Part One: The Student Debt Crisis and How We Got Here

Pursuing a degree in higher education is often romanticized. The mentality has remained that a job is guaranteed as long as you sacrifice anything and everything for a bachelor’s degree, and ideally, a master’s degree or two. Of course, there are valid arguments for this, and for the most part, it’s true. Over time, all the financial strife will be well worth the wait, as education is an investment into the future.

But what happens when the investment doesn’t pay off? It is not uncommon for students to have a period of unemployment post-graduation, which results in ignoring those looming student loans. In addition to this, we all know the job market is still on shaky ground, and not all of us will find something that actually pays us enough to survive.

According to Student Loan Hero, the total U.S. student loan debt is up to $1.2 trillion, with 40 million borrowers, and $29,000 being the average balance. Why have we allowed this to become our reality? Despite a generous financial aid package, even I fit into this statistic. To sleep at night, I let myself believe, “You’re in USC Annenberg, and you’ll be fine.”

Unfortunately, this is the mentality many students have. A respected degree from a prestigious university helps, but nothing is guaranteed. Student loan debt is often blamed on private universities, but cuts in state budgets have led to a rise in tuition at public universities as well. Additionally, private universities sometimes have more scholarships than public universities can afford to offer. It is difficult to argue that private establishments are not the worst offender, because of course they are. However, it is a case-by-case basis (for example, the UC’s had little to no scholarships available to me, therefore I would have a similar debt situation graduating from UCLA.)

At the end of the day, it is better to have a degree, but the federal government’s over eagerness to give out student loans has led to a serious problem. According to Business Insider, Bill Ackman is convinced the outstanding balance in student debt could trigger the next market crash. Ackman claims that the government has loaned out too much money, which is true. “Student-loan delinquencies, in red, have risen as late payments in other types of payments have dropped,” according to a study by the Federal Reserve Bank of New York. The student loan debt crisis is being compared to the housing market crash. Wall Street kept saying “the housing market is stable, there’s nothing to worry about.” Throwback to 2008 when our country faced the worst recession since the Great Depression. Ringing any bells? We all know history repeats itself, so why is it so hard to connect the dots, and realize predatory lending back then, isn’t so different from our current situation?

To clarify, it is a tad exaggerated to say the student loan debt crisis is a carbon copy of the housing market bubble. However, the issue is the casual attitude towards loans, credit cards, and OPM in general. Since the 1970’s, the convenience of credit cards and the mentality of “get it now, pay later” has transformed our economy. This transformation was crucial since consumers were encouraged to spend, which drove the demand up, which all in all boosted the economy. Today, without credit cards and the ability to borrow money, our economy would be at a stand still. Nonetheless, student loans are another story. Especially when student loan knowledge is lacking. According to a survey by intuition, two-thirds of millennials who received loans felt they did not have enough information about their loans. 45% of students are not receiving repayment counseling, 47% do not know the interest rates on their loans, and 75% have not been offered an income-driven repayment plan. In summary, college students do not know what the heck is going on. It is easy to point the finger at the students. Obviously, we don’t care about our financial future if the tiny, fine print isn’t read word for word right? Wrong! Student loans are perceived to be far more confusing than they actually are, the repayment process feels much more difficult than necessary. We all know young people are a bit naive, so why would the government or private lenders willingly keep us dazed and confused? It’s like they want us to default.

Additionally, no one is doing us any favors by never capping the amount of money we can borrow. There are measures taken to ensure that students don’t take advantage, but there are too many loopholes. Students are usually given a six-month grace period post graduation. What happens when graduate school is the next step? Paying back undergraduate loans are deferred, the interest goes up, and a few years later, you may be looking at paying off loans for 30 plus years. In some cases, the rest of your life.

Take Liz Kelley, an extreme example of how allowing students to borrow to their heart’s desire is risky business. In the New York Times article “Student Debt in America: Lend With a Smile, Collect With a Fist,” Ms. Kelley admits that she “made her own choices.” Ms. Kelley has $410,000 in debt due to a number of circumstances. Long story short, Ms. Kelley had financial factors such as her autoimmune disease, childcare, divorce, foreclosure, and much more that kept delaying her from completing her education. By the time she finished undergraduate school and eventually graduate school, the interest rates destroyed her ability to pay all this back anytime soon. This story goes to show the “deep contradictions in the federal governments approach to student loans.” There are so many students that are still handed out loans, despite a shaky history of repaying loans in the past. When it is time to pay back the loans, forgiveness is hard to come buy. This is setting students up for failure, and most importantly, the decline of our economy.

The argument is made that those with the most debt have the highest degree, and therefore have the means to pay back loans. In many instances, this holds true. However, according to William Elliot, director of the School of Social Welfare at the University of Kansas, ” ‘even people with only $5,000 to 10,000 [in loan] are still going delinquent.’ ” The Federal Reserve study reveals that the 90-day student delinquency rate has raised to 11.3%. The White House Study attributes this to drop outs or people with lower degrees (who therefore have low wage jobs,) but that doesn’t mean delinquency only applies to a certain group of people. The fact of the matter is delinquency is rising, and the amount of student debt people under the age of 35 must pay back is decreasing economic growth due to lack of willingness to spend.

