Underestimating the web… back in 1995
I came across this article by Clifford Stoll from the Newsweek magazine issue dated February 27, 1995. I couldn’t help but laugh at the opening lines of the article:
After two decades online, I’m perplexed. It’s not that I haven’t had a gas of a good time on the Internet. I’ve met great people and even caught a hacker or two. But today, I’m uneasy about this most trendy and oversold community. Visionaries see a future of telecommuting workers, interactive libraries and multimedia classrooms. They speak of electronic town meetings and virtual communities. Commerce and business will shift from offices and malls to networks and modems. And the freedom of digital networks will make government more democratic.
Baloney. Do our computer pundits lack all common sense? The truth in no online database will replace your daily newspaper, no CD-ROM can take the place of a competent teacher and no computer network will change the way government works.
Admittedly, he makes some great points later in the article about electronic interaction not completely replacing human interaction, which is true but not as true as it appears he thought. The entire article is worth a reading and can be found by clicking here.
Jump on the low interest rates? …or save for a downpayment?
Recently a certain line of thinking has been promoted by realtors and other various professionals primarily in the real estate and mortgage community. The idea is this: an increase in mortgage interest rates can be much more unpredictable, and at times more devastating, than an increase in home prices… so stop waiting, buy NOW while interest rates are low!
A good example of this type of messaging can be found in this article just published by the NY Times. I also received an e-mail from a friend of mine recently who works as a realtor who was essentially making the same argument.
While their logic is not entirely flawed, those who encourage the purchase of a home NOW rather than later in this manner are really only taking into account two factors – interest rates and home values. But in a home purchase decision, there are a variety of other factors involved that should be taken into consideration.
From a financial perspective, probably the most important other factor would be the amount of down payment a home buyer has ready as they buy a house. I performed an analysis below where I demonstrate that if a prospective home buyer does NOT have a substantial down payment to bring to the table but, at the advice of the real estate gurus in the market rushes to buy a home now in order to take advantage of stellar interest rates, what happens? Well, in that case their monthly payment and total amount paid for the home will be HIGHER than if they had waited to save a 20% down payment and suffered a 1% higher interest rate as a result of waiting.
Examine this chart closely, which takes a hypothetical look at the purchase of a $200,000 home in various down payment and interest rate scenarios:
Scenario 1 represents a buyer who rushes to buy a house in order to take advantage of current low interest rates (which are around 5%), but buys the house with little down (5% in this example, likely the minimum down payment their bank required). It is the most expensive option on the chart, as illustrated by the highlighting of the payments/costs in red. The least expensive option is Scenario 3 — by all means, take advantage of lower interest rates now if you do have a substantial down payment saved up (20% in this example). But note that Scenario 2 assumes the worst with interest rates — a full 1% increase, something that recently hasn’t happened very quickly — and yet demonstrates a strong 20% down payment on the part of the home buyer. And yet Scenario 2 leads to a lower monthly payment and total home cost than Scenario 1. My point is proven!
There are two other factors to consider that I believe make my case even stronger:
- Although 5% is a common current conventional 30-year mortgage rate, a higher rate would normally be charged for a non-conventional loan (a loan with less than a 20% down payment), and/or mortgage protection insurance would be required by the lender, making the home buyer’s cost even higher, further reducing the benefit of the lower rate they are receiving.
- The higher the cost/value of the home, the LARGER the gap grows and the MORE advantageous it becomes to save up a down payment INSTEAD OF jumping in now with little down payment but at a lower interest rate. Above, the difference in the 15-year mortgage monthly payment in Scenario 2 is $153/month ($1,503 minus $1,350). But purchase of a $300,000 home, with the same percentage down payment and interest rate assumptions, will increase that gap to $229/month!
Although unrelated to the down payment issue, I think it’s also important to point out that my chart (for simplicity’s sake) assumes the same interest rate for a 15-year and 30-year mortgage, even though in reality you can get about a 0.60% LOWER interest rate on a 15-year mortgage than on a 30-year mortgage.
I hope that I have sufficiently demonstrated that one must tread carefully when taking the advice of the real estate community in regards to the timing of when you should you buy a house as it relates to interest rates, home prices, etc. When do I think someone should buy a house? Outside of home market price considerations, my answer would be to buy when they have saved up a substantial down payment and have demonstrated by doing so that they can live within their means and afford the monthly payment of the house they wish to purchase.
