Dumbo, Brooklyn: A Neighborhood Transformed By Its Vibrant Tech Industry

Don’t let the relaxed vibe in Dumbo fool you – its technology industry is flourishing and newcomers are eager to join in its success. However, with this great expansion, problems have come about – expensive rent, a shortage of space to accommodate new startups and a lack of top talent.

On a weekday morning, the usual hustle of the city seems like a land far away in Dumbo, Brooklyn. While walking through the silent streets and passing by locally-designed clothing stores, hand-crafted art shops, vegan eateries, and empty playgrounds, the only noise seems to come from the train overhead, rattling across the Manhattan Bridge. Despite its serene façade, Dumbo is brimming with innovation, stemming from its thriving technology startup industry.

Manhattan Bridge

Manhattan Bridge

The technology industry in Dumbo has expanded considerably and changed the neighborhood over the past ten years, as more companies are choosing the area as the ideal place to launch a lucrative business, due to the fact that the tight-knit tech community allows for networking and collaborating with like-minded innovators. However, Dumbo’s creative culture is nothing new, as the tech industry emanated from the community of artists that had set up shop in Dumbo, more than 20 years ago.

With this rapid expansion, the cheap rent that used to be notorious in Dumbo is long gone, as property rentals have skyrocketed. Furthermore, with so many startups slinking there way into Dumbo, problems are occurring, such as a lack of space for newcomers and companies competing for the same talent to fill similar jobs.

Matthew Burnett and Tanya Menendez, the founders of Maker’s Row, an online platform that connects American designers with American factories, launched their company a mere few weeks ago in the NYU-Poly incubator in Dumbo, which gave the two a place to turn their idea into a viable business.

The NYU-Poly Incubator in Dumbo

The NYU-Poly Incubator in Dumbo

“I’ve been here in Brooklyn for over six years. I love the community,” Burnett said.

Both Burnett and Menendez appreciate that so many creators of startups live and work in Dumbo, and that they have the chance to socialize with those in the same industry. “If there is so much networking happening in this core area, it’s easier to find resources,” said Samir Ajmera, manager of the NYU-Poly incubator, which opened in December 2011.

The two hope to eventually keep their business in Dumbo upon moving out of the incubator. “It’s just nice not to be in the city. It’s not as hectic. I can walk outside and actually take a break and clear my head,” Menendez said.

Dumbo initially became a favored place to launch a business because of its inexpensive rent prices. “When you’re starting a company, money is scarce, so usually entrepreneurial companies establish themselves in off-the-beaten path neighborhoods and Dumbo basically was that about ten years ago,” said Gavin Fraser, Founder and CEO of Small Planet, a company he started in 2009 in Dumbo, specializing in the development and design of mobile applications.

In 2007, Andrew Zarick, CEO and Co-Founder of Digital Dumbo, a platform that helps connect those in digital communities, first started working in Dumbo for a digital agency and observed the neighborhood as it began to transform. “We started noticing this movement of digital to the neighborhood. You would be in coffee shops or bars, and hear people talking about similar work to what we were all working on,” Zarick said.

In January 2009, Zarick organized an initiative, Digital Dumbo Drinks, at reBar, known to all those in the industry as a place to gather and exchange ideas. “It was largely just to get like-minded people from the neighborhood in the same room,” Zarick said.

The many digital startups that have established in Dumbo have sparked innovation and a vibrant energy throughout the area. “When I was your age in New York, there was nothing going on in Dumbo. This neighborhood has gone through a radical transformation over the course of the last ten to fifteen years,” said Fraser, whose company has expanded from a one-man operation to a flourishing team of 25 over the past three years.

Dumbo

Dumbo

The animated, yet more relaxed working environment in Dumbo appeals to many working in the tech industry. “The neighborhood provides a more casual atmosphere, contrasted with Manhattan’s more buttoned-down culture. Dumbo has very distinct borders, which provides a small town or campus-like feeling that people here appreciate,” said Chris Martin, the Director of Community Development for the DUMBO Improvement District.

The DUMBO Improvement District instituted free neighborhood wifi on the streets in April 2011 in order to promote collaboration among the tech industry. “In bringing free internet access to our street life, we are encouraging people to step out of their offices, their residencies and engage with one another and the neighborhood in new and different ways,” Martin said.