Part Two: How Student Loan Debt is (Potentially) Crippling the Economy

Millennials are the future of the economy, and yet most are reluctant to be ” ‘big spenders’ .” According to the Los Angeles Times, millennial’s are cautious as ” ‘children of the Great Recession.’ ” However, there is much more complexity to this issue than millennials simply being too frugal (in comparison to past generations.) Student debt is a major deterrent from investing in the future. The graph below (left) shows how people aged 35 and under have much higher student debt rates than past generations. Therefore, buying a house, marriage, child rearing, even buying a car is all postponed. Many students resort to living with their parents, not because millennials are too “coddled” (I promise you no one willingly lives with their parents post grad,) but because ” ‘student loan debt, more than any other kind, contributes to people having less favorable views on their own financial well-being.‘ ”

 

The lack of confidence in spending has lead to the slowing of our GDP and overall economic growth. As young people put off buying homes, the housing market slows down. Those who need to sell their homes are unable to, because the young, hip couples are crammed in their minuscule, overpriced apartment. According to a survey conducted by the National Association of Realtors and American Student Assistance, “seventy-one percent of those surveyed said their student loan debt is delaying them from buying a home. More than half said they expect that delay to last longer than five years. ” Additionally, one third of current homeowners revealed that they cannot afford to sell their home and buy another one because of student debt. Something else to keep in mind is that not being able to pay back student debt negatively effects your credit score, and your credit score effects every crucial financial decision in life, such as buying a home. This is probably another reason why the housing market has struggled recently.

(Note: As of May 2016, there was indeed a boost in the housing market. However, this survey was taken in June 2016 and indicates that the housing market is still not as strong as it should be. Everything else in the economy? Sluggish in comparison.)

Waiting to have children till later in life is not the end of the world, but if this continues for too long, our economic future could adversely affected by not having enough young people in the next generation (take Japan or Germany as great examples.) Not saving for retirement could also cause problems down the road. All in all, everything is being affected by student debt, more than economists and the elitist Wall Street “geniuses” would like to admit

Wall Street believes that student debt is a ” ‘fiscal headache rather than a financial risk,’ “ since many loans are backed up by the federal government. Most are convinced that due to this, there is a low chance of another financial crisis if defaults become rampant. However, if the government ends up needing to bailout student loan debt, the $1.2 trillion necessary to do so will halt economic growth, and raise taxes.

The hesitance to refer to the student loan debt issue as “crisis” is the wrong action to take. Why wait for things to get worse when there are ways to fix the problem now? Senator Elizabeth Warren and Attorney General Kamala Harris have made the effort to find solutions, but no one has taken them seriously. Decreasing government loans is not the right move either, as the demand for student loans would stay the same, and private lenders would swoop in and take further advantage of students. Some might say blaming student loan debt for the slow economic growth is pushing it, but why discredit the statistics that are right in front of us? Why ignore the millennials, who are arguably the most important group of people for the future of the economy? It is only a matter of time before this problem thoroughly unravels, and all we will be able to do is say, “I told you so.”

 

 

 

 

 

 

 

 

 

 

Residential investment currently accounts for about 5% of the United States gross domestic product. Considering the US GDP stands at just under 18 trillion dollars, housing is clearly a significant portion of American spending. As a major driver of economic growth, housing indicates the wealth of the people, but since the 2008 recession, it has taken a dip, and it is important to examine why. At 35%, the largest generational group of buyers consists of millennials between the ages of 18 and 34, but since the 1980s, the probability of this age group owning a home has gone from almost 17% to just under 14%. The question now is whether this is a permanent change or if it is just a fluke due to the economic crisis.

In the early 2000s, credit was very cheap, and this led to banks loaning money to people who probably should not have been given that responsibility. They took this money and bought up homes because they were known as a stable, surefire investment. Eventually, these people struggled to pay back their loans, and the bubble burst, causing banks to suddenly tighten up and be wary of loaning money. This does not bode well for average young adults because they do not have a long financial history to back up their ability to pay off loans. Right now, young adults are also being hit with a plethora of other problems, such as student debt and a flailing job market. The average college graduate in 2015 has to pay back over $35,000, which is more than double the amount borrowers had to pay back only 20 years ago even when adjusted for inflation. What is worse is that 44% of college graduates in their 20s are stuck in low-wage, dead-end jobs. With such shallow income-growth trajectories, millennials are more focused on paying current bills and making rent every month than saving for their future home.

 

This goes against the fundamental “American Dream,” which is a traditional idea consisting of three entities: job, family, and home. The hope is that with hard work and determination, one can acquire a high-paying job and eventually purchase a home for his or her family. As a result, young Americans have set life goals around hitting milestones to put them on this path, but as illustrated above, this “dream” is increasingly becoming out of reach.

The share of young homeowners has fallen steadily for the last thirty years, which means many millennials have taken up a new, or perhaps old, residence: living with their parents. For the first time in 130 years, the most common living arrangement among millennials is sharing a home with their parents, and over one-third of this generation is choosing to do so. Much of this can be blamed on the recession. Young adults do not have the money for a down payment or the continuous stream of bills stemming from mortgage and upkeep. Additionally, the housing market is not making this any easier with its increasing market prices and decreasing number of available affordable homes. Young people say they will move out the day they can afford it, but that day is looking depressingly out of reach.

For some, this situation is old news. Those who grew up in poor neighborhoods have always been less likely to be motivated to leave their hometown. These young adults probably will not go too far for college, and they are stuck doing low-wage jobs that, even in the long run, will not provide enough income for them to save and eventually spend on their own house. Those in this group are more likely to live with their parents and may be providing for the family just to make ends meet. Their situation is dire, and they are bound to a place that cannot allow them to grow and prosper.

On the other hand, take a look at those who have the greatest chance of being able to afford their own home. These include high-achievers who tend to come from rich backgrounds, move away for college, and settle in popular cities with a concentration of jobs like San Francisco or New York. Compared to the first group, this group has drastically more resources and therefore more freedom to set their own priorities. However, they are still not buying homes, but this could actually signal a cultural shift and a delaying of the whole process. There are many rational reasons why a young person of decent money would want to wait to splurge on a home, and it is possible this is due to a change in mindset.

For one, the rent in the cities mentioned above has reached astronomical, and for many, unaffordable levels. In both New York and San Francisco, the average square footage of a one-bedroom apartment is 750 square feet. This is a comfortable size for at most two people. The median rent per month for this apartment is $2,200 in New York and an outrageous $3,600 in San Francisco. This means that per year, those who choose to live in these cities are committing between $26,400 and $43,200 to solely rent. For many, moving to these cities is not so much a choice as it is the best way to find a career in their desired industry. New York is a financial district, and San Francisco is the land of the start-ups. There are definitely more job opportunities, but as a location gains popularity, it also gets more expensive. This leaves little room for young adults to save a large enough sum for their own property.

