A Tale of Two Media Models

I am struck by two very different stories about media outlets in the last few days. The first is about a "tiny" local tv station, KXMC in Minot, North Dakota, that has become a lifeline to residents and evacuees desperate for information about the floods that have ravaged the area. The station, owned by a local family and staffed by another family—a father and two sons—has provided round-the-clock coverage of the flood.  Live coverage like that is expensive, but as the KXMC owners told The NY Times, "We don't know what the financials are going to be, but neither do a lot of other people here." In other words, providing crucial news to the community takes priority over profit calculations.

Contrast that to The Tribune Company, publisher of proud newspapers such as the LA Times and Chicago Tribune, and the subject of a devastating new book by James O'Shea (a former Trib editor) called "The Deal from Hell: How Moguls and Wall Street Plundered Great American Newspapers." The book tells the story of the disastrous merger of those two papers and their near-evisceration at the hands of financier Sam Zell.  In a review of the book in Sunday's NY Times, Bryan Burrough writes:

"For years, most large American newspapers were owned by families — the Grahams in Washington, the McCormicks in Chicago, the Chandlers in Los Angeles — but as those families grew and spread, their far-flung members sought greater returns. Beginning in the 1960s, many of the companies began going public, and therein can be found the underlying problem. 

The demands placed upon publicly held companies — more profits, a higher stock price — cannot easily be reconciled with the demands of quality journalism, which needs more people and higher salaries than a cut-rate alternative. When newspapers faced any kind of challenge, whether from the Internet or higher newsprint costs, the answer has long been to cut costs, which leads inevitably to lower-quality journalism."

So what does the future hold for journalism? Well, James O'Shea left the Tribune for the Chicago New Cooperative, one of a crop of new nonprofit  news organization providing high quality, relevant journalism. There's also a movement to support community-based local, low power radio. But yet another story courtesy of the Times points to another outcome: "A Newsroom That Doesn't Need News."   

Eat, Play, Drink...

It's (still) Eat, Drink Local Week in New York! For a schedule of locavore events in the 5 magnificent boroughs, see Edible Manhattan's guide.

Reducing Corporate Welfare is NOT a Tax Hike!

Bipartisan talks on reducing the deficit have fallen apart - surprise! - over the issue of increasing the revenue side of the government's balance sheet in addition to simply cutting expenses. Is eliminating some tax breaks to some of the world's richest and most profitable companies -- including Exxon Mobil, Royal Dutch Shell and BP - really a tax increase, as Republicans insist?

For a clear-eyed discussion of the issue, read Caroline Baum's piece on Bloomberg.com. A staggering $1 trillion in tax breaks are doled out every year - at the expense of American taxpayers. Federal tax revenues, by the way, are at their lowest levels in 60 years. And corporate taxes are around 1% of GDP,  a third of what they were in the 1950s and the lowest percent of GDP among major nations. (For a visual chart from the Tax Policy Center, click here.) Many of our biggest corporations (hello, GE) pay NO income taxes at all!

So let's stop falling for the line that these are tax increases. It is eliminating corporate welfare, clear and simple, to some of the wealthiest and politically-connected corporations on earth. So yes, let's rethink the 35% corporate tax rate. But let's also be clear that, as the NY Times has periodically pointed out, "nobody pays that."

Land of Plenty?

Nearly 2/3 of all fruits and vegetables and 3/4 of all seafood consumed in the U.S. come from outside the country, according to an eye-opening FDA report covered in the NY Times.  Does that seem crazy to you, too? And consider that, in one recent 12-month period, there were 40 recalls of imported foods that were considered an imminent threat to health. It gets worse: More than 80% of the active ingredients for the drugs we gobble down in this country are made abroad - mostly in plants in China and India that are rarely inspected by the FDA. Same with vitamins and medical devices, all of which fall under the purview of the FDA. Yet, as The Times points out, "instead of increasing the [FDA's] budget to perform those inspections, house Republicans voted last week to cut it."  Almost makes you want to reach for the Xanax...
Read the full FDA report in pdf format here. And support your local food producers!

Monday Madness

Just back from the BALLE conference in Bellingham WA, an inspiring gathering of people from around the country,  and the world, who are working to build "local, living economies." In case anyone needs to be convinced of the need for BALLE-like alternatives, spend a half-hour reading the NY Times today. From "hit & run" Wall Street business models, to the ludicrous (and ultimately wasteful) lemming-like behavior of Silicon Valley VCs ($15 million for a grilled cheese app?), to the self-serving efforts of the country's biggest corporations to shelter their vast cash piles from taxes, it will get your blood pumping. And don't forget "Afghanistan's Last Locavores," a compelling look at the government's shortsighted development strategy in Afghanistan, where we are transforming a traditional, sustainable way of life into a "consumer-oriented, mechanized, fossil-fuel-based economy." It's all in the name of "quick wins." As Wendell Berry famously said, this is truly the culture and economy of a one-night stand!

Do we really have to ask?

A piece in Smart Money questions whether the stock market is still fair in an age of high-speed trading, where a handful of deep-pocketed traders can jump ahead of everyone else. As one trader explains: "When the exchanges were member-owned they looked out for ordinary investors, but now that they've shifted to a for-profit model they're taking care of their big customers. They've found a way to make money for doing nothing." 