Zarick believes that the theory detailed in The Rise of The Creative Class by Richard Florida, best describes why Dumbo has become such a huge technology hub. “He [Richard Florida] basically said the conditions that lead to bohemian culture are the same conditions that lead to high-tech innovation. That makes a lot of sense because Dumbo historically, is an industrial neighborhood and all the buildings here are open-office environments,” Zarick said.

According to Zarick, artists used to work in the area in the 1980’s because the rent was so affordable. “There is a low barrier to entry for people with ideas to move in, set up their businesses and do it in a cost-efficient way, and we see culture as the underlying driver of that,” Zarick said.

Part of Dumbo’s allure is that the neighborhood has been at the center of creative and experimental work for decades. “Dumbo appeals to these companies because there are a lot of like-minded, creative and tech-savvy people in a small area, which fosters great collaboration and even competition. Dumbo has always been known as an important neighborhood in Brooklyn culturally. With the added exposure from the tech industry, the artistic culture here grows too,” Martin said.

For these reasons, many of the companies in the NYU-Poly incubator, like Maker’s Row, hope to stay in Dumbo and be a part of the creative community, but over the past few years, real estate prices have drastically increased. “It’s too expensive now and everything in Dumbo is taken. It’s impossible to get space here now,” Ajmera said.

In Dumbo, there is a lack of space preventing the tech industry from expanding

In Dumbo, there is a lack of space preventing the tech industry from expanding

Zarick also finds that space seems to be an immense problem working against the expansion of the tech industry in Dumbo. “We need more space and hopefully more will come on to the market, especially as some of the bigger companies outgrow Dumbo,” said Zarick, who predicts that Williamsburg and Bushwick may become new centers for tech companies to relocate.

Another fundamental problem with so many tech startups all trying to thrive in Dumbo is that most of the companies are searching for those with the same expertise and aptitude. “It’s a highly competitive market for talented programmers. That has always been the case, but it’s especially true here in Dumbo because people want to work here now and there are a lot of companies competing for the same talent,” Fraser said.

Zarick agrees that finding the top talent is becoming difficult. “It is always a struggle to find high-tech talent, especially engineers. It’s a huge issue in New York. Everybody is always vying for the best talent they can get,” Zarick said.

Despite these problems, many new businesses are still trying to establish in the neighborhood and the tech industry in Dumbo is expected to grow. New York City Mayor Michael Bloomberg openly supports entrepreneurship and with the Economic Development Corporation, has helped to set up numerous incubators around New York City, to house startups. As of March of this year, there have been ten city-sponsored incubators established, which have assisted over 550 businesses and provided more than 900 jobs.

The Brooklyn Tech Triangle, consisting of a partnership between the Brooklyn Navy Yard, the Downtown Brooklyn Partnership and the Dumbo Improvement District, conducted a study with Urbanomics, and found that the creative and tech industries have had a huge economic impact on Brooklyn, with total economic output amounting to $3.1 billion as of this year.

Under the Manhattan Bridge

Under the Manhattan Bridge

There are now 523 firms within the industry and 48% of them believe that their employment will double in the next three years. In fact, since 2000, the Downtown Brooklyn area (including Dumbo and the Brooklyn Navy Yard) has created over 9,000 jobs and over 500 new businesses.

The Brooklyn Tech Triangle is working on several proposals that would help to accommodate more startups in Brooklyn, mainly in Dumbo, as well as to supply even more jobs to the tech industry. “There is a lot of initiative to get as much tech in here,” Ajmera said.

Despite plans to further expand and allow newcomers in, those already working in Dumbo, hope that their companies will be able to stay. “Dumbo just feels more like a real community. You see familiar faces. I really like that,” Menendez said. “I don’t think there would be any better place for us,” Burnett added.

——————————————————————————————————-

*The audio/photo slideshow features part of an interview with Andrew Zarick, CEO and Co-Founder of Digital Dumbo.*

Advertisements
Posted in New York University (NYU) Journalism Assignments | 1 Comment

The European Financial Crisis: Can It Be Solved?

An Interview with NYU Stern School of Business Professor Itamar Drechsler on the Eurodebt Crisis 

Credit: allaboutmoney.com

Credit: allaboutmoney.com

Problems continue in Europe, especially in countries like Greece and Spain, where we see record high unemployment rates. What are the central issues that are still preventing Europe from solving their problems?

