn grown for fuel, not consumption, in making the raw ingredient.

This statement was sent out the day after Christmas as a press release, posted on all their social media outlets, mailed and emailed to customers. It was also written in both English and Spanish and displayed in their 3 stores.  Even today, each store has signs with a hashtag in Spanish that reads “#Better than Ever”.

Being prepared for an emergency and acting quickly, whether its losing both engines on your airliner or selling a bad product you’re known for, is the key to success in what could have been a total disaster for both Mr. Galvin and Captain Sully.  No matter whether you run a business or pilot a jet, make sure you have plans in place just in case the worst were to happen.

Molly’s Game, a cinematic example of CEO Issue Processing

Molly’s Game, written and directed by Aaron Sorkin staring Jessica Chastain as Molly Bloom, is a cinematic example of what hundreds of CEOs who are Vistage members experience every month in meetings with their peers.

A Vistage group typically consists of a dozen CEOs and entrepreneurs running businesses in a variety of industries.  Interestingly, members from VERY different industries often have shockingly similar issues they are each facing.  The real-life Molly Bloom could have been a typical Vistage entrepreneur with a problem to solve.

At the core of our meetings is something we call “Issue Processing”.  This is when we take an issue that an executive is having and “process” it in much the same way as depicted in Molly’s Game.  Here’s how the movie Molly’s Game and a Vistage meeting are structured alike:

SPOILER ALERT: IF YOU PLAN TO SEE THE MOVIE, YOU MAY WANT TO READ THIS AFTER

STEP 1: State the problem

Molly’s Game:  Within the first few minutes of the movie we see Molly Bloom arrested for running an illegal high-stakes poker game.  Her problem is convincing the Feds she is innocent to avoid going to jail.

Vistage: A CEO will state their problem, or issue, to their peers in the form of a question such as “How do I tell my sales manager he’s doing a lousy job?”  The executive will go on to explain why this problem is important, what they’ve done so far and what they’d like the group’s help with.

STEP 2: Ask Clarifying Questions

Molly’s Game:  Through questioning by Molly’s attorney we learn how she got into the gambling business, about the millions of dollars at stake and how her clients lives would be ruined if she were forced to turn over her hard drives and emails.

The movie shows us flashbacks of Molly’s childhood, particularly the tumultuous relationship with her demanding father.  We learn how Molly never came to terms with her father’s zealous drive for excellence.  In one moving scene, Molly realizes that she must have control over powerful men to be in control of her own life.

Vistage: The Vistage group will ask probing questions that may deal with how many hours the executive is spending on the issue, what are the emotions surrounding this decision, how will it impact their relationships of others, and how much money is at stake.

The group may also probe into the executive’s past to determine what drives him or her to do what they are doing.  Much the same way that Molly discovers that she must have control over powerful men to be in control of her own life due to the relationship with her strict father. By discovering this underlying state of being, executives can come to terms with their behavior and make better decisions based on acknowledging their belief.

STEP 3: Re-State the problem

Molly’s Game:  Sometimes the original problem stated may not be the real problem. Molly thought she simply wanted to stay out of jail, but after understanding her fundamental belief, she realized that the real problem she wanted solved was how to protect her name and reputation once the case was over.

Vistage: The executive is challenged to see if the original problem (How do I tell my sales manager he’s doing a lousy job) is the problem they really want solved.  The group may offer suggestions such as “How do I demonstrate stronger leadership in my company?” or “How do I build a better management team?” Ultimately, it’s up to the executive to decide whether to re-state the problem or not.

STEP 4: Suggestions

Molly’s Game:  Molly’s attorney offers several suggestions to avoid jail including a deal offered by the prosecution.  But to take the deal, she would have to give up the names of the players on her list.

Vistage: The Vistage group may offer suggestions such as weekly one-to-one meetings with managers, going to see key customers with along with the sales rep, looking for events to celebrate when employees do the right thing, or leading a management retreat.

STEP 5: Action Promise

Molly’s Game:  By the start of her trial, Molly decides to plead guilty and leave her fate up to the judge, so she can protect her reputation and that of her clients.

Vistage: The executive will commit to a specific action promise to be done by a specific date.  For example, he/she may commit to having an offsite retreat with key managers before the next monthly Vistage meeting.

Molly’s Game is a brilliant cinematic example of how Executive Issue Processing can work when a skilled writer and director like Aaron Sorkin decides to team up with a talented actress like Jessica Chastain.  I recommend you see the movie if you haven’t already done so.  If you’d like to learn about Vistage and how we help hundreds of entrepreneurs and CEO’s around the world, you can contact me.

