Save it for later

My grandmother was a saver.

When I was growing up, my grandmother, like many of her era, was well-known for saving things. She grew up during the Depression and World War II, and those times left a pretty strong impression on her. Having gone through some pretty lean times, small possessions became more valuable, and Grandma didn’t like to throw anything away, even when she could afford to. She saved greeting cards, paper clips, rubber bands, canisters, cardboard boxes, jars—lots of small items that in today’s throwaway culture we might not think about saving. Some of the stuff she ended up using. The rest of it—well, that’s what the cellar was for.

I’m sure that the Recession has left a considerable impression on many in our country, though probably not quite to the same degree (yet). We still seem to throw away a lot of stuff,  though it does appear that we are holding on longer to our more expensive possessions (e.g., cars).

If one result of the economic turmoil is that we end up buying fewer things and appreciating them more, that would be a good thing. Industry might not agree, but it already produces more stuff than we can buy and keeps trying to sell more to us—on credit.

All that to say, today when I was walking downtown, I saw this and it reminded me of my grandmother. Someone had the idea to make a dress out of used coffee filters. It is an example of saving that even Grandma never would have considered.

The preferred gown for the CoffeeFest Saturday night afterparty

Whether you are a saver or not, I think you can appreciate the effort it took to make the dress. By my estimation, there are about 500 coffee filters in the dress. It was sewn to raise awareness (it worked!) about what happens to all of the coffee filters that are used in this town every day. You can read the description for yourself (click to enlarge).

I’m not suggesting that you start saving your coffee filters to turn them into retro chic clothes (the compost idea sounds like a better use to me—easier, at least), but it might be a good idea to think about what you’re buying beforehand so you don’t just end up throwing a bunch of stuff away.

Or saving it, if you’re like my grandmother. 

Humans and pigeons

Humans are a lot like pigeons. Yes, pigeons. As I was walking to the bus stop this morning, I noticed a line of pigeons sitting on an overhead electric wire, enjoying the warm morning sun. They looked quite content sitting on their perch and watching the world below them slowly wake up and start the day.

Nearing the flock, I saw one of them make a dive for the street in front of the group. There was some kind of food down on the street, and it looked like he had been the one chosen to go see if it was safe to eat—a king’s taster, so to speak. Maybe he was the cat bait. If he landed and a cat sprung out of the bushes, all of the rest of the pigeons would still be safe and sound. Of course, if no cat showed up, the first mover would get to eat the most (and best) food that was there. Not too long after the first pigeon landed, one more pigeon followed. The rest of the group, however, stayed up on the wire.

This might be the first life lesson you’ve ever heard using pigeons as the metaphor, but here goes: You have a choice. You can be the first pigeon to jump off the wire, the one who takes the most risk and ends up with the most reward, or you can be one of the flock, who sits there where it’s safe, taking your chances that there will be something left when the others are done.

Most people are like the pigeons on the wire. They are happy to sit on the sideline contentedly and let someone else go after the first bite. In their minds, it’s better to be safe and know there aren’t any cats lurking around before taking the plunge. They would rather be safe (and hungry) than risk uncertainty and the benefits that might (or might not) come with it. You are lucky because you get to choose which type of person you are.

Be bold. Jump off the wire.

The bold, and the not so bold

This week's links: July 29

It was a quiet week for coffee news, but nevertheless, here are a few links:

Coffee drinkers worried about high coffee prices may get some relief in the future. It looks like Brazil is set to have record coffee crop in 2012. link Ghana is also set to increase its production over the next several years. link

Need a caffeine jolt? An entrepreneur from Berkeley is selling a cold vacuum-brewed coffee concentrate with 40 times the amount of caffeine that regular coffee has. That’s right—40 times. I hope it comes with a warning label. link

Apparently, specialty coffee is unique enough to make it onto Bizarre Foods, a Travel Channel show. link

I already gave some of my thoughts on Dunkin’ Donuts’ IPO earlier this week, and CNBC has an interview with the company’s CEO about what he thought. One interesting fact in the article was that the only DD on the West Coast is located in Portland. link

Wait! That might not be true. I tried to find out which Portland neighborhood was lucky enough to have the store, but according to Google Maps, all three former locations are closed. Aww, too bad… link

Here’s a “Portland” photo for the week:

Enjoy your weekend!

Coffeenomics, Dunkin’ Donuts and Private Equity

Today, in case you  missed it, Dunkin’ Donuts (DD) held its initial public offering (IPO) on Nasdaq. By all accounts, it was a successful IPO. The stock was originally supposed to be priced at $16-$18 per share, but the day before the sale, the owners raised the target price to $19 because they sensed there would be more demand for the stock than originally believed.

The sellers were right. On the first day of trading, Dunkin’s price jumped nearly 50%, closing at $27.85 per share. It was a good day for the owners.

I don’t want to dwell too much on the stock’s price or where it might be going, though that would be an interesting discussion (Forbes has a somewhat pessimistic take here). What I do want to talk about is a small part of the Forbes article that caught my eye:

“The members of the consortium recently paid themselves $500 million in a special dividend, which ended up as debt on the company's books, so the IPO proceeds will essentially go to pay for that little kicker.”

The ‘consortium’ consists of three private equity firms: Bain Capital (Mitt Romney’s former company), the Carlyle Group and Thomas H. Lee Partners. They had previously purchased Dunkin’ in a leveraged buyout (LBO), meaning they borrowed a lot of money (~$2.4 billion) to buy the company.

Leveraged buyouts are nothing new—they are what private equity firms do.  The firms borrow huge sums of money to buy a company that has a lot of cash or saleable assets, with the idea that they can dispose of the non-performing assets and make the company more profitable. The buyout firm is supposed to improve the operations of the company to make it more profitable and attractive to future buyers. They come in, turn the company around, and sell it after a few years for a big profit.

At least that’s how it is supposed to work.

Often, however, when the private equity firms buy a company, they saddle the company with huge amounts of debt, making it harder for the company to be profitable. Dunkin’ Donuts’ LBO is a typical example—the debt used to purchase the company ended up on the company’s balance sheet, and payments on the debt have been dragging down DD’s earnings. The money raised in today’s IPO was being used to pay down the debt.

This might lead you to ask, if Dunkin’ already had a lot of debt, why would the owners pay themselves a “special dividend” that only increases that debt? The short answer: because they can. As owners of a company, they have the right to do just about whatever they want to with the company’s assets, so paying themselves this kind of dividend is common. The investors get paid, regardless of whether or not the buyout actually improves the long-term health of  the company.

In order to make the LBO successful, the new owners ratchet up pressure on managers and employees, pushing for higher productivity and profitability. The push to make higher profits often leads to cuts in salaries and benefits, store closures and layoffs.  

The private equity firms  argue that they are just squeezing inefficiencies out of the system. They fail to advertise that these “inefficiencies” are often peoples’ jobs, pensions and by extension, their lives. Just ask the people who worked for the Chicago Tribune. The beneficiaries of the LBOs are the investors, not the system.

Here’s the bottom line: Billionaires can play games with other people’s money and lives in a way that the rest of us can only dream about.

Whether we like it or not, that’s how it is, and I don’t see it changing anytime soon. To tell you the truth, I can’t decide whether to rail against the system or try to start my own private equity fund. Maybe I’ll just start the prep work for a successful Caffeinated PDX IPO. . . How does the year 2020 sound?

Thoughts?