IFJ March Edition

THE INTERCOLLEGIATE FINANCE JOURNAL

THE HOTTEST RUNWAY OF 2014: WALL STREET BY KADEN LEE

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CALLING ALL SHOPAHOLICS BY TIFFANY CHANG

THE BUSINESS OF BURBERRY BY CAMILA MCHUGH

GROWING A MARKET IN YOUR BASEMENTBY MIGUEL FERREIRA

GET YOURSELF LINKEDINBY CLAIRE SU

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MARCH EDITION 2014

While I was handing out copies of our December edition, someone chal-lenged me to answer a single question: why does finance matter?

It’s a difficult question even for those already familiar with the industry. I could tell you about fiscal policy and interest rates and the 2008 financial crisis, but the answer is much simpler: finance provides money today to those who can make money tomorrow.

Imagine there are two technology enthusiasts in California that have an amazing idea for a product that’s going to revolutionize society. It’s the start of a billion dollar industry. The only problem, they’ve got little else than the lint in their pockets. They need money today.

A college student in Boston has just started his summer internship. He works hard for his money, and he wants his money to work for him. He knows that one day he’ll want to have a family, buy a house, and maybe even have a shiny, red convertible sitting in his garage. He’s got money today, but the future is uncertain. He needs money tomorrow.

Financial markets can connect these people, and millions of others like them all over the world. For the technology company, the answer is to raise money in the capital markets (see page 5). Helping these com-panies raise capital is the responsibility of investment banks. Meanwhile, the student can invest his excess funds through a mutual fund or asset manager, which allows him to profit from the growth of great compa-nies. Learning to manage your money is important, so make sure to take a look at our Personal Finance section (see page 13).

Many of you may already be pursuing careers in finance (see page 24). And if you’re not, finance will still have a role in your industry. Whether you’re leading a start-up (see page 30) or working on Capitol Hill (see page 16 for our new Political Economy section), finance matters.

And it shows – our team at our headquarters at Brown University has doubled since our last issue! People of all backgrounds, interests, and concentrations have worked to create the issue currently in your hands. So take the time to read on. I promise it’ll be worth the investment.

LETTER FROM THE EDITOR

Alex DreschlerCo President & Editor in Chief

WEB & SOCIAL MEDIAYuta Inumaru - Head of Web & Social MediaSara Hartse - Head of TechnologyTung Nguyen - Project LeaderAmanda YaoKarthik Harihar Reddy BattulaWenjie ZhengRaymond Zeng

EXECUTIVE BOARDAlex Drechsler – Co-PresidentBrice Gumpel – Co-President & FounderMax Deutsch – Co-Head of Business Matthew Ostrow – Co-Head of Business Steven Adler - Head of ContentAlexandra Nuttbrown – Head of StyleStephanie Hennings – Head of LayoutEmily Law - Head of DesignFelicia Iyamu – Head of DistributionMichele Narbonne – Head of RecruitmentLauren Tsai – Head of OperationsYuta Inumaru – Head of Web & Social MediaWonnie Sim – Treasurer

BUSINESS TEAMMax Deutsch- Co-Head of BusinessMatthew Ostrow- Co-Head of BusinessLauren Tsai- Head of OperationsWonnie Sim- TreasurerChristopher HeoYuta InumaruKaden LeeAidan LeonardQuinn HerreraDestin SisemoreWenjie ZhengScott FieldingAmanda BeaudoinChristine BlandholKyle Law Madalyn MetzHeather SabelPaul CichockiSara HartseConnor LynchArielle SchacterPranav SharmaAshna MukhiSara HartseIan Green Connor LynchArielle SchacterManfredo KoellikerPranav SharmaAshna Mukhi

BLOG TEAMJulia Verbrugge - Blog EditorAngelo NakosMaria Jose HerreraPatrick Rosanelli Paul CichockiShiying LuoMasahiro NakanishiEric Hu

EDITORIAL BOARD Steven Adler - Head of ContentChristian Ackmann - Personal FinanceSarah Park - Personal FinanceAndrea Wistuba Behrens - Careers and InternshipsAlon Galor - Markets & InvestingAlex Lloyd George - Markets & InvestingCarter Johnson - Business & Start-upsEric Han - Political EconomyThomas Pesce - Political EconomyCaroline Vexler - Interviews & Other Content

DESIGN TEAMEmily Law – Head of DesignChandelle Heffner – Graphic Designer Sarah Lee – Graphic Designer

SENIOR STAFF WRITERSTiffany ChangLauren SukinKaden LeeEbony McCaskillCamila McHughTung NguyenJasmine BalaAna RosensteinClaire SuCaroline VexlerAngela Marie Bernadette TengAmanda YaoJulia VerbruggeElizabeth StudlickChristopher DederickMichael Golz

STAFF WRITERSAlexander BehnkeShreya BhargavaFrances ChenNoah ElbotPerry FeldmanMiguel FerreiraAlexandra GarciaPeter HixKristina HuNathan JohnsonJoanne LowLehm MaguireGiuliano MarosticaAlisa OwensKiera PeltzChristian PetroskeIgnacio Perez-PozueloGraham RotenbergJordan SchochetKelsey ShermanKjetil StiansenCarolyn StichnothMark ValdezJonathan VuMatthew JanigianJonathan White

COPY EDITORSLisa OpdyckeNathan JohnsonFrancesca WhiteheadDuncan WeinsteinMaria Jose Hererra

FACT CHECKERSFrancesca WhiteheadArielle SchacterShreya BhargavaScott SchubertElla WarshauerEric Hu

LAYOUT TEAMStephanie Hennings – Head of LayoutMadeleine Johnson – Head IllustratorQuinn HerreraIsrael CarreteKaden LeeKimberly MeilunAmy Yao MengNicholas PucelLorraine SalimMili SanwalkaClaire SuSirena TurnerKayla TyrrellKwa Jie Hao

Markets and Investing Personal Finance Careers & Internships Political Economy Business & Startups Blog

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Russian Trade Policy: The Empire Strikes Back

Blonde or BRUnet: Alumni Who Defy Career Expectations

Russian Trade Policy: The Empire Strikes Back

Three Protests, Three Countries, Three Continents

The Sociology of Your Power Suit(Why “Dressing to Impress” is a Thing That Exists:”

Starting Your Retirement Nest Egg

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Our Writers

MARKETS & INVESTINGTHE HOTTEST RUNWAY OF 2104:Wall Street - BY KADEN LEE

SHADOW BANKING: How an Abstract Financial Chain Nearly Brought Down the Financial System - BY MATTHEW JANIGIAN

THE ECONOMISTS: To Each a Piece of the Prize - BY ALEX LLOYD GEORGE

THE MINIMUM WAGE: Waxing or Waning Income Inequality? - BY ALON GALOR

PERSONAL FINANCECALLING ALL SHOPAHOLICS - BY TIFFANY CHANG

THREE FREE ONLINE SHOPPING TOOLS- BY CHRISTIAN ACKMANN

ROTH IRA:A Wise Choice for College Students - BY PERRY FELDMAN

TRADITIONAL VERSUS ROTH IRAS: The Differences Explained -- BY CHRISTIAN ACKMANN

INFORMATION ASYMMETRY - BY MATTHEW JANIGIAN

POLITICAL ECONOMYGROWING A MARKET IN YOUR BASEMENT - BY MIGUEL FERREIRA

THE FEDERAL RESERVE: An Overview - BY SARH PARK

CHURCH VERSUS STATE - BY CAROLINE VEXLER

RUSSIAN TRADE POLICY: The Empire Strikes Back - BY CHRISTOPHER DEDERICK

THE (UN)DEMOCRATIC UPRISING - BY LAUREN SUKIN

THE DUBAI MODEL UNVEILED - BY TUNG NGUYEN

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CAREERS & INTERNSHIPSGET YOURSELF LINKEDIN - BY CLAIRE SU

SO, YOU WANT TO WORK FOR GOOGLE? - BY JULA VERBRUGGE

STUDENT SPOTLIGHT: Natalie Roe - BY CAROLINE VEXLER

APPLYING FROM AFAR: Tips on Finding a Job or Internship while Abroad - BY ANDREA WISTUBA BEHRENS

THE SOCIOLOGY OF YOUR POWER SUIT: Why “dressing to impress” is a thing that exists - BY ANDREA WISTUBA BEHRENS

WHAT IS BLOOMBERG? A Guide to the Financial Markets Platform - BY THOMAS PESCE

BUSINESS & STARTUPSTHE ROBINHOOD APP- BY ELIZABETH STUDLICK

THE BUSINESS OF BURBERRY - BY CAMILA MCHUGH

STARTUPS, FROM BROWN TO YOU - BY CARTER JOHNSON

BLONDE OR BRUNET: Alumni Who Defy Career Expectations - BY MICHAEL GOLZ

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The spectacular growth of Michael Kors Holding Limited follow-ing its IPO in December 2011 has proved to be more than a fad. The Kors brand has laid claim to the seemingly paradoxical but explod-ing niche of ‘affordable luxury’ as the global economy recovers from the financial crisis. The U.S. premium handbag and women’s acces-sories market is currently estimated to be $10.3 billion dollars, and in China, Bain & Co. estimates that luxury goods sales will reach up to $21 billion this year. In the last three years alone, Michael Kors has already captured an estimated 16 percent of the market.

COUNTDOWN FOR COACHBut as Kors continues to prosper, fashion incumbents have taken a big hit – most notably Coach, Inc. Coach has been a regular in the financial news, and for all the wrong reasons. The company, which pioneered the democratization of the luxury market, has subsequently lost significant market share to new competitors such as Kors, Kate Spade, and Tory Burch. After reaping gross profit margins of more than 70 percent for years in a relatively unchallenged market, Coach’s clock has finally struck midnight. Despite the two companies’ radically diver-gent paths, the similarities between them are striking. In fact, it is almost too easy to see Kors as little more than Coach’s younger, more fashionable counterpart. The growth patterns of the two companies following their respective IPOs are similar, and Coach too enjoyed steady growth until 2008.

SOARING FACTORY SALESFast growing lines often face the challenge of simultaneously pursuing rapid sales growth while maintaining the brand’s aura of exclusivity. Even before Michael Kors or Kate Spade entered the fashion scene, Coach attempted to shore up sagging sales by expanding into a line of outlet stores. Interestingly, up to 85% of the products sold in factory stores are designed exclusively for the outlets using cheaper materials and logo-heavy designs. This was a conscious decision on Coach’s part to distinguish outlet items from its regular line. As the outlets have flourished, these items have flooded the market, and today, the pattern of cross-hatched ‘CC’s is instantly recognizable as Coach. Factory stores now earn more per square foot than full-line stores, and outlet sales now account for almost two-thirds of Coach’s US retail sales. Rising sales are a boon for almost any other industry, but this self-administered shot of adrenaline is proving to be more poison than panacea.

