Young Entrepreneurs Navigate LA Startup Culture

Adam Jacobs, co-founder of Santa Monica based BuddyTruk, felt the risk of a startup was wortwhile

Adam Jacobs, co-founder of Santa Monica based BuddyTruk, felt the risk of a startup was wortwhile

Adam Jacobs, co-founder and Content Director for BuddyTruk – a Santa Monica based startup that aims to be the Uber for people in need of help moving – made a decision most people in their mid-20s would loathe: he moved back in with his parents.

For Jacobs, though, it was merely a byproduct of “tightening up the budget” and taking a chance on being a part of the next big Los Angeles tech startup.

“In [startup ventures], you absolutely have to be willing to take risks,” said Jacobs, while sitting on the rooftop of their office two blocks from the ocean. “I see it as the next step to something that is a huge success.”

Founder Brian Foley had the genesis for the company when he was using a U-Haul to move into his new apartment, and crashed into his roommates car before even meeting her. As he puts it, all he needed was “a buddy with a truck,” and he would have avoided trying to steer such a cumbersome — and expensive — vehicle.

The idea was too good to pass up when Jacobs was approached by a mutual friend about joining the startup, and convinced the 25-year-old UCLA graduate it was worth quitting his “comfortable” job at Apple to pursue full time.

And walking the halls of the office building BuddyTruk shares with more than 100 other tech startups, it becomes clear many more entrepreneurs share Jacobs’s desire to be part of the changing zeitgeist in LA.

The Company Town that was built on the film and entertainment industry is now becoming one of the premier locations for startup innovation. LA is now the third largest tech ecosystem in the United States (behind Silicon Valley and New York), and the fastest growing market, according to TechCrunch.

LA is the fastest growing startup market

LA is the fastest growing startup market

Altogether, there are more than 1,000 startups in the Los Angeles metropolitan area, according to company tracker Represent.LA. Silicon Beach is becoming a formidable southern counterpart to Silicon Valley.

While the LA startup scene appears to be blossoming, there remain a myriad of growing pains for companies like BuddyTruk, which launched their app this past August. Development, funding, and acquiring users remain the core roadblocks to success.

“The first two weeks we had two transactions, so it was like ‘ok, there’s a lot of work to do,’” said Jacobs.

Finding a way to get the app name recognized became paramount. Jacobs had to set aside time for “guerilla marketing” by passing out flyers on his old campus.

Things eventually began to turn around with the college move-in season, and the company was featured on TechCrunch and on KTLA 5 in LA. Still, the whiteboard behind Jacobs’s desk outlining the company’s goals for December – 1,500 users, 2,000 Twitter followers, 3,100 Facebook “likes” – highlights the importance and difficulty of simply making your app stand out.

Users are essential to venture capitalists looking to fund these companies in their early stages. For most startups, the game plan becomes: gain a following first, and worry about monetizing afterwards.

Wildly successful LA startups like Snapchat and Tinder understood the gravity of acquiring a large audience before monetizing. Snapchat, valued at $10 billion, only recently began experimenting with short advertisements.

Foley, the gregarious face of the startup, said the business received $175,000 in its opening round of investment, and is now trying to raise an additional half a million dollars. BuddyTruk also met with Target and Costco this month in an effort to provide their service to customers needing large items delivered.

From the outside, everything would appear to be coming up roses for the company: traction, a nice Santa Monica office, and room to grow.

But Foley understands how difficult it is to create a successful startup. The native of Austin, TX started four companies before BuddyTruk. Each one of them failed.

Rather than leaving him dejected, those disappointments galvanized the Pepperdine graduate even more when he was ready to tackle his next venture.

“Each time we ran a company in the past and it failed, I knew exactly why,” said Foley. “So this time around I was more confident than ever raising money and sticking by our mission statement.”

It’s an attitude that entrepreneurs must have to be successful in this industry. Failure is often synonymous with tech startups.

70 to 80 percent of startups fail to see a return on their projected return on investment, according to a study by Professor Shikhar Ghosh of Harvard Business School. And the numbers are even more dire for companies that issue projections and then coming up short of meeting them, with 95 percent falling through.

Blake Arnet realizes the high stakes nature of the startup world. His first company, CollegeHop, a social network to connect students with the “most fun and unique places around their area,” floundered.

“You fail a lot before you succeed,” said Arnet. “Building connections and a small company – the whole process was invaluable.”

