Credit Hour– Debatable Currency of Learning, Degrees, Credentials: Re-Examine Role of Credit Hours In Education

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Credit hour (or course credit, or credit, or credit unit, or student hour, or Carnegie unit) is the currency for academic degrees and credentials used in most colleges, universities, other educational institutions… Sometimes simplest concepts are most problematic, for example; the notion of the ‘credit hour’, which seems like a self-evident term: One earns a college ‘credit’ for an ‘hour’ of academic work. But quantifying work is a very complicated affair and one ‘hour’ of work is often a misnomer… According to Michael Arnzen; the ‘credit hour’ could be an anachronism, given various asynchronous methods of learning (as in online courses), and other changes that electronic media and new approaches to teaching have on the notion of ‘time’ spent learning…

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The ‘credit hour’ is a cornerstone to the administration of student learning-education; it’s the basis for evaluating student entry into college, determining student completion of course work, degrees… faculty workload, efficiency, and evaluation are rooted in this unit… However, many are critical of the ‘credit unit’ due to the arbitrary use of ‘time’ as basis for measuring education attainment. Generally, the criticism is that student learning varies greatly even among individuals who are taught the same material. Variations are even greater among the various faculty members, departments, topics, schools, colleges, universities… This has become an even greater concern in this era of distance learning and telecommunication. Frustration is particularly high among those involved with transfer of credit among institutions… Unfortunately, the credit hour has become a proxy for student learning…

Credit Hour vs. Competency: According to Celia R. Baker; the credit hour’s clout is weakening, however, with a dawning realization that four years spent in college does not guarantee success at a job. A 2006 study by National Center for Education Statistics show; 69% of college graduates could not perform basic tasks, such as; comparing opposing newspaper editorials or comparing cost per ounce of different foods. According to Richard Arum and Josipa Roksa in their book; Academically Adrift: Limited Learning on College Campuses: When 2,300 students at many four-year colleges took the ‘Collegiate Learning Assessment’ to measure higher-level skills taught at college, 45% didn’t demonstrate significant improvement in learning during the first two years of college and 36% did not demonstrate significant learning over four years of college…

A survey by the Association of American College and Universities show; one-third of employers said ‘no’ when asked if college graduates are well-prepared to succeed in entry-level positions in their companies. And when employers drill down to grades on transcripts when screening job applicants, it’s hard to tell what graduates know… Grade inflation can be blamed for that.. According to the Teachers College Record, in 2008, 43% of all college grades were A’s and in 1961, the number stood at 15%… According to Judith Easton; the idea of increasing competency measures at universities is highly desirable, because ‘seat’ time doesn’t tell everything– it’s not an ‘outcome’ measure... decisions about restructuring outcome measures should rest with colleges and universities, not government… even though credit hours are the basis for the government’s Pell grants to students, which amounts to billions of dollars…

In the article  Curious Birth and Harmful Legacy of the Credit Hour by Amy Laitinen writes: Time-based units were never intended to be a measure of student learning. In the early 1900s, Andrew Carnegie was troubled that most professors made too little money to save for retirement created a free pension system administered by Carnegie Foundation for the Advancement of Teaching. In order for colleges to participate in the program, they had to adopt a standard unit for admissions, which was based on a system used at the high-school level that measured time spent on a subject…

But colleges didn’t stop there. Carnegie’s pension system spurred them to convert their course offerings into time-based units to determine faculty workload thresholds to qualify for free pensions. And so credit hour became the fundamental building block of courses and degree programs in higher education… Unfortunately, it has also become the primary proxy for learning… The Carnegie Foundation did not intend for this to happen and now it believes it’s time to consider how a revised unit, based on ‘competency’ rather than ‘time’, could improve teaching and learning in high schools, colleges, universities. Theoretically, colleges supplement the credit-hour count with an objective measure of how much students learned: Grades... But it’s hard to reconcile that measure with the research suggesting that nearly two-thirds of provosts and chief academic officers think grade inflation is a serious problem: In 1961, 15% of undergraduate course grades were A’s; today more than 40% are A’s.

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While the stated mission of higher education may be about learning, the research findings on poor learning outcomes and rampant grade inflation, along with the difficulty of credit transfer, tell a different story… Without broader agreement about learning outcomes, credits and the value of degrees will remain opaque. Measuring ‘time’ is easy, but measuring ‘learning’ is hard. However, that doesn’t mean that it shouldn’t be done… Federal policy can help catalyze such efforts by leveraging the government’s authority to use financial aid– a huge incentive for institutions to pay for learning. Today the multibillion-dollar federal financial-aid system runs on the credit hour. And it gets only what it pays for: Time… As higher education becomes increasingly necessary and expensive, measuring ‘time’ rather than ‘learning’ is a luxury that students, taxpayers, and the nation can no longer afford. While Carnegie’s free money for pensions dried up long ago, the federal government is spending hundreds of billions of taxpayer dollars to pay for time-based credits and degrees of dubious value… Paying for what students learn and can do, rather than how or where they spend their time, would go a long way toward providing students and the nation with desperately needed, high-quality degrees and credentials.

In the article Hour by Hour by Paul Fain  writes: An over-reliance on the credit hour, which links the awarding of academic credit to hours of contact between professors and students, has led to many of higher education’s problems… There is very compelling evidence that what we have right now isn’t working… The standard of one credit hour for each hour of faculty-student contact time per week falls short, because the credit hour does not measure learning… Grades are supposed to do that, but plenty of research has identified problems with grade inflation. And even if grades did work, the credit hour still wouldn’t allow flexibility for students to learn at different speeds…

As a result, the credit hour is at the intersection of three of higher education’s thorniest issues: Cost, Time, Quality. However, blowing up the credit hour won’t be easy, in part because it’s so convenient, and reforms need to be both thoughtful and deliberate: Define the credit hour too tightly and innovation would be stifled. Define it too loosely and taxpayers would get taken for a ride… Several colleges have experimented with decoupling college credit from ‘seat’ time using ‘competency-based education’ to challenge status quo, and tie credits to ‘direct assessment’ of student competencies, rather than a traditional credit-hour calculation…

In the article Defense of the Credit Hour by Richard Schur writes: I like the credit hour and I know that I should embrace an educational structure that measures ‘learning’ and not ‘time’. A standard that embraces self-paced learning, experiential learning, competency-based tools, many people argue, is better than one that marks the time students have endured in a class. Furthermore, the credit-hour standard is expensive to deliver, and inefficient in linking ‘seat’ time to actual ‘learning’; making it impossible for institutions to realize the productivity gains associated with technological advances… But I find myself being quite conservative and traditional on the subject. I want to save the image, if not the reality, of a teacher and class meeting together over a semester, quarter, or trimester to explore a set of questions…

Education takes time and must happen in a particular space, either physical or virtual… I believe, perhaps foolishly, that education is a process, not a destination. Education is not reducible to a set of facts or skills. Rather, it’s about a way of being in the world, a set of habits, which help develop curiosity and wonder… An education is beginning, not an end… My paradigm for teaching comes from Socrates… If we read Socrates carefully, we understand that it’s not learning that he valued, but wisdom and virtue– knowing when to do the right thing, at the right time, for the right reason. Having the time to think and reflect is not the luxury that many of the critics of the ‘credit hour’ claim it is. From the perspective of the classic liberal-arts tradition, taking the time for deep thought and reflection is what makes a human. To deny our students that experience is to diminish their humanity…

