We Have Less Today

One of my favorite things to do is to sit around with my older relatives and listen to their stories about the old days. In my grandmother’s time, the middle class was a thriving class. The United States had competitive wages because manufacturing was at an all-time post-war high. As my grandfather says, if you worked hard, kept your nose clean, and spent wisely, you could very quickly own all the niceties in life; houses, cars, boats, college, you name it. Prosperity was shared by most. Retirement was possible.

This can be seen by the even spread of earnings across the classes. For example, from 1940 through 1980, the top one percent earned between 8 to 10 percent of total earnings in the United States, and the top 10 percent earned about a third of the total earnings.

Compare that to when I bought my house in 2007, where the top one percent earned over 23 percent of the total income in the United States, and the top 10 percent earned a whopping 50 percent of total income. The middle-class no longer had opportunities, but was fighting to grasp the other 50 percent of income being spread across 90 percent of our population. Things haven’t improved much in the last few years.

The answer? There are many theories, but the fact remains that income inequality has far reaching affects. Political coups, civil disobedience, epic strikes, and social unrest are all bedfellows with income inequality. When 90 percent of the country is struggling to survive, let alone prosper and flourish, the seed of discontent becomes well-embedded in the hearts of the average American and rebellion is on the wind.

Many things have changed since my elders flourished in this country. The beautiful Victorian that my grandparents lived in now has a freeway running through the backyard, and the 30 acres of orchards are filled with track homes. You would think this was a sign of population growth and prosperity, but most of the track homes are for sale or in foreclosure.

My advice in these economic times is to prepare yourself and your family for the worst. Get rid of your debt. Downsize and live within your means. Don’t hold onto the past dreams of home ownership if the mortgage payments are burying you. Save money, and save again. Current economic times foretell of a great wave coming, but you don’t have to drown. Find stability, create your life raft, and hold on.


Bitcoin: Disrupting Banking and Payments

Consumers, especially millennials (ages 18 – 35), are no fans of large banks. In particular, the banks that are Too Big to Fail and Too Big to Jail. In fact, banking was listed as one of the industries that was least liked and most ripe for disruptive innovation. Banking and payments are beyond ready for disruption. Bitcoin, although maligned by banks and economists for failing to meet the criteria of a true currency, posses the potential to lower costs for exchanging money and goods. Lack of transparency and trust as well as the impending threat of ratcheting regulations could imperil the adoption of bitcoin as a mainstream medium of exchange. Yet, financial engineering, technology and service innovation could overcome these roadblocks. Moreover, bitcoin opens up opportunities for new participants in global financial markets, such as miners, market makers, and bankers.

Viacom Media Networks performed a survey of thousands of millennials over several years. The Millennial Disruption Index discovered some key findings including that 71% of millennials would prefer to go to the dentist than visit a bank and the largest banks are least liked brands among this demographic. Moreover, the future is grim for Wall Street. In just five years, a majority (70%) of millennials expect that the way we pay for things will be transformed, the transitive agent will come from outside of banking, and technology companies like Google, Amazon, Apple or Paypal are most likely to bring about this change.  Could the rapid adoption of bitcoin as a medium of exchange be the catalyst for the decline of Wall Street’s stranglehold on Main Street?

Bitcoin is the world’s first digital, decentralized currency. Check below the fold for more information on bitcoin, the blockchain (transfer process), bitcoin mining (transfer confirmation process), and other basic information on the digital currency. Economists have spoken ill of the capability for bitcoin to become a competing currency; however, even its critics have admitted that there is amazing promise in the way that bitcoin enables low-cost payment transfers. The bitcoin blockchain is highly efficient in matching and confirming transactions through the mining process. “Bitcoin was built for the internet” and the value storage and exchange methodology could be extended to standardize the exchange of non-financial assets. Payment transfer fees range from around 3% for Stripe, Paypal, and Square to upwards of 10% for Western Union and domestic international bank wire transfers. However, Coinbase offers payment services for bitcoin transactions with just a 1% transaction fee for merchants. This fee could be lower for innovative pioneers willing to learn how to trade bitcoin.

In my previous posts on bitcoin I focused on the weaknesses of the digital currency as a currency. Yet, it has amazing potential just as a medium of exchange. The threats come from lack of trust and transparency and organizations and governments wanting to tax and regulate the digital currency. How do you know to trust a website? You should look for capital reserves, mature business processes, SSL Certificates (httpS://Secure Socket Layers), masked password inputs, the use of encryption on the server-side, Captcha bot blockers, and two-factor authentication. Moreover, the background, education, experience, and history of the bitcoin exchange and its founders is paramount. The laws of the country the exchange is headquartered in will determine the likelihood of being able to seek legal justice in the event that the firm goes belly up. Albeit, beyond trust and transparency, there are other concerns like taxes and future regulations.

