A Danish scam, deflation, and letdown at Macworld
BY Max Chafkin
High-flying Danish firm exposed as a sham.The Wall Street Journal has a front page story on Stein Bagger, a former bodybuilder and, until recently, a celebrated entrepreneur. Unbeknownst to KPMG, which was auditing the books for Bagger's company, IT Factory, and the Ernst & Young, which named Bagger its "Entrepreneur of the Year" last month, Bagger was the alleged architect of a $185 million fraud. Ninety-five percent of the company's reported business was made up, and victims include Denmark's biggest bank and a professional cycling team.
More on the Great Cheapening. Although consumer prices have fallen dramatically in the last three months, New York Times columnist David Leonhardt reports on one category of prices that is likely not to fall: wages. Thanks to the "sticky-wage theory" pay cuts are rare during a recession. That means that while most of your costs should decrease, payroll won't go down much. And if you're still having trouble understanding the ins and outs of inflation, check out this hilarious Depression-era video. A sampling: "To understand inflation, we must understand money. This is a cow!"
Happy thought of the day. if you're feeling a little glum amid all the bad economic news, remember that a down economy can actually be good for startups. "[G]ood ideas are still getting funded and some businesses are even reporting surprising growth," according to this article, published by Wharton's entrepreneurship department. Of course, if you read our May cover story on how to start a business in a recession, you already knew that. If you missed it, check it out.
California rolls out green products regulations. "Is that laundry soap truly 'environmentally friendly'? Was that mattress treated with toxic chemicals? Is that sweatsuit fashioned from organic cotton? Is that lipstick 'natural'?" asks the Los Angeles Times. The newspaper reports on "a sweeping green initiative" to regulate labeling on consumer products. If the program becomes law, companies will be required to figure out the amount of pollution created in the making of each product.
Indian business owners agitate for security. Just as the 9/11 attacks were a blow to New York City's economy, businesses in Mumbai are struggling in the aftermath of last month's terrorist attacks, according to the Washington Post: "In the wake of the Mumbai attacks, the new mantra in the weekly meetings of several companies is 'security preparedness,' and foreign clients are insisting that they subject their facilities to thorough searches, screen employees and vendors and beef up safety drills."
Jobs won't speak a Macworld. Apple made the unexpected announcement yesterday, and the New York Times has some nice analysis. Though the keynote speaker at a trade show might seem like a minor announcement, among Apple aficionados, who follow the event with near-religious fervor, the news that the founder of Apple will not speak is devastating. (It also seemed to devastate investors, with Apple's stock down 7 percent late this morning.)
Googling for low-cost TV time. Last year, Google made a splash when it announced it would be brokering advertisements for cable television and making it easy for small companies to create 30 second spots. Some speculated that Google's auction model could drastically change the way TV time is bought and sold. It's fair to say that the market is still nascent. Valleywag brings word of a 24 year old online poker player who spent just $500 to create an ad and reach 330,000 viewers, roughly one quarter what a typical ad buy of that size would cost. If you want to take advantage of this bargain, go here.
Do non-compete agreements stifle innovation? A Massachusetts state legislator plans to introduce a bill banning them. Boston VC Bijan Sabet of Spark Capital thinks non-competes are a bane for entrepreneurs.
Welcome to Facebook. You've been served. An Australian couple who defaulted on a home loan was served legal notice via Facebook, after the Australian Capital Territory Supreme Court deemed the husband and wife's birth dates, names, and virtual friendship status was sufficient evidence that the attorney had found the right people. The upshot: you might want to think twice about friending your partners in crime. But you can always friend Inc. magazine!
Last updated: Dec 17, 2008
Senior contributing writer MAX CHAFKIN has profiled companies such as Yelp, Zappos, Twitter,
Threadless, and Tesla for the magazine. He lives in Brooklyn, New York. @chafkin