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The higher education model hasn’t changed much in hundreds of years: Academic years are divvied up into semesters, which are made up of courses, for which students earn credits. When students have slogged through enough semesters to earn plenty of credits, they are granted a degree or some sort of credential… According to Daniel Greenstein; many of today’s students aren’t interested in a classic college experience of dorms and all-nighters. Rather, they need college to be ‘unbundled’, and to be able to integrate it selectively, sometimes a course at a time, into their busy and full lives… Hence, new academic models are emerging that offer the flexibility needed by students whose education occurs in fits and starts. We need to do a better job preparing students for post-secondary programs, so that they can make informed decisions about which education path is right for them. And, need to more fully explore how to deliver a personalized learning experience to all students– one that is both productive and affordable…

According to Robert W. Mendenhall; credit hour is the coin of the realm, but it’s badly in need of an update… it’s time we measured learning rather than time… we don’t need the credit hour as a pricing measure, financing measure, or even faculty-workload measure… According to Carol A. Twigg; the concept of a credit hour based on ‘seat’ time is a relic… but you must have some kind of a currency that can be traded.. The challenge is to find a way to measure the course content– whether it’s delivered at a distance or in an accelerated format… According to Mitchell L. Stevens; The credit hour by itself ‘isn’t a measure of quality, it’s about quantity’… At a time when the general public is questioning the cost and value of higher education, this could force the sector to measure quality in addition to quantity… But the question of what a credit hour means today, and in future, isn’t going away anytime soon…

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Labor Day Has Lost Meaning– Forgotten are the Achievements of the Union Movement: Labor Day is an Anachronism…

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Labor Day has lost much of its meaning: Most countries in the world celebrate some kind of Labor Day: In the U. S., Labor Day marks a significant event and is celebrated on first Monday of September, each year. The roots, results of the Labor Movement in America are vitally important to the way everyone lives today… In fact, the holiday was born from the ‘revolutionary’ idea that workers should be limited to laboring for only 8 hours a day; 8 hours of work + 8 hours of recreation + 8 hours of rest = the perfect formula for a happy and healthy life: At least that’s what labor leaders believed in the late 1800s… Prior to that workers (include child labor) had very few rights, protections and, in general, were supposed to be happy just to have employment no matter– the conditions, hours, demands or dangers involved… Now for most people, Labor Day is something different and it means two things: day off, end of summer… rather than, a special day that been set aside to pay tribute to working men and women…

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The first Labor Day celebration was on Sept. 5, 1882, New York City. The workers’ unions chose the first Monday in September since it was halfway between Independence Day and Thanksgiving… The idea spread across the country and some states designated Labor Day as a holiday before the federal holiday was created… President Grover Cleveland signed law that designating the first Monday in September as Labor Day nationwide… In European countries, China and other parts of the world; May Day, first day in May is a holiday to celebrate workers and labor unions. Membership in labor unions in the U. S. reached an all-time high in the 1950s when about 40% of the work force belonged to unions.

Today, union membership is about 10% of the working population… Now, Labor Day carries less significance as a celebration of working people– government offices and businesses are closed so that all the people can enjoy the day, but very little attention, if any, is giving to many accomplishments of the Labor Movement, and especially the many courageous labor leaders that fought tough battles for the rights of the worker… According to Samuel Gompers; Labor Day differs in every essential way from the other holidays– All other holidays are in a more or less degree connected with conflicts and battles of man’s prowess over man, of strife and discord for greed and power, of glories achieved by one nation over another. Labor Day is devoted to no man, living or dead, to no sect, race, or nation…

In the article Forgotten Meaning of Labor Day by Jack Marshall writes: Labor Day commemorates great ethical victory of American society, and not one in a hundred Americans know it– few people think about the real meaning of the word ‘labor’ in the name, and how it’s meant to honor brave, dedicated men and women who fought to ensure a measure of safety, consideration, fairness and justice for the hardest working among us… Today labor unions are controversial– many have been run as criminal enterprises, with deep connections to organized crime; many operate in a blatantly coercive, undemocratic fashion. Union demands and strong-arm tactics, while providing security, good wages to members, have crippled some U.S. industries and limited jobs, as well. Today the unions get publicity when one of them tries to protect a member who should be punished, as when the baseball players’ union fights suspensions for player insubordination or even drug use, or when school districts don’t fire incompetent teachers because of union power, or when members of public unions protest cutbacks in benefits that their private sector counterparts would be grateful for…

Many people feel that today’s unions often embodies an observation made by Eric Hoffer, a longshoremen philosopher, that: Every great cause begins as a movement, degenerates into a business and ends up as a racket… But the message of Labor Day has gotten lost: Labor Day is about the original labor movement that began at the end of the 19th century and rescued American workers from an industrial manufacturing system that was cruel, exploitative, deadly, often feudal… Over the century the labor movement has produced many heroes who personify what Labor Day commemorates, and the many battles they won– against child labor, for fair wages and reasonable work hours, for employee benefits and concern for employee safety… These are achievements and epic story that all Americans should know and take pride on this day…

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In the article True Meaning of Labor Day by Eric Zorn writes: Unions have been far from saintly. I’d never argue that every demand they’ve ever made has been reasonable nor every concession they’ve won good for the general public but, we owe them. Even though only about 10% of the private work force in the U.S. now belongs to a union, most of the other 90% are beneficiaries of the organization of labor... Maybe our parents raised us on union-level compensation– 38% higher than non-union in a 1995 study. Maybe we grew up in communities made more stable by the solid incomes and job security of neighbors with union jobs. Certainly we have enjoyed benefits of comparative domestic peace attributable to the large, union-bolstered middle class– bulwark of democracy...

According to Thomas Geoghegan; when it comes to many benefits, conditions and pay elevated by union standards and the threat of union formation, many non-union workers are, even now, taking a free ride… According to Sam Rosenberg; as union membership has declined over last two decades, so has share of income earned by working class...The idea that technology or human moral evolution has rendered unions and laws that support them obsolete is as quaint as it’s apparently popular... According to Alberto Pupo; union membership is at an all time low and most states are adopting the ‘Right to Work Laws’, and Monday’s holiday smacks of insincerity and flat-out hypocrisy… Labor Day needs to be celebrated as a day that truly honors the worker…  

In the article How Labor Day Was Hijacked by David Sirota writes: Quite obviously, there been a transformation of Labor Day from an occasion to specifically honor worker solidarity into an apolitical vacation day… Los Angeles Times noted; the holiday is the creation of the labor movement, which wanted a holiday to honor workers– and highlight the need for labor reform laws… But, there are ways to take back true spirit of this holiday, if more people are simply reminded of what Labor Day is really all about, there’s a decent chance that we can restore its real significance. Here are just a few reminders:

  • Legislation creating Labor Day did not pass the Congress in response to Americans’ demand for yet one more reason to– sleep in, fire up the grill, drink beer, watch football…
  • Labor Day was not designed to give a day off to commemorate the end of summer nor to give parents a special day to hit the chain stores for back-to-school sales. It was designed to give us all a chance to honor, commemorate the American labor movement and all of its achievements for millions of workers – union and non-union alike…
  • Labor Day was not created to give you one last day to work on your tan or to get drunk in the park at an annual picnic. Labor Day was created to give you a day to attend or participate in some sort of public event showing solidarity with the American labor movement…
  • Labor Day was not designed to be cast as an apolitical holiday that everyone should pretend they honor because they simply support the apolitical notion of work. The ‘labor’ in Labor Day refers not to generic ‘work’ but to organized labor, as in unions…
  • Labor Day is not designed to be a day for anti-union politicians and corporations to say ‘Happy Labor Day’, and momentarily pretend they support the rights of American workers. It’s a day for Americans to speak out against union-busting activity and vitriolic anti-union rhetoric…

