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LISTEN: Becoming a High-Road Employment Model With Managed by Q’s Dan Teran

Dan Teran, co-founder and CEO of the office services provider, explains on the latest episode of “The Bottom Line” podcast how the company’s success is leading more companies to invest in their workers.

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When Dan Teran launched Managed by Q in 2014, there was one business model that most every technology startup looked to emulate—holding down the cost of labor. Not him.

“At a time when a lot of my peers were looking at companies like Uber for inspiration, we actually . . . picked up the phone and reached out to some folks at Starbucks and companies like Trader Joe’s, the Four Seasons that have invested in their workers,” Teran, Managed by Q’s co-founder and CEO, told me on the latest episode of my podcast, The Bottom Line.

What was particularly notable was that Managed by Q was trying to do this in an industry infamous for generating bad jobs—office cleaners, handymen, and so on.

Managed by Q’s hypothesis was that by treating its employees well (and, yes, they’re all employees, not contractors or temps), turnover would be far lower—and engagement and job performance far higher—than that of most of its competitors. And that, in turn, would lead to high customer satisfaction and retention.

Managed by Q thus pays above minimum wage, offers ample job training, and provides its front-line workers with the same health insurance, retirement, and stock-option programs that those in the executive ranks enjoy.

“Plenty of people,” Teran recalls, “told us we were anything ranging from crazy to stupid.”

Flash forward four years, and Managed by Q doesn’t look so crazy anymore. The company, which today employs about 1,000 people, has expanded from its home base of New York into four other cities. More than 7,000 office locations—from relatively small facilities to full corporate campuses—can now access the company’s platform.

Last fall, Managed by Q announced that its core services business had become profitable. Meanwhile, it continues to augment an online marketplace showcasing hundreds of local vendors that also meet high employment standards, and it is busily building out new lines of business, such as a staffing agency for office managers. Teran says that the entire enterprise is on track to be in the black “in the next two years.”

But perhaps what’s most remarkable is that Managed by Q is now becoming a model for other entrepreneurs. “I have heard from some investors . . . that people are positioning themselves as the Managed by Q for X,” Teran says. “That brings me great joy.”

At the same time, other office-cleaning services in Mexico, Brazil, and Germany are also following Managed by Q’s approach of being a high-road employer. Teran notes that the founders of those companies have reached out to him to say “that they were grateful we paved the way because they wouldn’t have been able to raise money if we didn’t have a positive story.”

Others also find themselves drawn to what Managed by Q is doing. Software engineers, product designers, and other talented individuals from companies like Uber have flocked to Managed by Q, according to Teran, because they believe that it’s not only a promising company from a financial standpoint, but one that is transforming traditionally low-wage jobs into solid careers.

“I couldn’t have told you this when we started the business, but one of our secret weapons in attracting some of the best minds . . . is the fact that people want to increasingly put their values to work,” Teran says. “If they see there’s an opportunity to be in a . . . fast-paced environment and also create really positive outcomes for the world, they wouldn’t have it any other way.”

As for Teran, he wouldn’t have it any other way, either. He credits taking part in social justice activities in the Catholic Church when he was growing up with exposing him to those who are less fortunate. Then again, channeling this spirit into a cleaning company wouldn’t have necessarily been the most obvious choice.

“My mother,” says Teran, “would be the first to tell you that I was not the most hygienic child.”

You can listen to my entire interview with Teran here, along with Molly Nugent reporting on the blueprint used by Managed by Q—The Good Jobs Strategy by MIT professor Zeynep Ton—and Natalie Foster exploring why the basic income experiment underway in Stockton, Calif., is so significant.

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Battling Income Inequality With Second Avenue Partners’ Nick Hanauer

The Seattle maverick, who has pushed for a slate of progressive policies while warning his “fellow zillionaires” that the pitchforks are coming, explains on “The Bottom Line” podcast that his dad helped to shape his values.

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When venture capitalist, entrepreneur, and political provocateur Nick Hanauer was coming of age in Seattle, he wanted a sports car. His father, however, wouldn’t let him get one.

It wasn’t because the family, which owned and ran bedding producer Pacific Coast Feather Co., didn’t have the money for a luxury like that. Nor was it because Hanauer’s dad deemed it too dangerous or frivolous.

He forbade the purchase because he was worried about the optics. “He felt strongly that it sent the entirely wrong signal to our employees who worked, in his opinion, harder than I did and couldn’t afford such a thing,” Hanauer told me on the latest edition of my podcast, The Bottom Line.

“That was just kind of the perspective that my dad had,” Hanauer adds, “and I suppose I got some of it.”

Actually, Hanauer got substantially more than some.