THE CATCH IS THE CACHETA luxury brand’s greatest asset is its cachet, or prestige. A brand like Coach faces the added challenge of preserving its cachet while marketing itself as ‘affordable.’ Many people would be reasonably dumbfounded to hear that a brand that sells wom-en’s handbags for a median retail price of $298 is considered affordable, but compared to Louis Vuitton or Chanel bags that

BY KADEN LEE

ALSO IN THIS SECTION

(p. 7) SHADOW BANKING: How an Abstract Financial Chain Nearly Brought Down the Financial System

(p.9) THE ECONOMISTS: To Each A Piece of the Prize

(p.10) THE MINIMUM WAGE: Waxing or Waning Income Inequality

5

rarely hit stores for less than $1,500, a Coach bag is a steal. This sense of relative value rests on the fragile foundation of Coach’s cachet. And as the company plans to demolish up to 20 of its full-line stores to open 15 factory stores, the floor may start to crumble under Coach’s feet.

LUIS LOOKS AHEADIn Coach’s first earnings call of the year, CEO Victor Luis laid out the company’s plan to recover from its history of overex-posure and restore its luxury image. Luis plans to introduce a greater number of bags priced over $400 that feature exotic materials for added value. New designs will also feature classic and clean silhouettes that don solely minimalist and discrete lo-gos. Furthermore, Coach is optimistic about market growth in China where overexposure has not been a problem. According to a survey commissioned by Swarovski, more than 75 percent of Chinese consumers reported that they would favor trying new brands. In the U.S., the same figure is slightly over percent.

APPEALING UP AND DOWNAt first glance, Kors appears to be at risk for following in Coach’s footsteps. Stylistically, Kors also features its ‘MK’ logo promi-nently in many of its cheaper (under $400) designs. However, unlike Coach’s strategy, Kors has strictly avoided the outlet route. Instead, Kors has adopted a low-high approach by creat-ing a more casual and lower-priced subsidiary line, MICHAEL Michael Kors. Using this approach, the company has been able to reach a wider demographic with full-priced items from both collections without risk of damaging the brand’s image. In fact, the collections often work in tandem: the higher-end designs lure in the customers, and the more affordable bags offer a vi-able option for purchase. Combined, the collections currently span a price range from $98 to $2,995.

FASHION’S FUTUREOverall, Michael Kors seems to be well positioned to avoid Coach’s major mistakes. Even so, established brands are never safe from the whims of the fashion industry. A key rival, Marc Jacobs, recently left Louis Vuitton Moet Hennessy (LVMH) to prepare for his own line’s imminent IPO. The markets are also whispering that newcomer Tory Burch may soon follow suit. Regardless, these next few years are sure to be an exciting time for finance and fashion.

MARKETS & INVESTING 6INTERCOLLEGIATE FINANCE JOURNAL: MARCH 2014

Instead of borrowing money from banks, companies are increasingly turn-ing to credit markets for sources of bor-rowing—what’s known as the “Shadow Banking System.” Through this inter-mediation process, opaque long-term assets are converted into money-like short-term liabilities that provide a quick source of financing. For example, mort-gages can be aggregated into a bundle and sold off as “mortgage-backed securi-ties.” The Shadow Banking System (SBS) is similar to traditional banks in the types of transformation it performs, but unlike the traditional banking system, there are no liquidity backstops provided by the government or the Federal Reserve’s Dis-count Window.

Even though the SBS was at the center of the financial crisis because of its complexity and opacity, its actual opera-tions and significance have eluded main-stream attention. To clarify, Shadow Banks are not brick-and-mortar banks. Instead, the whole SBS is a process of turning illiquid assets into liquid assets. Loans are originated by finance compa-nies, which are then funded primarily by commercial paper (CP)—more on

that later. The loans are then structured and pooled into asset-backed-securities (ABS), which are then warehoused. ABS may then be pooled and structured into collateralized debt obligations (CDOs). In reality, the number of steps in the chain varies. For example, there may be more steps along a credit intermediation chain if CDOs are then packaged into CDO-squared (CDO2) securities. Con-versely, the intermediation chain might also stop after assets are packaged into

ABS. In general, if the quality of the un-derlying loan pool at the beginning of the chain is poor, then the intermedia-tion chain will be longer since more steps will be necessary to achieve greater credit transformation.

The CP market is key to the func-tioning of the SBS. CP is a short-term debt instrument issued by large corpora-tions. It is a cheap way to raise capital at short-term interest rates. During the financial crisis, there was a run on the asset-backed commercial paper (ABCP) market and, in order to prevent the sud-den evaporation of liquidity, the Fed-eral Reserve decided to directly purchase commercial paper instruments. Tradi-tionally, the CP markets were viewed as safe. During the crisis, however, once the subprime mortgage problem became evident, investors in ABCP became con-cerned that the collateral backing the ABCP might be of lower quality than they expected. As a result, investors stopped refinancing CP.

Because of the widespread confi-dence in the CP market during normal times, investors typically did not do much research on the market. During the crisis, investors dedicated more re-

7 INTERCOLLEGIATE FINANCE JOURNAL: MARCH 2014

sources to acquiring information about CP. Money-Market Mutual Funds—which are significant investors—initially invested heavily in CP. They have to in-vest in assets that are relatively safe, how-ever, so when it became clear that certain banks were at risk of default and the CP market started to decline, they had to change their investments. This exacer-bated the run on the CP market.

As mentioned earlier, the SBS is not backed by any form of liquidity back-stop. Unlike traditional banks, there is no access to the Federal Reserve Dis-count Window; unlike traditional banks, the government does not offer deposit insurance. With the size of the SBS peak-

ing at around $20 trillion, an erosion of the SBS meant widespread economic cri-sis. During the crisis, the Fed lowered the discount rate and announced the Term Auction Facility, which provided loans for longer durations of time than the dis-count window. Additionally, the Trou-bled Asset Relief Program (TARP) was instituted to provide sufficient capital for banks in order to prevent any more bank failures. Companies like American International Group, General Motors, and Citigroup all received substantial government investments since they were especially affected by the crisis.

So what exactly went wrong? How did an abstract financial chain nearly bring down the global economy? As mentioned earlier, CP is used to finance everyday operations for banks. If the CP market comes to a halt, banks cannot lend to each other; liquidity evaporates. Without banks to provide liquidity, capi-tal cannot move freely. Additionally, be-cause it was not clear which institutions were exposed to toxic assets, banks did not know to whom they could lend. The financial system froze.

Although they are topics of political debate, the Troubled Asset Relief Pro-gram (TARP) and the Federal Reserve’s Quantitative Easing (QE) programs of-fered much-needed liquidity during a time when financial operations were fro-

zen. TARP prevented a widespread col-lapse of the American financial system while QE provided greater liquidity to the market. Indeed, we have witnessed a significant rebound in markets as a result of those programs. Had those programs not been instituted, the Shadow Banking sector might have remained frozen for an even longer duration. After the injec-tion of so much capital into the financial system, banks were more willing to lend and the financial system began to thaw.

Going forward, economists and professionals alike have advocated for more transparent and less complex mar-kets, especially in regards to Shadow Banking. Much of the problem result-ing from the crisis was that no one knew who was exposed and no one knew just how toxic the MBS were. Indeed, the system undermined itself with its opac-ity. There is no question that Shadow Banking is absolutely vital to the opera-tion of financial markets. However, in order to prevent another crisis rooted in Shadow Banking, it is likely that more regulation, transparency, and reforma-tion of the SBS will be necessary.

MARKETS & INVESTING 8

The field of economics is not one often connected with consensus. This breadth of opinion and philosophy was handily encapsulated in the choice of Nobel Prize winners this year. Both Robert Shiller and Eugene Fama produced notable and enormously influential works on the stock market, but the similarities end there.

FAMAEducated, perhaps unsurprisingly, at the highly free market-ori-ented University of Chicago in the era of Milton Friedman, F.A. Hayek, and other titans of neoclassical economics, Fama is con-sidered the father of the efficient-market hypothesis mentioned above. The efficient-market hypothesis dictates that markets are informationally efficient. Within this assertion Fama identified three levels of efficiency: weak, semi-strong-form, and strong-form. These levels differ in the amount of information that they incorporate. The weak form incorporates only historical prices; the semi-strong-form integrates all publicly available informa-tion, such as quarterly earnings reports; and the strong-form ef-ficiency takes into account all public and private information, as in cases of insider trading. In all forms it is impossible to exploit market inefficiencies systematically outperform the market. This is the central contention of Fama’s work - that investors cannot receive excess returns on a consistent basis.

SHILLERShiller is a Yale economist who was one of the pioneers of the behavioral finance school. Also lending his name to the Case-Shiller index of repeat house sales, he first rose to prominence in the 1980s when he challenged the conventional efficient market hypothesis, which was widely accepted at the time. In contrast to Fama, Shiller received his economic training at MIT in the so-called ‘saltwater’ macroeconomic school of economics, after the coastal location of its primary university proponents: MIT, Harvard, and Berkeley. Contrary to the laissez-faire approach of the Chicago school, this school emphasized Keynesian econom-ics and governmental interference to correct for market failures. While Shiller’s work veered away from addressing the responsibil-ities of government in the economy, he did focus much of his re-search on the fallibility of markets - specifically the impact of irra-tional investors. This concentration on irrationality pointed him towards bubbles, such as the 1987 Black Monday crash. With this in mind, he argued that the volatility of the stock market could not be explained through rational means, and that consequently markets could not be considered inherently efficient.

CONSEQUENCESThe significant difference between the work of these two economists in the sphere of financial economics is in-dicative of a wider issue in the field - namely, the lack of consensus on market rationality. It is a lack of unanimity which is a blight on the argument of those who think the field of economics should be treated as a science. Regardless, it provokes intriguing questions about the diversity of opinion on such a pivotal economic topic, particularly when that variety is recog-nised by what can be fairly described as the highest arbiter of achievement in economic academia: the Nobel Prize.

BY ALEX LLOYD GEORGE

INTERCOLLEGIATE FINANCE JOURNAL: MARCH 20149

BY ALON GALOR

As the debate over income inequality takes center stage, policy-makers are considering raising the minimum wage as a means to narrow a widening fissure. Spearheading the initiative, Presi-dent Obama declared his intent to sign an executive order that would hike the minimum hourly wage for federal contractors from $7.25 to $10.10. Following suit, more than 30 states are set to consider legislation or ballot measures to increase the minimum wage in the coming months.

Since Congress first instituted a national minimum wage with the Fair Labor Standards Act of 1938, economists have struggled to evaluate the consequences of the policy. While Gregory Mankiw’s famed introductory economics textbook establishes that a minimum wage above the equilibrium level yields unemployment, a number of empirical studies including the work of renowned labor economists David Card and Alan Krueger have demonstrated that this theoretical framework may


fail to hold in some economic environ-ments. According to a 2006 study, econ-omists are divided on the issue, with 47 percent of Ph.D. economists supporting the elimination of the minimum wage, 14 percent in favor of maintaining it at its current level, and 38 percent in favor of increasing it.

So what is the source of the stark disagreement among economists? Us-ing the price floor model as a frame of reference, this article explains the funda-mental arguments that economists, and ultimately policy makers, use to justify their polar views of the minimum wage.

THE BASIC MODEL:In a free labor market, the point at which labor supply meets labor demand marks equilibrium (see Figure 1a). In a labor market where a binding minimum wage is introduced, more laborers are willing to work since the new wage is higher. Firms, however, demand less labor since the per capita cost of labor is higher. Thus, the quantity of labor supplied ex-ceeds the quantity of labor demanded which leads to a labor surplus, known as unemployment (see Figure 1b). In conclusion, the model demonstrates that the minimum wage raises the incomes of those workers who have jobs, while low-ering the incomes of workers who can-not find jobs.