For a more exhaustive treatment of the argument behind saving up a substantial down payment, see my blog post “Saving for a home down payment: 4 BENEFITS”.
Idea Productivity: my friend AND my enemy
As I opened my blog control panel last night to work on (and hopefully complete) a few blog posts, I was frustrated to find that I have more unfinished “draft” blog postings that are not completed or posted within my blog site than I have actual, published postings (and I’ve posted 56 blog postings so far!). To my regular blog readers, I’m sorry that new blog posts haven’t appeared particularly “regularly” as of late.
So not only was I frustrated to be reminded of my many started but not yet finished blog posts, I was also amused — because it reminded me of my “Idea Productivity” blessing and curse.
Let me explain.
Thanks to the generosity of a relative of mine on one of my birthdays a couple of years ago, I had the privilege to take part in a leadership development and personality assessment comprised of two individual assessments: the MBTI-II (Myers-Brigg Type Indicator II) and the Highlands Ability Battery. This was a perfect gift for me, because those who know me well are aware of my fascination with personality studies, leadership profiles, and other personal characteristic evaluative mechanisms. My interest in that world is strong enough that I’ve even thought about spending the time and money to become a licensed Myers-Brigg facilitator so that I can officially administer and interpret the Myers-Brigg test for others.
Anyhow, on the Highlands Ability Battery that I completed a year ago, one of my highest-ranked “driving abilities”, as it calls them, was Idea Productivity. It explains Idea Productivity in this way:
Leaders who score high in idea productivity (Brainstormers) generate ideas continually. A measure of the quantity of ideas produced, and not of their quality, high idea productivity results in a continuous stream of sometimes-related and frequently-unrelated ideas and in multiple streams of virtually simultaneous thought. Brainstorming leaders excel in roles that draw on their strength in producing their own ideas, inducing others to produce theirs, and motivating the discussion and selection of ideas that lead to a concerted plan or solution.
Because one idea tends to trigger another, leaders with high idea productivity often work on several projects simultaneously; they may actually have difficulty maintaining a single focus for prolonged periods of time. If they have 10 tasks and ten days in which to complete them, these leaders will devote some time to each of the tasks every day and may or may not complete them by the deadline. (Source: tHAB Leadership Report for Phil Murray, January 2009)
I was thrilled to get a better grasp on this part of my personality and approach, and I constantly (and annoyingly) pointed out the many wonderful examples of this Idea Productivity to my wife ad nauseum for weeks after completing the assessment. And you can probably understand why this attribute is such a strength and yet also such a weakness. As a strength, it makes me a great contributor in a brainstorming session, it allows me to multi-task, keep a lot of balls in the air at once and accomplish work quickly across a broad spectrum of subject areas. It provides me with a constant stream of ideas, and makes it relatively easy for me to see solutions to many difficult problems. On the flip side, it’s also the attribute that will get me producing new things at such a high rate that I don’t bring projects to completion — such as my 59 started but unfinished blog posts as of tonight!
In a work setting I am very cognizant of deadlines and accountability needs and so generally this does not create a huge problem — in fact, in my role I’m often the individual laying out the deadlines, holding people to them, and all the while trying to lead by example. But in my personal life, it keeps me spread thin across many projects, books, and relationships and often keeps me from being as effective as I could be. It’s also the attribute that doles out a bit of insomnia to me from time to time as I often awake in the middle of the night just to let my mind kick into high gear.
To be clear, this is not a personal rant or complaining session. Rather, I thought it would be a good way to expose more people to this strength of Idea Productivity. This may help many of you better understand the constant flow of ideas that seem to pass through your mind, or better understand how your spouse or co-worker “thinks”.
And, like any strength, it has a “weakness” attached to it on the other side of the coin. But remember, thanks to “Idea Productivity”, you just read another blog post from me. Happy brainstorming!
Highlights and implications from a finance benchmarking study – Part 1
This past November 2009, a fresh benchmarking study was released that provides valuable insight into the finance and accounting operations within U.S. businesses. The study, entitled “Benchmarking The Finance Function” (see full source info at the bottom of this post) was developed by The Financial Executives Research Foundation, the research arm of Financial Executives International (FEI), in collaboration with Robert Half International, the well-known national finance/accounting recruiting firm. The study’s methodology appeared sound and the sample seemed reasonable, with the 200 financial executives surveyed representing dozens of industries and a good mix of company sizes.