Individual investors and companies, especially smaller ones, are no longer well-served by this system - and that is one of the key arguments for the creation of local stock exchanges that serve their regions, such as those proposed in Lancaster, PA, Hawaii, and Toronto. Check them out!

Lancaster stock exchange takes shape

Read about the LanX and locavesting...

Where are the banks when you need them?

Hedge funds stepping in to fill a void left by banks? This is why we need alternatives.

Hipsters run afoul of the SEC, or, how NOT to raise money

When Pabst Blue Ribbon, the Milwaukee-based beer company beloved by hipsters, was up for sale a couple of years ago, two advertising execs had an idea:  Why not reach out to other PBR fans via Facebook and Twitter to raise the roughly $300 million that would be needed to buy the company? The men received pledges from 5 million people totaling $200 million - or about $40 a person - before the Securities and Exchange Commission shut them down. The problem: they did not register the securities with the SEC.  Companies are required to register with the SEC and provide financial and other disclosure to investors to help them make informed decisions - basic investor protections established after the Great Depression to deter scam artists. But registration is costly, and, as the PBR example shows, many people aren't aware of the basic laws regarding  capital raising.

At the same time, crowdfunding is emerging as a powerful way for companies to raise money by aggregating small sums from many investors—especially when banks are reluctant to lend and the stock market is closed to many smaller firms. Although fundamentally flawed, the PBR campaign shows the potential of crowdfunding—when done right. (So does the wild popularity of Kickstarter and Kiva, but those sites do not promise any profit or ownership). The SEC has a duty to protect, but our Depression-era laws are woefully outdated in the Facebook age, and all too often hinder the flow of capital to worthy businesses that would use the money to develop new products, hire workers and expand. Social media and technology are making it possible for companies to reach out to their loyal customers and supporters in new and transparent ways. The SEC should be studying how to harness that power for productive use. A proposal before the SEC would exempt crowdfunded investments of $100 or so per individual from registration. More on that here.
  

Community capital across the country

Busy week, but I wanted to post a few stories that attest to the groundswell of interest in local investing...

- A story in the High Country News about a small business in Colorado that raised $270,000 in loans from local residents (and thanks to Jeff Milchen of the American Independent Business Alliance for pointing out!)
- A piece about the wonderfully named No Small Potatoes Investment Club in Maine, which lends to the areas farmers and food producers
- And last but not least, another excellent article by the New York Times' Graham Bowley about our broken financial markets.

Enjoy!

Hot off the presses: Locavesting hits stores today!

My book Locavesting  - and namesake of this blog - is now available in stores! If you are interested in hearing the inspiring stories of citizens and communities that are finding innovative ways to fund their local businesses (you know, the ones that create jobs, pay their taxes, and contribute to healthy local economies) while revitalizing their Main Streets and downtowns, I hope you will consider it. 
I promise it's a good read!  (:

NYC: Let a 1,000 cupcakes bloom

Like many cities, New York has seen its manufacturing base shrink by two-thirds since 1990. But there's been a bright spot: jobs related to food production rose 6% last year in the city.  That may not be a surprise to anyone who has followed the explosion of gourmet food trucks and artisanal food producers or lined up for pupusas or People's Pops at the Red Hook ball parks or the Brooklyn Flea.

But if small businesses in general have a hard time raising capital to expand, the challenge is even more daunting for food-related entrepreneurs, which are considered too risky by many banks. That's why NYC's efforts to help young food entrepreneurs is a great example of smart local government policy. The Bloomberg administration is putting $1 million into a $10 million fund (the rest comes from Goldman Sachs!) that that will help finance local food entrepreneurs. In addition, the city is transforming unused buildings into commercial kitchens and light processing centers that small food businesses can use. As Seth Pinsky of the NYC Economic Development Corporation tells the NY Times today, not all of these entrepreneurs will be successful. "But you don't need everyone to succeed. You want as high a percentage as possible to continue operating. You then need some of the businesses to go from small to medium sizes, and you want a small percent to really succeed and become large businesses."

Let a thousand cupcakes bloom! 

What a difference one citizen can make...

I've been enjoying the occasional dispatches from writers around the country in the Opinion pages of the New York Times. Today there is a particularly inspiring piece by Ben Fountain about how one Dallas resident restored an overlooked neighborhood's long-shuttered art deco theater, turning it into a thriving performance space and community gathering spot. As often happens, that one act of faith has had a powerful spillover effect, attracting not just culture-starved customers but new businesses to the block, including an independent bookstore, a barbecue joint, a grocery store and a vintage clothing boutique. This is how neighborhoods are revitalized.

As Margaret Mead once said, "Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it is the only thing that ever does."    

WSJ on Locavesting

The Wall Street Journal ran a piece yesterday about local stock exchanges and "loca-vesting." The idea of local exchanges—like the ones that used to thrive across the nation before markets consolidated—is gaining ground as a way to support the growth of job-creating regional businesses for whom a Nasdaq or NYSE listing is prohibitively costly. The localized markets would also provide an important source of liquidity for local investors. The examples and concepts in the article will be familiar to early readers of my book, Locavesting, which will be in stores next week(!). But it is good to see mainstream media taking notice of this important trend. Local exchanges, it should be noted, are just one example of the many innovative models being tested across the country to once again allocate capital to the community-rooted businesses that are so vital to our local and national economies. I coined the term "locavesting" to refer to the entire sweep of these efforts, from community finance to crowdfunding to local exchanges.