A Shot in the Dark

Achieving goals often requires taking risks, but all too often in life, we’re afraid to take that shot in the dark.

Blind since the age of 8, Lex Gillette was determined not to let that fact keep him from achieving his goals. By the age of 32, Lex had earned 4 Paralympic medals, 2 world championships, and a world record in the long jump.

At 9, Lex asked his parents for a basketball hoop he could hang on the back of his door.  He tied the bottom of the net together so the ball wouldn’t fall out and he began taking shots. In the beginning he was terrible but with practice he was soon able to make the ball go in the basket from anywhere in his room by envisioning where the hoop was.

What he realized was that in life, sometimes we’re afraid to take a shot in the dark.  But envisioning where that rim was helped him sharpen his focus tremendously. It was this razer sharp focus that propelled Les to win 17 national championships.

Picture this, a tall, lean, black athlete standing at the end of the long jump runway.  But this athlete is blind.  His coach is at the other end of the runway, past the landing pit.  This blind athlete tunes into his coach’s audible instructions.  His coach then begins to clap and yells “fly, fly, fly”.

Lex homed in on the sound of his voice and took off in his direction.  On the 16th stride he lept into the air and soared to a world record jump.  He heard the roar of the crowd and knew he would be making a tip to the gold medal stand.

Was Lex born with the desire to succeed or does it come from facing adversity?

Do we need to lose our sight in order to see a better version of ourselves? The best view of ourselves?

Navigating through life without the use of eyesight has allowed Lex to ascend to new heights and push the limits of courage, faith and self-determination. The inability to see was not the determining factor in whether Lex would succeed or not. It was having a vision, seeing something before it is in existence, and working tirelessly to bring it to life.

It is that very power that has propelled Lex Gillette into being the best totally blind long jumper in the world. The ability to see things before they exist is a power available to all of us. Lex believes that the dream of flight can become a reality limited only by the power of your imagination. When you have a vision of soaring to new heights…wings are just a detail.
Close your eyes now and envision your highest potential, paint a picture of yourself at your absolute best.

What do you see?  Do you see your life the way it currently is?  Do you see your business, your practice, your relationships with your spouse, your kids, your co-workers as they currently are? Or do you see them how they could be?  What does that vision look like?  Vision your relationships with those most important to you, family, friends, customers, partners.  Vision your health, your wellbeing, your serenity, your peace.  What do you see?  Vision your lifestyle, does it match up to what you see?  If not, are you willing to put in the time and effort so it will?

Lex would remind himself that “For those determined to fly, having no wings is just a little detail.”
“Sight shows us what is, Vision shows us what could be.”

“Sight shows us our current reality, Vision allows us to have that reality”

“Vision gives us the ability to show us where we want to go, and who we want to be.  A lot of people have perfect sight, but they don’t have 20/20 vision.”

“Don’t accept the current sight in front of you, have a vision of what your realty could be.  Sight limits us to see what is, Vision frees us to see what could be.  Either accept the current realty or take a shot in the dark.”

Why you can’t always call a Spade a Spade

Names are very personal, everyone has one.  Either the name our parents gave us when we were born, the one a woman takes sometimes when she gets married, or the one you legally change it to for other reasons.  Either way everyone has a name they go by.  But sometimes, your name is not your name.

As we know, corporations also have names.  It’s not too uncommon for corporations to use the same name as the person who founded it.

  • The Walt Disney Company
  • Tony Roma’s
  • Charles Schwab
  • Eddie Bauer
  • Estée Lauder
  • Hugo Boss
  • John Deere
  • Johnnie Walker
  • Neiman Marcus
  • Liz Claiborne
  • Kate Spade

Let me tell you the story about Kate Spade, Liz Claiborne and Neiman Marcus.

The person Kate Spade’s real name today is “Katherine Noel Frances Valentine Brosnahan Spade”.  When she was born in 1962 her parents named her” Katherine Noel Brosnahan”

After graduating from Arizona State in 1985 she moved in with Andy Spade (brother of actor and comic David Spade).

In January 1993, Kate Brosnahan and Andy Spade launched the New York–based design company “kate spade handbags”. The next year Kate and Andy were married but she never legally changed her name to take on her husband’s last name.

Kate Spade Handbags, as the name implies, initially sold handbags, but eventually extended to clothing, jewelry, shoes, stationery, eyewear, baby items, fragrances, tabletop, bedding and gifts.