An early investor in Amazon and a co-founder of Second Avenue Partners, Hanauer for years has been citing the dangers of income inequality in America, famously warning his “fellow zillionaires” that “if we don’t do something to fix the glaring inequities in this economy, the pitchforks are going to come for us.”He also hasn’t been shy about offering a host of policy prescriptions to lift up the working class. Among them: raising the minimum wage to as much as $25 an hour at the nation’s biggest corporations; making vastly more people eligible for overtime pay; creating a system of portable, pro-rated, and universal benefits for independent workers; and curtailing stock buybacks.

If he had his way, he’d also significantly boost corporate taxes—a total reversal of Trumpian economics.

Hanauer says that he learned the merits of this idea from watching his father manage Pacific Coast Feather. At the time, in the 1970s, the top corporate rate was 48%. (The Trump tax law just lowered it to 21% from 35%.)

“When I grew up in the family business and tax rates were very, very high, my dad employed this fantastic tax-avoidance scheme,” Hanauer says. “We called it investing in the business.

“What my dad did to avoid paying corporate tax, which he hated, was to spend every dollar of cash flow on more employees, more factories, and more equipment,” he recalls. “We kept our profits insanely low because we did not want to pay more corporate tax. Today. . . the penalty of high profits is very, very low.”

While Hanauer has harsh words for what he calls the “trickle-downers,” his condemnation is not limited to one side of the political aisle. “The evisceration of the middle class,” he says, “took place during Democrat and Republican administrations.”

He also sees the public sector as just one part of the problem; the private sector, in Hanauer’s eyes, has largely abdicated its responsibility, as well. “In the old days, big companies used to set the tone at the top,” he says. “Today, they drag everyone down to the bottom. And that shouldn’t be tolerated.”

One of the corporations that Hanauer criticizes is Amazon, which he helped to get off the ground (and where, it was recently disclosed, the median employee made $28,446 last year while CEO Jeff Bezos’s net worth has climbed to more than $130 billion).

“They’re super exploitive—just unacceptable,” Hanauer says. “What I can guarantee you is that Jeff Bezos is not going to change those things in the absence of somebody putting essentially a gun to his head and forcing him to do it.”

If Hanauer’s father helped to forge a firebrand, there’s at least one aspect of the son’s life that he would have trouble fathoming. “I . . . have this giant pile of money that would have been inconceivable to my dad,” Hanauer says. “And I live a ridiculously lavish life as a consequence of that.”

You can listen to my entire interview with Hanauer here, along with Larry Buhl reporting on the steady erosion of overtime pay in America, and Karan Chopra explaining how great social benefits can result when “agents of innovation” combine with “agents of scale.”

 

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LISTEN: How Two African-American Entrepreneurs Are Determined To Change Diets In The Black Community

On the latest episode of “The Bottom Line” podcast, Naturade’s Claude Tellis and Kareem Cook share how their own families’ experience with diabetes has spurred them to promote healthy eating options.

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Many entrepreneurs pride themselves on solving some sort of “pain point” for their customers. But as Claude Tellis and Kareem Cook, the co-owners of health-products provider Naturade make clear, some pain points are a lot more serious than others.

“I had an uncle that went into the doctor, wasn’t morbidly obese or anything, lived in Louisiana and . . . the family was faced with, ‘Do we amputate both of his legs or not?’” Tellis told me on the latest episode of my podcast, The Bottom Line. “He never made it out of the hospital. He died, and he was about 55 years old.”

Another uncle, says Tellis, who serves as Naturade’s CEO, “was faced with losing a couple toes.” Eventually, “they had to take his leg from the knee down.”

In the African-American community, dealing with this grim loss of life and limb—often brought on by diabetes and peripheral arterial disease—has become disturbingly routine. “You just kind of grew up with insulin in the refrigerator,” says Cook, Naturade’s chief marketing officer.

And so Tellis and Cook have set out to combat this crisis by helping underserved populations—especially those in black neighborhoods—eat better. Their vehicle for sparking change is Naturade, which they acquired in 2012 for $8 million.

Although the Orange, Calif., company is nearly a century old, Tellis and Cook have revamped it completely, including introducing a new product that is now their No. 1 seller: VeganSmart, a plant-based meal replacement that is high in protein, low in sugar, and full of vitamins and minerals. Its suggested retail price is $35 for 15 servings.

“What we really wanted,” says Tellis, “was something that had Whole Foods quality that could be sold to a Walmart consumer.”

To achieve that vision, they’ve built the brand methodically. Step one, Tellis says, was making sure that vegans bought in, so that “people when they look online will see that there’s an authenticity and there’s a rigor” to what’s being offered.

From there, they handed out VeganSmart at Wanderlust yoga festivals, aiming to attract a hip, upscale crowd. This helped advance a “premium viewpoint of the product,” Tellis says.

Finally, there came the last step: bridging into urban America. To catch on there, they’ve adopted an influencer strategy, tapping rappers like Styles P and Da Brat and professional basketball players to promote VeganSmart. (Grant Hill, soon to be inducted into the NBA Hall of Fame, is an investor in Naturade.)