Obviously, the report is copyrighted by its creators and so I will not attempt to reproduce significant portions of the information found within the report, but rather I will examine a couple of key findings of the study and discuss possible implications that could be drawn from those findings. Here in part 1, I will examine the report’s findings related to accounting department staffing and staffing costs. In part 2, I will examine the report’s findings related to finance/accounting ERP and financial systems usage.
Accounting Staff & Costs
The average total cost of internal finance/accounting staff as reported by the FERF’s report respondents, as a percentage of their sales revenues, was 2.63%. At first glance that percentage may seem reasonably small, but let’s dig into this a bit further.
Of those costs, the largest segment (8.76%) was spent on transactional processing staff.
Approximately 34% indicated temporary staff was used, but over 68% of those companies utilizing temporary staff spent less than 5% of their total staff cost on that temporary assistance
Of all the groups within the accounting/finance staff world examined (Accounting-Transaction Processing, Accounting-Analysis & Reporting, Planning & Analysis, Payroll/Benefits Management, Tax, Treasury, Credit), the Credit group was surprisingly the lowest area of cost. Given the way the groupings were arranged, combined with tight credit and cash flow realities that have prevailed in many industries over the past couple of years, I was truly surprised that businesses are not spending more on their Credit staff.
Incidentally, 48.12% of respondents indicated their payroll function was outsourced. This is not surprising as ADP grew into a giant by moving years ago to dominate this function which many financial leaders find to be the most obvious and easiest outsource decision around.
Source: Benchmarking The Finance Function, 2009. ISBN # 978-1-61509-0222-8, Financial Executives Research Foundation, http://www.ferf.org
Ah, forget the mortgage… but I HAVE to pay my credit card!?
This recent article highlighted the irony in the credit crisis and the home mortgage crisis. There has been almost endless talk over the past couple of years about mortgage re-works, government assistance to struggling homeowners, and a variety of efforts to reduce foreclosures.
Not that any of these things are bad in and of themselves, but I think it may have planted some ideas in the minds of mortgage-burdened homeowners that were likely not intended.
As explained by this article in the San Francisco Business Times, a TransUnion study found that the percentage of homeowners deliquent on their mortgages but were current on credit card obligations increased, while the percentage of individuals in the opposite scenario (current on their mortgages but delinquent on credit card obligations) increased.
Contrary to the conventional wisdom that individuals will tend to favor secured loans/credit (such as debt secured by a home or a car) over unsecured debt (credit card debt, for example) when it comes to staying current on payments. But this new evidence suggests that the trend is reversing.
Why? There are a few reasons this could be occuring:
- The speed of creditor retribution is much slower and much less dramatic with a mortgage than with a credit card. A deliquent mortgage payment may result in phone calls, but the ultimate penalty (foreclosure and the eviction that comes with it) is literally months away from the first missed payment, and with banks eager to avoid foreclosure in many cases, homeowners know they will likely have many opportunities to make things right. On the other hand, credit card companies quickly hit cardholders with late fees for missed payments, not to mention the ongoing interest charges on their balance, often which are at a very high percentage.
- Credit cards are “helpful” to meet ongoing living expenses. If their ability to spend via credit cards is cut off, desperate consumers may be unable to buy groceries or put gas in their vehicles. It makes a lot of sense in the short-term to make a minimum credit card payment and keep the card open for ongoing spending if they are struggling to meet base-level needs such as food for the family.
- Homeowners deliquent on their mortgages are beginning to “call the bluff” of the banks. As mentioned a moment ago, all of the press coverage on the issue of mortgages gone bad and looming foreclosures may have made many homeowners disbelieving that their bank will ever actually foreclose on THEM.
- Homeowners have lost hope. With home price depreciation not reversing any time soon in many markets, recent owners of highly-leveraged homes don’t see any path to getting into positive equity territory any time soon. It could be argued that many homeowners consider foreclosure inevitable, so why continue to make payments?
As much as I loathe and discourage consumer (credit card) debt, vehicle debt, and highly-leveraged home ownership, the trend indicated by the TransUnion study is not surprising.
