What Works on the Small, Works on the Large

Recently my father-in-law visited from Minnesota and I really enjoy his company. We both love golf, classic rock, and my family, but when it comes to politics, we tend to have to keep our conversations short.

While we were both golfing we began discussing his future retirement, at that time he noted that he planned on moving to South Dakota. I knew he was from there originally, but I also knew he loved his adopted home. So I asked him why he was leaving and he said, "that's easy, South Dakota has a much better tax situation for retirees than virtually any state in the country." I cannot begin to state the many times he had told me how unpatriotic businesses were to leave the country because of tax and other laws.

With that I asked him, "so here you are, the average American, who is smart enough to change where you live to protect your wife and you from higher taxes, but you don't expect businesses to do the same thing with often large numbers of employees and even greater tax implications?" It is very rare to get him to get quiet once we gets started (and he would say the same about me), but he had that knowing look on his face that this conversation was over.

The United States has the second highest corporate tax rates of any industrialized country in the world and we are working hard to try to become number in this dubious area. Businesses are about efficiency, profit, and looking out for the interest of its stockholders. Taxes, like regulations and licensure laws, are just the fixed costs of doing business. If the costs get too high, businesses have no choice but to move to better places for commerce. It isn't personal, it is just business.

Most of the things that work or don't work on a micro level, translate the same on the macro. Because in both cases they include human nature and humans tend to respond to incentives (and disincentives) the same way. If the government could eliminate their fantasy and replace it with reality, all of our lives would be so much better.

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Time Magazine's Best Lists: Worst Business Deals

I have been summarizing my thoughts on Time Magazine's Best Lists over the last several weeks and hadn't even touched their business lists. Until now. I found the magazine's Worst Business Deals" very interesting.

* The Blackstone Group going public. It looked hot after years of some rather amazing deals, but lost 38 percent of its value in no time after going public. In my experience, VC firms are the epitome of feast and famine. It isn't the kind of place one puts the family nest egg in. However, you can't count these guys out yet. The stock market is a long term game. It is only a bad deal if you cash in from the early highs.

* DaimlerChrysler pays to unload Chrysler. After an amazing array of mathematic antics, Daimler actually paid $2 billion to unload the company to Cerberus. With mathematic geniuses like this, is there any question as to why Daimler was going broke?

* Microsoft overpays for Facebook. First it was MySpace and Murdoch, then it was Google and YouTube. Microsoft simply had to get into the social networking phenomenon. The one it bought a stake in was Facebook for $240 million. The deal gives Facebook an implied value of $17 million, but is only expected to make $30 million a year. Time Magazine fears it looks like AOL a few years ago. I agree.

* KKR and Goldman Sach's pull the plug on Harman Industries International. Time notes that "Private equity shop Kohlberg Kravis Roberts & Co. and Goldman Sachs Group's private equity unit pulled out of their $8 billion offer to buy high-end audio equipment manufacturer Harman Industries International, claiming a "material adverse change" in Harman's business. Harman's stock plummeted more than 20%." Harsh indeed!

* Bank of America dumps $2 billion dollars into Countrywide. "Better make that $1 billion — at least that's what B of A's investment was worth as of December 1. Bank of America thought it had picked an opportune time in August to invest in Countrywide's mortgage machine, but the mortgage mess hadn't bottomed out yet." Bank of America was already limping along due to its troubling approach to providing credit to its clients. This situation only makes matters worse.

Some of these stories are not as entertaining or as sexy as some of the others covered, but their implications are far reaching financially. And they are far reaching to investors, customers, and obviously the employees

2007 Forbes 400

The World's financial elite have become more elite over the last few years. It wasn't very long ago when you could get in the Forbes 400 with less than a billion dollars. Not anymore, the poorest guy on the list is worth $1.3 billion.

Here are a few other interesting facts:

* "The collective net worth of the nation's mightiest plutocrats rose $290 billion to $1.54 trillion."