Societies face a dilemma that cannot be solved by more debt or more technology: How to distribute not just the output of the economy, but the work and responsibility so that everyone has an opportunity to contribute and earn their keep… According to Charles Hugh Smith; paying people to stay home and rot is not a solution, but neither is paying people more than they produce in competitive markets… Of the three elements of civil society, the Market and the State have crowded out the Community. We either re-discover the labor-value of community or we devolve further into potentially ‘death spiral’ social, financial instability… According to Claudette Millette; to most people Labor Day symbolizes that summer is fading away and we are staring down face of autumn…

But, what is this holiday actually about? The observance of Labor Day began over 100 years ago, and born out of America’s labor unions… According to Samuel Gompers; the day for which the toilers in past centuries looked forward, when their rights and their wrongs would be discussed… that the workers of our day may not only lay down their tools of labor for a holiday, but upon which they touch shoulders in marching phalanx and feel the stronger for it… A century after Samuel Gompers spoke these words this holiday has taken on different meanings to different people: It’s the end of summer, beginning of school, return of football…

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According to Phillip Wilson; many unions, for most part, have outlived their usefulness and are mainly able to thrive in non-competitive niches of the economy. Spending a bunch of money on trying to get people to join current unions is just a waste of time – there is just not enough lipstick for this pig. Instead unions need to re-think the supply demand curve for their offerings and re-make the bundle of services they offer to fit with the demands of modern employees and employers. If they insist on living in the past and maintaining their old model then it may be time to pull the plug… According to Fernando Rendon; most Americans don’t realize that it is a day to honor the common worker; craftsmen, laborers, trades workers… who built this great nation… The first few Labor Days were not officially recognized and workers who participated did so without pay and risked retaliation, losing their jobs and physical violence. At that time there was no such thing as an 8 hour day, overtime pay or a 40 hour work week. Workers were little more than indentured servants… So on Monday as you are enjoying a day off with pay, think about the many job benefits that most people take for granted, e.g.: Overtime pay, vacations, bonuses, sick leave, weekends, pensions… Think of these things and realize that none of them were available until organized labor– fought, bargained… for them. Think of these things and try to understand the ‘true’ meaning of– Labor Day…

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E-Commerce is Global– Changing Face of Online Business, Reinventing the Customer Experience: Trends, Predictions; 2015

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E-commerce is becoming the life line for many businesses, and it’s changing how businesses develop their global expansion strategies… Although e-commerce is not an efficacious remedy for all businesses however, if you intend to be relevant in the business globally you must at least consider e-commerce as an element in your business strategy… The fast-growing world of e-commerce offers a new cost-effective portal, or bridge if you will, for consumers to learn more about a business and to purchase products and services with ease from anywhere in the world. The goal for business to extend their brand, increase impulse sales opportunities and to grow…

There is no doubt that consumers use online media when researching products,  services… Recent study by RetailNet Group– reports that 97% of consumers use online media before making a trip to the store, and they call this the ‘trip capture’ and says that ‘online-to-offline integration is the next wave of e-commerce innovation’… and that mobile devices such as smart phones and tablets are enablers that are shifting shopping habits... Also, other industry statistics show that consumers rely more and more on the smart phones to perform traditional shopping tasks, for example: 67% use smart phones to find store locations; 59% use them to compare prices; 51% get product information; 46% check product availability; 45% read reviews; 41% find coupons; 35% access social media…

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Although e-commerce has been around for almost 20 years, in many ways it’s still very much in its infancy. In most countries, e-commerce still represents less than 10% of all retail sales. Yet today, there is a very clear shift from e-commerce as a standalone entity, to more of a business model that is becoming integral in business operations; one that is increasingly global, and supports a more targeted, intimate conversation with customers... E-commerce channels continues to becoming an important driver for growth, and some key business strategies for an effective e-commerce implementation includes: Enhancing payment capabilities is essential for a strong e-commerce solution– offering a wide selection of payment types, having iron-clad security and global payment options, accessing detailed transaction reporting… Preventing fraud, protecting transactions in order to minimize losses, and bolstering consumer confidence to increase sales and profits… Using targeted marketing strategies, such as; mobile vouchers and other mobile marketing solutions, to capitalize on social and mobile revolution to attract and retain new customers… Also, it’s important to prepare for future by identifying emerging technology that are shaping the next decade of e-commerce… In implementing these strategies, it set the stage for e-commerce to make transition from ‘sideshow’ to a profitable component that is integral to the success of the business…

In an eMarketer Report: Internet usage continues to mature across the world, and e-commerce growth seems to be settling at around 10% for the next few years… However, with all retail sales reaching $2.356 trillion in 2018, a 10% growth rate still represents more than $200 billion new dollars… On a regional basis, North America, which includes only the U.S. and Canada is the leading region in e-commerce sales share in 2014, accounting for around one-third of the dollars spent on digital purchases worldwide… However, eMarketer expects Asia-Pacific to overtake North America and become leading region for e-commerce in 2015, representing 33.4% of the total, compared with 31.7% in North America and 24.6% Western Europe. These three regions combined will continue to take around 90% of the global e-commerce market, throughout the forecast period… The increase of e-commerce sales in Asia-Pacific is tied to a growing base of digital buyers, and as more new buyers come online, naturally sales will rise…

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China alone has more than half of all this region’s e-commerce sales this year, and by 2018 its share will top 70%. Australia and Japan will rival markets like; U.S., UK and Western Europe in buyer penetration and average order values. On the other hand, in less mature markets like; India, Indonesia… even though there are large absolute numbers of digital buyers, they tend to be more cautious and typically buy less costly items…  E-commerce and digital marketing teams increasingly understand that they must drive sales in a channel-agnostic way… Research by Forrester Research shows that the number of online shoppers in the 17 EU nations will grow from 275 million to 303 million by the end of 2015… On global scale, e-commerce sales are growing more than 19% a year…

In the article E-Commerce Trends for 2015 by Gwriter writes: Believe it or not, the small screen of a smart phone is not stopping shoppers from buying products– mobile shoppers are on the rise. Many online stores are already making a shift towards mobile optimized shopping! Also ‘wearable’ are positioned for substantial growth, for example; the Google Glass, no matter how silly some people think it looks, is ready to take off! And, so will the Apple ‘iWatch’ when it comes out later this year! So if you thought holding a smart phone was ever a pain, now your problems are solved; you’ll be able to purchase items with a blink of an eye! Can you imagine signals being sent to your ‘iWatch’ with an ‘alert’, such as; beep, beep… there’s a sale going on at ‘Gap’ right around the corner from where you are, here’s a coupon! Wow! Two other trends that continue to rise are; the ability to customize Internet searches and fast shipping… I mean, real, real, real fast shipping! First, search customization! It’s a big deal for many people and businesses to go directly to the item they want, without many intermediate stops– fast and easy… Second, fast shipping! Did you know some companies are already offer same day shipping? If you order early enough in the day, it could arrive at your doorstep just hours later…

According to Phil Levy; online payment is a critical component of e-commerce, it can enhance a merchant’s online services, open new markets, increase profits… Payment options are a key factor in where a consumer decides to shop online. Some of the key payment issues are: How do online shoppers want to pay at checkout? What are the shopper payment preferences? Answers to these questions can offer new opportunities for expanded services that– improves the shopper’s experience, prompt more frequent visits, and increase average order value, boost sales. By offering more payment options, online business can expect to see fewer cart abandonment and more sales… Online payments, other than debit, credit cards, are expected to grow to 30% of purchase volume; e-commerce merchants must consider enhancing their payment options to take advantage of this consumer trend…