Creditors and consumers alike would be wise to think through the implications of this trend on their current and future practices.
Sales professionals — tired of following up? Read this!
I am not a sales or business development professional by trade. However, I am passionate about networking with sharp people in business and I think that long-term relationships are the most valuable relationships for anyone, whether they be personal friendships or business relationships that develop over time.
Somehow, after attending a webinar on a related topic, I found myself on an e-mail list from Wendy Weiss, the self-proclaimed “Queen of Cold Calling” who dispenses her advice at http://www.queenofcoldcalling.com
Anyhow, I received an email from her today (advertising a webinar) that contained some statistics that I thought were intriguing. I think there is a lot of truth to be revealed in these statistics about networking and relationships in general. See what you think:
• 48% of sales people never follow up with their prospects.
• 25% of sales people make a second contact with their prospect and then they stop.
• 12% of sales people make three contacts with their prospect and then they stop.
• Only 10% of sales people make more than three contacts with their prospects.
• 2% of sales are made on the first contact with a prospect.
• 3% of sales are made on the second contact with a prospect.
• 5% of sales are made on the third contact with a prospect.
• 10% of sales are made on the fourth contact with a prospect.
• 80% of sales are made between the fifth and twelfth contact with a prospect.
Source: E-mail distributed by Wendy Weiss, http://www.queenofcoldcalling.com, on February 1, 2010.
Having been in a “buying” role inside of a business (a buyer of insurance services, banking services, consulting services, employee benefits, payroll providers, etc.) I have to agree with these statistics, particularly the second set of information above.
I recall one salesperson in particular who probably emailed me once every 3-4 weeks for almost 2 years before I bought from him. His contact with me was very professional and appropriate. He would email me from time to time when he encountered an article related to my business that I would find of interest. In this way, he stayed in contact with me without being a “pest”, and also without making me feel pressured to buy from him. But, sure enough, when I wanted to make a change in our commercial insurance brokerage, I picked up the phone and gave him a call.
I hope the above items are substantial food for thought for all of you out there working on building relationships, whether it be in a sales capacity, job seeking capacity, or other business or personal venture.
Goals for GIVING: How to execute better in 2010
Many people DESIRE to give.
Many people PLAN to give.
But many folks, despite meeting other financial goals in their life come year end, FAIL to meet charitable giving goals purely because they do not know what organization to give to. As a result, they may simply scramble and write a check to the first charitable organization to call them the last week of December, or send a check to a national well-known organization that they trust.
Others without a giving plan may fail to give because they find themselves spending money they had initially intended to give to a charitable cause. Or, maybe they have not spent it and intend it to be for giving, but by not giving in the current year they lose the tax deduction benefit until the year in which they make the gift.
Uncertainty about what organization to give to should not prevent individuals from setting aside the dollars that they intend to direct to charitable causes. The use of a donor-advised fund is, I believe, an excellent solution to the problems discussed here.
A donor-advised fund is a type of account that allows you to donate money into the fund NOW, and let the money sit in the fund (and even grow with interest) until you decide where to “advise” the fund managers to “direct” the funds. Obviously, if you have a regular organization you are giving to then there’s no need to go through this process, just give directly to the organization. But for periods of time when you wish to budget and set aside funds that will be given to an organization of your choosing LATER, the donor-advised fund is an excellent option.
Think of a donor-advised charitable fund as something more structured than off-the-cuff immediate giving, and yet less structured and complex than a foundation. Many foundations, in fact, are beginning to transfer their assets into these charitable giving funds to reduce their administrative and record-keeping burden.
If you regularly give 100% of your planned charitable giving in the same year in which you set aside those funds, then a charitable gift fund may not be right for you. As always, you should consult a financial planner or other professional that you hire to advise you based on your particular circumstances. However, I hope this overview of donor-advised funds below provides a strong introduction to this financial tool.
There are several KEY ADVANTAGES of the use of donor-advised funds:
1. It gets the money out of your checking account – With a donor-advised fund, you can make periodic contributions if you wish. Make your regular contributions correspond with your paycheck frequency, for example, if you want an easy way to budget your charitable giving. By providing a way of getting the funds out of your checking account (despite not yet knowing where you will ultimately direct the funds), it helps you live up to your giving commitments and keeps you from spending the money before you realize it.