The IRS made a ruling that bitcoin would be treated like a security. If you purchased X bitcoins at $100USD and spent then spent X bitcoins while they were worth $1000USD you would owe taxes on the value the difference ($1000 – $100 = $900). However, companies like Bitreserve to enable you to buy bitcoin, hold US dollars, and then transfer to bitcoin. The simultaneous transfer and holding in US dollars would minimize taxes. One could also use financial engineering to reduce potential tax burdens. For instance, a financial option is the right, but not the right, to buy or sell a security at a certain price. If a bitcoin enthusiast were to purchase Y units of bitcoin, and also purchase a certain number of at-the-money put options (about 2 put options) on bitcoin (put options confer the owner the right to sell a security at a pre-determined price), it would be possible to pay a small amount to reduce or eliminate taxes.

The bitcoin hedging example can be extended a bit further. It may be possible to enable consumers to store or transfer money at no cost. The more exciting possibility is using the blockchain protocol to enable consumers to make money in a world where Wall Street charges for the privilege of letting them hold onto your money. The reality is that Wall Street and the City of London have stood in the way of progress for eons. The global banking cabal has no qualms with manipulating interest rates or laundering money for drug cartels. In fact, whistleblowers continue to expose Wall Street banks’ massive securities fraud during the financial crises. There are market makers that make millions every year buying and selling securities, futures, currencies, and options. The advent of digital currencies give entrepreneurial trader/software developers the opportunity to envision and create new services. They can even become the new market makers for digital banking, mobile payments, and low-cost payment transfers. We should boldly embrace the future of money – millennials are depending on it.


Additional Resources:


What is bitcoin?


Bitcoin Wiki

Paper from Bitcoin Pioneer, Satoshi Nakamoto


Buy or Sell Bitcoin/Create a Wallet






Tip with Bitcoin



Op-Ed: David and Goliath Trademark Dispute

My company, Spendology LLC, started using the SPENDOLOGY trademark first and applied for federal trademark protection 7 months before PNC Bank. Nonetheless, the bailed-out bank hired one of the largest law firms in the US to persuade me to “abandon the trademark and adopt a new one”. The PNC Financial Services Group, Inc. or PNC Bank has succeeded in its attempt to use legal action to prevent my company from registering its trademark and namesake. The story starts a few years ago when I decided to start a company that would use psychology and analytics to advance intelligence. I had an ambitious goal – I just need a name for it.

It was a bright summer morning in 2010 when I woke up and had an epiphany. It was on that sunny July morning that I finally put a name to it, SPENDOLOGY, the psychology behind why we spend and how we can spend more wisely. I searched to see if the name had previously been trademarked on the US Patent and Trademark website. I also conducted several Google and web domain searches to ensure the name was not being used by company. As it turns out, there were no registered trademarks, trademark applications, or search results showing companies using the SPENDOLOGY trademark in July 2010.

I had recently read Dan Ariely’s first book, Predictably Irrational, which looked at behavioral economics research showing that people don’t always make optimal decisions. I previously worked as a management consultant making decision support tools for senior executives. I thought it would be great to put these powerful tools in the hands of everyday people. I wanted to combine insights from behavioral economics with the power of smart algorithms to help people make better decisions. Next, I developed the Instant Budget Calculator, an online financial calculator that has enabled over 1500 Spendology customers to create a smart, local, and personal budget in less than 10 minutes. Creating a budget is difficult. The 2014 Consumer Financial Literacy Survey found that a whopping 61% of consumers do not have a budget.

I decided that I should protect the namesake of my company by seeking federal trademark protection. I submitted a trademark application October 25, 2011. The SPENDOLOGY trademark application was published in the US Patent and Trademark Office’s Official Gazette on June 12, 2012. The PNC Financial Services Group applied for the Spendology trademark on June 12, 2012 and sent me a cease and desist letter dated June 13, 2012. On October 10, 2012, PNC filed a Notice of Opposition with the USPTO’s Trademark Trial and Appeals Board with the goal of preventing my firm from registering its trademark. One of the largest banks and one of the largest law firms in the United States were successful in combining forces to cancel my firm’s trademark application.