The experience of starting his own tech company left an impression on the former UCLA basketball player, though. Arnet knew he wanted to get back into the startup world, and recently launched his latest idea.

His latest app, Castoff, allows users to anonymously receive votes and input on pictures from their friends. Arnet believes the idea is more efficient than sending a mass text message, and is perfect for someone trying to figure out what to wear out on the town.

Any residual pain from his experience with his first company has been mitigated by the allure of making Castoff a success.

“I’m very optimistic as a person and with the app,” said Arnet, sitting at the Literati Café on Wilshire, two days shy of his 25th birthday. “I think [Castoff is] a great app and if people get it in front of them, they’ll like it.”

Like Jacobs, he’s driven to make his startup work by any means necessary.

Arnet personally split the $20,000 needed to get the app off the ground with his longtime friend and co-founder, Adam Jacobson, and Jacobson’s father. He’s working as a private sports coach, Uber driver, and helping with his father’s construction company in Orange County to give him enough time to work on the app. Coffee shops on the West Side and working from home are Castoff’s office space until further funding.

Funding, along with acquiring users, remains the biggest hurdle. While the venture capital market is rich in LA, it still falls well short of Silicon Valley. A company starting with a well-known LA incubator like Amplify figures to raise about half as much as a company in Northern California.

The high failure rate of new apps, which have been personally monetized, only exacerbates the importance of finding angel investors.

“When you’ve bootstrapped a business where you’re not drawing a salary and depleting whatever savings you have, that’s one of the very difficult things to do,” said Toby Stuart, a professor at UC Berkeley’s Haas School of Business to the Wall Street Journal.

To take his company to the next level, Arnet is preparing to pitch Castoff to investors. His goal of $300,000 in seed money would mostly finance the marketing and front-end help necessary to bring Castoff to a larger audience.

Still, the hardest part of being a young entrepreneur can often be simply getting your foot in the door.

“Being first time entrepreneurs, that’s our biggest struggle right now,” said Arnet.

“If you’re a guy like Biz Stone [co-founder of Twitter] you get money ‘like that’ – you get $100 million.”

With the potential funding, Arnet hopes to expand Castoff’s reach to more college campuses, where anonymous apps like Yik-Yak have become increasingly popular.

And while Arnet knew a co-founder he was confident in starting his company with, for others it can be one of the more difficult and time consuming aspects of building a team.

The inspiration for Nick La Maina’s app, Tikr, stemmed from an overly excited friend.

“This girl kept posting on Facebook that her birthday was in 50 days, 49 days, 48 days,” said La Maina. “I was like ‘that’s so annoying, she should do this in a countdown app.’”

After researching and noticing the market for a social media app that would countdown to events was relatively barren, La Maina decided to pursue the idea head-on.

But for the 2013 graduate of USC’s Marshall School of Business, there was one main issue: he couldn’t find the right person to start with.

It took countless mixers, hours talking to friends and professors, and working connections to find a match. La Maina compared the experience to dating.

“It was really hard to find someone,” said La Maina. “It too me a year and three months,” to find a co-founder.

The moment was both exhilarating and a relief for La Maina, but there were many other issues to solve. For tech startups, each day is like playing Whac-a-Mole, where one problem pops up the moment another has been taken care of.

Development talent In Los Angeles is growing, but still trails Silicon Valley. Finding a developer for Tikr was a headache, with bids as high as $100,000 to design the app.

As a new company working on a tight budget, La Maina felt it was imperative to get Tikr launched and A/B tested as soon as possible, rather than building the most refined app. Ultimately, he was able to secure a design for under $10,000, and see Tikr featured among the Best New Apps on iPhone’s store.

The rush of growing their user base and trying to bring in additional seed funding makes the high-stress nature of startups worthwhile to La Maina. Like BuddyTruk, Tikr was recently featured on KTLA 5.

“I woke up and there we like 2,000 installs in one morning. It was an amazing feeling,” said La Maina.

La Maina views being an LA startup as an advantage because of its proximity to the entertainment industry. Tikr did a countdown promotion with the History Channel’s Vikings television show and is looking for similar deals.

The 23-year-old is now an associate professor at USC, helping students outline a plan for their own startup ideas. But despite the early success, La Maina is aware the tech startup world is a minefield, and knows the odds are against having the next billion-dollar sale.

“Overall, the app market right now is a really tough one to play in,” conceded La Maina. “People don’t use a lot of apps, they’re tired of downloading them, and to break into someone’s daily habits is a big ask.”