The result is a profitable company that is now selling into, among other retailers, both Whole Foods and Walmart—just as Tellis and Cook had planned it.

Not that any of this has come easy. The duo, who met as Duke University students in the early 1990s, have played in the health-food space for more than 15 years now.

Their first venture, launched in 2002, was a vending machine company called Healthy Body Products, which supplied nutritious snacks and drinks instead of junk food and soda. The business won contracts with the Los Angeles Unified School District, but it was difficult to scale. So Cook and Tellis ultimately sold the venture—but not before gaining some insight into what it takes to persuade those in the mainstream to eat right.

At one point, they brought in actor Michael Ealy (then fresh off one of the Barbershop films) to talk to the students about the importance of maintaining a good diet. “One of the biggest things we learned in our first business was how to make it cool,” Tellis explains.

And, of course, if that doesn’t work as a motivator, there’s always a second message to fall back on. “Everyone wants to be cool,” says Cook. “And no one wants to die.”

You can listen to my entire interview with Tellis and Cook here, along with Bridget Huber reporting on Impact America Fund’s efforts to help improve low- to moderate-income areas, and Karan Chopra laying out what small rice farmers in West Africa can teach American business leaders.

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Finding the Perfect Career With Sokanu’s Spencer Thompson

On the latest episode of “The Bottom Line” podcast, Spencer Thompson explains how his own experience led him to found the career test site.

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In the 1967 film The Graduate, 21-year-old Benjamin Braddock—played by Dustin Hoffman—is famously given a single piece of career advice by a friend of his parents: “Plastics.” Some four decades later, most of Spencer Thompson’s high school classmates were steered, in similarly narrow terms, into the one area that supposedly promised them a bright future.

“I started asking my friends what they were going to study in university . . . and they kept saying health sciences,” Thompson told me on the latest episode of my podcast, The Bottom Line. “I found that very odd because in my four years of going to school with these individuals I had never once heard health sciences come up. And so I started asking, ‘Why is that?’ And they said, ‘Oh, I went to the guidance counselor, and she told me that there is a lot of money in pharmaceutical sales . . . and so I should really go into that.’”

In the end, Thompson adds, “you had 50% of my class of 300 basically study health sciences at the same one or two places.”

For Thompson, who grew up on the Canadian side of Niagara Falls, the whole thing got him thinking: There must be a better method for people to choose the right career.

The result was Sokanu, a machine-learning-based career test site and database for more than 800 careers that Thompson founded in 2012, when he was 20 years old.

The career test, which consists of 310 questions, is designed to measure an extraordinarily large array of factors: your personality, must-haves on the job, can’t-stands on the job, a breakdown of hard skills, and much more. Despite its breadth, people complete the assessment in less than 20 minutes on average.

“We’ve tried to make it incredibly compelling to go through,” Thompson says, pointing to a Spotify-like feature that shuffles people’s results in real time depending on the answers they provide.

Whatever Sokanu is doing, it seems to be clicking with folks. More than 70% of those who start the test complete it right away, according to Thompson. In all, more than 2 million people have taken it to date. The basic test is free (with the company making most of its money by selling services to college and career guidance offices in U.S. public high schools).

Of those coming to the Sokanu site, about 60% are new to the job market; the other 40% have work experience and are contemplating a career change. Those in this latter group are especially important to Sokanu because they leave behind valuable information, including how much satisfaction they’ve found in a particular occupation. That way, when newcomers with similar traits express interest in going into the same field, it’s possible to see how good a fit it really is.

Compared with a traditional career test, says Thompson, Sokanu’s offering is “much more of an adaptive prediction engine.”

Not that everyone is apt to follow Sokanu’s counsel. Social pressures, Thompson notes, can be fierce.

Even if you told someone “that you had 100% confidence that they should be a florist . . . but that person grew up in Greenwich, Conn., and their parents work in hedge funds and they went to Yale, the chance they’re going to be a florist is sub-10%,” he says.

Driving Thompson is a strong belief that having “not just a job, but having a job that is . . . at least an 80th percentile fit for who you are” is crucial to people’s health and happiness—“to what makes humans human.”

Going forward, Thompson is planning to start a separate company devoted to a related area: job training. His focus will be on helping people land middle-skill positions, which generally require some education beyond high school but less than a four-year degree.

One area that he won’t be concentrating on, despite his own digital background, is high tech. “Not everybody can be a web developer. Not everybody can be a data scientist,” Thompson says. “It’s an absolute lie that most people in the middle of the country or the edge of the country that have been struggling, that have been suffering, that have been left behind can automatically just become a worker in this world” of technology.

You can listen to my entire interview with Thompson here, along with Bridget Huber reporting on the skills that today’s teens will need to succeed in the workplace of tomorrow, and Natalie Foster exploring how and why the private sector is starting to make real strides on paid parental leave.