2. You realize a tax deduction in the current year – By “donating” the funds to the donor-advised fund in the current year, you are able to claim a charitable giving tax deduction, according to current IRS law, in the current year.
3. Give when, and to whom, as you feel is appropriate – By setting aside these funds and realizing the tax deductions on those donations now, you can be released from the pressure of deciding NOW how to give, and wait until you have identified the right organization, and timing, for your giving.
4. Most charitable funds allow you to invest your donor-advised funds until you are ready to recommend a grant – By investing the money inside your donor-advised fund, you should realize growth, exempt from taxes, of those funds until you are ready to instruct the charitable fund to issue a “grant” of funds. Not only does this help to offset any effects of inflation on those monies, but the growth you experience in the fund through investment returns will also help to offset the minimal fees associated with operating such an account.
5. Donate non-cash assets. Not only can you transfer cash into a donor-advised account, but you can also transfer real estate, business interests, restricted securities, and other non-cash assets.
Here is the BASIC PROCESS of setting up and using a donor-advised fund:
STEP 1: SELECTING A DONOR-ADVISED FUND PROVIDER
There a number of charitable fund organizations that allow you to set up a donor-advised fund, including most of the major brokerage houses. To illustrate differences between the features of various charitable fund organizations, I have created the chart below to demonstrate fee and minimums differences between three of the more popular charitable funds. As you peruse the chart, the following definitions may be of help:
Minimum Initial Contribution: This is the minimum amount you can donate to open a fund. If the amount is a bit steep for you, then one approach to take would be to, possibly in addition to your normal giving during this year, save up the amount over the course of this year that you plan to give NEXT year, but instead donate it to the fund at the very end of this year, thereby ensuring that you get the tax deduction in the current year.
Minimum Subsequent Contributions: This is the minimum amount of future donations to the fund. If you find it takes a few months to save up $500 or $1,000 towards giving, then a charitable fund may not be appropriate for you if you struggle to keep those funds set aside while saving up for the minimum.
Minimum Grant Amount: This is the minimum amount of money you can request the charitable fund to “grant” on your behalf to a qualified organization of your choosing.
Annual Fee: Most of the charitable fund organizations charge a fee on your fund balance, on a sliding scale basis that typically DECREASES as the size of your balance grows. Most charitable funds assess 1/12th of this fee on a monthly basis based on the average fund balance during the month. For example, if your fund charges 0.60% on the first $500,000 in your fund, and you have $25,000 in your fund throughout an entire month, the fee charged against your fund at the end of the month would be 0.05% of $25,000 (1/12th of 0.60%), or $12.50 for that month. Also, see Step #4 below for a further discussion on investing inside of your charitable fund. You may also wish to question the organization you are considering selecting to determine if there are other fees related to grant distributions, etc.
A COMPARISON CHART OF 3 CHARITABLE FUND ORGANIZATIONS
In our family we decided to select the Schwab Charitable Fund for a number of reasons – we liked the ability to invest the funds in our donor-advised account, their fee was comparable to other organizations in the market, and also for the fact that we had other IRA’s and brokerage accounts with Charles Schwab and so it made for an easier logistical setup for fund donation, etc.
STEP 2: SETTING UP YOUR DONOR-ADVISED ACCOUNT
Once you have selected the charitable fund organization you wish to use, simply download the application from their website, complete the application, and submit to the organization with your initial contribution. NOTE: It is important to get more information from your charitable fund about their process of approving charities before you commit to opening a fund; see Step #4 below.
Remember, any money you donate to the account is deductible in the year of the gift. Also, remember that once you have transferred money to the donor-advised account, you no longer have rights to the funds — you have given those funds away for all intents and purposes, even though you retain the ability to invest the funds and direct the funds to qualified organizations, as you wish.
Pretty straightforward, right?
STEP 3: MAKE SUBSEQUENT DONATIONS TO YOUR DONOR-ADVISED ACCOUNT AS YOU WISH
As you wish and have funds to do so, you can make subsequent donations to your donor-advised account any time you wish, as long as that additional gift meets the minimum required by the charitable fund organization you are using.
Your fund organization will very likely allow you to set up automated gifts through automatic transfers from your checking or brokerage account. You can also always send in individuals gifts however often you wish. However much and howevre often you contribute to this account, doing so is a key practice in reaching your long-time giving goals.