“There are a couple of problems and they are clearly related. One, is that there are a lot of banks in Europe and it’s not clear what their problem is exactly. Some people believe there is a general banking liquidity crisis. For example, one thing that’s out there is that many people are afraid that certain banks won’t survive and so they pull their money out of those banks, which of course, makes it so [the banks] won’t survive. So, there is a slow bank run going through Europe, where the countries that are weaker – their banking systems are slowly failing and, of course, a banking crisis is very bad for an economy, because it means businesses can’t borrow and people don’t have anywhere to save and we know that is a disaster.”

“The question is – is there enough intervention to lend them enough money that is going to fix it? I think the solutions that you hear have a lot of times been – ‘let’s lend them more’ and ‘let’s lend them against any kind of collateral they want.’ One impression that it hasn’t fixed things, is that it doesn’t look like that is changed so much. Even after being lent this money, they are fundamentally broke, so they cannot be fixed without a recapitalization or having them be taken over and if they don’t, they kind of have basic problems with the way that they manage their business. When you’re kind of on the verge of broke, you run your business usually in a suboptimal way. You’re kind of gambling for the upside, rather than necessarily doing what is the right thing to maximize value during normal times, so that can kind of make the problem worse and make the problem go on for longer.”

Do you think the issues with the banks are the underlying problem?

“I think it is a bad problem because the way you look at it is – how did this start? There’s some problem that drew all these things to this place and that has been going on for a long time. People claim that the periphery in Europe is not competitive, but now we’re talking about taking this thing back a long way – labor costs in the periphery are much higher than they are in Germany, people are less productive, they make a lot more money per whatever they are producing than they do in Germany and that seems to be clear. It seems like for quite a while, maybe a decade, unit labor costs in these countries are going up, whereas Germany has done a lot to make itself more competitive. At some point, they become very uncompetitive, but you didn’t see it in their output or in people’s consumption. One reason may be is that these governments borrowed more and more and kind of propped up the local economy by spending money that they borrowed, and they were able to borrow, and thought they were going to pay them back, and there’s a good question of why that went on for so long, but it ended at some point, 2009-2010, more than a year after the crisis. So now they’ve been cut off at borrowing money at cheap rates, so first that has caused a lot of problems internally because economies have contracted, they don’t pay as much taxes, so it makes them even more in debt and makes them have to issue money more expensively. At the same time, many of those issues really hurt the banks, so this is all very related. All these things were kind of going on with the financial crisis. These governments also often tried to help their banks, so now, they’re already kind of not competitive and borrowing too much and now they’re trying to help their banks, which is kind of loading debt on top of debt. The governments are in bad shape, the banks are in bad shape – these are not unrelated issues, and the economy is not in good shape, and again it is not unrelated.”

So you have these three related and interconnected entities stopping Europe from solving their problems?

“The question is what is the original one [problem]? Even saying that they’re not productive is not really an explanation. It’s a partial explanation. The question is why are they not productive? Why do they seem to have economies that are structurally not working as well as other places? These problems are related but they’ve kind of developed their own dynamics. You want to fix the banking problem before you try to fix some bigger productivity issue perhaps. Government can’t repay and banks already own a lot of the debt, so now you can’t fix the banking problem without fixing the sovereign problem and how are they going to pay their taxes if they are not competitive? These are all very related to each other. I don’t know whether to call these things different or not. Certainly, people talk about them in their own groups, but the sovereign and the banking problem are clearly tightly connected together.”

How can the Eurozone countries better align on the critical fiscal issues?

“There are a lot of problems. There are political issues and it’s also about what people are willing to accept. What is being sold, in some sense to the Germans, but they are not buying it completely, is with fiscal integration, essentially if they take on some of the debt of other countries, they’ll be able to get out of this crisis and that will be better for Europe then to break it up right now. Some people are saying ‘this is a failed experiment, we don’t want their debt, it’s not going to fix things’.”

So the problem is that these countries are all so politically different?

“Even internally, within a given country. Take Greece for example – very high government employment, very low government labor productivity, many people evade taxes, the tax law is not well enforced. You want to fix the problem, but then it gets into politics. You want to slash somebody’s wages and retirement. They will say, ‘I don’t want to be the one here, those guys first.’ Everybody’s trying to protect their own interests and nobody wants to be the first one to give up what they have. You want to do labor reforms in Italy – you’re always going to slash and take from somebody, maybe everybody, but nobody wants to be the one to give it up, so they fight for what they have, understandably, but it’s a terrible problem, and it’s very hard to make these reforms.”