Millennials also have this newfound desire for flexibility, and homeownership does not allow that. Many graduates have the mindset that they will take a job for at maximum a few years and then move onto something else. In fact, it is completely normal for millennials to switch jobs an average of four times in their first decade out of college, and more often than not, this career change also results in a location change. This demands the ability to be mobile, and renting means that once the contract is up, renters can move out without having to worry about finding someone else to take their place. Selling a house requires a whole other set of considerations, such as possible remodeling and hiring an agent in order to get the best price. From this point of view, renting property simply provides conveniences that buying does not.

Consider a newly married couple where the wife works at a large insurance company and the husband is a doctor. This couple has moved three times during their time together: once from college to medical school, again for medical school to residency, and one more time for the husband’s first real job. Throughout the years, the couple has accumulated a healthy sum in comparison to others in their age group, but because of their tendency to hop from place to place, they do not see the point in buying a house. Selling after just a few years does not provide much profit, even in high-income areas, and moving without selling the house does not make much sense. Years ago, it was uncommon for people to move across the country multiple times, so there was not much risk involved when buying a house. For young people nowadays, this is rather commonplace, so they have a totally different mindset than their parents did. Norms are changing, and that means cultural decision-making is changing as well.

On top of this, there is currently a shortage of starter homes, so young people have a very limited set of options. Housing starts went way down after 2008, and it is slow going on its journey back to pre-crisis levels. Instead, new construction is now being focused on the luxury side, so homes that used to be entry-level are now priced above what young adults can pay. Because of increasing expectations, the new supply is being adjusted to fit the demand. Getting fancier also means getting more expensive, which only prices out the people who actually want to purchase their first home. This is clearly a vicious cycle.

Money is a driving factor in most decisions. It hides behind other reasoning and provides concrete limits, but maybe it should not be the first thing people blame for the decline in homeownership. Perhaps it is simply a change in the mindset and priorities of millennials that has veered tradition off course.

Product sharing is an idea that can only exist in modern age companies because of not only technology but also the cultural shift mentioned above. One example is Zipcar. It boasts over 700,000 members, which makes it the largest car-sharing company in the world. Members are able to borrow these cars from various locations, and Zipcar covers gas and insurance. These conveniences are highly appealing to many people because this eliminates two large worries associated with owning a car. There is also no need to search and pay for long-term parking, which can reach exorbitant levels in big cities. If people do not want to worry about parking at all, they can turn to Uber or Lyft and simply pay for the ride itself. This “sharing” business model has been repeated across industries, including Airbnb for housing, Rent the Runway for clothing, and Spinlister for sports equipment. The list goes on. Sharing companies are now commonplace, and they are born out of a newfound prioritization of convenience and flexibility.

Regardless of the cause, the decline of homeownership has very real implications, and it is telling about the health of the economy. High levels of homeownership signal a certain confidence among buyers. They believe they can make good on payments, and this means they are earning a comfortable wage. Typically, a family’s largest purchase is their home, and home purchasing decisions are telling of the nation’s economic development. Families exhibit their buying power through what home they choose to purchase, but if they no longer have the desire to buy a home, this affects other industries as well. For example, urban planners who map out entire neighborhoods of homes suddenly have less demand, and construction workers have fewer jobs as a result. There are also real estate agents and others who have fewer sales to make, and the list goes on. Changes in the housing market no doubt affect the greater economy, which is why the decline in homeownership is so alarming.

At least at this stage in their lives, millennials simply place less of an emphasis on actually owning items than past generations have, and this translates to a decrease in young adult homeownership. However, this does not mean that young adults do not hope to one day own their own homes. Among millennials, 65.3% still associate homeownership with the American dream, and more than half of all millennials expect to buy a home within the next five years(USAToday). Their plans may be delayed, but there is definitely still a checkbox next to homeownership that they hope to tick off within their near future. The American dream lives on; the millennials just need more time to get there.

“I miss the price of my hair service in Beijing,” said Yuyuhou Li, a graduate student from the University of Southern California studying Strategic Public Relations, after her recent pricy experience in Korean Town. The total cost of having her hair dyed was “about $280 including tips.” In other words, having her hair dyed once in Los Angeles equals to three hair dyeing appointments at a similar salon in Beijing.

No wonder it seems that living in America is quite expensive, at least in most Chinese people’s eyes. It is well acknowledged that China is rising at an impressive pace. From ranking second in the world in nominal GDP to pulling itself from poverty at least in its southern coast, to the “Made-in-China” label being used worldwide, to the grand hosting of the Beijing Olympic Games. Even the great Uncle Sam started to fear the rising eastern star, going so far as to come up with the China Threat Theory.

Considering all of this, can we safely draw a conclusion that living in China is more appealing than living in the States, especially for a young and upcoming generation? The following aspects might give you some insight.

Living Cost & Purchasing Power Parity (PPP)

Pick up an apple from a Walmart in Shenzhen, one of the most developed coastal cities in China and read the price tag carefully. Those lovely red apples are sold at ¥4.98 （=$0.75）per 500g. Now let’s move the scene to a Walmart in Los Angeles, where a large price tag reading $2.47/lb ($2.24 per 500g) sits on top of those made-in-America apples.

It is not uncommon to see an almost triple price differential between consumer products made in the most developed cities in China and those produced in America. A box of 12 cage-free eggs are sold at ¥12.9（=$1.93）in the Shenzhen Walmart, while eggs in the LA Walmart are more than double that price. Not only groceries, but also basic necessities such as toilet paper and laundry detergent suffer from the huge price gap. For example, Tide detergents of the same size in both China and the US do not break the spell of the three-times price difference.