QUESTIONING UNDERLYING ASSUMPTIONS:Plausible perturbations of the model can yield dramatically different results. For example, suppose demand for low-skilled labor is highly inelastic, or in oth-er words, the quantity of labor demand-ed is insensitive to price changes. (see Figure 2). In this case, while an increase in the minimum wage would not change the total number of people employed, it would still generate unemployment by increasing labor supply. Drawn by a higher salaries, laborers who previously were not looking for work now join the labor force, only to become unemployed.

Alternatively, say employers have monopolistic power and set both wages and/or the level of employ-ment below equilibrium levels (see Figure 3). If this were the case, in the event of an increase in the minimum wage, firms would be able to main-

tain the same levels of employment while paying higher wages.

In addition to theoretical modifica-tions that could yield different results, sev-eral empirical findings have led economists to reassess the simple textbook model. In particular, a seminal paper in the early 1990s by Card and Krueger of America’s National Bureau of Economic Research shocked the academic world. The paper showed no change in hiring among sur-

veyed fast food restaurants when New Jer-sey and eastern Pennsylvania’s minimum wage rose nearly 25 percent.

BUILDING ON THE MODEL: Increasing the minimum wage tends to disproportionately affect young work-ers. According to a 2012 survey by the Bureau of Labor Statistics (BLS), teenagers make up about 25 percent of those paid the Federal minimum


wage or less, and workers under the age of 25 as a whole make up 50 per-cent of minimum wage laborers.

A high minimum wage for young workers can be problematic for two rea-sons. Firstly, studies have shown that when the minimum wage rises, some high school students choose to drop out and enter the labor force immediately. Secondly, teenagers are often willing to ac-cept a lower wage in exchange for valuable on-the-job training. Increasing the mini-mum wage may decrease the availability of such opportunities.

RECONCILING THE TWO VIEWS:With 70 percent of Independents and even 55 percent of Republicans in support of an increase in the hourly rate according to a CBS News poll last month, it appears the tide is turning. But keeping in mind economic equality, is this a step in the tw right direction?

Advocates of the minimum wage draw comparisons to European nations such as France and the United Kingdom, which have fared well despite maintain-ing significantly higher hourly minimums than the United States. They point to the fact that America’s minimum wage was just 38 percent of the median wage in 2011,

close to the lowest proportion for a nation in the Organization for Economic Co-op-eration and Development (OECD). Crit-ics respond by citing higher unemploy-ment rates in the Eurozone. Moreover, advocates view the policy as a way to raise the income of the working poor since the average minimum wage worker currently lives in poverty (see Figure 4).

It is important to consider, how-ever, that never-married workers, who tend to be young, were four times more likely than married workers to earn the federal minimum wage or less. Coupled with the significant portion of teens and young adults who work minimum wage jobs, such statistics draw some to cite the policy as poorly targeted. Critics have proposed alternative policies that they argue may be better targeted, support-ing families living in poverty, rather than middle-class teenagers and unmarried young adults.

Despite some of the compelling ar-guments in favor of the minimum wage, it may be wise to consider alternatives to address the ultimate goal of reducing in-come inequality. One such alternative is the Earned Income Tax Credit (EITC), which is a government program that supplements the incomes of low-wage

workers. A worker’s EITC grows with each additional dollar of earnings until reaching the maximum value, creating an incentive for people to leave welfare for work and for low-wage workers to increase their work hours.


More and more consumers are looking to their electronic devices to fulfill their shopping needs. In 2012, The Wall Street Journal reported that e-commerce grew seven times more than U.S. retail spending. According to United Parcel Service’s (UPS) 2013 sum-mer survey, seven out of ten online shoppers stated that they pre-ferred to shop their favorite stores through digital channels rather than in store. After all, online shopping is fast, convenient, and instantly gratifying. Despite the high consumer satisfaction (83 percent) of online shopping, a critical question remains. Is online shopping really gratifying to your wallet? Not exactly. However, it is possible to save when you shop, even when online.

Here are a few dollar-eating traps to spot and avoid the next time you make a purchase online.

1. THE SHIPPING PARADIGMThrough rain, snow, sleet, or hail, shipping and handling fees are the number one bane of online shoppers, adding five to eight dollars to every purchase. Arguably, shipping promo-tions which consumers use to “beat the system” make ship-ping fees worse. According to the UPS survey, three out of four online shoppers have added items to their carts just to qualify for free shipping. Instead of saving money, you are often playing directly into retailer’s profit-loving hands by items you did not intend to purchase. Instead of falling into this trap, look for free “ship to store” options or check items’ store availability and purchase items you cannot live without in store instead of online. Another option is to sign up for Amazon Student, which offers six months of free two-day shipping on millions of Amazon products. Just remember to cancel your membership before the trial period is over to avoid

being charged for the benefits. If you cancel and then restart your Amazon Student membership, you can be eligible for a fifty percent discount.

2. THE DANGER OF 1-CLICKThe 1-Click Purchase Button is frightening tool that has made transactions simply to occur with or without mistake. It is the equivalent of picking an item up off the shelf and having its price automatically debited out of your wallet. Amazon, the online re-tailing giant who boasts the fifth largest total internet audience, utilized this money-making trap with its patent of one-click buy-ing: shoppers no longer have to traverse the intermediate steps of a shopping cart and checkout page. However, these intermediate steps can save you money.

According to the UPS survey, nearly nine out of ten online shoppers abandon their online shopping carts without purchas-ing items — a majority doing so because shipping costs made the order more expensive than expected. In addition, checking out—whether online or in store— is often a reminder that you are actu-ally spending real money. Think before you click that button, or simply turn this option off in your Amazon account settings page.

PERSONAL FINANCE

PERSONAL FINANCE

CALLING ALL SHOPAHOLICSBY TIFFANY CHANG


(p. 14) Three Free Online Shopping Tools

(p.15) ROTH IRA: A Wise Choice for College Students

(p. 15) TRADITIONAL VERSUS ROTH IRAS: The Differences xplained

(p.16) INFORMATION ASYMMETRY

13

3. YOU NEVER KNOW UNTIL YOU TRYNothing says disappointment like opening a highly anticipated parcel and discovering the item does not fit or looks vastly different from the 300x300 jpg online. In such cases, a consumer is usually left with two undesirable options: send the item back and fork out additional money for shipping or restocking fee or keep the unsuitable item and mourn the wasted money. Before purchasing, visit the store to try on the items in real life instead, or shop retailers which offer hassle-free return and exchange policies.

4. ONE-DAY CLEARANCE SALE: ONLY ONLINE!Email subscriptions often blast your inbox with tempting graphics and promises of huge savings. It is so easy to click and visit the website when you were not planning a shopping (read: money dropping) session. Though the savings can be significant, you are often better off not browsing and consequently purchasing items you do not need. Click “unsubscribe” and your wallet (and cluttered inbox) will thank you later.

5. LOVE IS A TWO-WAY STREETIf nothing will deter you from being an online shopaholic, try signing up for a free membership to online rebate websites, such as eBates.com, which gives cash back for purchasing through its proportional platform. However, be sure to clearly read the terms and conditions to ensure there are no fees for inactive membership.

3 FREE ONLINE SHOPPING TOOLSBY CHRISTIAN ACKMANN

1. PRICEBLINK

This nifty add-on is available for all major browsers. When view-ing an item online, PriceBlink searches the web and auto-matically alerts you if it finds a cheaper retailer or any cou-pons. PriceBlink also tracks the price history of items so you can decide whether it is the right time to buy.

2. BIGWORDS BIGWORDS.com is a search engine specifically designed for buying and selling text-books. When you search for books, BIGWORDS consid-ers quality, shipping fees, and available promotions to pro-vide you with the best option. A textbook may be cheaper from one vendor, but promo-tions and shipping costs may cause the overall price to be lower from a different vendor. You can customize your search based on quality, rentals, used books, and even the date by which you need the textbook.

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PERSONAL FINANCE INTERCOLLEGIATE FINANCE JOURNAL: MARCH 2014 14

your income exceeds $129,000 you can-not contribute any money to a Roth IRA. Traditional IRAs have no income limit.

WHEN IS IT TAXED?Income placed in a Roth IRA is taxed when it is invested in the account, but any earn-ings can be withdrawn tax-free. Converse-ly, Traditional IRAs are taxed when money is withdrawn, and provide a tax deduction when you initially contribute the money. Because of this difference, Roth IRAs are typically the smarter choice for young investors. Depending on your current and future tax brackets, the amount of taxes paid on the original contribution is usually less than the potential future taxes after interest has accrued for 40 or 50 years.

TRADITIONAL VERSUS ROTH IRAS:The Differences ExplainedBY CHRISTIAN ACKMANN

Traditional and Roth IRAs are both accounts that allow you to save money for retirement. For each account, you can con-tribute $5,500 per year (or up to your tax-able compensation if you made less than $5,500). However, Traditional and Roth IRAs differ in several ways.

WHO CAN CONTRIBUTE?You can contribute to a Roth IRA at any age, but only people aged 70.5 and younger can contribute to a Traditional IRA. The amount you can contribute to a Roth IRA is reduced if your income is greater than $114,000. If

The biggest choice is deciding whether you want your deduction now or later.

WHEN CAN YOU WITHDRAW?You can withdraw earnings from either account if you are older than 59.5. At any younger age, you will have to pay a 10 percent penalty tax unless you qualify for certain exceptions, such as the down payment on your first house. With a Roth IRA, you are never required to accept a minimum distribution, but traditional IRAs require minimum distributions once you are 70.5 years old.

If you have any questions, you can email [email protected]. And if you are still hav-ing trouble deciding, you can always split your contribution between each type of IRA!

If you, like most college students, have earned income from a summer job or internship, then you should give serious consid-eration to opening a Roth IRA. While most college students are not even thinking about retirement yet, the attraction and flex-ibility of a Roth IRA are too good not to take advantage of. This savings vehicle could really have a dramatic effect on your retire-ment. The fundamental attraction of a Roth IRA is that your contributions grow tax-free for decades and when you retire, all of the money can be withdrawn tax-free. Plus, you can invest in stocks, bonds, mutual funds, and real estate, which makes an IRA much more flexible than a 401(k). With the effects of com-pounding, even a relatively small contribution today will grow dra-matically over the next 45 or so years and result in a substantial nest egg for your retirement. Even more, with a Roth IRA you are not taxed or penalized for withdrawing your own contribu-tions (as opposed to the earnings), so you have nothing to lose!

As an example, let’s assume that you made $4,000 last year in various jobs. If you fund a Roth IRA with $4,000 starting at age 20, and do so each year until you retire at 65, your account will grow to $1.67 million, assuming an average rate of return of 8%. If you fund the account with the current maximum contribution of $5,500 per year, the account will be worth $2.35 million. In the first example, although your contributions will have totaled only $180,000 over those 45 years, you will be enjoying $1.67 million at your retirement. Because of the effects of compounding over such a long period of time, if you begin this plan at age 18 and contribute just $4,000 each year, you will have nearly $2 million at retirement. With a $5,500 annual contribution, you should have $2.7 million and will have contributed just 10% of that total amount! As you can see, the earlier you start a Roth IRA, and the more that you can manage to put into it, the greater will be your available funds

for retirement. Also, you can choose to withdraw the contributions and the earnings tax-free upon your retirement or leave them to continue to grow. With a traditional IRA, your withdrawals will be taxed at retirement, there are mandatory withdrawals starting when you are 70.5 years old, and only certain withdrawals before retire-ment are permitted. While it is not recommended that you with-draw your contributions, you may do so without a tax or penalty after the Roth IRA has been open for five years and you are over the age of 59.5. Withdrawals are also permitted, even out of earnings, for extraordinary expenses such as buying your first home (up to $10,000) or funding your education or that of a family member.