* "Nearly half of the 45 new members made their fortunes in hedge funds and private equity. "

* "The biggest gainer this year was Kirk Kerkorian, who padded his fortune by $9 billion as shares of his MGM Mirage (nyse: MGM - news - people ) casino outfit rose 135% over the past year. "

* "The youngest member of the Forbes 400 this year is 33-year-old John Arnold, a former Enron trader who now runs hedge fund Centaurus Energy and has amassed a $1.5 billion fortune."

* Number 1 remains Bill Gates (who was temporarily displaced by Carlos Slim for a few months)

* "The oldest member of the list is potato king John Simplot, who is 98 years old and worth $3.6 billion."

* "Seven members of last year's list have died."

* Fifty people couldn't keep up and either lost a significant amount of wealth, couldn't keep up with the higher threshold, or were surpassed by others.

I always enjoy Forbes annual list because if gives cause for ponder and cause to always hope about next year. Enjoy Forbes's interesting slide show.

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Ms. Dewey Isn't Worth the Wait

One of my favorite shows is the Big Idea with Donny Deutsch on CNBC. Tonight they discussed several innovative ideas including a "dynamic new website" called "MsDewey.com." The primary attraction to the site is suppose to be the lovely Ms. Dewey (see photo), who provides an interactive approach to search engines.

The site is the product of Microsoft and the lovely Ms. Dewey (played by actress Janina Gavankar) invites people to put a search item in, comments on your subject, entertains herself and the user while you scroll the results, and simply offers a unique approach to searching.

The site is suppose to challenge Google and other search engines with its unique interaction and beautiful model. I don't believe any of Ms. Dewey's competition are losing sleep. The concept seems like it would be attractive -- combine entertainment with searching. However, I think it fails on several fronts:

* It is extremely slow in its initial loading.

* It is very slow in its searches.

* It makes several mistakes. It does such often. I searched for several items that came up with thousands of responses on other search engines and turned up nothing on Ms. Dewey.

In my opinion, Ms. Dewey will not work because I believe people do not want to combine searches with entertainment. In my case, I will forget what I was looking for if I am sidetracked by entertainment. Mixing the two is very frustrating. Worse still, Ms. Dewey isn't that interesting. I find getting the exact information I want quickly to be far more enjoyable. I think most search engine users will agree.

The Authorities on the Houston Business Show this Week

On this week's Houston Business Show (today at 1 PM on CNN 650)I interviewed Richard Sonnier, our IT expert from Nimble Services; Sam Morris, representing the Bank of Houston; and Mike Alexander, our Insurance expert from ABM Insurance.

Richard (photo, top) discussed some of the major innovations going on in the ever changing world of the Internet. Specifically he reviewed a new program developed by Yahoo to counter Microsoft Office.

Sam Morris (photo, middle) discussed the commitment to community banking that is pervasive at the Bank of Houston and how that has contributed to the institution's rapid growth (from $20 million in assets when it started two years ago this month, to almost $200 million today). Also, Sam is a graduate of Northwood University, which is one of my favorite schools in the country because of its commitment to free market economics. That certainly made the interview more enjoyable.

Finally, Mike Alexander (photo, bottom) discussed the looming deadline facing seniors when it comes to making changes in their Medicare Supplement program. The cost and inconvenience could be serious if individuals fail to make changes by the deadline at the end of March.

To hear archived shows visit the Houston Business Show website. Subscribe to the Houston Business Review and keep informed of up coming shows or when new podcasts are available.

Why Can't Blogger Spell "Blog"?

I love to write and have done it for many years, but any reader of this blog can appreciate the fact that I need a spell check. Often my entries includes terms such as "blogs," "blog", "blogging," etc. You would think that a website such as "Blogger" would easily approve such terms. Think again, any word that has the root "blog" turns up as misspelled on this site.

To me, this doesn't make sense. How is it possible? This is a Google owned company and not some minor player on the Web. I've spoken to friends and colleagues and they seem as confused as I am. My oldest son, KJ, thinks that Blogger may use the Microsoft Word spell check for corrections. If that is so, it is using earlier editions because I believe the most recent Word includes blog.

Whatever the case, I think this demonstrates how rapidly things are changing. So amazing are the shifts that even a company like Google has difficulty keeping up with them and incorporating them in a site that is as important as Blogger.