Both Shenzhen and Los Angeles are coastal cities with a high volume of port trade and technology-intensive industries. However, according to Numbeo’s comparison, people would need around ¥35,143.95 ($5,266.80) in Los Angeles to maintain the same standard of life that they can have with ¥21,000.00 ($3123.60) in Shenzhen (assuming you rent in both cities). As the chart below shows, Shenzhen’s living cost is higher than Beijing’s, but still falls way behind Los Angeles’.

 

(Source: Numbeo)

In terms of the price gap among different countries, Purchasing Power Parity (PPP) plays a vital role in evaluating the living cost in the respective country.

PPP is arguably more useful than nominal GDP when assessing a nation’s domestic market because PPP takes into account the relative cost of local goods, services and inflation rates of the country, rather than using international market exchange rates which may distort the real differences in per capita income.

According to the International Business Times, China’s economy surpassed the U.S. in purchasing power for the first time in 2014 and continued to rank in first place in 2015.

With the same amount of money, you can enjoy more goods and services in China than in the United States. For example, Yuyuhou Li can buy the same detergent and enjoy similar hair dyeing services in both Shenzhen and Los Angeles; but in China, where labor and rent are lower, dyeing her hair and purchasing basic daily necessities cost much less than she pays in the U.S.

This round, China wins America by a huge margin.

Per Capita Personal Income

“If I am making money in dollars, living in the United States won’t be that expensive,” said Yutian, Li, a graduate student studying in USC with a major in computer science. There’s no doubt that computer science is one of the most profitable jobs in the United States. But earning dollars and spending yuan is very tempting in the fact that the exchange rate between yuan and dollar is more than 6:1.

“You earn a lot less money in China, but you can save more,” said Robert Little, who used to teach English at the University of International Business and Economics in Beijing. “America is much more expensive to live in because cost of living is much higher,” he added.

The National Bureau of Statistics of China reveals that per capita personal income in Shenzhen was 73492 yuan (=11010.45USD) in 2014. Also, the latest data revealed by the Shenzhen survey group of the National Statistics Bureau shows that the average disposable income of Shenzhen residents was 30524 yuan (=6,868 USD) in 2015. The latest data shows that per capita income in Los Angeles County is 42,042 USD, almost 4 times higher than in Shenzhen.

If we divide the items sold at the Walmart in both cities by the per capita personal, Interestingly, the percentages are so similar.

	Los Angeles	Shenzhen
Apple	0.006%	0.007%
Egg	0.01%	0.018%
Toilet paper	0.03%	0.03%
Tide detergent	0.02%	0.03%
Hair dyeing	0.67%	0.82%

But what causes Los Angeles’ cost of living to run ahead of Shenzhen’s? Although the overheated property market in China has driven the prices up and up, rent prices in Shenzhen are 50.93% lower than in Los Angeles. “My living cost per month is about $3,000,” said Jake Davidson, a senior from Los Angeles studying accounting at USC.  According to Jake, he has to pay $1600, almost half of his living cost, for his rent. In that case, people living in major cities in the United States such as Los Angeles and New York actually suffer more renting pressure.

However, Shenzhen’s hair dyeing services are at a higher percentage than Los Angeles’, which meets a current trend of more expensive service industry in China’s big cities. 

Opportunity Matters   

“I prefer to work in the United States,” said Caixin Yang, a sophomore who comes from Chongqing City and now studies economics in America. For her, the United States has more advanced and mature financial systems and markets. “China is under transformation and everything is in a mess,” she said.

The same answer goes with Yuyuhou Li who thinks highly of a  well-established public relations career path in America. “Although the living cost is really high here especially in LA, working in the United States represents a more stable life,” she added.

In spite of skyrocketing living cost especially the rent in the United States, Chinese students are rushing to pursue education in the United States, in the hopes of receiving better a education and a better life in the future. The most recent figures, from the 2014-15 academic year, show that 304,040 international students in the US hailed from China – far more than from any other country.

An estimated number of 2.64 million Chinese have moved overseas to study since 1978, but only 272,900 students returned to China in 2012, according to the Ministry of Education. A 2014 report by Oak Ridge Institute shows that 85 percent of the 4,121 Chinese students who received doctorates in science and engineering from American universities in 2006 were still in the U.S. five years later. The stay rate had been 98 percent a decade earlier, which actually marks an improvement. This situation results in a massive loss of talent for China.

What entices Chinese students who receive education in the United States to choose to earn a life in a foreign country even though China has become the second largest economy? Free work culture, decent income and better welfare treatment could be the answer.

“High living cost is not something I value if I choose to stay in the United States or in China,” said Yiling Jiang, 23, studying communication management at USC. He values personal development, opportunities, lifestyle, family, and friends when judging which country is more appealing. Not only Yiling, but all of the interviewees agreed that the U.S. living cost is high but not a huge problem. It is the bureaucratic working ethics, complicated relationship (guanxi) and unfair career treatment that decrease the charm of coming back to China.

In addition, as smog worsens, China’s most well-educated have begun fleeing the country. Caixin Yang also mentioned her concern in her interview about the long-lasting severe pollution in some Chinese metropolitan cities such as Beijing, the Capital of China.

Faced with the army of ambitious Chinese up-and-coming professionals, are Americans worried? Yes, they are. Despite current slowing growth rate, plummeting stock markets and a variety of economic challenges that China is facing, Americans are still concerned about economic threats posed by China. The loss of jobs is one of the top three problems that are rated as a very serious problem by approximately sixty percent of the American public, according to a survey in 2015. The other two concerns are the amount of U.S. debt held by Beijing and cyberattacks from China.

At the same time, still, a number of Chinese students who pursue degrees in America prefer to go back to China. “China has a lot more potential in development and I am willing to contribute myself in this course,” said Yutian Li.