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In the article E-Commerce Trends by Annie Jie Xu: The e-commerce landscape is changing by the minute and businesses must be sure that you have the tools and strategies to adapt to these changes… The unifying factor of the e-commerce trends is that they benefit both, consumer and business alike: Better e-commerce means a memorable shopping experience with more options, better services, and lower prices. And, it’s a win for businesses, too; it means happier customers, smoother online functions, more growth opportunities…  Here are a few e-commerce trends that you should consider:

  • Mobile, mobile and more mobile: According to the ‘Custora High-Growth E-Commerce Index’, ‘Black Friday’ has become ‘Mobile Friday’ with almost 40% of all online shopping done on mobile devices. This trend will continue as consumers are empowered to use their phones and tablets to shop anytime, anywhere…
  • Free and faster shipping: There will be more innovations in delivery end of the purchase experience. It’s now a must to offer free or faster shipping options…
  • Business without borders: Businesses are waking to the fact that they need to look beyond their borders… A.T. Kearney recently concluded that successful retailers in search of sales growth are increasingly going global by expanding their online shopping operations in foreign countries…
  • Content marketing is essential: Content marketing is one of the main ways that companies establish authority and gain trust with their online shoppers.  A recent study shows 82% of marketers plan are increasing their budgets for content marketing…
  • Growth of guided discovery: With today’s shoppers going online and crunching for time, they need fewer choices but the right choices. To make shoppers’ lives easier, more online businesses will start engineering right mix of ‘guided discovery’ to provide targeted and welcome suggestions that help consumers make purchases…
  • Consumer-driven demand and personalization: Consumers want unique, original products and businesses need to be able to deliver that in increasingly creative, profitable ways. There will be more businesses that empower customers with ability to personalize, modify, or even design the products that they want to purchase. More businesses will start to implement 3D printing technology to enable and speed up this customization…
  • It’s still about the brand: In the midst of the mega e-commerce coming, businesses will go back to the basics: Building a strong brand– No e-commerce trend will survive without a solid brand foundation…

Business must craft and implement an effective e-commerce strategy to succeed, but first they must have a basic understanding of why and how e-commerce will improve their business… Business must ask the question: Why do they need e-commerce? For example: Is it to sell product? or, To build awareness? or,  Establish a brand? Also, before business can develop an effective strategy they must have a solid understanding of the target audience’s buying patterns… In creating their strategy, business must develop a balance between attracting customers with features of the website (window dressing), and helping customers to easily– enter and navigate the aisles of this ‘virtual shopping world’– an effective e-commerce strategy must be designed with– clear intent, focus, simplicity… According to Sassoon Grigorian; there are four key trends that are emerging for e-commerce: Logistics and shipping– Logistic, shipping suppliers will offer more innovative solutions… Personalized shopping– Artificial intelligence will expand to anticipate consumer shopping habits… Rise of the multinational– Internet-enabled e-commerce has torn down global trade barriers, for example; an astounding 97% of commercial sellers on eBay export globally… e-Payment options– Payment solutions will provide saving and convenience in making e-commerce purchases…

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According to Ramneek Bhasin; in a study comparing shopping searches across major search engines and comparison shopping sites– where they compared results over 50 searches in 6 shopping categories– found that Google’s price is 12% higher on average, compared to the lowest available online, with Bing at 25% and Yahoo at 31% premium… However,  lowest price isn’t the only thing: Consumers want– local, coupons, reviews, and more… Comparison shopping engines that are focused on just price aspect of comparison do not always deliver the best results– consumers want much more… Purchase decisions are being driven by other elements like; local stores, ratings,  reviews, coupons, return policies, shipping costs, and payment options… According to Alastair Kane; the path to a cohesive, seamless e-commerce strategy is no small feat, for example consider: integrating communications– capabilities, reliability, competency… from the initial e-commerce transaction through fulfillment… then, to communicate the progress of each purchase to the customers, in real-time… the e-commerce process must be– fast, seamless, well-communicated from dispatch to delivery– the entire process must be– reliable, credible, capable… Your e-commerce business strategy and implementation must fulfill all customer expectations…

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Stock Market– Iconic Symbol of Capitalism– Rigged, Fixed, Scam… Its Become a Wild West Of Dueling Algorithms…

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Is the stock market rigged? This is a question you might expect from a wild-eyed conspiracy theorist or a down-and-out day trader… but according to Thomas Peterffy; the current state of the stock market is ‘complete mess’… stock market has become a– Wild West of dueling algorithms. Stock exchanges used to be physical place, where people would come together to buy or sell, hoping to achieve the best price for themselves… The more the exchange was able to attract all of the buy and sell interests in a product, the more the prices on exchange would reflect the true state of supply and demand… It was the old mantra: liquidity breeds liquidity, but things have changed… Now exchanges are all run by computers, electronic communications, electronic exchanges, dark pools, flash orders, multiple exchanges, alternative trading venues, direct access brokers, OTC derivatives, high-frequency traders… and even many stock market experts don’t really understand the inner workings of the system…

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Increasingly, the financial markets are becoming more like a casino, except that a casino is more transparent and simpler to understand. Technology is both– hero and villain in stock trading and brokerage: For the good– its brings electronic trading and record-keeping for more transparency and accountability, and the trading processes are more efficient, lowered transaction costs, more liquidity… However, for the bad– its brings more fragmentation, and the opportunity for people to use technology to keep to the letter, but avoid the spirit of the rules– and thus creating the current mistrust… According to Thomas Peterffy; it’s vital that we bring back– order, fair dealing, trust in the marketplace. The financial markets of the world are at a turning point: Technology, market structure, and new products have evolved more quickly than the capacity to understand or control them. The result has been a series of crises over the past few years that have caused many investors to lose confidence and to think that whole system is a rigged game…

In the article Is the Stock Market Rigged? by Bill Mann writes: Self-interest does a strange thing to people: It corrupts. So this leads to two questions: Is the market rigged? Does this hurt you? As to the first, my answer is an unequivocal ‘yes’, followed by ‘and this isn’t new’; high-frequency trading (HFT) as practiced by exchanges’, i.e.; selling of asymmetric access to select market participants, simply isn’t fair. The HFT algorithms essentially attempt to influence the price of the market through tactics like ‘quote stuffing’, which is about like it sounds. Then that  questions becomes: How far are the manipulators willing to go to distort the market to their advantage… The second question is more important: When there are systematic activities, events… that cause the general investor to lose faith and perception that the markets are probably being manipulated, then that’s bad… However, there are lots of things that manipulate stock markets, for example; Federal Reserve policy is all about influencing investor behavior, so is capital-gains tax policy… so, where is the line?

