Explaining Southern California's economy

VIDEO: So you want to start a company?

How to Become a Billionaire

Jonathan Benn/KPCC

Matt DeBord explains how to become a billionaire.

People start businesses for lots of reasons. They crave entrepreneurship, they cherish independence, they want to change the world, they hope to get rich, they believe that they have a business idea or a product or service that deserves to get to market. 

Some just want to get the private jet and the second yacht and the third home. 

Some could care less about the money and are basically ill-suited to punch the clock for anyone but themselves.

But no matter what the motive, anyone who wants to start a business has a fundamental need: Money!

KPCC's terrific video team — and new addition Jonathan Benn, who's a talented young animator — and I put together the explainer above. It has a startup-y emphasis: This is how you launch a company that might follow the pattern of a Twitter, Facebook, or Instagram. But the general idea — that funding is essential for you to grow and thrive — applies to any kind of new business.

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Econ 474: What's a tax credit?

Mercer 3809

Chris Arnold/NPR

A sign in Maui, Hawaii, urges people to buy before the $8,000 tax credit expires. Both individuals and businesses can get credits.

Yesterday, I wrote a post about how Louisiana is offering aggressive tax credits to the gaming and software industries in an effort to lure them to what I dubbed "Silicon Bayou." Louisiana, along with many other states, offers tax credits to encourage business activity and relocation.

But how do tax credits work?

There are basically two types of tax credit: refundable and non-refundable. The latter can lower a business' tax bill to zero, but not turn into a cash refund if the amount takes a tax liability lower  than zero. The former can result in a check being cut by the state or IRS, as a refund. 

This can work about particularly well if a company is eligible for a tax credit and is losing money — as several producers of pulp, the raw material that goes into paper, learned in 2009, when big companies such International Paper received billions from the Treasury for exploiting a credit that was originally aimed at encouraging alternative-fuel use. A byproduct of pulpmaking is something called "black liquor," which paper mills have for a very long time cycled back into their systems and burned to provide power.

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Montessori: It's good for business

Emmanuel Dunand/AFP/Getty Images

Amazon CEO Jeff Bezos, a Montessori student as a child, introduces the new Kindle Fire tablet in New York, on September 28, 2011.

An interesting post from Harvard Business Review's blogs, written by Ambiga Dhiraj of Mu Sigma in Chicago. Her company is revamping professional development in the image of...Montessori education. If you don't know about Montessori, here's a good primer. I should confess right up front that my daughter, who's nine, has been in a Montessori elementary school for the last two years, and my 6-year-old son will start at the same school this fall. He also went to Montessori preschool. My wife and I are big fans.

Businesses could be, too. Mu Sigma certainly is:

[I]n 2010 we began to model our development after Montessori schools, whose principals include "an emphasis on independence, freedom within limits, and respect for a child's natural psychological development, as well as technological advancements in society." Since then we've applied these basic tenets to our workforce.

[...]

Prior to the Montessori model, our managers used promotions as carrots. Now they are challenged to motivate employees in other ways — by giving them interesting projects to work on, public praise for their work, and the right guidance and encouragement.

The end effect is that employees develop a longer-term vision for their place at our company — it's the genesis of a career, rather than just an entry-level job. There will inevitably be some turnover, as there is in any firm, but we believe this intrinsic motivation — an employee's love for what she does— is better than money and promotions. We've already seen the results in terms of lower turnover among the entry-level employees who have been through the program. Our retention rates were noticeably higher in 2011 than they were in 2009-2010, and are trending steadily upward.

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Should we be afraid of Mitt Romney?

GOP Presidential Candidate Mitt Romney Campaigns In Florida

Chip Somodevilla/Getty Images

TAMPA, FL - JANUARY 24: Republican presidential candidate and former Massachusetts Gov. Mitt Romney greets supporters and gives autographs after a speech at the National Gypsum Company January 24, 2012 in Tampa, Florida. Romney's speech was billed as a "prebuttal" to tonight's State of the Union speech by President Barack Obama (Photo by Chip Somodevilla/Getty Images)

That's what Michael Keating, formerly of the Boston Consulting Group, thinks. A president who comes from the brutal world of private equity? Terrifying. Keating outlines the fear in the LA Times:

Private equity consultants are not real business people, if real business people can be defined as entrepreneurs who want to build something of lasting value that can employ members of their community and make profits for their shareholders, whether public or private. A private equity consultant is more like an Excel spreadsheet with legs that looks at the "target" company through the lens of return-on-investment and cutting costs to the bone. If those costs are people, well, that's just capitalism in action. If an opportunity exists to expand a product line and it becomes necessary to hire some engineers and sales people, then welcome aboard. It's all a very finely tuned calculation that has nothing to do with what most people recognize as doing business. It is an abstract exercise, at best, that most of these ladies and gentleman have learned at places like the Harvard Business School, the University of Pennsylvania's Wharton School or wherever business is taught as warfare rather than as a contributor to the social good. 

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What's hard to get? The numbers on the porn business, that's what

When I recently blogged about the struggles of the California porn industry, I cited a figure of $12.6 billion in yearly sales. I'd seen figures in this general ballpark before. But there's also a…let's call it a feeling out there that the porn business' numbers are unreliable. 

So is it really a $12 billion-plus game? Ten years ago, a somewhat smaller number — $10 billion — was being questioned by Forbes:

The idea that pornography is a $10 billion business is often credited to a study by Forrester Research. This figure gets repeated over and over. The only problem is that there is no such study. In 1998, Forrester did publish a report on the online "adult content" industry, which it pegged at $750 million to $1 billion in annual revenue. The $10 billion aggregate figure was unsourced and mentioned in passing....For the $10 billion figure to be accurate, you have to add in adult video networks and pay-per-view movies on cable and satellite, Web sites, in-room hotel movies, phone sex, sex toys and magazines--and still you can't get there. 

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