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Why a Pioneering Green Energy Investor is Optimistic About the Future of the Planet

Daniel Weiss, managing partner of Angeleno Group, describes on the latest episode of “The Bottom Line” podcast how clean energy has moved from the realm of politics and policy to that of the markets and economics.

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When Daniel Weiss co-founded Angeleno Group in 2001 to fund green energy companies, few would have regarded him as a master of timing.

Oil was trading at a lowly $23 per barrel. The California electricity crisis had recently triggered large-scale blackouts across the state. Enron had just gone belly-up.

“To launch an investment firm and raise capital to invest in this space . . . maybe we ought to have had our heads examined, ” Weiss, one of Angeleno Group’s two managing partners, told me on the latest episode of my podcast, The Bottom Line.

Seventeen years and $2.5 billion worth of investments later, Weiss and his colleagues have proven that they were lot more savvy than silly.

Along the way, they’ve kept their eyes on four fundamental drivers: an urgent need to replace an aging and inadequate power infrastructure in the United States and elsewhere; the steadily increasing demand for fuel and electricity as ever more of the world’s population enters the middle class and becomes urbanized; a push by different nations to secure their own energy independence; and the rise of global warming and other environmental issues as a major social concern.

“You add those four things up,” Weiss notes, “and we thought, ‘These are not 10-, 20-, 30-month trends. These are 20-, 30-, 40-year trends. And they’re going to create massive investment opportunities.’”

Plus, Weiss adds, the field was pretty wide open back then. “Not a lot of folks were focused on the next generation of energy,” he says.

At least not in the private sector. Two decades ago, most of those paying close attention to our biggest energy and environmental problems — and how we might overcome them—were public officials, nonprofit leaders, and scholars.

Not any longer, however. “We really are shifting,” Weiss says, “from a world in which adoption of some of these technologies is driven by politics and policy to a world . . . being driven by markets and economics.”

Actually, among Angeleno Group’s greatest strengths is its ability to draw on the assistance of those who have deep experience in both arenas—corporate and government. The firm’s advisory board includes John Browne, the former chief executive of British oil giant BP; Ernest Moniz, who served as Energy Secretary under President Obama; Bennett Johnson, the long-time senator from Louisiana who chaired the Energy and Natural Resources Committee; and nine others with similarly golden credentials.

Motivating these heavy-hitters — who take a very active role in helping Angeleno Group and its portfolio companies — is the belief “that this $6 trillion vertical of the global economy is an important one,” Weiss says, and that “technology, science, and entrepreneurship in this sector can make a really positive difference.”

Despite the ongoing threat of climate change and a number of backward steps on the environment made by President Trump and his administration, Weiss thinks so too. He points out that the companies Angeleno Group has invested in — a range of enterprises offering products and services in wind and solar, clean transportation, energy efficiency, and more — have had the effect in terms of reduced carbon of taking the equivalent of 50 million cars off the road per year.

But there’s another metric that hits even closer to home. In 1977, when Weiss was growing up in Los Angeles, there were more than 120 Stage 1 smog alerts. “You couldn’t go out and play on the blacktop” because the air was so nasty, he recalls. But now, “in my kids’ experience in elementary school . . . in Los Angeles there were zero Stage 1 smog alerts” — even though there’s far more traffic on the road.

What made things better, says Weiss, was a steady progression in which politics and policy helped to drive the adoption of new technology (in that case, the catalytic converter) until, eventually, market forces took over and spurred truly widespread change.

“I’m optimistic,” he says, “because of that track record and history that we have of innovating our way against some of these challenges.”

You can listen to my entire interview with Weiss here, along with Marty Goldensohn reporting on Coca-Cola’s “World Without Waste” sustainable packaging campaign, and Rachel Schneider pondering whether the United States can ever have lasting full employment.

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The ‘Uber For HealthCare’ Aims to Transform the Marketplace

CEO Walter Jin explains on the latest episode of “The Bottom Line” podcast how the Uber model represents a part of what the company does—but don’t forget about FaceTime, OpenTable, and more.

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Like many digital startups, Pager originally pitched itself as the Uber for X—in its case, as the “Uber for healthcare,” a label that made all the more sense given that one of the company’s founders, Oscar Salazar, also helped to launch the real Uber.

But as Pager has brought in a new CEO, it has found that Uber isn’t quite the right analogy anymore.

When you order a car to pick you up, “you know that you want an UberX or UberXL,” Walter Jin, who now leads Pager, told me on the latest episode of my podcast, The Bottom Line. But when it comes to medicine, “I would surmise that people don’t know which care setting they really need to go to—whether it’s ER, urgent care, primary-care physician, specialist, just getting a . . . lab order or a prescription pharmaceutical. We don’t know. All we know is that we’re sick.”

If someone wants to go see a regular doctor, Jin adds, it can often take weeks to get an appointment. That “leaves us really just to wallow at home and suffer or we go to the ER”—which can be inconvenient and costly.