Like other young entrepreneurs looking to make their mark in LA’s startup scene, he knows it’ll take two things – “a lot of hard work and a little luck.”

Raising the age limit doesn’t make cents for the NBA

NBA commissioner Adam Silver wants to increase the NBA's age limit -- even though it seems to be financially unsound

NBA commissioner Adam Silver wants to increase the NBA’s age limit — even though it seems to be financially unsound

NBA commissioner Adam Silver recently reiterated his goal of raising the league’s draft eligibility from the age of 19 to 20 in the next collective bargaining agreement.

For several reasons, this doesn’t make economic sense for the NBA, and it escapes me why the commissioner would push for such a resolution.

The current rules force high-profile players to attend college for a minimum of one season — or in rare cases like Brandon Jennings, play in Europe for a year — before qualifying for the draft.

This has lead to an influx of talent for the NCAA that wasn’t seen before the age limit was put in place in 2006. Stars like Kevin Garnett, Kobe Bryant, and LeBron James were able to skip playing in college because NBA teams were willing to bet on their talent and pay them immediately.

The NBA age limit allows the NCAA to bolster its ratings with freshman phenoms like Andrew Wiggins

Proponents of the age limit will also point to notorious preps-to-pros flops like Kwame Brown as a reason athletes need to attend college to “grow” as people and players — while also arguing the incubation of talented players in college helps make them more marketable once they become professionals.

It’s flawed logic, even if it were true, because it results in the NBA propping up a direct competitor. ESPN scored their highest college basketball ratings in the network’s history last year, with 1.4 million viewers tuning in on average. Their ratings have increased six percent each of the past two seasons.

The NBA shouldn’t view this as a positive. Unlike in football, professional and college basketball are played on the same nights. They’re competing for the same viewers, and the NBA shouldn’t do anything to influence that finite market to watch a different product.

And yet, that’s what the NBA age limit does. Last year’s NCAA ratings increased because of a well documented collection of high school seniors like Jabari Parker and Andrew Wiggins going to college for one season. If NBA teams were allowed to draft them instead, there would have been much less incentive for basketball fans to tune in for random college games on ESPN during the year.

At the same time, the NBA saw its ratings slide five percent last season. The Finals rematch between the Spurs and Heat featured the most high profile American athlete, and ratings still fell one point.

NBA ratings dropped five percent last season -- and the Finals were no different

NBA ratings dropped five percent last season — and the Finals were no different

The age restriction runs counter-intuitive to what the league’s goals should be: to collect the greatest amount of talent, put out the best product, and give consumers every reason to watch professional basketball rather than college.

As we discussed in class, sporting events carry more cache to advertisers now because they are live, making it more likely their ads will be watched. The increase in college ratings is more money in the NCAA’s coffers, and the NBA would be best served having curious fans tune into their product to see how the young players will fare.

Sports are one of the last effective spots for TV advertisers to bet on

Sports are one of the last effective spots for TV advertisers to bet on

It would behove the NBA financially to consider removing their age restriction entirely, rather than increasing it.

Mergers & Acquisitions still in vogue

Allergan is the latest company to be bought in a banner year for M & As

Irvine-based Allergan is the latest company to be bought in a banner year for M & As

Mergers & Acquisitions in 2014 have reached their highest point since the turn of the century — the $1.5 trillion in M & As recorded this year is the most since 2000, according to financial information firm Thomson Reuters.

The theme continued this past Monday, with more than $100 billion in M & As accounted for between Allergan being bought out by Irish pharmaceutical company Actavis  and Halliburton acquiring oil company Baker Hughes.

For Allergan, the bio-tech company based in Irvine, the deal was especially sweet. The firm best known for making Botox was the target of a hostile takeover from hedge fund manager William Ackman and Valeant Pharmaceuticals for several months. Not only did Actavis pay more for Allergan — $66 billion, or $219 per share compared to Ackman/Valeant’s reported ceiling of $209 — but vowed to cut funding for research and development much less than the previous offer. Ackman still made out ok, though, since he had been accumulating shares since they were in $120s earlier this year. His 10 percent stake in Allergan saw $2.3 billion in paper gains this Monday.

Halliburton, on the other hand, was already the second biggest oil services company before buying Baker Hughes — which was the third largest. Despite a mixed reaction from shareholders so far, Halliburton believes the deal will lead to “cost synergies” of $2 billion per year and increase the company’s product line , according to Forbes.