So what will happen? Do you think it is likely to see the Eurozone go back to the core six countries?

“I don’t know, I think anything is possible. These things always look impossible until they happen. Anything is possible. I think they’re trying not to get there pretty hard. I think at the end of the day, that bluff will be called.  I’m not a European, I don’t know how they feel. I can see the Germans are very angry. The French want them to do fiscal integration, but they’re not really buying it. They spent a lot of years keeping wages down in German manufacturing and they’ve sacrificed a lot to get here. It’s not like they are super rich. They’ve done well, they’ve worked very hard, the unions have been forced to give up a lot there, and they feel like they’re already paying for it, because they lent this money and it’s not going to be repaid back to them in full, but they sometimes pretend that if they just press hard enough, it’s going to be, but it seems clear that it won’t.”

Do you think the EMU was created too quickly, rushed into, and wasn’t integrated correctly from the onset?

“The Maastricht Treaty and this convergence of Europe to a single currency was actually a very long-term process. It’s easy to call it a bad idea, but I think one of the puzzles is if you asked a bunch of economists, what is the right way to set up borrowing in such a union, I think the theoretical answer most people would have given you, is that you actually shouldn’t, you don’t want to issue common debt – you want to let each country issue its own debt and then the market will discipline them because it would see which countries are responsible, which will raise the borrowing costs for those that look irresponsible and, therefore, force them to cut back on their spending. That is exactly what we did. Somehow, the market let different countries pile up a lot of debt before that happened. If you really asked people honestly and if you never showed them what happened, and you asked them, how should we do it? They would tell you the way we did it. So is it rushed? I think that’s the answer people would have told you, but somehow that device failed and given that it failed, then you get into a situation where many people have a strong interest not to let any given country, even a small country like Greece fail.”

So maybe there was no better way of doing things?

“Clearly, this didn’t work, so I wouldn’t say that, but it would have been hard to foresee. There were well-known people that criticized this. There’s even an interesting article that Chris Sims, who was a Nobel Prize winner last year, wrote in 1998-1999. He kind of criticized a lot of these things, it looks a lot like what happened, but there’s always somebody saying that something is not going to work or it is going to work. He criticized the fact that every country gets to keep its own central bank as an important regulatory function.”

——————————————————————————————————-

So, as you can see, it clearly is not the end of the story on Europe and there is likely to be many more twists and turns before the Eurozone countries are able to better align and fix their problems once and for all.

Posted in The Global Economy | Leave a comment

US Multinationals Face Declining Profit in Europe, Tapping Into Latin America Instead

US multinational companies are facing declining sales in Europe, with some companies barely making any profit.

According to an InvestorPlace article, “The double whammy of a shrinking Eurozone economy and weaker euro makes an already depressed revenue picture for some major U.S. multinationals all the much tougher for 2013.”

So where are US multinationals heading? Latin America.

Many multinationals are not only greatly profiting through their operations in Latina America, but in countries such as Costa Rica, the global companies are finding it financially rewarding to provide numerous jobs, which tend to stimulate the economy there as well.

According to InsideCostaRica.com, IBM operates in Costa Rica and plans to employ 1,000 more people by 2014. St. Jude Medical Company also intends to create numerous job opportunities for those in Costa Rica in 2013.

As stated in a Reuters article, Fitch Ratings recently allocated Costa Rica’s global bond (with a maturation date in 2022) a projected “BB+” rating.

“Costa Rica’s ‘BB+’ ratings are supported by its institutional strength and favorable social indicators. A history of political and macroeconomic stability combined with a skilled labor force continues to attract foreign direct investment and foster the development of highly competitive export-oriented industries” (Reuters).

The global think tank, Council on Foreign Relations, affirmed in a recent article that US foreign direct investment in Latina America has remained consistent over the years and amounted to over $25 billion in 2011, which was about 20 percent of all FDI in Latin America for that year.

It seems as the financial crisis in Europe only deepens, US multinationals will place a larger emphasis on their operations and investments in Latin America as 2013 approaches.

Posted in Multinational Companies, The Global Economy | Leave a comment

An Interview With NYU Stern School Of Business Professor Kim Ruhl On Multinational Companies And Their Impact On Underdeveloped And Developing Countries

Globe Are multinational companies more helpful or hurtful to the underdeveloped countries in which they operate?