STEP 4: INVEST THE FUNDS INSIDE OF YOUR DONOR-ADVISED ACCOUNT AS YOU WISH
As described earlier, most charitable funds will let you invest the funds inside of the donor-advised account in various mutual funds.
Many charitable funds allow you to invest the donated dollars that are sitting in your donor-advised fund; these monies can be invested in mutual funds with varying levels of risk and expected return. These individual investments within the fund will carry fees with them, like mutual funds or investments in any brokerage account would, so make sure to keep that in mind.
As described earlier, investing these funds will help to offset any effects of inflation on those monies, and the growth you experience in the fund through investment returns will also help to offset the minimal fees associated with operating such an account.
If you do not anticipate holding the monies in the fund long and expect to give them quickly, then simply keep them in “cash” form inside the fund and avoid these investment fees. You will of course be also foregoing any investment returns that may have occurred during that time.
STEP 5: RECOMMEND “GRANTS” TO BE MADE OUT OF YOUR DONOR-ADVISED ACCOUNT
When you wish to give to an organization, you will simply notify your charitable fund either by completing a form online or submitting a hard copy form. Most national organizations will already be on the charitable funds “approved list of charities”. You should expect to be able to give funds to any 501(c)(3) non-profit organization. Additionally you can give to educational institutions and religious organizations, even though many religious organizations may have a “de facto” non-profit status though they are not all required to have filed for 501(c)(3) registration. It is important to get more information from your charitable fund about their process of approving charities before you commit to opening a fund.
Once you “recommend” that your charitable fund send a “grant” to a qualified organization, you can expect them to do so quickly, within a matter of days. Remember that even if the charitable organization that is given to erroneously claims your gift is tax-deductible and includes that grant in their statement of your giving that they provide you at the end of the year, that is not actually possible. You received a tax deduction once when you donated the funds to your donor-advised charitable fund; you cannot receive a second tax deduction when the charitable fund grants the charitable organization some of those dollars.
CONCLUSION
Giving, like so much else is life, is often simply a matter of developing a plan and executing on that plan.
Donor-advised accounts offer an easy, accessible way for individuals, families, and even corporations to budget their giving on an ongoing basis, ensuring that tax benefits are accelerated and most importantly ensuring the funds are directed out of one’s hands and into an account that can only be used to later give those funds in a charitable way.
The issue of “What Organization Should I Give To?” is ALSO an important question, but also very different from one person or family to another, and is too big of a question to be covered here in this blog post.
It is my hope that readers of this post now have a better understanding of an innovative way of executing their giving plan through the use of donor-advised charitable funds.
Intriguing quote from Adam Smith
I’m reading Going Broke: Why Americans Can’t Hold on to Their Money by Stuart Vyse. I have just started the book but I suppose I will eventually write a summary/review of the book here on my blog, but in the second chapter today, I encountered Vyse’s quoting this famous passage from Adam Smith’s Wealth of Nations. Vyse provides some supplemental explanation with it — I thought it would be worth reproducing here:
“The man who borrows in order to spend will soon be ruined, and he who lends to him will generally have occasion to repent of his folly. To borrow or to lend for such a purpose, therefore, is in all cases, where gross usury is out of the question, contrary to the interest of both parties.”
Loans for the purchase of durable goods or investment in business or production, on the other hand, had the potential to produce wealth, so these forms of lending were acceptable.
As Vyse goes on to explain, in Smith’s view of a healthy economy lending was permitted, but was only considered ideal in cases where the lending was done for the purposes of enabling production.
It is fairly ironic the Adam Smith’s thoughts and economic theories are widely referenced and his advice followed by many free market capitalists in the United States and elsewhere, and yet clearly business leaders nor the general population has taken his advice in this matter. He calls the habit of lending for the purpose of spending “contrary to the interest of both parties”. BOTH parties! The recent economic meltdown, featuring headlines chronicling past years of mortgages gone bad and credit card debt handed out flippantly shows us what happens when both parties ignore this advice. Not only are consumers’ finances ruined, but ultimately the lenders are affected as well.
Barnes & Noble’s nook device – proposals for better lending
Barnes & Noble’s highly anticipated ebook reader, the nook, boasts a variety of features that B&N says makes it superior to the Kindle device made by Amazon.