Monday’s activity highlights how commonplace the practice has become. The Economist cautioned 20 years ago about the potential pitfalls of combining companies, and that was after a “mere” $210 billion had been registered by September, 1994.

The Economist worried M & As were too common -- 20 years ago

The Economist worried M & As were too common — 20 years ago

Critics of large M & As point to several potential issues. First, many workers often lose their jobs when companies merge. This was evident when Sprint fired thousands of employees when they were acquired by Japanese telecommunications firm Softbank last year. The deal hasn’t found a way to make the company more of a threat to AT&T and Verizon yet, with Sprint recently announcing 2,000 more people would be losing their jobs.

And in many cases, there are reservations about M & As creating conglomerates that are too powerful — leading to monopolies and oligopolies. The Halliburton – Baker Hughes connection will certainly draw scrutiny from regulators concerned about antitrust violations. Although the deal will not be formalized until next year, shareholders may already be wary — with the company’s shares falling two percent a week after the deal was announced.

This isn’t unique to Halliburton, though. In general, mergers aren’t well received by the shareholders of the company buying out another firm. However, for investors of the company being bought, the opposite is true, because they are normally being bought at a premium. Allergan was bought for a five percent markup of the current share price on Monday, after they had already skyrocketed since the beginning of the year.

Lastly, the tech industry has been a hotbed for buyouts of late, and the exorbitant prices companies are paying for startups has many thinking this is the second coming of Dot-Com Bubble. What makes these purchases especially tricky is that many times the companies being bought aren’t publicly traded, so deciding on a market value for the business is rather arbitrary. Facebook buying messaging platform WhatsApp for more than $19 billion raised eyebrows for its seemingly over-the-top price. And even though the deals are worth billions of dollars, they can seemingly happen on a whim. Mark Zuckerberg reportedly said he “must have” virtual reality tech company Oculus earlier this year, and closed the $2 billion deal so fast that several high ranking executives at Oculus didn’t even know it was in the works until they showed up for work and found out they had been bought.


NPR outlined some notable tech mergers from the past decade

NPR outlined some notable tech mergers from the past decade

While there are red flags to consider when companies merge, recent activity suggests it won’t be slowing down anytime soon.


Black Monday 1987

NY Times Front Page

NY Times Front Page

We’ve been looking at the financial crisis of 2008 and seen how it impacted several facets of the economy, including the stock market. It made me want to take a look back at the market crash of 1987,  known as “Black Monday,” which is the greatest single day collapse in market history.

On the morning of October 19th, 1987, the downturn initially started in Asia before sweeping to western markets. The Dow Jones, a leading index that measures 30 large American public companies, fell 508 points — nearly 23 percent in one day. This accounted for about $500 billion in losses. Every index was crushed, though, with the S&P 500 also diminishing by about 20 percent on the day. Chaos ensued. Nervous investors tried contacting their brokers to take their money out of the market, but many were unable to get through because of the high influx of calls.

The Dow shot down 508 points on Black Monday

The Dow shot down 508 points on Black Monday

The crash was extraordinarily improbable. Professor Henry T.C. Hu of the University of Texas calculated it was a “25 standard deviation event,” which meant  “if the stock market never took a holiday from the day the earth was formed, such a decline was still unlikely.”

What made the misery all the more glaring was the run Wall Street had been on. The Dow had recently peaked in August of ’87 at 2722 points, which was an increase of more than 40 percent on the year. More confusing was the lack of a news event — like the subprime mortgages in 2008 — that would seem to trigger such a drastic fall. The week prior, the market had seen a correction that was sharp, with the Dow dropping more than 3 percent on two different days, but it was relatively inconsequential compared to what happened on the 19th.

Computers were new trading instruments in 1987 -- and many blamed them for the crash

Computers were new trading instruments in 1987 — and many blamed them for making the crash worse

Many analysts pointed to the rise in computer trading as exacerbating the problem. Program trading was relatively new at the time, and algorithms that calculated when to sell securities were triggered by the decline in share prices — which lead to a bigger crash. Today, virtually every trade is made electronically, but in the video below you can see two analysts who were less than thrilled with the technological advances the market had seen.


Class favorite Michael Lewis, who was working for Solomon Brothers back then, talked about how selling futures contributed to the hysteria.