“They’re probably good in most cases. They tend to provide higher wages than domestic firms do. Usually, there are some transfers of technology that are there. Depending on which countries you are talking about, there may be joint ventures involved that have spillovers into the domestic market. They also tend to provide a demand for skilled labor and provide an impetus for people to accumulate more skills, so I think a lot of what multinational companies are good for is kind of bringing better technology and better management ideas into those countries and then there is always some kind of spillover. Certainly, you can find workers that have worked at a multinational firm later go and start their own firm, or go work in other firms, and that is generally seen as good.”

What impact do multinational companies have on their host countries?

“I think there is something about seeing successful businesses and that encourages other people, and allows these companies to put pressure on domestic institutions. When Intel went to Costa Rica and built manufacturing plants there, it kind of spurred a change in the education regimes in Costa Rica, so they can bring about some sort of better change in institutions.”

Why do multinational companies choose to operate in underdeveloped and developing countries?

“A lot of reasons why multinational companies go into other countries is they’re looking for a productive workforce, so it’s in their best interest to have a well-functioning country as well. They don’t want to put a huge investment into a place that is politically unstable or that has poor institutions. You see the big inflows into countries like China and India happening once they start reforming, not before. Now that wages are going up and the markets are working better in China, that’s when all these companies are showing up. You don’t see a bunch of people lined up on the door of North Korea just waiting to get in. You want to be in a place where you can operate. We saw the first big rounds of multinational expansion into Latin America, after a lot of policy reform there. We saw a lot of FDI, because those places were seen as being stable economies at the time – they were reforming, and workforces were becoming educated. It was becoming a good place to produce and to sell.”

What would you say in response to claims that multinational companies exploit poor workers in underdeveloped countries?

“Yes, their wages are low, but their wages would be even lower if they weren’t working for that company, if they were farming in the countryside or working for an unproductive domestic firm. That is not to say that there aren’t conditions in these countries that really are not great. That is something that needs to be changed, but it needs to change within.”

When large multinational companies claim that they were not aware of exploitation and corruption going on in their factories and plants in underdeveloped countries, do you believe them?

“It is hard to believe, for most companies, especially these really big multinational companies, that they don’t know what is going on in these places. Walmart became the biggest retailer in Mexico really quickly and they paid lots of bribes to officials – for building permits, and other things you need in order to build in Mexico. To be honest, that is just the way business works in Mexico. When this was found out, Walmart claimed they didn’t know anything about it, but in the end, it was clear they knew what was going on.”

Since underdeveloped and developing countries have such different rules and policies, is it even possible for multinational companies to operate ethically?

“You’re in a place with a different set of institutions and you’re following the right way to do things somewhere else – it may never work.  I think there is some tension between having to operate in a country that looks a lot different than the US, and at the same time, hold yourself up, or be held up by US laws, and people in the US questioning why you’re doing what you’re doing.”

What are the effects on the US job market, since so many US multinationals operate elsewhere and outsource jobs?

You can see if you look at employment manufacturing over the last 20 years, every time there is a recession, employment kind of falls and some of that is coming from certain kinds of goods just not being made in the US anymore and some of that is being done by multinationals.”

What are some recent issues concerning multinational companies?

“There are some interesting issues about tax behavior. Companies can kind of engineer things so the part of the production that earns all the profits happens in the place with the lowest tax rate and that is simply what multinationals do and that is something that policy has not been able to catch up with. This is an issue where ownership matters – I’m technically a US company, I enjoy all the benefits of being a US company, I’m listed on the NY stock exchange, I’m protected by US laws, but I can engineer things in a certain way so I can pay less tax through these kind of foreign transactions.”

How do multinational companies affect the entire global economy?

“If you think about the entire world as a whole, [the companies] are probably extremely helpful. Again, it is letting these firms, who tend to be really big firms, organize their production in the most efficient way that they can – you put the labor-intensive parts of the production here, you put the capital-intensive parts here, you put the skilled labor-intensive parts here, and it let’s [these companies] take better advantage, the different comparative advantage in different countries, and that let’s you produce things better, so everybody enjoys better products at cheaper prices.”

 

 

Posted in Multinational Companies, The Global Economy | Leave a comment

Google, Microsoft and FedEx Top List of “The 2012 World’s Best Multinational Workplaces”

Great Place To WorkA list of “The 2012 World’s Best Multinational Workplaces” was recently published by Great Place To Work, a global consulting and training firm, who compiled the list by surveying 350 multinationals out of the 5700 that participated in its “Best Workplaces” competition in 2011-2012. Great Place To Work used the survey, along with additional criteria and narrowed the list to 38.