Pager has been trying to change this scenario by steadily broadening its offerings. Feeling yucky? Now, you tap into Pager and begin with a free interactive session (via chat, voice, or video) with a nurse at the company’s “command center.”

This setup was inspired in part by what Jin himself does when he’s under the weather: He simply reaches out to his brother, who is an emergency room doctor, by text or FaceTime. “He literally just tells me what to do,” Jin says. “We can help you in the same way that my brother does for me.”

The command-center nurse, for instance, might advise you to head straight to the emergency room or to urgent care, if your condition is serious enough. Or this intake conversation might lead to a more extensive telemedicine session with a physician or a house call visit from a Pager-contracted doctor (back to Uber again). Or you might nail down the next available appointment at a local doctor’s office by using Pager’s scheduling app—a feature that Jin likens to OpenTable. Another service now on Pager, called PokitDok, will help you check your insurance coverage.

“We’re really a traffic cop for the healthcare system,” Jin says.

Among the company’s biggest challenges is how to direct more traffic across the country. Pager, which has raised about $40 million in funding since its inception in 2014, currently serves about 100,000 people a year in select parts of New York, Florida, Texas, and New Jersey (where it struck a major deal last fall with Horizon Blue Cross Blue Shield, which promises to swell its numbers). But penetrating new communities is tough.

That’s largely because markets are highly localized. “When you go to Nashville, the healthcare system and the players are different than if you go to Dallas, Texas, or Oakland, California,” Jin explains. “While we’d love to be a national app that everyone can just download . . . it just doesn’t work that way.”

Jin, who has been involved in the business side of the healthcare world since the mid-1990s, was Pager’s non-executive chairman and an investor in the company through his Three Fields Capital before becoming CEO a little more than a year ago. He credits Salazar and his two co-founders (all of whom remain in senior roles at Pager) with recognizing that they needed to bring in a leader with deep experience in the field.

“As we spent on time on the board talking about the nuances in healthcare,” Jin says, “I think they really started to take a very humble approach to how difficult our industry is to transform.”

After all, while Jin is happy to invoke Uber, FaceTime, and OpenTable, he is quick to point out: “It’s not Snapchat. . . . It’s extremely, extremely complicated.”

You can listen to my entire interview with Jin here, along with Megan Kamerick reporting on a mental-health app called Woebot, and Kanyi Maqubela exploring the fine line “between exploitative and empowering” in consumer finance.

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Taming the Ups and Downs of Workers’ Incomes With Even’s Quinten Farmer

Quinten Farmer, co-founder of the banking app provider, explores on the latest episode of The Bottom Line podcast how Even’s open culture helped it to get its product right.

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Late last year, Even generated a lot of buzz when it was announced that the banking app provider had signed up Walmart—the nation’s largest employer—so that its 1.4 million workers can draw in advance on their next paycheck and thereby smooth out their financial ups and downs. But this huge success notwithstanding, Even’s own path has been anything but smooth.

“We’ve only just recently exited this experimental stage,” Quinten Farmer, Even’s co-founder and chief operating officer, told me on the latest episode of my podcast, The Bottom Line.

Launched in 2014, Even displays an all-too-rare sense of humility in a world where many startups feel a constant need to swagger. This doesn’t mean that the company is timid; Even is plenty eager to put forth bold ideas. But it is also willing to be transparent about what isn’t panning out—and change directions when necessary.

To this end, when Even brought on a head of research a few years ago, “her mandate was to make sure that we as a company didn’t lie to ourselves,” Farmer explains. She has since used the company’s blog to, in Farmer’s words, “essentially live our product development experience in public.”

Making Even’s embrace of this fishbowl existence all the more extraordinary is that things were bound to get messy given that the company had chosen to take on an immense social challenge: income volatility.

Because of erratic work schedules, the need to take time off to care for a loved one, and other issues, many American households face wild swings in their earnings—25% or more on an annual basis and even bigger fluctuations month to month. This makes it “difficult for families to plan, pay regular expenses, save, or pay down debt,” the Pew Charitable Trusts has pointed out. Often, they’re forced to turn to expensive options, such as payday loans or overdraft protection, to cover the bills.

Even’s original way of trying to solve this was through a product called Pay Protection, which Walmart quietly piloted.

“Basically they said, ‘You know, we think you guys are pretty small. We think this is pretty early. But there’s something here. Can we figure out a way to work together?’” Farmer recalls.

Under Pay Protection, the system would establish an average income for you based on your pay history. If you earned more than the average during a particular period (because you worked a bunch of overtime, for instance), it would direct you to save your money. If you earned less (because, say, you had to miss work), Pay Protection would either take money from your savings or float funds from Even to make up the shortfall. All of this was made available for a subscription fee of just $3 a week.

“You can kind of imagine this nice, elegant smoothing function,” Farmer says.