The damage was so severe that the idea of closing the market for a day or two to “cool off” was even floated. Thankfully that didn’t happen, and the Federal Reserve pumped money into financial institutions and urged lenders to continue as if everything was normal (this sounds familiar from class). The Fed wanted to maintain liquidity and buoy investor confidence, and to a large extent this worked. The markets recovered slightly over the last two months, and closed slightly up for the year.

Still, the aftershock was felt for some time, with Wall Street not recovering to its 1987 marks until 1989. In an effort to curb a high volume of panic trades in the future, circuit breakers were put in place to pause trading and give investors time to process information before trading. Now, the New York Stock Exchange stops if the Dow falls 350 points from the previous day, or 200 points in one hour.

Adidas is down for the count


Adidas is headed in the wrong direction

Adidas is headed in the wrong direction

In a small, rain-soaked town in northern Bavaria, a German company is trying to design athletic apparel and footwear that will appeal to the masses in America. And they’re failing miserably.

Adidas, the world’s second largest sportswear company in the world, has a problem: the American consumer doesn’t think they’re “cool.”

“At the moment, Nike is cool, very cool,” said Tammy Smulders, head of marketing consultancy at SCB Partners, to Reuters. “If you ask a 20-year-old, they are not going to pick Adidas right now.”

Part of this is due to the disconnect between their headquarters in Herzogenaurach, Germany, and the US market. Analysts and even the company itself have acknowledged the difficulty in recruiting top design and marketing talent to live in a German farm town with a population of less than 25,000 people.


Being based in Bavaria has left Adidas out of the loop with US consumers

Being based in Bavaria has left Adidas out of the loop with US consumers

Their products, while functionally sound, have recently lacked the style and marketing necessary to permeate the American market.

Nike, on the other hand, has been more willing to push the envelope. A recent illustration is their introduction of neon-yellow shoes for their athletes at the 2012 London games, a bright color scheme that has become a staple over the past two years.

The Swoosh has also introduced several well-received footwear innovations in recent years. Flywire, Hyperfuse, and Flyknit technologies, for example, have been hits with the US consumer because they are both stylish and practical.

“[Nike] understands the US consumer. Adidas does not,” said Matt Powell, head of Forbes’ Sneakernomics blog.

But Powell doesn’t believe the disparity between the companies is due to technological innovations, but rather their ability to market them.

“Adidas has a very credible technology in Boost [a new shock absorbing system],” said Powell. “They just have not exploited it here.”


Footwear expert Matt Powell believes Adidas has the tech to compete -- they're just not promoting it right

Footwear expert Matt Powell believes Adidas has the tech to compete — they’re just not promoting it right

It certainly hasn’t helped that the North American faces of Adidas have been trending downward.

After signing a 13-year, $185 million extension with Adidas in 2012, Chicago Bulls guard Derrick Rose has dealt with a myriad of leg injuries that have kept him off the court for nearly two full seasons. While his $40 million in signature sales ranks fourth overall among athlete-endorsed basketball sneakers, it’s difficult to make a shoe look good when the lead endorser is wearing a suit on the bench.

Adidas’ other top endorser in North America, Rockets center Dwight Howard, has faired even worse. His line only moved a paltry $5 million in product. Big men generally don’t sell shoes as well as guards to begin with, and Howard’s Q Score, which measures “the familiarity and appeal of celebrities,” has fallen to 13. The average is 16.

Between the location of the company, its inability to market fashionable products, and its pitchmen failing to resonate, it becomes clear why Adidas has lost ground in the States.

Conversely, The fact Nike’s lead endorser, LeBron James, rarely wore his signature shoe and still generated huge returns speaks to the company’s Teflon status. As long as the shoe design appeals to the consumer, they’re willing to look the other way. This speaks to the underlying divide between the companies – that consumers feel Nike inherently makes a better and more desirable product.

The numbers back this up. Combined, Nike and its largest subsidiary, Jordan Brand, account for 60 percent of all US footwear sales, ten times the market share of Adidas. The gap is also substantial in their apparel sales, with the Swoosh enjoying a 30 percent cushion.

Nike is crushing Adidas in US

Nike is crushing Adidas in US

And with Nike making inroads in Adidas’ home turf of Western Europe, the increasing divide between the world’s two biggest athletic companies has only become more glaring.

Nike’s nearly $28 billion in total sales for 2014 dwarfed their German rival’s most recent sales figures. In 2013, Adidas’ total sales were €14.49, equal to a little more than $18 billion. It represented a 2 percent drop from the year prior.