I received one as a gift for Christmas, and while I am still awaiting its arrival, I’ve done a good bit of reading about the device. Overall, it sounds like a great device but like any 1st/2nd generation product, the nook should be expected to have its share of imperfections and unfinished features.
One of these unfinished features is the nook’s ability to lend out books, but only temporarily, to other Nook users. According to the clarification from B&N as stated on the nook blog nookTalk (on Twitter as @nookTalk, “the books you buy for your nook can only be loaned out ONCE for fourteen days.” This “one-lend-only-and-just-for-14-days” feature, in my mind, makes this feature more hype than substance. How often do you borrow a book from a friend and return it 14 days later? And how often have you lent out a book multiple times to various friends you have who you think should read the book, or read enough of it to be interested in purchasing it themselves? How frustrating would it be to only have the ability to lend the book out one time, and never again?
Admittedly, the nook’s ability to lend books at all is better than the Amazon Kindle’s lack of a lending feature. And I imagine there’s plenty of business, partner/copyright, and technology issues at play here that prevented a more relaxed lending feature at this time, but here is my question: why not allow the process of lending an e-book to occur in essentially the same way as the lending of physical books works?
Here are my specific suggestions on how to loosen up the technology to better emulate real-life book lending, while also (somewhat) protecting content creators’ copyrights, their royalties, and the publisher’s/distributors’ revenues. These suggestions could be implemented by any of the e-book / e-reader companies:
- Extend the time limit of lending. This is an obvious problem; I would propose they extend the time limit at least to 60 or 90 days, but preferably to something closer to 6 months. This only makes sense, as a physical book lent out can sometimes stay gone for a while.
- Do not allow the owner of the e-book to read it while it is “lent out”. This may be disappointing to e-book users, but it does accurately match what happens with physical books and thereby provides some protection to content providers’ copyright and distribution concerns.
- Implement automatic reversion of the reading rights. As a way of preventing the scenario we have all experienced where you lend a book to someone, but it turns out to be a gift to them (because they never return it!), the devices would ideally revoke reading rights to the book on the lender’s device/account after the lending time limit is up, and return those reading rights to the e-book owner. Update: I heard from @nookTalk shortly after publishing this post that this feature “should work” currently. Thanks for the info!
- Allow for upgrades / “full license” purchase of ebooks to remove or relax restrictions – Apple has already done a similar thing with their music, often offering a non-protected version of songs on iTunes for $1.29 instead of the standard $0.99 per song price, for example. So, an e-book that normally sells for $9.99 could sell for, say, $14.99 in an unprotected format that might have relaxed lending restrictions (even longer lending, lending to more than 2 or 3 people and simultaneous access to the book yourself, etc.) This would calm the critics and ensure that people could have more flexibility if they paid more for the e-book– probably something closer to the cost of what the physical book would cost in the store.
- Implement a “lending friends” list – Thankfully, my understanding is that the nook does allow multiple accounts (I’m not sure of how many, but I am sure it’s comparable to the Kindle’s 6 account limit) to have access to the same books. This should assuage any concerns about members of the same household being able to access each other’s books. But my LENDING friends list that I suggest essentially works the same way, except that the list of accounts can be larger and is used for the lending feature only, not for unlimited normal access to your library. This again would somewhat of a limiting feature to users, but would be a mitigating protection for B&N and publishers. If you, for example, can only lend any of your books to someone on a list of 10 different for example, this will limit the odds that lending will be so easy as for some to avoid purchasing books altogether.
I am hopeful — and confident — that as the e-book technology improves and technology creators, authors, and publishers come to grips with the radical changes that will be coming to their industry with the rise of e-books, there will also be an eventual improvement and standardization of features such as e-book lending across all devices. Hopefully these suggestions here will help to kick-start the discussion.
Why isn’t faxing dead yet?
My original title for this post was “Is faxing dead?” But upon typing out those words, the answer was obvious: yes and no, and so I changed the title to “Why isn’t faxing dead yet?”. If the ancient 20-something-year-old art of placing a paper in a machine that will send the image across phone lines to a fax machine or server elsewhere in the world was entirely dead, then people would disconnect all fax machines, stop purchase fax software, and most importantly they would stop placing the numbers on their business cards. But those things haven’t happened across the board as of yet (in fact, the idea for this post came to me as I was entering an attorney’s contact info off of her business card, fax number included, into my computer the other day). Nonetheless, many DID turn their back on fax machines long ago and so as far as they’re concerned the answer is “yes”. But for the reasons I will detail momentarily, one cannot claim the total death of faxing quite yet.