Focusing on HFT as a reason to be in or out of the market is absurd. The stock market isn’t Las Vegas or some crooked numbers game. It’s a tool that allows ordinary folks to buy pieces of businesses, which, if you’re doing it right, tend to appreciate in value. Some lose, yes; but ultimately your investment returns are going to be driven by the quality of the investments you hold… Worrying about HFT as an individual investor is like worrying about sunspots… Frankly, out-of-control management compensation is a–  far bigger drag on your long-term investment returns than HFT could ever dream of being… Returns in investing come from buying something, say for– $1 and selling it for a lot more… but, if it so happens that HFT causes you to buy it for $1.00000001 is that really harmful when you sell it for a good gain? Trading has many other more serious expenses– overt and hidden– and those expenses are far more troubling…

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A free market is not a free-for-all; it’s not a dog-eat-dog jungle where everyone is trying to rip off or to screw everyone else… According to Stuart Schneiderman; market participants are morally obligated to maintain market fairness. If they reduce it to lowest common moral denominator– their personal greed– then the markets will fail… It’s not easy to describe high-frequency trading; in truth, next to no one understands it. That’s why its adepts have been getting away with it, and screwing not only the individual investor but many institutional clients… Michael Lewis makes an excellent effort to describe how the system works: Broadly speaking, there are three activities that led to a vast amount of grotesquely unfair trading: The first is called ‘electronic front-running’– seeing an investor trying to do something in one place and racing ahead of him to the next… The second is called ‘rebate arbitrage’– the seizing of whatever legal kickbacks, called rebates within the industry, that the exchange offered without actually providing the liquidity that the rebate was presumably meant to entice… The third, and probably by far the most widespread, is called ‘slow-market arbitrage’– This occurred when a high-frequency trader sees the price of a stock change on one exchange and picks-off orders sitting on other exchanges before those exchanges were able to react; it happens all day, every day, and very likely generated more billions of dollars a year than all the other strategies combined.

In the article Is the Stock Market Rigged? by Ian Wyatt writes: Mary Jo White, head of Securities and Exchange Commission (SEC), was on Capitol Hill to testify about  manipulations in the stock market, and she says; the markets are not rigged… U.S. markets are the strongest and most reliable in the world… the U.S. financial markets are the best in the world…  and its long-term record proves that the stock market is the best place to build wealth… However, given size , complexity of U.S. markets, it’s a ripe opportunity for manipulators and scammers to fool the system, recent frauds include; insider trading at hedge funds, credit default swaps, mortgage fraud, money laundering by big banks, and list goes on… The SEC has a specific mandate: Its mission is to protect investors, and maintain fair, orderly, and efficient markets, and facilitate capital formation… Despite defending the current structure of the markets, Ms. White did admit that the market is not perfect. But, she continued to defend the markets, saying; I want to be very clear that the market metrics suggest that the retail investor is very well-served by the current market…

In the article Markets are Rigged, So What? by Chris Mayer writes: I hear more and more people say the market is rigged… They say it is a game for insiders to fleece gullible outsiders, and Wall Street has not helped this image at all. There seems to be no end to lurid scandals or crises of confidence in the system… I have to say I, too, have felt this way more often of late. However, I believe there are ways to invest safely and feel good about it. You can ignore scandals. You can ignore Wall Street… Just focus on investing in stocks of quality companies, and by paying attention to what I call the CODE System: Cheap– these are stocks trading below replacement costs or below private market value… Owner-operators– these are stocks with high insider ownership of the people in charge and/or a good track record of delivering results for shareholders… Disclosures– these are stock for a business we understand, and it reports are transparent with good disclosures. Transparency is another word for the virtue we seek… Excellent financial condition– these are stock from a business that is relative absence of liabilities, it has lots of cash and/or cash flow and the ability to ‘do deals’ (i.e., borrow at super-rates, take advantage of good business opportunities, convert assets to other uses, etc.)…

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So is the market rigged? According to David Merkel; it depends who you are. If you understand your limitations, do your due diligence, and control your emotions, then no, the markets are not rigged… If you naively presume that you can make money in the markets without adequate study, discipline, experience, etc., eventually the markets will seem rigged... According to Tim Hanson; just another game rigged against youdata collected in a recent study said that only 15% trust the stock market, while another study revealed that 40% of 18-to-30 year old believe they will never feel comfortable enough with stocks to invest in them… I am not defending Wall Street, which is rightfully in tatters after more than a decade of scandals, bubbles, dishonesty… But, the question that you should not be asking when investing in stocks is: Do you trust Wall Street? or Do you trust stock market? But rather: Do you trust the specific companies that you are looking to invest? Are these companies doing the right thing for the employees, customers, and suppliers?

According to Laurence Siegel; it’s possible to imagine a kind of high-frequency trading that is completely harmless and in fact beneficial… Since high-frequency trading improves liquidity, there’s a case to be made that it improves pricing… Whether some or all of that benefit is lost due to the front-running and other nefarious activity is an open question… But truthfully, for a small investor it does not matter… this is more of rich person’s worry than average investor’s concern… High-frequency traders don’t care about, for example; the 100 shares of Company ‘A’ you’re trying to buy, or even the 500 or 1,000 shares of Company ‘B’… there’s no real money in these trades. Distasteful? Yes: A reason to avoid the market? Hardly: The stock market is not a zero-sum game, or a winner-take-all poker tournament… Over time, as economies grow stock markets will rise, and everyone will profit

Focus on long-term goals and ignore market noise, and you can coexist with the predators; you quickly realize that whoever is responsible for actions that lead to claims that the market is rigged is simply part of the sounds you are brushing off… According to Robert Laura; as for the question of whether the stock market is really rigged, the answer is absolutely– Yes! It’s rigged with risks and opportunities that investors take each and every day. The reality is HFC is not illegal (yet)… News like this can shake markets and when it does– investors, advisors… must be prepared to respond by investing their money in the places that they feel is most suitable for them… Ultimately, the markets can only stay rigged as long as investors allow it to take place…

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Business Lies– Deception, Deceit, Untruths, Fibs: CEOs Do it, Workers Do It, Customers Do It, Men Do It, Women Do It– Lairs.

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Lying in business is an essential; businesses cannot function without telling lies… Lying produces results; whether bolstering a personal credential or developing a sales pitch– business people lie because it works– lying in business is the rule; and not the exception… Most business people know that lying is unethical, immoral, even criminal, but they do it any way because it’s easy… As we all know, lies are not all the same; some lies are harmless and even helpful, and other lies are harmful and very hurtful… Yet, once you have experienced the utility of a ‘lie’, it becomes a useful ‘tool’… But, the psychology of lying is complex; people lie for many reasons and chances are that many people tell same lies to different people for different reasons, for example:

Some people lie to avoid conflict: Faced with unrealistic deadlines and a demanding boss, some individuals would rather lie than address a difficult issue where anger, frustration, and disapproval will create conflict… Some people lie to save face and please other people: They figure lying will allow them to look better at least temporarily. The problem is that it generally takes 4-lies to cover 1-lie… Some people lie to sell more stuff: There actions are evasive, deceitful, and they view a business transaction as a trophy… The worst lies are the ones where a person will intentionally withhold significant information or changes facts: With practice, this form of lying looks very much like the truth. We know that the more someone lies and succeeds, the better they become at it… In many modern business workplaces, the normal indicators of truthfulness just aren’t there anymore when dealing with an adept liar.