I thought about quitting. I hired and fired several lawyers. Many lawyers I spoke with suggested that I give up. This was regulatory capture at its best. PNC Bank, a recipient of TARP bailout funds, was Too Big to Fail, Too Big to Jail and Too Big to Be Wrong. The Department of Justice and Federal Regulators refuse to take Wall Street to task for willfully crashing the economy. Main Street is still reeling from the financial crisis. PNC is continuing to wage War Against Main Street.

Big companies with deep pockets, like PNC, can use “legal force” to cancel the trademark applications and registrations of startups or small businesses – even if the startup used the mark first. The implications of this far-reaching. Moreover, the Supreme Court is scheduled to hear a landmark case (B&B Hardware, Inc. v. Hargis Industries, Inc.) on December 2, 2014. The Supreme Court’s decision will directly impact the matter between Spendology LLC and PNC Bank.

I founded Spendology so that I could empower people and organizations to make better financial decisions. Now, I am in a battle for my company’s namesake; albeit, the matter goes beyond my company’s property rights. I am fighting to prevent another entrepreneur or small business woman from being deprived of their property rights despite having done all the rights things. This is a struggle that can be likened to the battle between David and Goliath. Yet, we all remember that, in the end, David triumphed over Goliath.

Corporate Privilege

Imagine that a terrorist organization aimed to poison the water supply with dangerous chemicals, blow up a fertilizer plant in a residential area, or dump nearly 5 million barrels of oil into the Gulf of Mexico. The US Government would waste no time smoking said terrorists out of their holes. However, this is not the case for corporations. The events I mentioned were perpetrated by corporations – corporations that have invested in lobbying and political action committees to reduce or eliminate regulations aimed at keeping the public safe. The fertilizer plant that exploded next to schools and homes occurred in West, Texas. We are all perhaps familiar with the BP oil spill and the recent chemical spill in West Virginia that rendered municipal water unusable.

The major tragedy in West Virginia is two-fold. On one hand, regulations on chemical storage for coal suppliers was eliminated. Thus, companies like Freedom Industries had not had a site visit from State or Federal inspectors since 1991 despite being located right along the Elk River, a major water supply. On the other hand, there was very limited knowledge of  the chemical that was spilled. The tragedy goes a bit further when politicians on both the right and the left loudly boasted right after the incident that regulations on the books are sufficient, e.g., Speaker John Boehner and Senator Joe Manchin. West Virginia is a state that is hard-pressed for job growth so this is used as an excuse for lax regulations on coal and coal-related industries. Yet, it seems like profit trumps the safety of citizens.

I founded Spendology because I wanted to bring decision tools used by executives to individuals. I literally wanted to give Decision Power to the People. I am an African-American male. I am very familiar with the concept of white privilege. Dave Chappelle  jokingly highlighted this concpt with one of his stand-up routines. Chappelle was with a white friend who was driving under the influence who got stopped by police. His friend simply told the police officer that “he didn’t know that he couldn’t do that” and was allowed to go about his way. Mr. Chappelle hilariously expressed his shock. Stop and Frisk data shows that blacks and latinos are stopped more often and arrested at higher rates than whites. Yet, white privilege emboldened former Mayor Bloomberg to say that black males are not stopped enough.

It appears that the concept of being privileged has somehow extended to corporations. Actions that would be considered terrorism are reduced to the “cost of business”. Companies like Apple proudly proclaim that they must offshore and minimize taxes in the interest of shareholders. Companies like Walmart and McDonald’s depend on US Government subsidies like welfare, food stamps, and Medicare to subsidize their poverty-level wages. Nonetheless, politicians and some people hardly bat an eye because this is somehow what companies are supposed to do. The extent of the privilege appears extreme when we look at what executives and lobbying efforts are pushing for: weakening the social safety net, eliminating regulations, and lowering taxes. The tax issue is huge. We usually hear that taxes are too damn high. In fact, although the US corporate tax rate is 40%, the Government Accountability Office found that the effective corporate tax rate was 13% in 2010.

Moreover, companies have been shifting the burden of training and taxation to the State and its citizens, respectively. At one point in American history, corporations and individuals paid taxes at roughly a 1:1 ratio. At this point, individuals contribute 6-fold more to taxes than corporations. Corporate executives and Governors are pushing for a Common Core curriculum so that students are ready for work on day one – perhaps because internships, apprenticeships, and on-the-job training is on the decline.

