Last night I had a rude awakening as to how much I will owe Wells Fargo on my student loans. It was also scary to think that some of my loans had gone into repayment and require my filing of forbearance while I finish school. I have been in school (undergraduate and graduate) for eight years now and will be for another year. And during those nine years, I will have seen three presidents in office, a domestic and international war, and a wavering economy not to mention anything else that occurs before May 31, 2009.
But going back to “a wavering economy”… Many people are worried about the immediate future of the United States economy. Political parties are blaming one another for the downturn and stagnation. Folks are working longer to hopefully ensure their retirement. Others are going further into credit card debt to stay afloat. And many are concerned where they will live in three, six or twelve months. My fraternity brother set his Facebook status to, at what was first amusing but soon somewhat frightening, “T. bought a house. Haha. When will I foreclose?”
It was at this point that I pulled up my morning news sources (CNN, Drudge Report and Fark) and noticed several disturbing stories regarding “questionable” business practices. And I began to wonder: “Can American businesses help stabilize the economy and restore consumer confidence?” From the news stories I read, it looks like companies are on the path to destroy consumer confidence.
For instance, CNN reported this morning that Southwest Airlines “flew thousands of passengers on aircraft federal inspectors said were ‘unsafe’ as recently as last March…” I’ve never flown Southwest, but throughout business school, I’ve heard praise stacked upon praise of the company and its operations. Who would think that Southwest’s “no frills” approach would also include failure to meet FAA guidelines? It’s scary to know that Southwest carried more passengers than any other domestic airline last year and the FAA - a government organization designed to protect the safety of passengers - turned a blind eye because requiring Southwest to fix the planes would “disrupt their flight schedule”. While Southwest claims there is no truth to these reports and should be afforded due process in these claims, I have a hard time thinking I will be “okay” flying Southwest in the upcoming year or two when there are documents showing 47 Southwest jets “flying after missing deadlines for inspections for cracks in the planes’ fuselage or ’skin’.”
Another article by CNN that caught my eye had the following headline: “$75M in gift cards could become worthless“. According to the story, The Sharper Image - who I had no idea was experiencing severe financial difficulty - announced it was suspending the acceptance of gift cards. When you buy a gift card, you effectively become an unsecured creditor and therefore last in the pecking order of creditors if a company goes bankrupt. This seems to go against the philosophy of gift cards. When you buy a gift card, you are not investing in the company, expecting a return on your investment in the future. Instead, you’re handing over hard cash for receipt of credit at a later date equal in value to that cash. It’s much like when you traded baseball cards as a kid and had the stipulation of “a player to be named at a later date”. Now, the other kid is saying, “Sorry - I’m going to keep your card and you can forget about that other card I promised you.” I thought there was a very poignant quote in the article from C. Britt Beemer, chairman of America’s Research Group. He said, “… you will see a lot of frustration among customers. You basically stole (money) out of the customers’ pocket. They will never forgive you.” How true.
I have a feeling we’ve seen only half of what’s in store from consumers.
Kiva, in a nutshell, connects third world entrepreneurs with “investors” all over the globe. But these aren’t investors that you and I typically think of like banks and capital investment firms - they are in fact, you and I. Many of the entrepreneurs are seeking small ($500 - $1250), short-term (6 months - 1 year) loans to get their businesses going. Kiva uses a network of established micro-investment firms to connect the entrepreneurs with investors and ensure the security of the transaction. Entrepreneurs and their loan agents keep investors up-to-date with journals and pictures of their business.