If you intend to save any of your summer earnings, you can fund your Roth IRA dollar for dollar against your earn-ings up to $5,500. You can make your contribution for 2013 up until April 15, 2014 too. You can open a Roth IRA at most brokerage houses, such as TDAmeritrade or Charles Schwab, as well as at most banks. Most financial institutions have low-ered their minimum requirements to $1,000. They also of-fer the option of monthly funding, making it easier to save.

Roth IRAs are only available to those earning less than $114,000 per year. As students, we should take advantage of this fabulous savings and investment vehicle while we remain within these income limits.

So, while your retirement may seem like a lifetime away, the advantages of funding a Roth IRA are too numerous to pass up.

ROTH IRA:WISE CHOICE FOR COLLEGE STUDENTS BY PERRY FELDMAN


Those “buy buy buy!” and “sell sell sell!” prompts are probably pretty compelling on a particularly mad show about money and investing, especially considering the intellect and success of the man giving you the advice. But is it really advice worth act-ing on? Are you actually going to make a fortune following the suggestions you hear on news channels? Probably not: once you hear that information, it’s already too late to take advantage of it.

VICE AND ADVICEFinancial markets are filled with imperfections and frictions like transaction costs and information asymmetry. Transaction costs are fairly obvious: just look at the bid-ask spreads of a stock. If there’s a spread, then there’s a transaction cost. Information asymmetries, however, are less obvious. It’s common sense to think that certain firms and professionals have more information than the typical household. So when those smart professionals get in front of the camera or in front of the computer to write an article in order to give their advice, shouldn’t we listen? Indeed, their advice can be quite informative. However, think twice before acting impulsively on that advice.

INFORMATION ASYMMETRY IN ACTIONInformation asymmetries influence trans-action costs. Information can be public or private. Public information could include free information like earnings reports or price movements in the stock market, or some form of costly information, such as analyses carried out by companies. Private information is information that is not re-leased to the public, but instead is held by only a handful of people associated with a

firm. In either case, the information has some cost associated with it. Market mak-ers impose a bid-ask spread not only to reflect this cost of information, but also to protect themselves from trading against informed traders.

According to the Efficient Market Hypothesis (EMH), prices of equities traded on popular exchanges incorporate all information into them. As a result, it is possible to identify patterns that may be indicative of a general economic trend. Yet one must keep in mind that information about these patterns will also be incorpo-rated into prices. Firms invest based on the information that they find and analyze. Once they know whether to invest, they act on the information they have. Let’s say that a firm decides to buy 10,000 shares of Apple stock. By placing that buy or-der, the price of a share of Apple will be pushed up; the information will have been incorporated into the market. If, later, a company executive appears on the news and says, “Hey, we just bought 10,000 shares of Apple,” then all we can assume is that this information has already been ab-sorbed into the price of Apple. Prices move when potential opportunities are taken advantage of. It is, in some sense, specula-tive arbitrage.

BEST-LAID PORTFOLIOS OF MICE AND MENSo does this mean that there is no real use-ful financial advice? Well, not quite. For those looking to build a long-term portfo-lio, seeking financial advice is a wise move. The future is undeniably uncertain, and since new information is being incorpo-rated into prices every second, prices are

constantly changing. There’s no question that it is possible to invest in a successful portfolio. However, it is important that one make informed—not impulsive—de-cisions. Prices are always adjusting to new information. Between quarters, the prices reflect predictions on the success of the companies. Once earnings are released at the end of the quarters, the prices adjust to the information given by the earnings report, and the predictions subsequently changed. Due to this dynamic nature of prices, there are always winners, and always losers.

SOME PARTING WISDOMIn general, a recreational investor should not be too concerned with daily price fluctuations. Instead, one should look at the big picture. If possible, one should also seek financial advice and guidance. There will always be more sophisticated and better-informed traders in the market. Rather than acting impulsively on immediate news, one should first consider the goals of his or her investment. The expert offering advice knows more than the typical audience member, and the information he or she gives will likely not cause any quakes in the market. However, information asymmetries mean that there are always opportunities from which to gain. If many experts believe that a certain company will be successful in the future, then of course the price of the stock will reflect the positive outlook. That does not necessarily mean that all of the future rewards have already been reaped. Ultimately, it is the long-term growth—not the short-term fluctuations— that matter.

INFORMATION ASYMMETRY AND WHY IT MATTERS WHEN YOU INVEST

PERSONAL FINANCE 16

On January 1st, 2014, Colorado officially became the first and only state where marijuana is now legally available for recreational use. (Washington will join them soon at the end of February) The law, passed in November 2013, was the culmination of much debate since the Controlled Substance Act of 1970, which prohibited any person to buy marijuana, or cannabis, for recreational use.

However, lawmakers and advocates for the legalization of cannabis have had a rough journey thus far. In the past, other U.S. states have legalized cannabis for medical uses and decriminalized its use. In Rhode Island, cannabis possession is not a criminal offence but will instead only earn you a fine. But

what does it mean to legalize the recreational use of marijuana? Are officials in Colorado and Washington ignoring the problems associated with drug usage?

Typically, economics and policy go hand-in-hand, and it is almost impossible not to link one to the other. In the realm of the political economy, policymakers, politicians, and other lawmakers consider more than public opinion when signing bills that impact state policies and laws. In the spirit of making the best decisions possible, they turn to economists, who are major players when it comes to understanding some of the consequences associated with different decisions made by Congress or state authorities. In essence, an economic advisor plays devil’s advocate and seeks to understand the resulting social impact of the political world.

In economics, it is important to consider the effect of decisions on society. After all, legalizing marijuana infers a negative externality. Many economists have argued that the primary concern with marijuana is that it conveys an ‘OK’ on drugs- seeing as many scientific studies suggest that it can serve as a gateway to other more harmful substances.

But then why would any economist advise for the legalization of drugs in Colorado or Washington? Many economists believe that cannabis generates illicit markets. Black or illicit markets only arise from an inability to sell in legitimate markets, which is what typically occurs with drugs. Demand for drugs exists and therefore producers (illicit or not) will have an incentive to sell cannabis. However, this poses a greater concern on consumers and producers. On one hand, consumers purchase unregulated marijuana which may contain other more harmful substances or higher levels of Tetrahydrocannabinol (THC), than those that have been approved. On the other hand, illicit production generally incites other types of criminal activity that are harmful not only to themselves, but to those around them.

Many prominent economists, including the Nobel laureate Milton Friedman, believe in the legalisation of cannabis, because much like the prohibition of alcohol it seems to create more crime and poses a danger to consumers. In 2005, a

POLITICAL ECONOMY

GROWING A MARKET IN YOUR BASEMENTColorado and Washington’s controversial recent legalization of marijuana has stirred up a lot of excitement in weed-enthusiasts and economists alike.


(p.18) THE FEDERAL RESERVE: An Overview

(p.19) Church Versus State

(p.20) RUSSIAN TRADE POLICY: The Empire Strikes Back

(p.21)The (Un)Democratic Uprising

(p.22) The Dubai Model Unveiled

BY MIGUEL FERREIRA

17

group of over five hundred economists, including three nobel laureates, advocated for cannabis legalization stating that there is great benefit to be harvested from its legalisation. Among these benefits, economists found that governments would be able to save vast amounts of revenue that are used to convict those involved in the illegal sale or purchase of marijuana, and any other activities used to police the illicit activity.

Before you decide to pack your bags and move to either of these US pot-havens, it is important to mention that economists treat problems of externalities with the intent of improving social welfare. In order to disincentive people from abusing the narcotic, the government has imposed sales taxes that will drive prices up. The intuition behind the use of taxes is to control the consumption of marijuana and reduce the negative effects associated with its consumption. In Colorado, taxes in the wholesale market are fifteen percent, but with prices already high in the narcotic industry, this could mean a very large difference in prices for consumers. In addition, governments have imposed numerous regulations consistent with other legal- drug laws, including age restrictions (over 21) and license requirements.

In general, it is extremely difficult to foresee the impact the recent changes will have on the future of marijuana consumption, but it appears that Colorado and Washington’s current legislation already represents a major shift in policymaking. There are,

however, still some problems to consider: producers face rough paths ahead, due to the lack of banks willing to grant loans and difficulty in accessing the market itself. Furthermore, consumer behavior may not be as predictable as previously imagined. With the rise of prices in the legal market in comparison to the black market, there is ambiguity as to whether people will have an incentive to purchase in legal markets at all.

“Before you decide to pack your bags and move to either of these US pot-havens, it is important to mention that economists treat problems of

externalities with the intent of improving social welfare.”

Gallup Poll Results for Marijuana Legalization“Do you think the use of marijuana should be made

legal, or not?”90%

80%

70%

60%

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IT’S INCREASINGLY NORMAL TO SUPPORT MARIJUANA LEGALIZATION

1969 1974 1979 1984 1989 1994 1999 2004 2009Yes- Legalize Marijuana No- Keep it Criminal

POLITICAL ECONOMYINTERCOLLEGIATE FINANCE JOURNAL: MARCH 2014 18

The Federal Reserve, or “The Fed” as it is commonly called, is the United States’ central bank and one of the most influential financial institutions in the world. Established in 1913, the Federal Reserve’s responsibilities have evolved and expanded over time, primarily in response to fiscal panics or recessions. Today, the Federal Reserve’s duties include conducting monetary policy, regulating financial institutions, and maintaining market stability. Arguably the Federal Reserve’s most important task is controlling the monetary supply through changing interest rates and either buying or selling bonds—formerly known as open market operations.

The Fed consists of a Board of Governors, the Federal Open Market Committee, and twelve regional banks. The Federal Reserve was designed to be independent of partisan influences; thus, its decisions are not subject to the approval of Congress or the President. Furthermore, the terms of the Fed’s members do not coincide with presidential or congressional terms. However, the Board of Governors are appointed by the President and must be confirmed by the Senate.

A NEW CHAIRWOMANJanet Yellen, Brown University graduate, took over as the Chairwoman of the Federal Reserve after Ben Bernanke’s term ended on January 31, 2014. Not only is she the first female to hold this prestigious position, but her term begins at a crucial time for the Federal Reserve as it has started to scale back its

monthly $85 billion stimulus program. Yellen has a reputation for being what is known as a “dove,” or someone who prefers using low interest rates to encourage growth, and is widely expected to continue Bernanke’s policies moving forward.