In 1996, the Kate Spade brand opened its first boutique, a 400-square-foot shop located in Manhattan’s trendy SoHo district, and moved its headquarters into a 10,000-square-foot space in West 25th Street.

In 1999, Neiman Marcus purchased 56% of the Kate Spade, the company.  In October 2006, the company purchased all minority interest for approximately $59.4 million.

Neiman Marcus, the company, was founded in 1907 by Herbert Marcus, his sister Carrie Marcus Neiman and her husband Al Neiman.  Today, Neiman Marcus Group is owned by two private equity firms, Texas Pacific Group and Warburg Pincus.

Neiman Marcus then sold the Kate Spade label for $124 million in 2006 to Liz Claiborne Inc., which was later renamed to Fifth & Pacific.

Liz Claiborne, the person, launched her own design company, Liz Claiborne Inc., in 1976. It was an immediate success, with sales of $2 million in 1976 and $23 million in 1978. Liz Claiborne Inc. went public in 1981 and made the Fortune 500 list in 1986 with retail sales of $1.2 billion.

In February 2014, Fifth & Pacific, now owned by Liz Claiborne Inc. changed its name back to Kate Spade & Company.

In 2016, Kate Spade, the person, wanted to go back into business a collection of luxury footwear and handbags.  She sold the rights to her name, Kate Spade back in 1999 so she called the new company Frances Valentine named after two of her family members and she legally changed her name from Katherine Noel Brosnahan to Katherine Noel Frances Valentine Brosnahan Spade.

She recently went into a Kate Spade store in New York to buy a gift for her daughter Frances Beatrix Spade.  When the sales clerk asked if she wanted to be on their mailing list she just smiled. Her daughter said, “mom tell her”.  Kate politely told the clerk that she was sure she was already on it.

The Unsung American Hero

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I was in the Albuquerque airport the other day having a quick dinner before my flight home when two servicemen from Kirtland Air Force Base sat down near me.  When I finished my meal, I went to the cash register to pay my bill and told the cashier that I’d like to pick up the tab for the two servicemen who just sat down.  She politely told me that I couldn’t because another guest had already picked it up.

I can remember, not too long ago in the Vietnam era, when our men and women in the armed forces were not as well regarded as they are today. I didn’t hear of anyone back then offering to buy them a meal, let alone thanking them for their service.  Many of them were looked down upon by the very citizens they were fighting to protect.  Now, just a couple of generations later, they are revered and looked up to as the national heroes that they are.

Some of the business owners I meet with these days feel the same way that those Vietnam servicemen felt back then.  They sometimes get the feeling that the general public, politicians and bureaucrats think all of them gouge their customers, pollute the environment and make way too much money on the backs of their hard-working employees.

Our elected officials play right into this myth while at the same time acknowledging that small business is the engine that can solve most of our economic problems. As proof, business owners point to all the anti-growth policies that have been enacted over the past few years.  Laws like ObamaCare and minimum wage increases that make hiring workers prohibitively expensive.

Restrictive Dodd-Frank provisions have led community banks to finance fewer and fewer new businesses despite their unique knowledge of the local markets.  It’s easier for an 18-year-old high school student to get a college loan than it is for a 25-year-old entrepreneur to get a small business loan.  

Last month in California, voters approved a raft of new state marijuana laws presenting employers with hazy challenges when it comes to workplace drug testing.  Employers should tread carefully when testing workers for pot under drug-free workplace policies.  Firing or disciplining a worker for a positive drug test could open firms to legal challenges from employees.

In Los Angeles county, voters approved a ½ cent sales tax increase for Measure M to raise billions of dollars for transportation projects. This is in addition to over 30 school bonds and parcel tax assessments that passed and are also paid for by businesses.

According to a survey by the Kosmont-Rose Institute, eight Los Angeles area cities, including Los Angeles, Santa Monica and Long Beach, rank among the 20 most expensive cities to do business in the Western United States.

In Long Beach, where I live, the sales tax next year will be 10.25% but next door in Orange County the sales tax will be 7.75%.  That means I’ll save $5.00 in taxes if I buy $200 at the hardware store in Seal Beach, a mile away from my house, instead of in Long Beach.  The net effect will hurt small businesses in my neighborhood.

Entrepreneurs in this country are like salmon swimming upstream, they must overcome waterfalls, bears and man to make it to their spawning grounds.  Yet despite all these obstacles some of them still make it.