Yutian admitted that current American life is more attractive in terms of advanced education and systematic career training, but in the future, living in China will be more appealing to him as China’s is speeding up in making itself better.

In light of a rising China, which country is more appealing? There is no definite answer. Living costs are not scary. Opportunity matters most.

Finnish-French Marketta Fourmeaux accomplished her dream of having her own winery in California. What else than a dream is needed to make a winery successful?

 

 

An oddball. When Marketta Fourmeaux moved to Napa Valley, California, in 1988, she heard she is an oddball. That was probably a nice way to put it. A blond in her mid-thirties, a mother of two, coming from France, born in Finland, said she wanted to buy a vineyard to make her own wine in California.

”Some people would have rather talked to my male dog than me!” Fourmeaux says and laughs. ”There were not many foreign winemakers nor female winemakers in California back then.”

Now, 30 years later, Marketta Fourmeaux is the only Finnish female wine-maker of Napa but no longer an oddball. California is a growing wine area attracting international investors. The U.S. is both consuming and exporting more and more wine – situation totally opposite to that of old wine empire France.

Fourmeaux has created two wine brands in California: Château Potelle and Marketta Winery, and now people pay close attention to what she says. She is a board member of The Wine Institute, the largest advocacy and public policy association for California wine, and the ex-president of the Mount Veeder Appellation Council.

She came to the U.S. well prepared.

 

Fourmeaux has a master’s degree in economics from Finland and a diploma in enology – the science of wine and viticulture– from France.

In 1976, one single happening in Paris changed Fourmeaux’s life and that same happening shook the world of wine. The Judgement of Paris, a prestigious blind tasting wine competition, rated California Chardonneys and Cabernet Sauvignons over French comparisons.

This was devastating news in France. Fourmeaux was then married to a Frenchman and evaluated wines for the honorable ”Institut des Appellations d’Origine”, the core of the qualifications of French wines.

A group of French wine producers asked her to travel to California to find out what is happening in its’ vineyards. Years earlier she had been an exchange student in California and her English was fluent. Fourmeaux agreed to travel to Napa. Later she sent a telegram home. It said: ”Looks good. We’ll stay.”

 

Wine is not an easy business. Making a vine grow is a basic form of agriculture, but farming vine to produce wine is much more complicated than farming vine to sell grapes or raisins. The quality of soil, the amount of rain and sun as well as the temperature all play a role in setting the taste and the quality of the final product. It is impossible to control nature. Fourmeaux says that the draught in California has not yet affected Napa Valley’s wine production but she is afraid of what the future brings. If northern California gets dryer, both the volume and the quality of its’ wine may decrease.

Now California produces 90 percent of the wine made in the U.S. The production, consumption and exports of Californian wines have all steadily grown during the time Fourmeaux has been here.

When she came much of the wine making was in the hands of big companies producing industrial bulk wine.

The prohibition law of the 1920s and 1930s had a long lasting effect on the wine culture of the U.S. It swept away many old vineyards, and later quality vines were replaced by lower-quality vines that grew thicker-skinned grapes, which could be more easily transported.

Much of the knowledge of artisanal winemaking was lost.

When Fourmeau bought the 273-acre estate Mount Vedeer in Napa Valley she planted new vines  – Cabernet Sauvignon, Zinfandel, Syrah, Chardonnay and Sauvignon Blanc.

Americans ”new nothing about wine”, says Fourmeaux. The food culture and viticulture ”were not sophisticated in the 80s”, she says, but there was a reason for her to stay in California.

”I could have never became a winemaker in France. Here the oldest vineyards are run by maybe fifth generation of the same family. In France, it is the 15th generation. Foreigners are not accepted or taken seriously as winemakers in France.”

 

People doubted her in California too, but Fourmeaux says that the U.S. legislation made it easy to start a business and then proof that she can make good wine.

”Having a vineyard and winery in France means endless fighting with bureaucracy. Here I was able to concentrate immediately on developing the vineyard and the business.”

Fourmeaux wishes she could say that quality of wine means everything in sales but that is not true. The brand means nearly everything. Newcomer has to market aggressively.

”The most expensive wines of the world are not necessarily the best wines,” Formeaux says. The most wanted wines are the ones that have a name and fame.

Fourmeaux’s Mount Vedeer produced and sold around 300 000 bottles a year. It was a small, independent winery that had clients – restaurants, wine dealers and direct buyers – who had learnt to know the winemaker and appreciated her talent and brand. They were not looking for big volumes or a cheap price.

This kind of production is very vulnerable in economic turmoils.

The volume of the wine production of the U.S. has grown in past ten years from 35 million gallons to 117 million gallons. At the same time, the revenues to wineries grew from from $196 million to $1,494 million. There was a drop of one million dollars between the years 2009 and 2010, after the financial crisis of 2008.

”Premium wine is a luxury product. Many of my clients have big wine cellars. After the market crash they stopped buying new wines and started drinking the ones they already had in their cellars,” says Fourmeaux.

”I know many small winery owners who have been forced to quit because they haven’t had capital to overcome bad years.”

 

”I could have never became a winemaker in France. Here the oldest vineyards are run by maybe fifth generation of the same family. In France, it is the 15th generation. Foreigners are not accepted or taken seriously as winemakers in France.”

Fourmaux was forced to give up the Mount Vedeer estete and Château Potelle brand when she divorced. She now buys grapes from vineyards she has helped during her years in California and gets to choose the ones she wants. She gets a small amount from her own backyard plot of 100 acres. She matures and blends her current wine called Marketta in downtown Napa.

Marketta Winery produces only about 100 boxes of wine per year and sells them to two restaurants and loyal old customers. Earlier her wines were exported to Europe. Today Fourmeaux prefers to keep her business small although she knows that there are potential markets.