The Federal Reserve began to reduce its monthly purchases to $75 billion in December 2013 after the U.S. economy continued its recovery - indicated by a rebounding housing market

and both major stock indexes reaching record levels, increasing

consumer confidence. In its late January policy meeting, the Federal Reserve announced a further reduction of $10 billion to the bond-buying program. The Reserve hopes to completely end the stimulus program by mid-2014. Still, the Fed will retain short-term interest rates near zero until unemployment reaches 6.5 percent, and possibly longer, contingent on the overall health of the economy. Although the unemployment rate has steadily decreased to 6.7 percent, some of its reduction can be attributed to large numbers of discouraged workers leaving the labor force rather than a significant increase in jobs. Therefore, the Federal Reserve has emphasized that it will consider a range of economic data when it debates raising interest rates.

THE TAPERYellen’s decisions, particularly the pace of tapering - pulling back and the eventual rise in interest rates, could have enormous ramifications for U.S. and global markets. Thus, her actions will be closely scrutinized by the entire world. In order to prevent economic turmoil, clear and credible communication is essential. In fact, the reduction of the Fed’s bond buying purchases and prediction of rising interest rates have already sparked a sharp pullback among investors in emerging markets. In the aftermath of the financial crisis, riskier assets in countries such as Brazil, Argentina, and India enjoyed increasing popularity due to extremely low yields on U.S. investments. After years of being supported by unprecedented monetary stimulus, it will be interesting to see how the U.S. and the rest of the world will fare as this program finally reaches its conclusion.

What does the taper mean for college students? First off, higher interest rates mean borrowing costs will become more expensive. If you are planning on taking out loans, you may want to take this into account. Moreover, as the Fed gradually begins to raise interest rates and borrowing becomes more expensive, expect these increases to be passed on to you - the consumer - in the prices of big-ticket items. Lastly, if you have a portfolio or are thinking of creating one, you may want to factor in expected increases in U.S. interest rates when deciding where to allocate your money.

FEDERAL RESERVE: An Overview

Graph Above: Dow Jones Industrial Average Mar 13 May 13 Jul 13S ept 13 Nov 13 Jan 14

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Janet Yellen, Brown University Graduate & Chairwoman of the Federal Reserve


BY SARAH PARK

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Pope Francis’s recent step into the socio-economic sphere has left the world won-dering whether economics falls under his ecclesiastical jurisdiction.

As one of the central dogmas of the faith, Catholic social teaching endorses economic justice and above all charita-ble treatment of the poor. Without being particularly specific in terms of solutions to global poverty, Catholic social teach-ing champions helping the lowest mem-bers of society and the preservation of

human dignity while denouncing both socialism and capitalism among other social and political “isms.” This teach-ing has been echoed by popes through-out history. In more recent times, Pope Benedict XVI advocated for fighting poverty as a mechanism for creating world peace on the 2009 World Day of Peace. Similarly, Pope Francis is a pro-ponent of this doctrine. On 7 July 2013, he declared,

“The times talk to us of so much poverty in the world and this is a scandal. Poverty in the world is a scandal. In a world where there is so much wealth, so many resources to feed everyone, it is unfathomable that there are so many hungry children, that there are so many children without an edu-

cation, so many poor persons. Poverty today is a cry.”

The Pope’s characterization of global poverty is not unfounded. According to the World Bank, even though progress has been made in fighting extreme pov-erty, at the current rate 1 billion people will live in extreme poverty - living on less that $1.25 per day - in 2015. Given these facts, it seems logical that Pope Francis, considered to be a somewhat radical pope, would make a stand against poverty.

A MODERN POPEPope Francis’s attempts to modernize the papacy have landed him on the cover of Rolling Stone Magazine. The current controversy is Francis’s condemnation of capitalism in his first written teaching, Evangelii Gaudium.

“Some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bring-ing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing eco-nomic system.”

“Trickle-down economics,” some-times referred to as “Reaganomics” or

“supply-side economics,” is the theory that the economy as a whole will ben-efit by giving tax breaks to the wealthy. With the increased spending as a result of the tax breaks, the benefits will pre-sumably “trickle down” to the middle and lower classes. However, President Barack Obama - along with most liberal politicians - is not a proponent of trick-le-down economics; instead, he and they

favor an income tax system where indi-viduals are taxed at a progressively higher rate as their income increases.

Unsurprisingly, Pope Francis’s attack on capitalism has received a great deal of media attention. As Rolling Stone points out, “It’s one thing to question God’s will when it comes to sexual moral-ity, but for American conservatives, tak-ing on the sacred economic doctrines of Ronald Reagan is a mortal sin.” Ulti-mately, it is important to remember that whether you agree or disagree with Pope Francis’s claims about the effects of free-market policies or even theologi-cal ideology, politicians and popes alike are working towards the same goal - a better world.

BY CAROLINE VEXLER

“The current controversy is Francis’s condemnation of capitalism in his first written teaching, Evangelii Gaudium.”

POLITICAL ECONOMY 20

THE RUSSIAN TRADE POLICY: THE EMPIRE STRIKES BACK

As a young KGB officer stationed in East Germany, one can imagine the thoughts that must have been racing through the mind of Vladimir Putin on November 9, 1989. Confusion? Dismay? Frustration? The Berlin Wall had fallen. Years later, Putin would look back on this day as the President of the Russian Federation, through a lens far removed from that of Europe’s newly freed people. He later described the Soviet Union’s collapse as the “greatest geopo-litical disaster of the century.” For Putin, it was not a question of communism or capitalism; instead, the Soviet Union was a superpower - an empire. The Russia he would later inherit was neither. It was a Russia beset by internal instability, corruption, currency crises, and unman-aged inflation – a country that could no longer compete with the United States in internation-al realpolitik.

When Putin assumed the presidency in 2000, he had a vision for a newly assertive Rus-sia, a superpower in a multipo-lar global order. As president, Putin quickly consolidated his control domestically and turned his attention abroad, specifi-cally the “near abroad.” Shaped in Cold War geopolitics, Putin’s worldview focused on Central and Eastern Europe, Russia’s historic buffer zone and sphere of influence. For Putin, the expansion of the North Atlantic Treaty Organiza-tion (NATO), and later the European Union (EU) was a source of humilia-tion. Specifically Poland, Hungary, and the Czech Republic’s inclusion in the EU represented the United States exploit-ing Russia’s weakness, in violation of an understanding between George H.W. Bush and Mikhail Gorbachev. For Putin, reasserting Russia’s influence in the “near

abroad” was paramount. Today, we see his Machiavellian streak mirrored in Russia’s rhetoric, foreign policy, and trade policy.

RETALIATIONPutin has historically used trade policy as a geopolitical weapon, most recently in Ukraine. Putin’s government pres-sured Ukraine’s pro-Kremlin president

to renege on an EU association agree-ment that paved the way for Ukraine’s full membership. This spawned unrest among a population that envisioned Ukraine as part of Europe. Consequent-ly, Putin turned to trade policy, offer-ing Ukraine’s insolvent government an interest-free loan and reduced gas prices. Given the time value of money prin-ciple, Russia’s interest-free loan is the equivalent of free money - underscor-

ing the fact that Putin’s trade policy is motivated by geopolitics, not sensible economics.

This is nothing new, however. In 2007, Russia retaliated to Estonia’s removal of a Soviet-era statue by halt-ing the delivery of energy products. In 2006 and 2009, Russia cut off natural gas exports to Ukraine, a major ener-gy transit hub for the rest of Europe.

In the dead of winter, this left much of Europe with a natural gas shortage and drove prices up - a move many saw as an attempt to punish Ukraine’s West-ern-leaning government. Today, Putin continues his efforts to expand Russia’s existing customs union to include Ukraine. Putin hopes the customs union will give way to a Eurasian Union by 2015, an eco-nomic bloc intended to rival the European Union. Above all, Putin’s Eur-asian Union is an attempt to reestablish Russia’s geopolitical grip over its near abroad.

How this will all play out remains to be seen. The backlash towards Putin’s policies threatens to unseat his pro-Kremlin ally in Ukraine, Presi-dent Yanukovych. His-

tory has a sense of irony, it seems, and Putin’s attempts to bring Ukraine into the fold could ultimately empower an opposition deeply hostile to Russian interference. In addition, natural gas fracking technology has the potential to sever Central and Eastern Europe’s longstanding dependence on Russian gas imports. What is abundantly clear, however, is that Putin is a man on a mis-sion, and he is unlikely to easily give up.

BY CHRISTOPHER DEDERICK


THE (UN)DEMOCRATIC UPRISING ruption. Not only is the current party a recreation of Thaksin’s original TRT party, but current Prime Minister Yin-gluck is the younger sister of Thaksin, who now lives as a billionaire in exile. In 2013, Thailand tied Panama, Moldova, and Ecuador for 102nd place on the Corruption Perception Index, placing it below nations with globally notorious corruption such as Colombia and India.

PROTESTS TURN VIOLENTProtesters have been working since Novem-ber to reverse what they see as a continued trend towards corruption. So far, there have been eight protest-related deaths and more than 470 injuries. To these casualties the Thai government has reacted strongly. Of course, the protesters are not oblivious to the closing of Bangkok’s commercial industries and have consequently stormed into the army’s headquarters. Regardless, parliament has been dissolved and the prime minister has proposed new elections. Yingluck has offered to meet with senior protest leaders to discuss their demands.

It is easy see these as markers of success. While they may indicate a certain success for the protesters, they do not indicate suc-cess for the country overall. That is, they are unlikely to lead to an increased representa-tion of minorities or a thriving democracy.

The protests resemble the now-infa-mous Arab Spring in which waves of people took to the streets, calling on their govern-ments to root out corruption and create policies that represent the real will of the people. It happened in the Middle East, Egypt, Turkey, and Brazil. Now, it appears the people of Thailand have embraced the method.

LESS DEMOCRACY, FEWER PROBLEMS? However, there is one primary differ-

America is not the only country con-fronted with the consequences of a gov-ernment shutdown. Now, it is Thailand’s turn, as protesters divert traffic, shut down streets, and picket the homes of top government personnel. Thai pro-testers have received more recognition from their government in a shorter time period than most of the recent protests that have rocked the globe. But the Thai protests represent a new kind of failure – one where, if the protestors succeed, successful democracy is unlikely to re-emerge for some time.

CORRUPTION THAT BESTS EVEN COLOMBIA AND INDIAThe protesters have explained that they are primarily concerned with a govern-ment overhaul in the face of upcoming elections. The current ruling party, the Pheu Thai, and prime minister, Yingluck Shinawatra are slated to win. Indeed, the Pheu Thai Party’s past is storied with electoral troubles; the party was reincar-

nated as the People’s Power Party (PPP), which was dissolved in 2008 by the Constitutional Court of Thailand after the party chairman was convicted of fraud. The PPP itself was an incarnation of the Thai Rak Thai (TRT) party, cre-ated in 1998 by Prime Minister Thaksin Shinawatra and dissolved after a 2006 military coup unseated the party and TRT party officials were subsequently found in violation of election laws. The current protests call to rid Thailand of Prime Minister Thaksin’s influence. Critics of Thaksin have pointed to cor-ruption levels in the country, question-able electioneering tactics, restriction of press freedoms, and policies that directly benefit companies owned by his friends and family members. Protesters today believe that these policies reflect cor-

ence between these previous democratic uprisings and the Thai protests. The Thai do not want more democracy; they want less. One protester’s plans includes replacing parliament with a “people’s council” – democratic in name, but not in practice. Members of the council would not be elected, but would be selected from a variety of professions. While the current prime minister has offered new elections, that is not what the protesters want. Therefore, the people of Thailand have taken to the streets to delay the election process.