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According to Webster dictionary; a lie is ‘to make a statement that one knows to be false, especially with the intent to deceive’, or ‘to give a false impression’ According to Leanne Hoagland-Smith; regardless if it’s a C-Level executive leader, or manager, or worker… everyone must be held to the same standards… Too often, many business people have the attitudes of–  ‘wink and nod’ or ‘do as I say and not as I do’… But, if you are looking to build a workplace that consistently demonstrates high ethics, then everyone must accept the same definition of a lie… According to Edmund Burke; lies transform themselves into mis-representations of the truth… now is the time for good people to call lies exactly what they are– lies… And to call people who speak lies– liars. Until we take these actions, evil (and a lie is evil) will continue to prevail…

According to Bella DePaulo; most people lie at least once or twice a day– almost as often as they snack from the refrigerator or brush their teeth… Both men and women lie in approximately a fifth of their social exchanges lasting 10 or more minutes; over the course of a week they deceive about 30% of those with whom they interact one-on-one. Also, there are some types of relationships, such as; between managers and workers that are virtual magnets for deception… Certainly anyone who insists on condemning all lies could only imagine a better workplace when it’s purged of the all deceptions, and thus enabling genuine and honest communications… On other hand, perhaps some businesses would collapse under the weight of relentless honesty, with unveiled truths destroying the ability to connect with others. The ubiquity of lying is clearly a problem, but is business prepared to take away all lies? Let’s be honest…

What is the truth about lying? According to Tm Mazur: The noted philosopher Immanuel Kant said that lying was always morally wrong. He argued that all persons are born with a ‘intrinsic worth’ that he called human dignity. This dignity derives from the fact that humans are uniquely rational agents, capable of freely making their own decisions, setting their own goals, and guiding their conduct by reason. To be human is to have the rational power of free choice; to be ethical is to respect the power in oneself and others… Lies are morally wrong for 2-reasons: First, lying corrupts most important quality of being human: the ability to make free, rational choices. Each lie told contradicts your moral worth. Second, lies rob others of their freedom to choose, rationally. When a lie leads people to decide in ways other than the way they would had they known the truth, you harm their human dignity… Kant believed that in order to value ourselves and others… we must avoid damaging, interfering with, or misusing our ability to make free decisions, in other words: No lying.

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In the article Right, Wrong Way to Lie in Business by Michael  Church writes: Lies, even ethical ones, can be corrosive to most relationships. Most people have a visceral aversion to being lied to. When you lie to someone, you’re making the statement that you don’t believe person can be trusted with the truth… Lying to someone is corrosive because people take it personally. This means that, when you lie, you must be comfortable telling the lie to everyone, and moreover, you must act as if the lie was true. There’s a saying in creative writing, which is most often applied to poets, and it says; the bad ones borrow and the good ones steal… and, a similar rule applies to lying in business; steal but don’t borrow… If you’re going to lie about something, then you must be prepared to continue lying about it for ever… that means if you’re going to use a lie– you must own it… That restricts the scope of what one can lie about, which is generally a good thing. Lying is a surgical art, for example; you must never lie about something that contradicts an objective ‘fact’, for example; don’t cook ‘the books’ since you will probably get caught…

In the article Lies, Damned Lies in Business by Neil writes: Business is full of lies: Sometimes the lies are big, sometimes the lies are small. Sometimes the lies are inconsequential and sometimes they rock the foundations of the business world. But like urban myth– you’re never more than 8 foot from a rat; and in business– you’re never more than one cubicle away from a lie... Consider: Is it a coincidence that so many public companies come within their stated profit targets every year? When a business over-performs, it run the risk of raising expectations for future years, when it under-perform, it runs the risk of the share price being devalued, and people’s jobs also might be at risk… Hence, a business common practice is to release provision in a bad year to bolster the bottom-line, or take bad news in a good year to manage down profits… but are these practices really lies? Well some people might say yes, in the truest sense of the word. But, since the practice is universally accepted, the issue of a ‘lie’ is ignored…

The language of business is a weasel mix of truth and lies, but it isn’t any different from any other part of society… It’s very easy for the press, for the public, for the politicians to highlight individual failings and to find a helpful scapegoat… Hence, business must not be held to any higher moral standard than we would hold anyone else. We must not confuse profit-making with profiteering, we must not engage in duality or assertions of duplicity. We must be open and honest about all human imperfections… Lies are an everyday part of business life and in covering over this fact we are reasserting its veracity… And we rationalize the use of lies by saying; business needs lies to survive; it needs lies to maintain balance, it needs lies to underpin existence. Like in social life; like in sport, like in the church… sometimes a lie is so big, so grave that it causes serious– damage, hurt… Business is full of lies: Yes, guilty as charged, but lets face it– so is most other parts of human existence…

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Stretching the truth is a natural component of human instinct since it’s an easy way out… According to John Seeley; all good relationships are based on trust… but sometimes ‘white lie’ may make sense, if it avoids hurting someone else, and maybe it’s better than being fully honest; after all, honesty without compassion is cruelty. According to Leona Charles; sometimes a ‘sweet lie’ feels better than a ‘hard truth’ but in business it’s supposed to be all about facts. In a world where perception can be skewed as quickly as a tweet is posted, how can you make sure that your business is telling the hard truth all of the time? The truth is that you can’t, but you can instill a culture in your company that is based on doing the right thing, no matter how hard it is… According to Linda Finkle; each of us has our own sense of what is right and wrong; what’s a lie and what is not… If a person is asked this question, most people would probably answer– ‘it depends’… It depends on the nature of the lie, for example; Is there ever a time when a ‘lie of omission’ is really not a lie? Are ‘white lies’ still lies? Here people differ; sometimes these ‘pseudo-lies’ (if there is such a thing) are hurtful, and other times they don’t make any difference at all– some people say; no harm, no lie… 

According to Edward Marshall; perhaps it’s a sign of the times but we seem to be living in an age when lies and deceit are commonplace in every aspect of our lives… Most of us were taught from a very young age to tell the truth, no matter what. We know it’s the right thing to do, but these days it’s hard. It’s not that people are deliberately dishonest. Rather, we live in a culture that, over many years, has made it much easier for some to lie and get away with it… Perhaps ‘the truth, the whole truth, and nothing but the truth’ has become a relic of a bygone era. Perhaps it doesn’t matter that much anymore. Perhaps we don’t even know what the truth is. It seems like leaders in all aspects of our lives, including the workplace, are lying these days– and getting away with it…. Perhaps it’s time to create a different culture, at least in the workplace…

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Mutation of Medieval Feudalism Into Modern Corporate Capitalism: The Rise of Neofeudalism in Corporate Governance…

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Feudalism is still alive and well in today’s modern corporate world, in spirit and intent… Question: What is the most enduring and stable system of economic and social order the world has ever known? It’s not capitalism, or socialism, or dictatorship: It’s feudalism… Feudalism was primary political system of the Middle Ages (9th to 15th Centuries). The system came about, for the most part, because the reigning king had two major woes; he couldn’t keep the people from rebelling and he couldn’t take care of all his land. In order to solve these problems, the king created the feudal system, in which he would give sections of land, called fiefs, to his most important nobles, barons and bishops in exchange for their services and their loyalty… Peasants or ‘serfs’ were considered to be the lowest of the lower class, and rather than being given land in exchange for loyalty, they were forced to work the land, and the lord of that land would offer them protection… The brilliance of this system is that it ‘killed two birds with one stone’, solving both of the king’s problems– he now had control over both, people and land…

Though brilliant in its conception, feudalism was a biased hierarchy of authority, rights, power… that extended from monarchs downward, creating an intricate network of obligatory situations that infringed on almost every basic human right… Thus with growth of commerce and industry, feudalism gradually gave way to the class system as the dominant form of social ranking…  Feudalism means different things to different people and its origins depend on its meaning: Narrowly defined, feudalism is a system in which a weak central government distributes its power to people who support it… The strength of such a system is that a problem that develop at a local level can be dealt with faster than it could be if the central government had to mobilize to deal with it… According to Dredd blog; feudalism– feudal society was a military hierarchy in which a king or ruler offers a fief, a unit of land to control in exchange for a military service… The feudal society was constructed for one reason: Security… The nobles wanted the security for maintaining control over their far-reaching kingdoms, and like wise the peasants who worked the land for the nobles wanted security from robbers, marauders, barbarians. However all this came at great expense for the common man: He gave up his many freedoms for security… 