The European Union’s 28 member countries are the largest export market for California wine. Last year they accounted for $518 million and 35 percent of the exports. Canada is the second largest export market with value of $487 million. Following eight export areas are Japan ($88 million), China ($71 million), Hong Kong ($69 million), Mexico($24 million), South Korea  ($22.2 million), Nigeria ($21.9 million), Vietnam ($20 million) and Singapore ($16 million).

 

 

”Cheap dollar helped the exports for many years”, says Fourmeaux.

With weakening Euro, exports to Europe are down slightly. The Wine Institute of California is not expecting the situation to get any better in the near future.

The UK however, is seen as a more promising market. The sales of wines at low prices are decreasing in the UK but the sales of wines costing $15 or more increased last year by 30 percent.

In Japan, the situation is similar to the UK. The volume of the exports to Japan is decreasing because less and less bulk wine is shipped to Japan but at the same time Japanese show more interest in premium California wine.

Since 2011, the value of wine exports to Asia has doubled, and the future looks bright.

Even though the economy of China is currently slowing down and California wine exports to China and Hong Kong decreased last year. “Asia’s emerging wine markets remained buoyant in 2014 despite the negative impact of China’s ongoing austerity campaign”, reports The Wine Institute. ”However the long-term outlook for these key markets remains very promising.”

Wine industry lobbied strongly for the Trans-Pacific Trade Agreement and is pleased with the result so far. Wine trade will remain under special regulation but many trade barriers are to be eliminated.

 

If Marketta Fourmeaux was now to advice a young, enthusiastic winemaker on where to start her own winery, she would not recommend California.

”The land is so expensive. One acre of vine costs 250,000 dollars or even more.”

California attires affluent investors, and in Marketta Fourmeaux’s opinion some of them come here out of vanity. ”They want to make themselves nobles by buying a vineyard.”

California still has many advantages. The climate is ideal, and it is easy to get cheap work force from Mexico.

The country’s wine consumption is growing. The U.S. is now number two in wine consumption in the world and will likely bypass France soon. In per capita consumption, the U.S. is only the 23rd in the world when France holds the second place – after tiny Luxemburg. There should be plenty of room to sell more and more wine to the Americans.

However, Marketta Fourmeaux would advise a new winemaker to start in South America – or maybe in India which is an emerging wine area.

Chinese drink more and more Western style wine, and the climate is good for growing grapes in many parts of the huge country. China is already a huge producer of raisins. But China does not welcome foreign entrepreneurs in its’ agriculture.

France and Italy have long been the largest wine producers of the world. These old world countries are slowly losing their positions. The traditional, hierarchical, male-dominated wine industry is not appealing to young consumers nor innovative entrepreneurs.

Fourmeaux thinks this could actually open paths for new winemakers in lesser-known wine areas of France.

Marketta Fourmeaux is sure that one does not need to be an economist to become a successful wine producer. One needs to know wine and be ready to work hard.

Why pay exuberant prices for goods and services when you can rent it more cheaply from a stranger online? That is the principle behind a range of online services that make it possible for people to share accommodation, household appliances, cars, bikes and other items, connecting owners of underused assets with others who are willing to pay for them. A growing number of businesses such as Uber, where people use their car to provide a taxi service to paying passengers, or Airbnb which lets people rent out their spare rooms, act as matchmakers, allocating resources to where they are needed and taking a small percentage in profits in return. 

Such peer-to-peer rental business is beneficial for several reasons. Owners make money from underused assets. Airbnb says hosts in San Francisco who rent out their homes average a profit of $440 (after rent) and some neighborhoods snagging upwards of $1900 a month. Car owners who rent their vehicles to others using RelayRides make an average of $250 a month; some make more than $1,000. Borrowers, meanwhile, benefit from the convenience and pay less than they would if they bought the item themselves, or turned to a traditional provider such as a hotel or car-hire firm. And there are environmental benefits, too: renting a car when you need it, rather than owning one, means fewer cars are required and fewer resources must be devoted to making them.

The internet plays a vital role in this business, it makes it cheaper and easier than ever to provide accurate supply and demand information. Smart phones with global tracking services can find a nearby room to rent or car to borrow. Online social networks and review systems help develop trust; internet payment systems can handle the billing. All this lets millions of total strangers rent things to each other. The result is known variously as “collaborative consumption”, the “collaborative economy”, “peer economy”, “access economy” or “sharing economy”.

The model of the sharing economy works for items that are expensive to buy and are widely owned by people who do not make full use of them. Bedrooms and cars are obvious examples but you can also rent fields in Australia, washing machines in France and camping spots in Sweden. As proponents of the sharing economy likes to put it, access trumps ownership.

How Did We Get Here and Why Now?

The world is at a turning point. Globally, economies are strained as companies and governments are seeking to “do more with less”. Natural resources are no longer cheap and plentiful and some are at the risk of exhaustion. The urbanization of populations continues to rise, and more old people are ageing while young people, such as the Millennials also known as generation Y, are booming. These changes are most prevalent in big cities and new business have already begun to adapt.

The consumer is changing, the Millennials generation, born 1980s to early 2000s, are 92 million strong and stand to inherit large amounts of wealth and decision making power in the U.S. for many years to come. Millennials have experience incredible uncertainty, having lived through the 2008 – 2009 financial crisis and struggles with increasing student debt. These financial pressures lead to demand for a more efficient allocation of resources – and that, by large means they want to own less, be more connected with others and be a part of something bigger than their individual selves.

While the classic American dream is to own everything, the Millennial’s version is to move to an “asset light” lifestyle. These trends have sparked massive innovation, created new marketplaces and potentially holding the keys to the future.

Premium on Ownership Disappears

About a decade ago, companies such as Zipcar started to capitalize on idling cars, which sit on idle for an average of 23 hours a day. Today there are hundreds of ways to share assets, the most popular ones include entertainment, transportation and hospitality and dining.

At 9% entertainment and media holds the highest percentage of users. The consumption of media has changed drastically since the rise of digital age and perhaps it is the best example of the millennial generation shift.