Adidas is headed in the wrong direction, and they’re looking for answers.

Where does Adidas go from here?

The Trefoil realizes it has to make its brand sexy again, both in America and internationally.

Adidas fears its headquarters in sleepy Bavaria has lead to being out-of-touch with the US market. To assuage this, they poached three of Nike’s top designers last month and pegged them to open a new design studio in Brooklyn this winter.

They’re also looking beyond athletes to help make an impact on the American market. Collaborations with hip-hop artists such as Big Sean, ASAP Rocky, and Snoop Dogg have been geared towards drawing the younger demographic back into the fold.

Adidas has also partnered with fashion designers Jeremy Scott and Raf Simmons in an effort to target the high-end casual shoe market, where products can run for several hundred dollars.

These moves point to a concerted effort from Adidas to reposition itself as a company that not only see itself as a sportswear brand, but a lifestyle brand.

Still, Adidas has a ways to go before catching Nike on this front, where the Swoosh has benefited from having artists turn up online wearing their performance and casual wear. In essence, celebrity is just as important as athlete product endorsement.

“[hip-hop artist] Wale wearing a pair of Durant’s is just as important as [Durant] wearing a pair Durant’s,” said Ian Stonebrook, writer for His weekly “Celebrity Sneaker Stalker” column routinely ranks as the most-viewed page on their website.

Signing Kanye West to a design deal may be the biggest indicator Adidas has caught on to this phenomenon. West had previously designed two popular shoes for Nike – the Air Yeezy – but was upset over his compensation.

Adidas hopes the coup will cut into Nike’s stranglehold on cool.

“[Kanye’s] influence on the market is unmatched…he’s ahead of LeBron” said Stonebrook. “This could be the biggest move since Jordan.”

Adidas is banking on Kanye West bringing some cache back

Adidas is banking on Kanye West bringing some cache back

And if it isn’t, and their marketing continues to be second-rate, Adidas could see a change in leadership. With shares of ADDYY down more than 30 percent on the year, investors have started to grumble about the performance of CEO Herbert Hainer.

Powell believes this is a necessary move for Adidas to truly become a competitor again in North America. “The US must become design and product center for the brand,” said Powell. “Current management does not see that.”

It’s become apparent the latest maneuvers from Adidas will bring change in one form or another – either in market share or in the boardroom.

Minimum Wage Worker Against Increase in Minimum Wage?

De La Cruz

David De La Cruz is against the increase

Five times a week he gets on the Metro bus and heads to work. The 30 minute ride from West Hollywood to Downtown LA isn’t all bad. It gives him time to read for school or listen to music, but there’s one major drawback.

“It stinks. Like, the bus literally stinks,” said David De La Cruz, when describing his trips to work.

The 19-year-old has come to deal with it, since he can’t afford any other way to get around town. No car, no motorcycle, no bike. And no Uber.

De La Cruz makes minimum wage as a cashier at Taco Bell, where he works between 30-40 hours each week. The increase in Metro fees from $1.50 to $1.75 (or from $75 to $100 for monthly passes) doesn’t seem life-altering, but when you’re on a tight budget like De La Cruz, every quarter matters.

“It isn’t much, but it adds up. When the bus driver told me I was like ‘ah, man!’” laughed De La Cruz.

His paychecks are spent each month on the basics: helping his older brother pay rent for their apartment, schoolbooks, and food. Finding a way to get by on $9 an hour is a grind, but he’s gotten used to it.

As a four-year-old, De La Cruz’s single mom brought their family to Los Angeles from Mexico. Even with his mom having to work several low-paying jobs to keep their heads above water, De La Cruz is certain it was the best move for the family long-term.

“Everyone says it all the time, but it really is the Land of Opportunity,” said De La Cruz when describing the United States.

De La Cruz is an English major at Cal State University, Northridge, and hopes to become a language arts teacher after he graduates. Having a Dream scholarship helps assuage his financial burden somewhat, but De La Cruz has to clock his hours each week at Taco Bell to make ends meet.

There are simultaneous initiatives in motion that aim to help people like David. While there is a ballot being circulated to raise it to $15 by 2017, Mayor Eric Garcetti’s proposal to raise minimum wage to $13.25 over the next three years has gained the most traction.

You would think if anyone would be in favor of Garcetti’s proposal to increase minimum wage in LA over the next three years, it would be De La Cruz, right?