Tax Disparity Chart - Spendology

Moreover, members of the elite 1% are striking back against calls for a living wage or income equality. Multi-millionaire venture capitalist, Tom Perkins, even joked that you should only be allowed to vote if you paid taxes and that the power of your vote should be in proportion to the taxes paid. There was a time in America when you had to be a white male landowner to vote. Comments like that from Mr. Perkins are a reminder that privilege is not about seeing reality. The 1% don’t just want to be wealthy and successful. They also want reverence and respect despite lacking respect for those who work full-time for little pay and no benefits. However, my biggest problem with corporate privilege is that it is robbing workers of dignity and dollars as well as the right to life, liberty and the pursuit of happiness.

The 1% Strikes Back

Tom Perkins and Bud Konheim are 2 of the many rich people who have recently lashed out against the 99%, claiming that the rich are demonized, and unfairly taxed. Are these rich-kid complaints warranted, or are the mega-rich completely out of touch with reality?

Living in the US, one must clock-in about $500,000 in annual income to be considered a part of the 1%. After taxes, and depending on where one lives, this might not leave them feeling as rich as they sound. Individuals in the 0.1% bracket are far wealthier, making millions and billions of dollars each year. The class diversity among the 1% is steep, but it’s nothing compared to the spread between the super rich and the average Joe. Separated by city limits, school systems, and gated communities – most of the 1% has created a reality all their own, in which some believe they play the victim.

I doubt Don Thompson, the CEO of McDonalds, lives near any of his employees, the ones that make his business go-round each day flipping burgers, serving customers, and cleaning bathrooms. While Don Thompson earns around $9,200 dollars an hour, most of his employees make minimum wage, not even a living wage. Still some wealthy citizens feel entitled to large paychecks, even if that means those further down the assembly line make next to nothing.

Harvard Professor, Greg Mankiw routinely speaks out for high-paid executives, stating that they deserve the exuberant money they make. Tom Perkins, the founder of successful venture capital fund Kleiner Perkins, got a bit too cozy during a recent interview with Fortune magazine saying the rich were in danger of Kristallnacht, born from the same scapegoat mentality thrust upon the Jews during Hitler’s reign. The fact Mr. Perkins was booked for an interview and not hiding beneath a less wealthy neighbor’s floorboards indicates the exaggerated nature of his words. During this same interview, Mr. Perkins also divulged his desire for more voting power to compensate for paying more taxes. Needless to say, this earned him serious public backlash, at which point he told the press that his comments were made as a risque joke. Yet, as they say, there is some truth behind every joke, and perhaps the rich are feeling unfairly attacked.

The 1% are given a lot of tax breaks, but they are also undeniably forced to pay a lot of taxes. Is it fair that they have to give away nearly half of their hard-earned money? Any mega corporation clocking in billions is doing so only with the help of the larger population, and so giving back is the right thing to do. But how much is too much? Many of the 1% believes the astronomical funding they provide the government should earn them favors, some argue it already does. Tom Perkins will take his reward in more voting pull, while Bud Konheim, the CEO of designer clothing brand Nicole Miller, thinks the 99% should stop complaining. Konheim can’t get past the fact America houses the richest ‘poor’ people in the world, and those that make $35,000 a year are a part of the global 1% richest people. While his facts are accurate they are also irrelevant, especially to any single parent working 2 jobs and barely making ends meet. While the average salary in India is far lower than it is in America, the cost of living is unbelievably lower too. It seems exuberant wealth and prestige can cloud an individual’s reality in more ways than one; the Institute for Policy Studies released a dark secret about the top paid CEOs over the last 20 years: 38% of them conducted white-collar criminal activity on the job.

Despite Tom Perkins’ complaints, or the fact rich CEOs are actually bad people 38% of the time, the rich are far from demonized by public society. Shows like Rich Kids of Beverly Hills wouldn’t exist if everyone truly hated the 1%. We can’t lump the entire 1% into one group of identical people either – some high paid CEOs devote more power to the greater good of society than others. The worst and most greedy CEO is one that does not pay their employees enough money to live comfortably and save. CEO’s that earn millions, but have employees making $7.50 an hour are stealing money right out of needy’s hands just to buy another vacation home or yacht. In order for everyone to thrive, those with the bulk of the resources have to relinquish some of their money and power, otherwise CEOs will continue flying jets while their employees struggle to pay basic bills.

A quote from Oliver Stone’s film, Wall Street, comes to mind: “How much is enough? How many yachts can you water ski behind?” . The so-called class war is not about hating the 1% it is about valuing the hard work of all people. If you work full-time you should not be below the poverty line. Most importantly, paying employees a living wage is about the value of the worker and not just the value of work.