Alvaro Garcia is a 45-year-old father of 3 living in the San Gabriel Valley.  He came to this country from Nicaragua when he was 18 years old.  While attending high school and learning English, he got his first job as a Domino’s delivery driver.  The next year he was promoted to supervisor then district manager and a few years later he was able to buy a franchise.

When a Domino store became available, Garcia recruited his fellow employees to buy into what eventually became 22 stores doing over $7 million in sales.  In 2013 he sold his Domino franchise and, with 3 partners, bought a Jersey Mikes sandwich franchise.  Garcia now owns and operates 70 Jersey Mikes locations.  He does more than $30 million in sales and is providing jobs to hundreds of people living in Southern California and paying thousands of dollars in taxes, permits and fees.

My family is another example of entrepreneurs helping this country.  Between my grandfather, father, father-in-law, uncle, cousin, brothers and me, we have created thousands of jobs for all sorts of Americans as well as paying millions of dollars in taxes, permits and fees over the past several decades.

Last month the Wall Street Journal reported that small businesses account for 64% of all new jobs in this country and that companies less than five years old create more than 80% of all new jobs every year.  Yet fewer than 500,000 new businesses were started in 2015, that is a disastrous 30% decline from 2008. 

In the past eight years, more than a million new companies have “gone missing” from the economy. This absence accounts for an estimated 7 to 10 million jobs that, had they existed, could have provided employment for every one of the nation’s discouraged workers. Simply put, the U.S. will never reach full employment without more startups.

Donald Trump wants to “Make America Great Again”.  One way he can do this by creating an environment that enables at least one million Americans to start companies every year. Such an outcome would assure his target of 4% GDP growth, as well as full employment.

In California, elected officials are trying to find ways to fight the incoming administration.  Perhaps they should step back and see what’s missing in the golden state.  There’s a reason Florida, Texas and other red states are growing.  Those states have embraced an economic model that fosters job growth, lower taxes, fewer regulations and a government that is business friendly.

Yet here in California we have a state where a temporary tax was made permanent, a public pension plan is out of control and the governor and Legislature have no intention of cutting taxes or reducing regulations.

But what can you about it?  One thing you can do is the next time you see a business owner at dinner or in the bar buy him, or her, a drink and thank them for their service to our country.  For they are the Unsung American heroes.

Merit Badge Day at the Museum

One Hundred Boy Scouts descended upon the International Printing Museum in Carson California Saturday, August 13th, to earn two merit badges; Pulp & Paper and Graphic Arts.  Thanks to over 20 museum and industry volunteers the boys made paper, silk screened t-shirts, and printed cards that they designed that day.

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Ten groups of ten boys rotated every half hour to various stations set up around the museum property in order to pass the requirements for the two merit badges.  On the museum grounds volunteers helped the boys blend pulp which was then poured onto wire frames allowing each boy to take home the paper they made.

 

Boys also silk screened their own commemorative Merit Badge Day T-shirt while volunteers taught the boys about various bindery methods in order to fulfill that requirement for the graphic arts merit badge as well as how to identify the various types of printing they run across at home and at school.

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Since the first Merit Badge Day on May 7th 2011 over 2,000 boys have been exposed to the graphic arts and paper industry at the International Printing Museum.  Mark Barbour, curator of the museum, Dan Freeland, museum chairman, and I came up with the idea to host a merit badge day in order to promote paper making and the graphic arts to a generation of kids raised on iPads and cell phones.  This was during a time when funding was cut in the education system for printing programs.

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Fewer and fewer boys are learning about the printing and paper industries and we thought there might be a desire among the boy scouts to learn while earning a merit badge.  I contacted the Boy Scout National Office back then and learned that the Graphic Arts and Pulp and Paper Merit Badges were among the least popular of all the merit badges boys can earn.  When my son was in scouts, I remembered that Merit badge days were popular among boys seeking rank advancement. At the same time Mark had been working on a way to get the Boy Scouts more involved with the museum so we came up with the idea of creating a Merit Badge Day.

When asked why they signed up, one boy from Orange County said he had always been interested in Printing and this sounded “Cool”.  Another boy said he liked engineering and he thought a job in this industry might be interesting.  A third scout said he was there because his friend decided to come and he liked the chance to make something by hand.

Because of the Merit Badge Day, the Printing Museum now has a steady stream of new visitors, the Boy Scouts now have a way to learn about our industry while earning two merit badges, and the printing industry is once again educating a group of smart and engaged boys who will soon enter the workforce. Now thousands of boys are learning about the careers and benefits of the graphic arts and paper industries.