The trouble was, what Farmer and his colleagues imagined didn’t match the way that people actually lived their lives. As it turned out, many folks were routinely running into a cash squeeze before their next payday, when the Even app was designed to intervene. Action, however, was required immediately.

“The classic example really is rent is due two days before payday,” Farmer says. “It’s purely a timing problem.”

And so the company ditched Pay Protection and introduced a new solution called Instapay, which allows people to withdraw part of their paycheck early. Because this is offered as a benefit by employers, Even knows how much money in total is coming to the individual. This ensures that it won’t extend funds, willy-nilly, beyond what someone has earned, helping to keep them financially healthy.

For Farmer, the entire process—trying something, failing, and finally seeming to nail it—is exactly what Even promised its earliest investors. “We don’t know all the answers,” Farmer remembers telling them. “We don’t know what the right approach is. We’re pretty confident we can find it.”

You can listen to my entire interview with Farmer here, along with Molly Nugent reporting on one woman’s struggles to cope with her own financial instability, and Rachel Schneider examining how our assumptions about gender are shaping the future of work.

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Tim O’Reilly Eyes the Future of the Tech Industry By Peering Into the Past

On the latest episode of The Bottom Line podcast, the O’Reilly Media CEO draws on lessons of history to help understand high-tech’s current perils and promise.

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Lots of folks have expressed amazement at the speed with which Facebook, Google, and Apple have gone from being at the center of “the coolest industry” around to being likened to Big Tobacco, “peddling a destructive addiction,” as New York Times columnist David Brooks has characterized the shift.

Count Tim O’Reilly among those who’ve been decidedly less surprised.

“It’s something that happens in the life of every technology,” O’Reilly, the founder and CEO of O’Reilly Media, told me on the latest episode of my podcast, The Bottom Line. “Television was going to change the world for the better. And then we had this backlash where we said, ‘Oh no, it’s making everybody into couch potatoes and making everybody stupid.’ The automobile was going to change the world for the better—and it did. And then we realized, oh my gosh, there are all these terrible downsides. . . .

“It’s kind of how we progress as a species,” adds O’Reilly, the author of, most recently, WTF?: What’s the Future and Why It’s Up to Us. “We start out starry-eyed and optimistic with all the possibility of a new technology,” only to realize that there are shortcomings that need to be addressed—and often are addressed, even as some people invariably resist in order “to preserve the profits that they’re making.”

If it sounds like O’Reilly has a keen sense of the past, that’s because he is a close student of it. But it’s also because he himself has helped to make history, at least in Silicon Valley.

O’Reilly Media started in the 1980s as a publisher of books about computer programming, and later the Internet. Today, its learning platform, Safari, is considered the largest online library for technical and business topics. The company is also well known for its industry conferences. In 1998, O’Reilly organized the meeting where the term “open source software” was born. In 2004, he became instrumental in popularizing the term “Web 2.0” to indicate the shift, in the wake of the dot-com bust, to sites that emphasized user-generated content and were easy for even non-experts to tap.

O’Reilly is also a partner in an early-stage venture firm.

As he draws on the lessons of yesterday to help figure out—and shape—tomorrow, one area that O’Reilly is focused on is the growing concentration of power among a handful of online behemoths. Many critics are concerned that the dominance of Google, Facebook, and Amazon is hurting consumers and workers alike. O’Reilly, though, believes that their behavior is also bound to have another casualty: the tech giants themselves.

“I watched this early in my career with Microsoft,” O’Reilly says, recalling how the company came to wield so much control in personal computing that it would dictate to venture capitalists “what they could invest in” and to entrepreneurs “what was safe to do.”

“That ended up leaving Microsoft holding all of the cards—they thought,” O’Reilly explains. “But in reality, all the innovators said, ‘Well, we can’t make any money in this world anymore. Let’s go over somewhere where there’s just interesting opportunity, namely the Internet. . . . Suddenly, Microsoft wakes up and went, ‘Oh, all of the innovators went somewhere else; they’re not developing for our platform anymore. . . .’

“What’s so interesting,” O’Reilly notes, “is the current conversations in the Valley are very similar. ‘What’s safe to invest in? How close are we to the center of Google’s bull’s-eye or Microsoft’s or Facebook’s or Amazon’s? Is this an acquisition opportunity—or will they just put us out of business?’”

O’Reilly stresses that while a lot wary eyes are being cast toward tech—and for good reason—the impulse to squeeze others transcends the sector.

“It’s really the problem in our entire society and our economy,” O’Reilly asserts. “Long-term greedy is good. Long-term greedy says we’re going to make everybody wealthier, and I’m going to get a piece of that. I’m going to make my customers more successful. I’m going to make my partners more successful.

“But you look at so many companies and you realize that it becomes increasingly zero-sum. And zero-sum is short-term greedy.”