A TALE OF TWO CITIESThe movement excludes the lower class-es. Protest leaders largely come from the upper class. Individuals in rural Thailand mostly support the current government. The protest represents the 1 percent against the 99 percent; it is an inverted Occupy Wall Street move-ment. The powerful old elites frustrated with their recent losing streak in elec-tions and unable to influence politics

through their conventional means, have taken to the streets.

The government’s rapid response to the protest represents an action that reflects upon the Arab Spring that the world has seen, albeit slowly, since its dawn in 2010: governments are scared of uprisings. The American vision of democratically-run elections as the outlet for domestic distress and major changes has not materialized. Instead, street violence is increasingly common and increasingly simple. The protest mechanisms utilized may have a democratizing effect, an ability to provide information to the masses and incite a reaction to unjust policies. Yet, Thailand’s protests demonstrate that these tools can indeed be corrupted and manipulated by the elite.

BY LAUREN SUKIN

POLITICAL ECONOMY

“The protest represents the 1 percent against the 99 percent; it is an inverted Occupy Wall Street movement.”

22

SEEMINGLY PICTURE-PERFECT PARADISEDubai creates a facade for worldwide media, in which it is the pinnacle of luxury and success. Dubai boasts the world’s tallest building, the Burj Khal-ifa, standing almost twice the size of the Empire State Building. The Burj Khalifa is a luxury hotel shaped like a sailboat with two thousand dollar per night rooms, an artificial archipelago with house villas, and an in-your-face gateway structure of Atlantis Resort. Dubai, within merely twenty years, has transformed from a dusty desert town to an international metropolis for finance, luxury real estate, and tourism.

According to HSBC’s chief Middle East economist, “The key to [Dubai’s] success has been both its readiness to take risks and its capacity to deliver. Things are changing in Qatar and Saudi Arabia, but for now Dubai still has no peer within a thousand miles.” Dubai strives to be the Middle Eastern business hub equivalent to Singapore and Hong Kong, while adding luxury entertain-ment similar to Las Vegas and Monte Carlo. But Dubai works to shield the world from the truth: merely four years ago Dubai was effectively bankrupt, hav-

ing fallen with the tide of the Wall Street banking crisis of 2008. Bankrupted by its hypercapitalistic dependence on the Western world, Dubai serves as a prime example of rapid economic growth that is unchecked, unregulated, and driven by monetary greed.

POLARITY OF REALITYIn general, the media portrays Dubai as a Middle Eastern commercial utopia, not based on oil but commerce. Emerg-ing as its own model of modernization, often referred to as the “Dubai model” in Middle East studies, Dubai placed itself in a volatile situation with a near apocalyptic financial collapse without any liquid funds to its 80 billion dollar debt. In essence, Dubai went bankrupt due to lack of regulatory infrastructure and unstable economic planning.

As Dubai caters to foreigners with-out an identity of its own, the Emirati in Dubai compose less than 10 percent of the city-state while the populace’s majority remains largely foreign. With 500,000 Indian construction workers living in slum-like conditions building more and more superstructures, Dubai’s downfall in 2009 left architectural proj-

THE DUBAI MODEL UNVEILEDBY TUNG NGUYEN

Dubai’s police force has two Ferraris, a Bentley, a Lamborghini, a Mercedes, an Aston Martin, and a $1.4 million dollar Bugatti Veyron. With a combined price of $4 million dollars, this supercar patrol fleet is the most opulent, ostentatious, and wasteful police force in the world. The Dubai model for modernization, the fairy tale of ultrarich in hypercapi-talism, has nearly doomed itself in recent bankruptcy


grew sevenfold between 1968-1973. During this time, the Middle East played a key role in Dubai’s exponential growth.

1. The OPEC oil embargo strengthened wealth throughout the MiddleEast. 2. Lebanon, a banking, finance, tourism center, fell into civil war by 1975. 3. Islamists took over Iran in 1979. 4. Iraq and Iran engulfed in war in 1980. 5. The USSR invaded Afghanistan from 1979 to the end of the 1980s.

While the Middle East was falling apart, the UAE was at peace and focused on developing its internal economy based on oil. Crown Prince bin Rashid Al Maktoum transformed the oil-state of Dubai into to an international com-merce hub in the 1990s. He has suc-ceeded in winning the hearts and minds of foreigners and Emiratis alike.

His Dubai Model diverged from the Abu Dhabi oil model and focused on prime real estate. By 2001, the Jebel Ali industrial district, also known as the Dubai Internet City, housed 2,000 western companies, including Microsoft, Dell, Reuters, and BBC. Today 2,000

Chinese companies accompany these western companies. This commercial expansion has created immense demand for consumption and tourism.

Evading the Western industrial-ization archetype, Dubai emerged with

ects, such as the Palm Jebel Ali islands, abandoned. The global demand for ultraluxury real estate, tourism, and finance diminished.

HOW DID DUBAI GET HERE?In context, the Middle East has been mired in war, civil war, and social tur-moil, from terrorism to the Arab Spring to Syrian oppression. However, the United Arab Emirates (UAE) and Dubai have maintained political stability and national security. Its desirability has rocketed the city’s status as a business oasis governed by English common law, rather than the UAE’s stringent Islamic sharia law that bars Western financial practices and tourist entertainment, such as casinos.

The United Arab Emirates gained independence from the United King-dom in 1971 and then formed the UAE alliance, composed of seven near-auton-omous emirates, each ruled by an emir. A combination Persian Gulf location well as British colonial infrastructure (i.e. electrical, airport, and communications) and liberal trading policies attracted commerce to the Dubai emirate.

RISE TO THE ROARING 2000’SIn 1958, the Abu Dhabi emirate, the ruling emirate and capital of UAE, dis-covered oil; Dubai then discovered oil in 1969. By 1971, the UAE nationalized the oil industry, and Dubai’s economy

a service-oriented economy with little focus on oil and other hydrocarbons. But when the 2000s came to an end and Wall Street then collapsed, Dubai attempted to dispel panic in its $80 bil-lion dollar debt announcement. How-ever, international media did not buy that Dubai’s $85 billion dollar sovereign wealth could be liquidated. Abu Dhabi’s ironically strong oil riches bailed Dubai out of default with a $10 billion dollar five year bond in 2009.

THE MODEL RECAPPEDThe city-state of Dubai has rebuilt its financial stability within four years. But the near disaster in 2008 was a dire warn-ing about the flaws of the rapid growth Dubai Model. With its overdependence on other countries’ economies and now increasing awareness of its human rights abuses on foreign workers, Dubai has many steps to take before it can fully assume its place as a modern nation.

“The key to [Dubai’s] success has been both its readiness to take risks and its capacity to deliver.”.

POLITICAL ECONOMY 24

The nuances of an interactive resume

CAREERS & INTERNSHIPS

GET YOURSELF

WHAT CAN LINKEDIN DO FOR YOU?LinkedIn is the world’s largest professional network and having a fully fleshed out profile puts you within reach of thousands of recruiters looking for potential full-time hires and interns. According to LinkedIn’s third quarter financial reports for 2013, revenue from the website’s Talent Solutions products have increased by 62 percent since last year, making up a whopping 56 percent of the total revenue from the third quarter. As recruiters rely more and more heavily on social media, here is how you can stay ahead of the curve:

PROFILEPHOTO: Your profile is both a more extensive online resume and an online marketing tool and you should treat it as such. Keep your target employers in mind when selecting your profile picture. You might opt for a different style photo depending on the type of employer you are aiming to attract. If you are applying to a diverse range of firms or to companies that value professionalism and formality, keep it simple with a clean, professional headshot of yourself, preferably with a solid color background. If you have a more specific target audience, like small startups looking for quirky, fun-loving interns, find a photo that showcases

get connected

ALSO IN THIS SECTION(p.26) So, You Want to Work for Google

(p.27) STUDENT SPOTLIGHT: Natalie Roe

(p.28) APPLYING FROM AFAR: Tips on Finding a Job or Internship While Abroad

(p.29) THE SOCIOLOGY OF YOUR POWER SUIT: Why “Dressing to Impress” is a Thing That Exists

(p.29) WHAT IS BLOOMBERG: A Guide to the Financial Markets Platform

94%

43%

of recruiters surveyed are on LinkedIn Jobvite social recruiting survey 2013

of college students surveyed are on LinkedIn

BY CLAIRE SU

25

that aspect of your personal brand. If you are applying to an architectural firm, take a photo in front of your favorite piece of local architecture to add a personal, artistic touch.

HEADLINE: Your headline should do two things: 1. Help your target employers find you2. Get them interested in you

When creating your 120-character headline, stop to consider what a recruiter might type into the search box when looking for someone like you. An effective headline might include a position title and organization you work with that is relevant to the job you are looking for, a few words conveying what strengths you bring to the table, and if you have enough space, what type of job you are seeking.

SUMMARY STATEMENT This is the section that stumps people the most, partly because there are so many ways to go about writing it. While there is no formula for the perfect summary statement, your summary should at least answer the following questions:

1.Who are you and what do you do? 2.What types of opportunities are you looking for?3.What relevant experiences have you had? 4.What have you done that makes you unique?5. What is the best way to contact you?

For question number four, consider writing one or two sentences about a challenge you faced, how you solved it, and the results you achieved.

If you have a portfolio, include a link to it at the bottom of your summary. You can also upload media files and documents to your summary section as well as other parts of your profile so they are immediately visible to viewers.

CONNECTING AND EXPANDING YOUR NETWORKMost of the people you connect with should be people you would be comfortable asking for introductions from. These are your first-degree connections, and this is where LinkedIn magic comes in. When you connect with someone, all of their first-degree connections become your second-degree connections. The second group of people you may want to reach out to are speakers you happened to meet when they visited campus or other professionals you may not know personally. When connecting with these people, do not use the default message LinkedIn automatically generates for you. The default message looks like spam mail and suggests laziness, especially to recruiters and established professionals who already have hundreds of connections. Always give a reason for why you would like to connect with the person. It shows sincerity and personality. The person you are connecting with is much more likely to help you out when your connection request reads something as follows:

TAKE YOUR NEWFOUND PROFESSIONAL NETWORK OFFLINE!As wonderful and convenient as online networking can be, the strength of the relationships you build online will never beat those you can build in person. Once you have connected on LinkedIn and built a relationship through emails or phone calls, set up an informational interview at a café so you can converse in person.


OTHER TIPS: Customize your LinkedIn URL. This will allow you to add a professional looking link to your profile page in your email signature and business cards. Once you log into LinkedIn, go to your profile and click the edit button on the section with your heading edit your profile. For example, my unique URL is www.linkedin.com/in/clairesu.

Ask for recommendations from previous employers, professors, and/or clients. Testimonials from others about your work ethic and out-of-this -world creativity boost your credibility an tell a more personal story than a resume. The fact that someone took the time out of their schedule to rave about how you basically ran the show at your last internship or volunteer job say a lot to recruiters who may be skimming your profile.

26


SO, YOU WANT TO WORK FOR GOOGLE? BY JULIA VERBRUGGE

Google, a company consistently at the top of “best places to work” rankings, is one of the most difficult companies from which to get a job. To stand out and make the best first impression, keep in mind the following tips from Google employees and recruiters:

1. DO YOUR RESEARCH: Google gets thousands of applications each year, so stand out! Make sure you mention more than the free gourmet food and in-house massages when asked why you want to work for Google.