Here is a compilation of the top ten:

1.) SAS Institute

Employees: 13,268

Headquarters: Cary, North Carolina

Global Revenue: $2.7 billion

2.) Google

Employees: 34,311

Headquarters: Mountain View, California

Global Revenue: $37.9 billion

3.) NetApp

Employees: 12,643

Headquarters: Sunnyvale, California

Global Revenue: $5.1 billion

4.) Kimberly-Clark

Employees: 57,929

Headquarters: Irving, Texas

Global Revenue: $20.8 billion

5.) Microsoft

Employees: 96,052

Headquarters: Redmond, Washington

Global Revenue: $73.7 billion

6.) Marriott

Employees: 325,000

Headquarters: Bethesda, Maryland

Global Revenue: $12.3 billion

7.) FedEx Express

Employees: 151, 344

Headquarters: Memphis, Tennessee

Global Revenue: $26.5 billion

8.) W. L. Gore & Associates

Employees: 10,059

Headquarters: Newark, Delaware

Global Revenue: $3 billion

9.) Diageo

Employees: 25,000

Headquarters: London, United Kingdom

Global Revenue: $16.8 billion

10.) Autodesk

Employees: 7,254

Headquarters: San Rafael, California

Global Revenue: $2 billion

Read the full listing of all 38 multinational companies: http://www.greatplacetowork.com/best-companies/worlds-best-multinationals/the-list

Posted in Multinational Companies | Leave a comment

Homes Damaged By Hurricane, Yet Neighborhoods Remain Desirable

Property damage from Hurricane Sandy is estimated in the billions of dollars, but many prospective Manhattan property owners, and sellers, remain undeterred. Home prices in Manhattan don’t appear to be going down, even in the hardest hit neighborhoods.

A night view of Manhattan’s Tribeca area, a desirable area for real estate in NYC. Flickr credit: rockroseny.

A night view of Manhattan’s Tribeca area, a desirable area for real estate in NYC. Flickr credit: rockroseny.

New York – Hurricane Sandy may have caused severe destruction to a significant amount of property in New York City, but the real estate market is not predicted to face as many negative repercussions. Despite the damage from the storm, some residents still wish to live in New York’s trendy, marketable, and highly sought-after areas.

According to Governor Chris Christie, New Jersey alone received as much as $29.4 billion in damage from Hurricane Sandy, which includes destruction to the transit system, homes and businesses. Governor Andrew Cuomo estimated damages to total $30 billion in New York.

Most notably included in the damage that occurred is the destruction of many homes. Before Sandy hit, data from CoreLogic, an analytics service specializing in property information, showed residential properties amounting to $88 billion deemed to be “at risk” to hurricane-driven flooding among seven states in the northeast, including New York and New Jersey.

The aftermath of the storm proved CoreLogic’s estimates to be close to target, as neighborhoods that were on or near the water faced severe destruction.  Many homes in Breezy Point, Queens were completely destroyed, and much damage was done to properties along the Jersey Shore, among many other locations in the tri-state area.

Although an abundance of real estate was destroyed in a multitude of neighborhoods, Sandy may not have left the housing market so drastically affected, in terms of what locations are still classified as desirable to live in.

Tribeca, in downtown Manhattan, is currently a sought-after location to rent or buy property, proven by the sky-high price tags that come with the real estate. Despite being left without power, much like the rest of lower Manhattan, property prices will not likely change.

“What I do know is that Tribeca is a desired area,” said Zach Gutierrez, a real estate agent at Anchor Associates. “It takes more then a freak storm to really alter the perceptions of New Yorkers. We are severely overestimating the effect that the storm will have on real estate. It was a once in a century storm.”

However, Gutierrez does think that areas unaffected by the storm may appear more attractive than ever before. The Upper East Side faced very little damage, so Gutierrez predicts that families that live along the waterfront in lower Manhattan may move uptown. “If there is an influx of renters and buyers to the Upper East Side, I think it will come from Battery Park City,” said Gutierrez.

In general, Gutierrez believes that coveted areas will remain pricey, despite the damage that Sandy may have caused properties in those locations. “The popular areas are cyclical. If there is a shift, I think it has less to do with the storm and more to do with the natural cycle of what is popular,” said Gutierrez.