Let’s travel back to 1999, when the millennials were still children  exploring the internet. Many children took advantage of Napster, a website that enabled users to download songs for free. Illegal? Sure. But no one really cared. There are profound differences between the millennial’s peer-to-peer downloading than that of their parents or even people 5 years their senior. From the very beginning the experience of acquiring and consuming media content was based on the premise that access to content should be easy and free.

Now back to 2015, access to media content is essentially free. Want on-demand access to whatever music you want? Spotify has got you covered. On-demand access to movies and TV shows? Netflix. On-demand access to videos of anything you want to watch? Lose a few hours on Youtube. Of course some of these services require a subscription fee so they are not truly free. But when access to goods and services becomes cheap, satisfactory and reliable enough that the premium on physical ownership has disappeared, there is hardly any reason to purchase these goods and services aside from personal habits or peculiar requirements.

Ten years ago, to watch a movie released on DVD, there were 2 options: purchasing or renting. Of those options, renting was the inferior option as there was a greater premium on ownership. Today, that premium has disappeared, streaming a movie on Netflix isn’t inferior to owning a DVD the same way that renting was. And ever since then, the extensive access to cheap and easy media content, has lead to new kinds of behaviours have emerged like binge-watching. Similarly, the rise of music streaming services has enabled behaviours such as sharing playlist, a process that used to be time-consuming and effort-intensive. When nobody buys music but has access to it, social sharing of music emerges as a natural and human behaviour.

Obstacles on the road to Success

To truly grasp the scale and greatness of the sharing economy, consider the following data. Airbnb averages 425,000 guests per night, totalling to more than 155 million guest stays annually – nearly 22% more than Hilton Worldwide, which serves 127 million guests in 2014. Five-year old Uber operates in more than 250 cities worldwide and as of February 2015 was valued at $41 billion – a figure that exceeds the market capitalization of companies such as American Airlines and United Continental. According to PwC’s projections, the sharing economy (including travel, car sharing, finance, staffing and music streaming) has the ability to increase global revenues from $15 billion today to around $335 billion by 2025.

It is not hard to find evidence of successful sharing economy but not everyone is as delighted by the rise as its participants and investors. Taxi drivers in America and now Europe have complained loudly (and in the case of Paris, violently) about the intruders who, they say not only are unqualified but also under insured.

Uber has always been plagued with problems with regulation and taxi unions around the world. In 2014, a court in Brussels prohibited drivers from from accepting passengers through UberPOP or face a €10,000 fine. In July 2015, Uber took one of its biggest hits. The judge ruled that Uber has not complied with state laws designed to ensure that drivers are doling out rides fairly to all passengers, regardless of where they live or who they are. This lead to a $7.3 million fine or California Suspension.

It is not just car-sharing services that have run into legal problems. Apartment-sharing services have also fallen victims of regulations and other rules governing temporary rentals. Many American cities ban rentals of less than 30 days in properties that have not been licensed and inspected. Some Airbnb renters have been served with eviction notices by landlords for renting their apartments in violation of their leases. In Amsterdam, city officials point out that anyone letting a room or apartment is required to have a permit and to obey other rules. They have used Airbnb’s website to track down illegal rentals.

On top of legal regulations, issues with customers have also become obstacles for sharing businesses. In 2011, Airbnb suffered a rash of bad publicity when a host found her apartment trashed and her valuables stollen after a rental. After some public relations and Airbnb eventually covered her expenses and included a $50,000 guarantee for hosts against property and furniture damage.

Peering into the Future

The sharing economy can be compared to online shopping, which began in America 15 years ago. In the beginning, people were not too sure about the vendors and didn’t trust the services. However with time and perhaps a successful purchase on amazon or two, people felt safe buying from other vendors too. Now consider Ebay, a company started as a peer-to-peer platform, now is now dominated by professional “power sellers” (many of whom started as ordinary Ebay users).

Big corporate companies dominating the market are getting involved too. Avis, a car rental firm has shares in Zipcar, its car sharing rival. So do GM and Daimler, two car manufacturers. In the future, companies may follow a hybrid business model, listing excess capacity on peer to peer websites. In the past, new ways of doing things online have put the old ways out of business. But they have often changed them.

We will have to wait and see which on-demand services start to gain traction with mainstream markets and which wont’t. It is not likely that in thirty years time our whole lives will be on demand and we won’t hold ownership. But a major possibility is products and industries most likely to be disrupted by the sharing economy would be things that we possess but not necessarily. An example would be Airbnb, it has disrupted the demand for owning vacation homes (something you possess) and tourist hotels (something you don’t possess but is still “yours” in a way that an Airbnb isn’t). 

A bus full of Chinese tourists arrive in front of Galeries Lafayette Haussmann, a must-visit department store in Paris; it is just one of many throughout the year. Although recent policy in Chinese government has devalued its currency, RMB¥, and consequently slowed down its economy, it doesn’t seem to scare Chinese people away from traveling to Europe. Nor has it decreased the desire to purchase luxury products. According to the article “Meet The Chinese Luxury Shoppers Who Are Taking Over The World” from Business Insider, Chinese customers account for 35% of the luxury sales around the globe and their spending is 1-2 times higher than other nationalities.

Jasmine Lai, 24, is a recent college graduate from one of the well-known universities in Shanghai, Fudan University. After graduation, she took a trip to Europe to help propel her career as an overseas purchase agent. “Before this trip, I was not aware that the price for the same luxury product in Europe and in China could varies so much.” Lai saw a chance for her to step in. The price discrepancy between luxury products priced in Euros and the same product’s price in China, gave her the idea for a brand new business model. “I started to ask myself. If I was able to purchase the luxury products in Europe and bring those products back with to China, even if a service fee is added, the price for the product from Europe is still lower than its retail price in China.”