2. GET INVOLVED: There are many ways to get your foot in the door at Google, including the Stu-dent Ambassador Program, AdCamp, or any of their other student programs. Having Google on your resume will make recruiters look twice.

3. MAKE CONNECTIONS:Reach out to alumni at Google to gain in-sight into what working there is like and ask them for guidance in the application process. Connections will not land you a position, but they will make you more a more knowledgeable applicant.

4. BE “GOOGLEY”: Recruiters always emphasize this, and in simple terms, it means that your applica-tion should demonstrate that you would fit with the company culture. Showcase your uniqueness, quirkiness, and inven-tiveness. For example, recruiters recom-mend making a separate resume with your more creative skills and hobbies.

5. KEEP TRYING: One of recruiters’ top suggestions for in-terested students is to be persistent. If you don’t get an internship, apply again the following year. If you don’t get a full-time position, check their job postings regularly and keep applying because it shows them your high interest level.

27

EXTRACURRICULARS I do karate, I sing, and I’m working on an app called

“DrinkGuage” (not currently on the market). It’s an app that tells you how high your level of alcohol is based on the number of drinks you’ve had and the amount of time in between each of those drinks. It changes color and goes to varying degrees of red depending on how intoxicated you are. We’re going to input a feature so that you can call a friend or a cab.

THE STORYI was coming back from Australia on a summer vaca-tion and I sat next to one of the hiring managers for the student-internship program at Google. I was next to the window and he was in the middle. We started talking about where I was going to school in the fall and what I wanted to concentrate in. It got into where he worked and how I was really interested in cyber security and my background in the subject. All of a sudden he gave me his card and told me to call him if I wanted an internship, and I did!

WHY PLANES?It’s always planes! I don’t know why it’s always planes. On the plane coming back from winter break I, again, struck up a conversation with some other person who was not really a hiring manager but a high-up employee for this company called Valin, which is in the oil and gas industry. They needed someone to help secure their website too. I started talking to him and ended up getting a part time job this semester.

WORK AT GOOGLE A cyber security related topic. I’ll probably be helping them enforce security on parts of their website like some the web applications they have, like Google Docs and other such things.

PAST EXPERIENCE The past two summers, 2012 and 2013, I worked at San-dia National Laboratories in Livermore, CA as a cyber security intern working on national security problems for the government.

DREAM JOB A mentor once suggested that even after I get a job at some company or with the government I should branch off and have my own cyber insurance company. I think that would actually be the dream: working for myself doing cyber security for private business.

NETWORKING TIPSOf course, strike up a conversation with the person next to you. Everyone has something interesting to say about themselves. You’re there to learn about the other person, whether they can do something for you or not. And if you find out they’re in a field that you’re interested in, tell them that, tell them if you have any experience, and convey a lot of enthusiasm.

STUDENT SPOTLIGHTLast summer, Natalie Roe ’17 (computer science concentrator) got on a plane in Australia after a family vacation. When she land-ed back in the United States, she had a summer internship at Google as a software engineer. Read about how she did it, and more about the successful Brown freshman with big dreams.

CAREERS AND INTERNSHIPS

BY CAROLINE VEXLER

28


For many students, finding a job or internship while in college is frustrating enough. For the many students who study abroad each academic year, the process can seem even more daunting. With hundreds or thousands of miles between themselves and campus, students worry about missing recruiting events, being unable to conduct interviews, and ultimately ending up without an offer. So whether you are just returning from a semester abroad, are abroad now, or are considering going abroad in the future, check out these tips on how to continue the search while away.

1) Stay in Touch: Whether in Hong Kong, Buenos Aires, or Lon-don, you can stay up to date on your career center’s events and reach out to the office with any questions. If you are worried about missing information sessions or recruiting events, keep an eye on newsletters and your career center website. When you see an event of interest, contact your career office and ask for the email address of the company representative who will be on campus. This way, you can reach out to the recruiter directly, convey your interest, and explain your absence. The Career Lab can also review resumes and cover letters while you are abroad and assist you via email or phone.

2) Take Advantage of Technology: You don’t need to be on your campus to network with alumni, submit online applica-tions, or even conduct interviews. While abroad, take advan-tage of the opportunities to connect with potential employers online. Use LinkedIn, job and internship boards, a career center website, or employer websites. This will get your foot in the door, but when it comes to the next step of interviews, the pro-cess becomes more difficult. Many employers offer the option of conducting a Skype interview, but if they do not, work with them to figure out a solution, like a Google Voice call.

3) Make Plans While on Campus: If you are going abroad in the spring, do the best you can to reach out to potential em-ployers in the fall. While this may be challenging for summer internships in that employers do not yet know their summer staffing needs, it allows you to develop in-person relationships before departing. If you are abroad in the fall, focus more on the internship search upon your return in the spring. While some recruiting events—especially for investment banking and con-sulting—occur in the fall, most application deadlines are in the spring, allowing returning students to participate in the process. One tip here: make it clear that you were abroad by including it on your resume and by mentioning it in your cover letter.

4) Market Yourself with the Experience: International experi-ence can be invaluable in the job search. Employers are looking for candidates who can adapt to any environment and work with people of varied backgrounds, two qualities that students can market through their experiences abroad. When speaking about your experience abroad, highlight the relevant skills you developed and how you could apply them to the workplace. Companies look favorably at candidates with cross-cultural competencies, so use your experience abroad to your advantage by framing it in the appropriate way.

APPLYING

FROM AFARTIPS ON FINDING A JOB OR INTERNSHIP WHILE ABROAD

BY ANDREA WISTUBA BEHRENS

29

CAREERS AND INTERNSHIPS

THE SOCIOLOGY OF YOUR POWER SUIT WHY “DRESSING TO IMPRESS” IS A THING THAT EXISTS

BY ANDREA WISTUBA BEHRENS

You showered (I hope), got dressed, and put on nice shoes—why, for whom, and for what? Because you know that your blazer, shoes, and blouse amount to more than just profes-sional dress attire; but ask yourself, of what is this indicative?

The way you dress undoubtedly says something about you. Assuming that certain clothes carry certain attributes, style does speak to the way people perceive themselves. What an article of clothing does not do, however, is assign itself a meaning. Instead, it is society that imposes these meanings on them. Tailored, composed attire that shows little fuss is considered professional, but it is not that a pow-er suit holds the meanings of professionalism: you hold the power to attach meanings.

So, let’s talk about that job interview and that power suit you just put on. Sociologist Ervin Goffman, author of The Presentation of Self in Everyday Life, dedicated his work to

observing people through their interactions; he coined this view of social interactions as a “dramaturgical analysis,” one in which people present themselves to convey certain meanings. The following analysis comes from the paradigm that looks at people as the relative makers of meaning within situations.

Therefore, Hillary Clinton puts on a power suit for talks, and you consider buying one for that Bain Capital interview, all because of the shared interactions related to wearing suits. You are not purchasing that suit because you look like a Hugo Boss model; you are purchasing it because people attach the meaning of power to someone who dress-es the part. For the first time at college, you can answer the question of “why,” with the response “because we say so.”

Society – pause and take a deep breath – has construct-ed these scenarios for maximum efficiency, or so that we can enter a social interaction with some understanding of what you are about to do. When we speak of job inter-views, we immediately associate an intimidating boss drill-ing one with questions. Any other scenario would be out of the ordinary, it would be the exception, and it would seem weird.

Similarly, “dressing the part” – or rocking your power suit – is a way to aid in distinguishing the meaning of social interactions. Without it, maybe I could wear my lion onesie daily... Until then: dress to impress because we collectively seem to think you should (but also because I think you look like a Hugo Boss model.)

WHAT IS BLOOMBERG? A GUIDE TO THE FINANCIAL MARKETS PLATFORM

BY THOMAS PESCE

If you plan on a career at an investment bank, money man-agement fund, or any other financial services company, chances are you will come across the Bloomberg Profes-sional Service. The Bloomberg terminal is the main com-puter platform for financial markets. When you see traders watching many different numbers and graphs over several screens, they are probably using Bloomberg.

Bloomberg provides up to date data on prices and news on financial markets. In a world where a one-second delay on information can be costly, this real time informa-tion is invaluable. Bloomberg also provides a database of historical information, which allows a user to look for any trends in prices or indices.

If you intern at a company that uses Bloomberg, your day will likely revolve around it. Once you turn your com-puter on at the beginning of the day, you will immediately open up your Bloomberg Terminal. You will be welcomed with a Launchpad, which is a set of tables, graphs, and other data that is customized to what you focus on. For example, a currency trader will see the spot prices for all the major trading currencies.

You will also be welcomed with the Bloomberg Chat, which is the base for all communications between traders. Similar to any Instant Messaging service, the Bloomberg Chat connects traders from a money management fund to their sellers at the major banks. Taking the currency example, our trader may buy 50 million Euros as fast as she can type, “50 mine.” Once again, the speed at which these conversations on the Bloomberg Chat take place is crucial for these traders, as it may mean the difference between earning or losing money.

There are also some basic commands you will use to quickly look at information on the Bloomberg Terminal. Imagine instead of hastily shifting through the many news sources to stay on top of daily events, using the terminal you can simply type the letter “N” and instantly see the top ten news stories of the day. Similarly, you can type in “WEI”, and all the major World Equity Indices will appear. Another useful command is “ECST,” which will put current and historical statistics for all the world economies right at your fingertips. Now imagine having the ability to run all these commands at the same time. With Bloomberg you can look through all of these applications in a matter of seconds and look at them side by side.

“The way you dress undoubtedly says something about you.”

30

BUSINESS & STARTUPS ALSO IN THIS SECTION

(p. 32) The Business of Burberry (P.33) BLONDE OR BRUNET: Alumni Who Defy Career Expectations (P.33) Start ups from Brown to You

BY LIZ STUDLICK

31

BUSINESS & STARTUPSINTERCOLLEGIATE FINANCE JOURNAL: MARCH 2014

Stealing from the rich and giving to the poor might be the goal of the mythical Robin Hood, but that is not the only way to build equality in an economy. Robinhood, a Silicon Valley firm whose product is a stock trading app, is leading a populist financial movement with the aim of “allowing everyone to fully share in the fruits of capitalism.” The solution is not just quick, easy trading on mobile devices: it is zero-commission (read: free) trades with no minimum account bal-ances. Licensed by American regulatory authorities, Robinhood has a goal not of redistributing wealth, but of bring-ing power back to the people by level-ing the playing field between amateur investors and financial insti-tutions. Backed by firms includ-ing Google Ventures and Andreessen Horowitz, and authorized to trade in 43 states, the company plans to initially use seed funds to cover its relatively lean operating costs, eventually looking to monetize by charging for API, or appli-cation programming interface, access, premium services for customers, and margin trading.