 

Posted in Uncategorized | Leave a comment

Whole Foods Market CEO John Mackey Believes In Business Model That Is Not Solely Profit-Driven

I do not believe maximizing profits for the investors is the only acceptable justification for all corporate actions. The investors are not the only people who matter. Corporations can exist for purposes other than simply maximizing profits”

– John Mackey, CEO of Whole Foods Market

Generally, CEOs of large multinational corporations have business models that focus primarily on generating profit, which is understandable, as in order to maintain a viable business, creating profit is important. However, by solely focusing on profit, oftentimes, large corporations somehow miss the mark when it comes to their responsibilities to customers, employees, the environment and other stakeholders involved.

John Mackey, the co-founder and CEO of Whole Foods Market is different from most CEO’s of successful businesses with large market capitalizations (Whole Foods’ market cap is $16.79 billion). Mackey strongly believes that his own success is largely due to building Whole Foods around a model that is not solely focused on driving profit. Mackey explains that many economists believe that business models must be focused on production leading to profit, in order to benefit investors. However, he does not believe this has to be the case.

After reading a report Mackey wrote on his business model, titled “Conscious Capitalism: Creating a New Paradigm For Business”, I think it is very interesting to think about the consequence of modeling a business in the way that Mackey describes, as while his template appears to be very charitable and ethical, it does seem rather difficult to implement.

In his report, Mackey discusses how currently, large businesses have a terrible image, mostly due to discreditable and unethical behavior on the part of corporations such as Enron, Tyco, WorldCom and AIG, to name a few. “Instead corporations are widely perceived as greedy, selfish, exploitative, uncaring – and interested only in maximizing profits,” said Mackey.

Mackey feels that it is the responsibility of entrepreneurs, who create the business, to ultimately decide the way it will be run, and to ensure that the business does not add to corporations’ notoriously bad reputation. “When we recruited our original investors at Whole Foods Market, they understood that Whole Foods Market had other purposes besides maximizing profits. Entrepreneurs discover and/or create the purpose of a business – not investors, or politicians, or lawyers, or economists,” said Mackey.

While Mackey does admit that profit is important, he believes that in order to generate long-term profit, executives need to not allow profit to be the paramount goal of the company, and focus on other goals, which will then lead the business to be the most successful.

Mackey’s business model for Whole Foods consists of a set of “core values” with all constituents (customers, employees, suppliers, investors, the community, the environment) directly affected by these values. Customers, to Mackey, are the most important constituents.

Credit: John Mackey’s “Conscious Capitalism: Creating a New Paradigm For Business”

“The core values are: selling the highest quality natural and organic products available, satisfying and delighting our customers, supporting team member happiness and excellence, creating wealth, profits, and growth, and caring about our communities and environment,” said Mackey.

Mackey employs many unique tactics in order to promote a transparent and trustworthy atmosphere within his company. For example, salary information is made available to everyone, which Mackey says greatly helps to contribute to an open and honest environment among staff.  Mackey also allows all employees to vote every three years on what benefits they would like to receive, and also institutes incentive-reward programs.

In general, it seems that the working environment in Whole Foods is one inspired by teamwork. “We also teach the importance of ‘shared fate’, and by shared fate I mean that the better the company does, the better the customers do, the better the team members do and the better the investors do,” said Mackey.

Mackey focuses a large portion of his business model on helping the environment and communities in which his business operates through philanthropy. He even calls the environment the “voiceless stakeholder”.

“I believe philanthropy is consistent with citizenship and should be managed prudently and efficiently just like every other aspect of a business. Philanthropy, executed properly, can also contribute to shareholder value through increased goodwill with customers, team members and communities,” said Mackey.

Mackey thinks that his business model needs to be applied to more companies in order to improve the image of global business around the world. “Corporations must rethink why they exist. If business owners/entrepreneurs begin to view their business as a complex and evolving interdependent system and manage their business more consciously for the well-being of all their major stakeholders, while fulfilling their highest business purpose, then I believe that we would begin to see the hostility towards capitalism and business disappear,” said Mackey.

While Mackey’s business model seems to be the perfect approach to pleasing all constituents and managing to generate enormous profit at the same time, it does seem difficult to execute. Can Mackey’s business model be applied to other businesses, or did Whole Foods just get lucky?

Read John Mackey’s full report: http://www.wholeplanetfoundation.org/files/uploaded/John_Mackey-Conscious_Capitalism.pdf

 

 

Posted in Global Business, Multinational Companies | Leave a comment