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According to JacobSloan; everything old is new again– make note of the growing belief that modern sociopolitical structures increasingly resemble those that were found in feudalist societies– a concept called neofeudalism: Among the issues claimed to be associated with the idea of neofeudalism in contemporary society are class stratification, globalization, immigration, open borders policies, multinational corporations, and ‘neo-corporatism’… According to Scott Powell; the fundamental feudalism relationship was the basic form of barter, which defines every feudal relationship– ‘land for loyalty’… In this barter arrangement, a vassal was granted territory (a fief or feud) by his lord in exchange for various expressions of loyalty. Whenever the lord required an army in defense of broader objectives, the vassal was to provide a levy of knights and fighters from his land, and in exchange the vassal’s claim to his land was sanctioned and protected by his lord. If one landholder’s claim was threatened by another it was the lord’s obligation to arbitrate the relative claims of his vassals and to interpose his military might when needed. This type of relationship existed at every level in the medieval social hierarchy, from serfs and farmers to knights, barons, counts and dukes, all the way up to kings and emperors…

In the article Modern Feudal State? by Aglaya writes: Feudalism is the system whereby political and economic power is held by a relatively small group of capital owners who permit their capital to be worked or used by the large majority of landless people for their subsistence. The landless have little or no political power of their own, but in a stable system are guaranteed a basic set of rights… Europe through most of its history, since the Dark Ages, was a series of feudal states, which remained remarkably stable for hundreds of years, until power was slowly devolved to larger and larger groups of people… Also, the very stable Asian societies in Japan, and especially China have long been feudal in nature…

The basic contract in the feudal state is the majority of the population will be content to remain relatively uneducated, unsophisticated, and unambitious. They will demand little more than a job through which they can feed, clothe and house their families. They will expect a basic level of fairness within their class, guarantees of protection by their lords, and perhaps some government entitlements, e.g.; healthcare, free education, and the ability to retire before death (although these last three are mostly represented in a modern feudal state, they are not historically traditional one). In return, the holders of capital are allowed to be wealthy, comfortable and separated from the majority, so long as they provide the basic measures of subsistence to the landless… Although to most people’s psyche this social contract may appear grossly unfair and extremely repressive, it has, nonetheless, proven unequivocally to be the most successful in history, in terms of pure longevity…

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In the article Corporate Feudalism: The End of Nation States by Steve Lovelace writes: Feudalism developed in the medieval ages when communication and transportation were both scarce and unreliable. Kings had little control over the day-to-day affairs of their kingdoms, and most of the power was held by the lords and barons. Borders, as we know them, did not exist and instead there was property and allegiances… Then over time, advances in technology allowed nation states to form, and national borders became much more rigid. To this day, people still think in terms of nations and borders, but times are changing…

The same technological advances that built the nation-state are now leading its demise. The Internet and modern communications allows companies to have employees and suppliers anywhere in the world. Container shipping allows goods to be made in the cheapest places possible. Air travel allow people across the earth to have the same cultural experience, the same points of reference. This means that a company can incorporate in Delaware, design goods in California, produce them in China, ship them on a Norwegian ship registered in Liberia, and sell them all over the world. Tech support can be based out of India, and the executives making the money can keep their money in Switzerland and the Cayman Islands. This kind of thing happens everyday, and the ramifications are just beginning to be felt. Ultimately, this will lead to the return of feudalism… As the power of multinational corporations grows, you will find a weakening of nation states: Corporate oligarchy will be the new norm…

In the article Feudalism in America? by absurdistan dan writes: The term ‘feudalism’ elicits images of kings in their vast, fortified castles, knights in their armor defending the land, and poor peasants working their land from dawn to dusk. Feudalism was a strict social hierarchy in Medieval Europe and was certainly an oppressive political and economic system from the tenth century that disappeared after the fifteen century… Except that it hasn’t disappeared: Feudalism’s success wasn’t due purely to the strict separation between different social classes, but rather the fact that the population accepted their class standing in society… The American dream’s selling point is that hard work over a long period of time allows people to support their family and allow them the benefits of home ownership… Except serfdom was often defined as serfs who were bound to the land which they worked to pay taxes to their lords…

Then fast forward to modern times; as an intelligent person I keep asking myself: Why do I work as I do? A part of me knows that the only reasons I’m still working is because of the large bonus everyone in the industry looks forward to at the end of the year. The bonus that one day will release me from the tyranny of corporate slavery and allow me to do something more enjoyable like running my own business or investing in other people’s businesses. Basically, it will grant me the freedom to one day be able to live my life on my own terms, and not be stuck in the office late into the early morning, on weekends and be subject to menial tasks… Little did we all know that we were actually signing our lives away to serfdom. But if anything, this was the job that gave me the best chance to one day free myself from modern-day serfdom… A prominent politician once said; in today’s modern world the corporation is the lord and master, and most of its employees have been desensitized much as were the medieval peasants who never knew they were serfs…

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In the article Corporations Are Feudal Manifestations by Russ writes: Contrary to popular belief, there’s nothing modernistic about the corporation. On the contrary, they’re a carryover phenomenon from feudalism… The corporation originally arose out of medieval guilds and the monopoly charter. This charter was also called a ‘searching and sealing patent’ and it had nothing to do with production of goods or services. The charter-holder, who generally was some royal crony, did not produce or do anything… So corporations were one form in which elites tried to continue their feudal prerogatives into the 19th century… According to Ted Nace;  what is not as well-known is that, long after ratification of U.S. Constitution and the adoption of the Bill of Rights, most aspects of employer-employee relations continued to be regulated by a common law legal structure that continued to enforce the principles of privilege and hierarchy derived from the feudal society of the late Middle Ages…

As explained by political scientist Karen Orren; The original, mainly landholding, masters had long since been overtaken by business owners and managers; however, their privileges remained and passed on to their successors largely intact… The power of employers over their workers was considered a private relationship, where normal constitutional rights did not necessarily apply. Thus, common law also permitted measures of enforcement that were unacceptable in other social realms… This is the atmosphere in which feudal practices were being carried over into modern age of nominal capitalism and democracy…

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Few political systems have shown the adaptiveness and longevity of feudalism. The system that was based on personal relationships, local administration and defined hierarchies, touched several continents for more than 1,500 years. Feudalism grew out of practice, precedent and code of values and aesthetics that developed into ‘chivalry’ in the West and ‘bushido’ in the East… According to Lynn Nelson; feudalism has transcended many centuries that even in the modern society there are institutions that have retained strong feudal elements… Keep in mind the basic characteristics of feudalism, one can easily observe, is what has passed on to society in modern times…

According to Victor Baines; modern life seems to have ‘de-evolved’ into a strange and difficult to define state of economic existence; if you are wealthy person and or successful business owner, you might be doing well (in economic sense) but, if you are a ‘former member of the working middle class’– it should be easy for you to relate to questions that I raise: What the F%#K happened to all the jobs? Where the F@*k did they all go to? How the h#$L am I suppose to make a living these days? These are the questions that many people are asking! So much for saving for retirement– people are simply trying to make it week-to-week, and month-to-month! This is the unspoken state of economic existence… its modern-day feudalism… 