You can listen to my entire interview with O’Reilly here, along with Bridget Huber reporting on how we seem to be facing less the rise of robot overlords and more the rise of robot coworkers, and Kanyi Maqubela exploring whether censorship in China is as much about business as it is about politics.

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Labor & Economy

The Most Successful Union Organizer in America Thinks Traditional Organizing Is a Lost Cause

On the latest episode of “The Bottom Line” podcast, David Rolf of the SEIU explains why worker advocates need to move to a different model.

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David Rolf (Photo: SEIU)

If anyone has shown a keen understanding of how to unionize workers in America, it’s David Rolf.

In the 1990s, he was a key player in the Service Employees International Union winning the right to represent some 74,000 home care aides in Los Angeles—the largest union organizing campaign since the 1940s. In his present post, as president of SEIU Local 775 in Seattle, he has spearheaded growth from 1,600 to 45,000 members. In 2014, The American Prospect called Rolf “the most successful union organizer of the past 15 years.”

All of which makes Rolf’s take on the collective-bargaining system—that it is a relic, and that those who truly care about workers should stop focusing their efforts on promoting it—particularly provocative.

“I think we made a valiant . . . bet that if we put enough talent and enough resources behind traditional union organizing that we could somehow bring back the old model,” Rolf told me on the latest episode of my podcast, The Bottom Line. “It wasn’t the wrong theory to try necessarily. . . . But ultimately, when you try something over and over again and cannot achieve the results you want, it’s time to try something new.”

Instead of being sufficiently innovative, Rolf adds, most labor leaders have been “reinvesting and doubling down on our American system of enterprise-based collective bargaining since the union movement started to shrink in the early 1950s.” The result: “Through decades . . . we’ve seen unions grow weaker and weaker every year while continuing to repeat the same strategic directions.”

Today, less than 6.5% of the private-sector workforce in the United States is unionized, a steady drop from nearly 35% in 1955, 26% in 1975, and 10% in 1995.

To move forward, Rolf has plenty of ideas, including promoting worker ownership and introducing “ethical workplace” certification and labeling programs designed to appeal to socially conscious consumers.

Especially important, he believes, is to supplant firm-by-firm bargaining with a European-style paradigm in which representatives of the employees, employers, and the government set standards for wages and benefits throughout an entire industry or across a geographic area.

“The more there’s bargaining centralization,” Rolf says, “the less anti-union the culture is, the more union coverage you have in the workplace, the lower inequality is within the overall society, the lower the level of gender wage inequality is, and the more time people get for social and leisure activity.”

Another part of Rolf’s strategy has been to build advocacy organizations like the Fight for $15, which, in his words, has put forth a “bold and morally compelling demand” to elevate the pay of more than 20 million low-wage workers.

Whether a critical mass of labor leaders will ever agree with Rolf and push hard to replace the status quo is far from certain. But nobody, he says, should interpret the organizing triumphs that he and a relatively small number of others around the country have enjoyed as a sign that 20th century trade unionism can survive the 21st.

“Overall, the trend lines are not good,” Rolf says, suggesting that the current system is simply “marking time until its eventual extinction.”

“It’s not to say that you can’t find a few dozen black rhinos left in the wild somewhere,” he continues, “but that shouldn’t make us think that they’re suddenly going to take over the world.”

You can listen to my entire interview with Rolf here, along with Marty Goldensohn reporting on the state of employee stock ownership plans, and Kanyi Maqubela reflecting on why the toughest obstacle facing driverless cars is psychological, not technical.

 

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Labor & Economy

TV Legend Norman Lear: Maximizing Shareholder Value Is the ‘Central Disease of Our Time’

In a special edition of The Bottom Line podcast, the hit sitcom creator zeroes in on a topic that has long interested him: business and its connection to society.

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Rick Wartzman photo by Joanne Kim

Through hit sitcoms such as All in the Family, Good Times and Maude, Norman Lear has taken on all kinds of contentious topics during his legendary television career: civil rights, women’s rights, the Vietnam War and more.

But as it turns out, the 95 year old has long had his eye on another issue with huge societal implications: the way that many businesses push to rake in ever bigger financial returns—often in the short term—with little regard for anything else.

Norman Lear

“This is the greatest fallacy I think I know,” Lear told me on the latest episode of my podcast, The Bottom Line. “When nothing in nature suggests anything can grow forever, the American corporation is dedicated to a profit statement this quarter larger than the last. . . . Even as I repeat it, it sounds just ruinous.”

Of course, this relentless pursuit of profit stems in large measure from the fact that, over the past 30 years, companies have embraced an ethos of “maximizing shareholder value.” Says Lear: “I think of it as the central disease of our time.”

Lear became directly involved in promoting a cure when he co-founded the Business Enterprise Trust, which during the 1990s recognized companies that tried to solve social problems as a part of their core business strategy. The program was very much in the spirit of the Shared Value Initiative launched by Harvard’s Michael Porter and Mark Kramer—only Lear’s effort came some 20 years earlier.