THE OBVIOUS ALTERNATIVE TO FAXING
With Internet access and Internet use now more ubiquitous than a nearby fax machine, one would think the simple act of scanning and emailing a document would have replaced faxing years ago. The idea of emailing a scanned image, and more importantly the idea of receiving a scanned image attached to your email (as opposed to pages falling off of a fax machine in the next room) is extremely attractive. The electronic, scan/email approach is so much easier (in my opinion) that at one point when I worked at an office without a scanner but that had a fax machine down the hall, I would fax a document to my e-fax number on my computer, walk back to my computer and then forward the email I received from that fax machine on to the intended recipient via e-mail. I did both myself AND the eventual recipient of my fax a big favor by keeping our correspondence digital by converting the hardcopy document into digital format. This would allow us both to access and view the document then and in the future from anywhere and at any time.
REASONS WHY FAXING ISN’T DEAD
All this having been said, why is it then that fax numbers still exist, and fax transmissions continue? I would propose that the jump has not yet happened for 3 reasons:
Reason #1: Scanner manufacturers (i.e. Brother, Canon, HP, etc.) and computer manufacturers (Dell, HP, Apple, etc.) have not done a good enough job of simplifying the act of sending an image to someone else, thus making it as easy for everyone to throw out the fax machine for good.
Despite my obvious preference for scanning as described above, even I must admit that sitting down at a computer, finding the scanning software, and making it all happen together with the device at hand is not as easy as it should be, with different processes, software, and things to consider. Less-comfortable computer users will often find it easier and quicker to use a dedicated device – a fax machine – to send several pages of images.
Even if the Windows and Apple operating systems got their act together, you still have the issue of the scanning device itself. Until the recent popping up of The Neat Company kiosks in airports all over the country, I haven’t seen one vendor get the device small enough, simple enough, and integrated with scanning/filing software well enough to really push scanning into the mainstream. Again, The Neat Company has done a pretty good job with this, although my impression is that their filing system is still proprietary, but their flagship desktop scanning device and system is listed at $399 on the first page of their website — a price too step for most people to consider a dedicated device. Instead most people will stick with a Brother multi-function device or similar (great machines, by the way) and that would be fine, except many of them will never figure out the scanning technology and system well enough to use it smoothly and productively.
Reason #2: Services rose up to fill in the fax -> technology gap, thus prolonging the total death of faxing technology. Efax.com, a leading online fax service provider, gives people free fax numbers and lets them receive a limited number of faxed pages per month at no cost (I use this service, in fact, as some people still want to fax me documents from time to time). For a monthly fee, Efax.com provides outbound faxing, a local phone number of your choice, etc. etc. Within corporations, IT departments have long been acquainted with fax server software made by companies such as GFI which allows for the routing of incoming faxes straight into employee e-mail boxes.
These services have kept people tolerant of the old fax-to-a-phone number approach, largely because people often send and/or receive faxes through these systems without ever touching a fax machine. The tragedy here is that money is spent on fax server software and phone lines are tied up in the transmission and receiving of faxes with this technology. Despite the obvious benefits to these services, over the long haul they will become unnecessary.
Reason #3: The move from transmitting hardcopy documents over the phone lines via faxing to the outright irrelevance of paper documents in many of our homes and companies has created something of a “leap frog” affect. Ironically, I believe one reason few companies have ever gotten serious about giving the average personal/home user an easy, consistent, and inexpensive way to scan, email, and organize paper documents on their computer is that very few things even come to us in hard copy form any more. Bank statements, newsletters, daily news, and correspondence all come to us and are available for later retrieval by us in a web browser. As a result, there almost wasn’t enough time and profit incentive for hardware and software companies to kick out fax machines for good by creating an inexpensive, easy-to-use device that could be successfully sold and marketed to millions.
CONCLUSION
In conclusion, this is what I believe: faxing will “die” once and for all when desktop scanners become cheap, small, and easy to use– AND when paper document flow slows to such a crawl that an email address will be more than sufficient on a business card for all professionals — even attorneys.
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