The Price Umbrella in Housing

  It's important to understand the price umbrella if you're going to build a house or otherwise invest in single-family housing.  Most residential neighborhoods in large cities can be categorized as either 1] very desirable, 2] desirable, 3] less desirable, or 4] undesirable.  Generally speaking, the price umbrella for a neighborhood is set by another neighborhood in the same city that is one rung up on the desirability ladder.  Thus, when the prices in a very desirable neighborhood increase, they make room for price increases in neighborhoods that are merely "desirable."  As an example, I will use two neighborhoods in the same part of Texas (full disclosure:  I'm a Texan).

Area A is a well-known upscale area.  Most of the homes for sale in Area A are priced at over $1m.  The public schools are excellent, crime is very low and, most importantly, the residents are either wealthy and/or have "top 1%" jobs, so in all likelihood home values are safe and will probably continue to increase with the incomes of the top 1%.

Contrast that with Area B.  Nice, but not quite as upscale as Area A.  Fewer than 40% of the homes are priced at or over $1m.   The public schools are good, crime is low and most of the residents have "top 5%" jobs.  Like Area A, home values in Area B are safe.

The price umbrella indicates that the potential opportunity here is to buy a lower-tier home in Area B, upgrade it but stay below $1m, and sell it.  Sounds simple, right?  Seems like common sense, right?  And yet, I have seen many professionals -- savvy investors and homebuilders -- violate this guideline by building well above $1m in Area B, and live to regret it.  They either didn't know about, or forgot about the price umbrella.

Movie That Should Be Remade -- 36 Hours (1964 movie)

  Good story about a clever attempt by the Germans to trick an American into revealing when and where the Allied invasion of Europe (D Day) will take place.  The original features James Garner, Rod Taylor and Eva Marie Saint.  The story could easily be updated -- even improved -- for modern tastes.  In the meantime, check out the original.

What's With All The Misspelled Words?

I'm surprised at how often I find missing or misspelled words in posts from magazines such as Inc. and Business Insider.  I've even found them in New York Times online articles.  What's going on here?  Certainly a computer spell check/grammar check would catch at least some of these mistakes.  Is it no longer necessary for professional writers to write correctly?  Is there no pride of workmanship in these organizations?  Are these articles rushed to publication too quickly?  Whatever the cause, it's disturbing that this is level of professionalism is acceptable to organizations that deal in the written word.

Business Plan Tip -- A Great Product Is Not Enough

  An idea for a great product is often the necessary starting point for a good business venture.  But there's more to business than just great products, particularly if the product is something tangible, like a device of some sort (as opposed to an iPhone app).  A tangible product needs to be manufactured, distributed, marketed, sold and probably serviced and even updated from time to time.  And all those activities have to be supported by purchasing, logistics, finance, management and accounting.

A company writing a business plan needs to be realistic about all the things that have to be done to build a successful business, not just the product development.  (This issue can be particularly problematic for engineers and other hard-science types.)  It may be the driver, but it will have to be supported by other business activities.  And a good business plan must reflect that.

Movie That Should Be Remade -- The Blue Max

The 1966 original starred George Peppard in the lead role of a German fighter pilot in WWI.  The story is set in WWI, but it is actually about the social stratification and norms that existed at that time, namely that the poor were grunts in the trenches while the wealthy were pilots.  The Blue Max is about a soldier from a humble background who ascends from the trenches to become a pilot, bringing his perspectives with him.  Peppard was a good actor and popular at the time, but not convincing as a German.  That may partly be why the social messages of the times were so undersold (another reason may be that the movie assumed that viewers already knew about German social strata).

The remake should feature an actor who is more convincing as a German; maybe it should actually be made in German.  The remake should also do more to explain how German (and French, and English) society was stratified at that time.  This would provide the context for the accompanying message for who is most expendable, and why.  It would also explain why casualties were so high.

Wealthy People Don't Hire Just Because They Have Extra Money.

The debate over so-called "trickle-down economics" will probably rise up again with the change of control in Congress.  The argument in favor of trickle-down, in it's usual sequence, is that, 1] the economy will be stimulated by, 2] the increased hiring that, 3] wealthy people (and businesses) will do if, 4] they have extra money, and they'll have extra money if, 5] their income taxes are lowered.  On the surface, that argument seems sensible and has a certain allure, especially when presented in that sequence.  The problem is, it doesn't work.

Remember this:  Wealthy people and businesses do not increase hiring simply because they have more money.  The only reason wealthy people and businesses hire is because they see a potential return on the investment.  That's it.  That's how wealth is accumulated, and that's how wealth is retained.  It is not retained by giving someone a job just because you have more of it.

Now, there was a time when trickle-down might have worked.  That was back in the 50s, 60s and early 70s, when our economy was structured different.  Back then, people at the bottom and middle of the income ladder had increasing spending power that could be tapped to help recover from a recession.  With that kind of economic structure -- where the mass market has the money to buy things and business needs additional employees to transact with that mass market -- it makes sense to cut taxes to stimulate additional buying and subsequent hiring.  But that's not how our economy is structured today.  First, the mass market these days doesn't have more spending power; by many measures they actually have less.  Second, with the level of automation being used today, business usually doesn't need more people to accommodate more transactions.

The bottom line with trickle-down economics:  IT.  DOES.  NOT.  WORK.  And when someone tells you we need it, ask them when it has ever worked.

The 80/20 Rule for Social Media Advertising

So, I'm getting my real estate business ramped up and I'm looking for people on that offer insights and suggestions for real estate agents and I come across an outfit that looks like a possibility.  But I discover that 80-90% of their posts are merely promotional -- Only two days left to sign up..., Here's what you missed at our seminar…, etc. -- so I move on.  Why?  Because I want information, not a stream of sales pitches.  The thing is, there's LOTS of people out there using that very same approach.

Here's a tip for those who want to use social media to promote their business: Don't use it for direct promotion.  Instead, use it as a platform to display expertise and insight.  Instead of 80/20 promotion/insight, do 80/20 insight/promotion.

Social media is not supposed to be the online equivalent of highway billboards.  And unfortunately it is rapidly becoming the next incarnation of the the old interrupt-and-repeat advertising model (the previous incarnation being television and radio advertising).  People go to social media to get away from all that, not to find another way to receive it.

Just my 2¢.