“I’m not an economist or anything, but I really don’t think it’s a great move,” said De La Cruz. “For me it might help, but I think it would hurt just as many — or more –people than it helps.”

De La Cruz argued the customers at Taco Bell are dependent upon the prices being low, since many of them pay with their EBT cards. If Taco Bell had to pay its workers more, De La Cruz felt the prices would increase and the customers would suffer.

“And they would probably cut our hours, too!” said his co-worker Jessica as she walked by. (It was at this point I started to wonder if Taco Bell had really awesome employee benefits)

De La Cruz echoed the same sentiment, fearing a decrease in customers would lead to less hours for him and everyone else. For him, the fear of potentially losing his job outweighs the benefit of a potential increase in his hourly wage.

Critics of Garcetti’s plan have similar concerns. The LA Chamber of Commerce said on Tuesday an increase in minimum wage would “reduce, not increase the number of jobs” in the city.

Others claim if the mayor is successful it would push businesses out of LA and into neighboring cities.

Still, the reality is that for more than half of the fast food workers in America, the pay isn’t enough to get by. A joint study from UC Berkeley and the University of Illinois last year showed 52 percent of fast food workers were on government assistance, compared to 25 percent for the workforce as a whole.

“I could definitely use the extra couple bucks an hour – just to help with rent and gas,” said Walter, cashier at a local Jack in the Box who did not want to give his last name. “I hope [the increase in minimum wage] happens.”

Those in favor of the increase believe it is necessary to assist in paying for everyday items. While gas, rent and groceries have all seen price increases, wages have been static for several years.

Despite being against the Mayor’s plan, even De La Cruz had to admit he could see a benefit to an increased minimum wage. “It’d help me pay for all these bus rides,” said De La Cruz.



Las Vegas as Economic Indicator

Looking to Las Vegas for signs of economic recovery might not be such a bad idea. With the 2014 NFL season kicking off this weekend, it serves as a reminder that gambling is one of the more taboo economic indicators we can look at. Casinos have been commonly thought of as “recession proof,” but they have become much more susceptible to the business cycle. Bernard Baumohl noted in his book The Secrets of Economic Indicators: Hidden Clues to Future Economic Trends how true this was for Las Vegas during the recent economic malaise. “In the year before the recession, casinos on the Las Vegas Strip were raking in about $600 million each month from just gaming activity,” said Baumohl. “Those monthly revenues plummeted 25% during the economic downturn.” This makes sense, since it isn’t hard to see how gambling patterns can hint at the overall economy’s performance. When people are more confident they will have disposable income they won’t need to save incase of a rainy day, they’re more willing to blow it at a casino.


This article from Hannah Dreier of the AP last fall highlights how deadbeat gamblers becoming more willing to repay their outstanding debts is another sign things are turning around for Las Vegas casinos. Shockingly, the article notes “Las Vegas executives say people are especially likely to skip out on their gambling losses when times are hard.”


Las Vegas has followed the economic roller-coaster of the past few years, with tourism dropping from over 39 million visitors in 2007 to only 36 million in 2009. Sin City’s gaming revenue also plummeted during the same time frame, falling nearly 20 percent, according to the Las Vegas Convention and Visitors Authority. However, Las Vegas has returned to pre-2008 visitor numbers, with the city expected to cross the 40 million visitors threshold in 2014 for the first time in its history.


Giving people a place to gamble hasn’t been the only reason for the city’s comeback, though. Casinos have shifted their focus to attract customers through celebrity restaurants, fancy pool parties, and bringing in high end DJs to their nightclubs. “Las Vegas has moved away from being just a gambling town,” said Rob Oseland, president and COO of SLS Las Vegas told NBC news. “It’s about offering a broader array of products from luxury rooms to fine dining to entertainment for people who aren’t necessarily interested in gambling.”


Las Vegas is banking on the trend to continue upward, with new hotels popping up along the Strip. Oseland’s 1,600 room SLS Las Vegas opened up last month, and new hotels are expected in the coming years next to Circus Circus and the Wynn. It’s a welcome change to a city that has seen several big money casino projects abandoned following the economic downturn.


Lastly, investors have caught on to the recovery in Las Vegas as well. Wynn Resorts (WYNN) has seen its stock appreciate nearly 300 percent in the past five years, and the Las Vegas Sands Corp. (LVS) has seen its share price increase from the low teens to $63 dollars per share this week.