A BREAK FROM TRADITIONRobinhood’s free trades are in sharp con-trast to industry-wide fees of anywhere from $7 to $10 a trade. Traditional bro-kerages actually pay next to nothing to trade; the fees are to cover brick-and-mortar costs and analysts’ salaries. Some brokerages offer free trading, but with monthly trade limits and often restric-tive minimum balance requirements. With virtually all operations automated and lacking a traditional banking staff, Robinhood’s free trade promise attempts

to pass savings directly on to the cus-tomer. Robinhood’s strategy has been compared by TechCrunch to Amazon: building a large user base and making (eventual) small amounts off each user. However, some critics say the app reeks of lock-in, or luring users to the platform with a populist promise, only to instate fees and restrictions once the user base grows large enough.

THE BEGINNING OF ROBINHOODFounded by two Stanford grads with Wall Street algorithmic trading creden-tials, Robinhood first launched as a stock tracking and prediction-sharing app. Designed to fill the niche of stock-track-

ing for mobile devices, the original app focused on social investing. Users could follow fellow investors, seeing their track record in predicting rises and falls in stock prices in real time. Robinhood boasted 25 percent of users contributing predictions, an unusually high participa-tion rate that produced a community of investors. The startup briefly pulled its app from the store in November, mak-ing its big announcement about opening trading weeks later.

SUITABLE FOR STUDENTSAimed at amateur and low volume investors, Robinhood looks like the per-fect tool for students. Accounts have no minimum balance or yearly fees. The app, available on iOS and coming soon for Android, is slick and intuitive, with the original app’s tracking features seam-lessly built in. The process is easy and accessible for anyone with a smartphone:

just hook up your bank account and start trading with a few taps. Though this may not be game-changing for those with existing brokerage accounts or for high-volume traders, this could be the most disruptive move in the industry for millennials and new investors.

ZERO-COMMISSION COMPETITIONThough certainly exciting, Robinhood isn’t the first commission-free trading firm. Zecco, launched in 2006, was an online brokerage built around the zero-commission promise. However, plagued by technical issues and high customer service overhead costs, it gradually restricted access to free trading, with a

minimum quali-fying balance raised first to $2,500 and then

to $25,000. In 2011, it began charging a fee of $4.95 per trade; in 2012, it merged with TradeKing, another low-cost, high volume online brokerage. Zecco seemed to prove free trading wasn’t profitable, but Robinhood plans to fill the niche first and monetize later.

RESEARCH ROBINHOODFollowing Silicon Valley growth hack-ing strategies, Robinhood has avoided traditional advertising, relying largely on tech blog coverage and an aggres-sive social media campaign. Users cur-rently can only sign up for a waiting list, and the only way to move up that list is through sharing a link through Twit-ter, Facebook, email, or LinkedIn, with friends’ clicks and referrals bumping up your spot in line. With a waiting list of 125,279 at press time, it will be a while before Robinhood brings free trading to the people.

“The process is easy and accessible for anyone with a smartphone: just hook up your bank account and start trading with a few taps.”

32


As 2014 dawns, Angela Ahrendts, Burberry’s CEO since 2006, has left the company she restored to its former glory as a global luxury brand. She will become Apple’s new head of retail and the first woman in a senior vice president role at the company. Her transition makes for timely reflection upon the dynamic and innovative growth of the Burberry Group over the past five years. Creative director Christopher Bailey will lead the company forward as both chief creative officer and chief executive. Bailey was instrumental in Ahrendts’ campaign to reestablish Burberry’s status as a luxury brand after its trademark pattern was co-opted by the mass market, alienating its wealthy clientele. Burberry is classified as a holding company that designs and sources luxury apparel and accessories, distributing these garments through a diversified global network of retail, digital, wholesale and licens-ing channels. Ahrendts focused on reinventing Burberry’s image and operations through innovative use of technology, conse-quently reimagining the Burberry brand as a social enterprise.

AHRENDTS TO APPLEIt seems appropriate that Angela Ahrendts would be leaving Burberry, where she has been CEO since 2006, for Apple. Ahrendts computerized many stages of Burberry’s business model, from sales tracking to social media, leading to substantial growth for the British luxury brand. As she becomes Apple’s new head of retail and the first woman in a senior-vice president role at the company, her colleague, creative director Christopher Bailey, will add her portfolio to his. Bailey was instrumental in Ahrendts’ campaign to reestablish Burberry’s status as a luxury brand after its trademark pattern was coopted by the mass market. Ahrendts focused on reinventing Burberry’s image and operations through innovative use of technology, consequently reimagining the Burberry brand as a social enterprise.

THE BUSINESS OF BURBERRY IN THE 21ST CENTURYAhrendts’s comprehensive technology strategy used social media networks like Facebook, Twitter, and Instagram but also utilized enterprise software from companies like SAP and Salesforce. To understand the scope of Ahrendts’ feat, it is necessary to look at Burberry’s suc-cess qualitatively and quantitatively, particularly because it is difficult to calculate the returns on the resources Burberry spends on technology. Largely due to Ahrendts’s innovation, Burberry’s revenue grew relatively steadily over the past five years. This past year saw rev-enues of $1.9 billion compared to $1.2 billion in 2009. This growth reflects a dramatic doubling of gross profit and a similar expansion of operating expenses over the same period. Her emphasis on technology is a pioneering approach not only for a traditionally British and some-what conservative brand, but also for a luxury business as a whole that fears los-ing its exclusive allure. Of the employ-ees in Burberry’s London headquarters, 70 percent are under 30 and its flagship store on Regent Street is digitally driven, designed to be a material incarnation of the company’s website. According to the consultancy Stylophane, Burberry has more Facebook and Twitter followers than any other luxury brand, compa-rable to mainstream brands like Adidas or Nike by number of Facebook likes. Burberry’s digital approach to all aspects of its operation is indicative of the retail business model of the future as it contin-ues to explore new possibilities to give the consumer a multimedia experience.

LOOKING FORWARDThough Christopher Bailey worked closely with Ahrendts throughout her tenure at Burberry, investors and journalists were initially unsettled that a designer would be running this $3 billion luxury company. As this is the first time a designer has stepped into the role of chief executive at Burberry, Bailey’s ascendance is a monumental moment and other executives at Burb-erry are confident that he will be suc-cessful. Ahrendts is the second notable Apple hire from the fashion industry, as former Yves Saint Laurent CEO Paul Deneve joined Apple to oversee product development this summer.

BY CAMILA MCHUGH

33

BUSINESS & STARTUPS

Not all students with an interest in finance go on to work in finance-proper. In fact, many alumni in your own school’s network have probably gone on to pursue their interests in unconven-tional ways. By reaching out to them and hear-ing about their experiences, you can learn more about different paths and what options exist. To accomplish this goal, I interviewed prominent Brown graduates about their careers related to innovation and business development.

THE BUSINESS OF BUSINESS DEVELOPMENTI first spoke with Michael Noble ‘97, who stud-ied Biology at Brown. Noble is the founder and CEO of Apruve, a Minneapolis-based company that helps businesses manage expenses through a PayPal-like model. In justifying the purpose for Apruve, Noble described the way businesses process expenditures: “40% of business expenses are on personal cards,” he said, and “70% involve

two or more decision makers. 14 percent involve credit card fraud or illegal employee expenditure.” Of course, this is just Noble’s problem to tackle; each entre-preneur must tackle their own, according to various market needs. If the idea does not add something of value, then it might

fail. But by building quick, iterable versions of the product (an MVP, or minimum viable product), you can test out this assumption and keep moving until you find something that works.

ROAD WARRIORStowing my cell phone and signing into my Sky-pe account, I took my voice on an 8,600 mile journey to the other side of the planet to speak with John Richards ‘73, an economics major at Brown who now lives in Brisbane, Australia. A quintessential Brown spirit, Richards found himself fed up with the political environment of Vietnam-era America, and upon graduation moved to Australia where he worked on a farm until he landed a job with IBM. That was a career move he recommends for any aspiring business owner. “Become a road warrior,” he said, and seek extensive experience with a company you admire in order to develop the sales, marketing, and people management skills necessary to run your own firm. If you spend five to seven years in an

organization, he noted, “you’ll know everything the corporate world can teach you by then,” and you will be better-equipped to tackle your own business problems. In conjunction with mentor-ship and some practical skills, students will have a better sense of what it means to be in a business or startup environment.

THE INDIVIDUAL IDEARichards had some more advice for students interested in the business and finance world at large: “Stay away from Wall Street.” On this point, I certainly agree with him. It isn’t just the competitive nature or otherworldly lifestyle; don’t fall into the trap of pursuing token wealth or the path that you believe to be the most pro-lific. There is great value in pursuing your own idea in order to find success. And besides, apart from often promoting a culture of money for money’s sake, the world’s financial situation is precarious. As Richards said, “There is no way out of this debt trap. Be flexible.” Once more, I agree. We must be prepared to tackle our fu-ture without begrudgingly holding on to prior expectations. Be willing and able to adapt your skills to meet any new sort of challenge, be that welcoming the help of a development team you never thought would have to crash your startup party, or exercising a little patience before div-ing into an innovative venture.

Between the freedom of Brown’s open cur-riculum and the organizations that promote entrepreneurship on campus, like the Brown Entrepreneurship Program, it’s no surprise that several Brown grads are making waves in the startup game. From tea to teeshirts, their prod-ucts have successfully grabbed a foothold in an ever-competitive market. And while many stu-dents know Nantucket Nectars and our beloved Mama Kim’s both founded by Brown alums and studied in the popular ENGN 0090 class “Man-agement of Industrial and Nonprofit Organiza-tions,” what follows are some ventures that you might not have heard of, yet.

RUNA TEATyler Gage and Dan MacCombie traveled to Latin America during their time at Brown, and returned to school with inspiration and an idea: capture the benefits of the Amazonian guayusa plant in tea. The result was a drink that had the

BY CARTER JOHNSON

BY MICHAEL GOLZALUMNI WHO DEFY CAREER EXPECTATIONS

same amount of caffeine as a cup of coffee and double the antioxidants found in green tea. Founded in 2008, Runa won the Brown Entre-preneurship Program’s business plan compe-tition in 2009 and launched in U.S stores the following year. Runa LLC has grabbed a foot-hold in the consumer market, with 2011 sales reaching $330,000.

TEESPRINGIn 2011, Walker Williams and Evan Stites-Clayton founded Teespring, a crowdfunded apparel company. On the Teespring site, t-shirts (and now sweatshirts) are designed by groups or organizations and upon reaching their funding level, sold and distributed (think of it almost like a Kickstarter for custom apparel). Teespring ad-dresses many of the problems facing an apparel industry burdened with enormously difficult barriers of entry. SONGZASongza, a music streaming service created by Elias Roman, Peter Asbill, Elliott Breece, and Eric

Davich, brings consumers music streams in a unique way. What separates Songza from other streaming services like Pandora and Spotify are specific, “curated” playlists broken down by day and time. Looking for a great “Tuesday, Late Morning Playlist”? Try “Keeping Calm and Mel-low,” or alternatively search for “Record-Store Clerk” playlists and try “Dance Music That’s Not Assaultive.” No matter the occasion, Songza’s ready with the music.

EXOExo, founded by Greg Sewitz and Gabi Lewis, manufactures protein bars with a twist: their main ingredient is dried, ground up crickets, which contain high levels of protein and little fat and carbohydrates. When the duo first released their project on Kickstarter, they reached their $20,000 funding goal in three days. Featured in a New York Times article this January and with their first bars available for retail in February, Exo is poised to make a big splash in the nutri-tional food market.

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IFJ March Edition