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Ideal Capital Structure– Predominate Theories; Pecking Order, Trade-Off, Market Timing: Seeking a Golden Rule…

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What’s the optimal capital structure for a company? Capital structure is how a company finances its overall operations and growth by using various sources of funds– It’s mix of different types of– debt, equity, and profit. If your company hasn’t given this question serious thought, than it’s about time that it did... Broadly speaking there are two forms of capital: equity capital and debt capital. Each has its own benefits and drawbacks and a substantial part of wise corporate stewardship and management is attempting to find the perfect capital structure in terms of payoff for shareholders; risk/reward. The crucial issue for deciding the right capital structure is to identify the best combination of equity and debt that maximizes the market value of the company and minimizes the cost of capital. The three most prominent theories of capital structure are;

  • Pecking Order Theory: It postulates that the cost of financing increases with asymmetric information. Financing comes from three sources and companies prioritize their sources of financing by orderly selection (the pecking order); first, internal funds, than debt, last equity…
  • Trade-Off Theory: It refers to the idea that a company chooses how much debt and equity finance to use by balancing (trade-off) the costs and benefits…
  • Market Timing Theory: It decides how to finance with equity or with debt instruments based on the timing of market conditions…

Modern theories of capital structure began with the proposition of Modigliani and Miller (1958) that described the conditions of capital structure relevance… Since then many economists have changed their financial models in order to explain the key factors driving capital structure decisions. According to Anton Miglo; the recent financial crisis has forced many companies to look critically at various modern capital structure theories… However, the problems of many companies is related to their flawed financing policies and lack of a clear understanding of the role of asymmetric information and agency issues– i.e.; conflict of interest between two involved parties, e.g.; management vs. shareholders, or bond issuers vs. investors… 

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Assessing the overall capital structure situation is interesting, for example: The Trade-Off Theory can explain a lot of factors about capital structure, except for one weakness, which is the negative correlation between debt and profitability… The only theory which provides a straight explanation for this phenomenon is the Pecking-Order Theory; although it has other issues… According to Li-Ju Chen, Shun-Yu Chen, Chang; recent studies have shown a focus shift from the Trade-Off Theory to Pecking Order Theory… The Pecking Order Theory was popularized by Myers and Majluf, and it assumes that there is no specific target capital structure… companies choose their need for capital based on the following preference (or pecking order); internal finance, debt, equity… also, Myers and Majluf argued that ‘equity’ is the least preferred way to raise capital due to the role of asymmetric information– i.e., management know more about true condition of the firm than do investors; hence,  when issuing equity the investors may believe that management thinks that the firm is overvalued and they are taking advantage of this over-valuation.  As a result, investors will place a lower value on the equity issuance…

According to ablogaboutfinance; there is conflicting evidence on the nature of the Pecking Order Theory, e.g.; it performs poorly for small firms because they have low debt capacities that can quickly be exhausted, and forcing them to issue equity. The Pecking Order Theory performs much better for large firms, firms with rated debt, and where the impact of debt capacity is greater… Overall, the debate over capital structure is unlikely to be resolved in terms of predominance of one prevailing over the others, and since there are a larger number of elements that must be factored, for example; the cost of capital must be balanced against considerations of flexibility… hence, the existence of multiple theories for capital structure provide alternative approaches for the conflicting issues…

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While the Pecking Order Theory argues that companies do tend to manage financing using the easiest approach, for them, as their first choice– this does not necessarily imply that one mode of financing is inherently superior to the others… For example; depending on the circumstances of a business, it may be more prudent to use an asset to acquire a secured loan rather than deplete a business’ interest-bearing accounts… Also, management must weigh all the options, and then choose the one that is most likely to produce the result that is in the best interests of the company over the long-term, rather than simply going with what appears to be the easiest solution. There is no simple answers for capital structure decisions, in some cases– debt may be better than equity, whereas in other cases it may be worse… In a financial evaluation there are at least four dimensions that must be considered:

  • Taxes: How valuable are interest on debt tax shields? Is the firm likely to pay taxes over full life of a debt issue? Profitable firms are most likely to stay in a debt tax-paying position…
  • Risk: Financial distress is costly even if the firm survives it. Other things being equal, financial distress is more likely for firms with high business risk. That is why risky firms typically issue less debt…
  • Asset type: If distress does occur, the costs are generally greatest for firms whose value depends on intangible assets… Such firms generally borrow less than firms with safe, tangible assets…
  • Financial slack: How much is enough? More slack makes it easy to finance investments, but it also weaken management incentives… More debt, therefore less slack…

In the article Determining Ideal Capital Structure by Philip J. Isom writes: In today’s business uncertain climate, it’s critical for most companies to optimize their capital structure and make sure that they retain access to capital. The challenge is to create a structure that is workable through multiple business cycles, and determining an optimal capital structure is an important step… In the simplest terms, a company’s debt capacity comes down to its ability to repay debt and to support ongoing working capital. However, as the past few years have demonstrated, it’s not always simple to predict cash flows, especially in a volatile economic climate…

A company must have a comprehensive understanding of its financial position before it can determine what its capital structure should look like. It’s common for two companies in the same industry to have identical debt-to-equity ratios, but significantly different cash flow capabilities due to different growth rate, cost structure, profitability and asset turnover. Further, more volatile and uncertain in company cash flows, the more uncertainty there is regarding its ability to meet debt payment obligations. Companies with extremely unpredictable cash flows should usually assume that less debt is more advisable… Thus, an ideal capital structure will not only limit risk of default, but substantially increase profit, shareholder return… In order to make the right decisions, companies must fully understand their specific macro- and micro-economic risks that can affect their business and their industries…

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The appropriate capital structure is critical decision for any business organization. The decision is important not only because of the need to maximize returns to various organizational constituencies, but also because of the impact such a decision has on an organization’s ability to deal with its competitive environment… According to  Roy L. Simerly and Mingfang Li; researchers have not yet found the optimal capital structure… The best that academics and practitioners have been able to achieve are prescriptions that satisfies short-term goals, for example, in a recent Harvard Business Review article; readers were left with impression that the use of leverage, debt, was one way to improve the performance of an organization. While this is true in some circumstances, it fails to consider either the complexities of the competitive environment, or the long-term survival needs of the organization… Others argue that the use of leverage, either to discipline management or to achieve economic gain is the ‘easy way out’… and, in many instances, this can lead to the demise of the organization…

So: What is an optimal mix of debt and equity that will maximize shareholder wealth? Or, is this an incorrect framing of the question… Possibly, a better framing might ask the question: Under what circumstances should leverage, debt, be used to maximize shareholder wealth? Debt and equity have profound long-term implications for corporate governance that far exceed exigencies of the moment… One of the dramatic changes created by expanding global economy is the increase in the rate of change within industries… and, as more industries experience greater levels of change, the use of debt-centered governance should prove to be less effective in the near future…

The first duty of management is to ensure the long-term survival of the organization in its competitive environment. In a world devoted to quick fixes and short-term thinking, edited by sound bites, it’s difficult to take time to think through all the serious challenges. But, as business become more competitive, those who make the time to reach appropriate decisions will be the ones left standing… But, there are no easy fixes… there are no hard and fast golden rules in deciding on which capital structure works best… Capital structure differs from company to company and each company must consider the specific factors that impact their company, for example; how much free cash flow the company is generating, what leverage is it creating, how much interest must it pay, how much interest can it pay, how much revenue is it able to generate… and is the company’s current capital structure yielding the– ideal or desired or optimum benefits… and what are the other alternatives…

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