One corporation that has consistently impressed Lear is Starbucks. It’s “a company,” he says, “that thinks about its employees a great deal.”

But Lear makes clear that this is the exception. Most companies have kept wages flat and gutted worker benefits over time, leaving many Americans anxious and angry. Indeed, analysts believe that one reason Donald Trump won the White House was that he was able to tap into these feelings among the white working class—a group known as the “Archie Bunker vote” in a nod to Lear’s irascible blue-collar lead character in All in the Family.

Yet Lear says he actually isn’t sure whom Archie would have cast his ballot for—Trump or Hillary Clinton. “Either way is possible,” he says. Getting inside Archie’s head, he adds, “would take 11 scripts leading up to the vote, and I haven’t thought that through.”

As for the business he’s in, Lear—who serves as chairman of Act III Communications, a multimedia holding company—stresses that entertainment can have a positive social impact.

He’s excited about a pilot that he’s doing for NBC, Guess Who Died, which will look at the lives of the elderly—a demographic that, in Lear’s words, has “not been represented ever on television in any way that reflects their numbers and importance in our culture.” He also points to the current reboot of his 1970s show One Day at a Time, which last season grappled with a teenage girl coming out as a lesbian to her single mother and grandmother.

“The lack of acceptance for people who are very different from you . . . this show will help a conversation about it,” says Lear, who was one of those celebrated this year at the Kennedy Center Honors for his lifetime achievement in the arts—set to be broadcast on CBS on Dec. 26. “And there is no way conversation doesn’t aid in the long run.”

You can listen to my entire interview with Lear here:

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Why One Private-Equity Pioneer Is So Fed Up With The Industry, He’s Ready To Quit

Co-published by Fast Company
Leo Hindery has long been outspoken about super-rich fund managers who exploit a loophole that allows them to pay the capital-gains tax rate—about half the ordinary tax rate—on a huge chunk of their personal income.

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Rick Wartzman photo by Joanne Kim

Co-published by Fast Company

Greed is winning,” Leo Hindery tells me on the latest episode of my podcast, The Bottom Line. “I don’t like its trends. ” Hindery, a private-equity pioneer, is fed up with the mores of his $2.5 trillion industry.

“I’m not sure I’m going to stay in the business,” he says.

Hindery, who runs New York-based InterMedia Partners, stresses that he looks forward to continuing to make “thoughtful investments” on behalf of others. But he is mulling a new vehicle outside the realm of private equity.

“I don’t like the fee structure,” he explains. “I think it’s usurious. I think it’s caused really unfortunate—almost unethical—behaviors by some of the managers. I’m not happy with it. So we’re going to change our own perspectives.”

Hindery’s displeasure comes in large measure from seeing private equity change over time. When the field began to take off in the mid-1980s, he says, there was more of an inclination to acquire businesses and hold onto them for five to seven years, building them up along the way.

But now, he says, there is so much capital chasing so few good deals, it has put pressure on private-equity managers—often young generalists with zero experience in the types of businesses that they’re buying—to become overleveraged and then try to turn a relatively quick profit.

“They’ve backed away from the longer hold, and they’ve gone for the more expedient action of cutting . . . costs, especially employee costs,” Hindery says.

His peers infuriate him in other ways, as well. Hindery has long been outspoken about super-rich fund managers who exploit a loophole that allows them to pay the capital-gains tax rate—about half the ordinary tax rate—on a huge chunk of their personal income. “It’s just unconscionable,” Hindery says. “It’s beyond intellectually absurd.”

“There’s nothing that suggests that what we do as managers of these monies is a capital gain,” he adds. “To call it a capital gain is to call an orange an apple.”

For Hindery, the declining standards in private equity are one piece of a larger picture in which the leaders of corporate America have become increasingly focused on short-term profits at the expense of the greater good to society.

When Hindery went to work for natural resources giant Utah International in the early 1970s, fresh out of business school at Stanford, he says he plunged into a world in which major CEOs “were patriots.”

“They believed in the value of their employees as assets,” he says. “They believed in their responsibility to their communities and to their nation.” Today, however, “I can’t make that generalization much anymore.”

Hindery acknowledges that social impact investing is a force to be reckoned with, as more and more public-pension funds, university endowments and charitable foundations steer their investment dollars into those companies that are good stewards of the environment and their workers.

But money managers and top corporate executives—the bulk of whose own compensation is typically linked to their company’s share price—are still often motivated by other concerns. At least for now, says Hindery, “greed is winning.”

You can listen to my entire interview with Hindery here, along with Larry Buhl reporting on efforts by a group of wealthy individuals called the Patriotic Millionaires to battle income inequality, and Rachel Schneider exploring why we need to develop new indicators that measure people’s overall financial health, not just their creditworthiness.


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