With the advancement of technology, instead of setting up online website, Lai created a business that relies solely on two of the most used mobile applications in China, which are Sina Weibo and Wechat. Sina Weibo is a social media application that combines the functions of Facebook and Twitter. Users are able to comment, share posts from friends, and upload photos, and videos. Contrarily, Wechat offers free messaging and focuses on interactions between the user and his/her friends. “Wechat serves as a great way for me to interact directly with my client. When my clients saw a product that they are interested in buying, they would send me the picture of the product directly through Wechat.”

Using these graphics, I will explain how Lai’s business model works. Take this iconic handbag from Saint Laurent, one of the luxury brands in Paris. On the top, the price for the bag is £1590, which is ¥9540. On the bottom, the price for the same bag in China, is $2190, which is ¥14322.6. When a customer requests the bag, Lai would signal her buyers in Europe to confirm the price of the bag. Once the price, ¥9540, is confirmed, Lai will add thirty percent of service fee, ¥2862, to the price and report the price back to the customer on Wechat. After the client’s nod, Lai’s employee in Europe will purchase the bag and sent it back to China.

Although it might seem to be fun and glamorous to be an overseas purchase agent, there are many underlying difficulties and uncertainties jeopardizing Lai’s daily work. “The most challenging part of my job is going through customs,” Jasmine said.

A big part of Lai’s career as an overseas purchase agent is to travel to Europe twice a year, during its sale season. It was easy and quick for Lai and her employees to buy the desired products for the clients. Nevertheless, bringing all the products back safely to China without custom’s suspicion is the hardest part.

“Carrying all the products with me didn’t become a problem until recent years. During my first and second year as an overseas purchase agent, I would place all the items into two large suitcases. Except having to pay an extra overweight fee, I never encounter problems with China custom. However, the situation is different nowadays.” With an increase numbers of overseas purchase agents, Chinese shoppers tend to purchase luxury products overseas thus leading to a shrinking economy for the luxury brand market in China. As soon as the government realized the overseas purchases are endangering the growth of its luxury brand industry domestically, it immediately enforced stricter custom policies.

“With the new custom policies, instead of leaving the price tag, boxes, and the wrap for the luxury products, we need to remove everything in order to pretend that all the products are for personal instead of commercial use.” The updated custom policies definitely bring changes to the overseas purchase industry but it seems that even though the risk for buying the products through overseas purchase agents is bigger than buying the products in a nearby department store. Chinese shoppers are willing to take the risk instead of paying for the retail price, which include stiff taxes imposed by the government.

Besides the need of paying extra attention on custom policies, monitoring the foreign exchange between RMB¥ and the Euro becomes the daily task of an overseas purchase agent’s due to the fact that it might also serve as a potential threat to the sales. On one hand, when the value of the RMB¥ increases comparatively to the value of the Euro, the price of Chinese exports increased because it is more expensive for European to buy Chinese products but it is cheaper for Chinese to buy European products. On the other hand, when the value of the RMB¥ decreases comparatively to the value of the Euro, the price of Chinese imports increases, which makes it cheaper for European to buy Chinese goods but more expensive for Chinese to buy European products. “When RMB¥ appreciates against Euro, our sales tend to decrease a little because our clients are more likely to pick Europe as their travel destinations,” recalled by Lai.

The luxury brand industry in China is booming. An increased number of Chinese shoppers, combined with an increased interest toward luxury products, creates more opportunity. However, just like how happiness is often associated with the purchase of luxury products, the risks, such as custom policies and the fickle foreign exchange rate, are closely tied to the success of overseas purchase agents.

College sports are an important fragment of most universities. Athletics create a sense of community and pride for the schools and can ultimately lead to more applications and alumni donations if a specific sport performs well. Those sports in particular are male football and basketball teams. Many universities receive millions of dollars in revenue from television broadcast deals and merchandise sales for college football, and to an extent, men’s basketball. It is no wonder why the question of “should college athletes get paid?” is in discussion as well as currently being discussed in court.

One man who stepped up and voiced an opinion is former UCLA basketball star and NBA player, Ed O’Bannon. In July of 2009, O’Bannon filed a lawsuit against the National College Athletic Association pleading the department violates antitrust laws by using former and current players images, names, and likenesses for commercial purposes. What sparked O’Bannon’s reason to be a lead plaintiff was seeing his image in an NCAA video game that he was not compensated for. The O’Bannon v. NCAA case is fighting against the college organization and believes players should be compensated a fraction of the billions of dollars generated by college athletics from its huge television contracts. After six years the case has caused much controversy for the NCAA and universities. But just recently, some court decisions have impacted the case.

The NCAA has created multiple laws to keep college athletics as amateurism sports. This includes that all athletes cannot be compensated for the use of their name, image, and likeness while attending the university. If such actions are performed, punishments can be anywhere from losing playing time to being kicked of the team. For instance, during the 2014 football season, former Georgia player Todd Gurley was suspended from the team for four games because he made money off his own autograph. It even goes to as far as former players, like Ed O’Bannon, not compensated for their image used in video games authorized by the NCAA.

The NCAA is fighting for college athletes to receive no compensation beyond their scholarship because it would ruin amateurism status of athletes and goes against “eligibility” rules. Others argue paying players would destroy the moral purpose of college athletics and drive spectators away. But let’s not leave out a big factor here, money. It has been debated whether or not universities could generate enough money to pay athletes while also supporting them and contribute to other less popular sports. However, these concerns still leave out the main point. People are arguing that it is the athlete’s own name, and ethically he/she should be able to make money from it. Several college players have testified that the sport they play in college is their occupation and the many hours they devote to the game makes it difficult to function as a regular college student. An article from the Business Insider discussed one of the O’Bannon v NCAA trials over a year ago and how O’Bannon viewed his student-athletic career. “I was an athlete masquerading as a student,” O’Bannon said at trial. “I was there strictly to play basketball. I did basically the minimum to make sure I kept my eligibility academically so I could continue to play” (Dahlberg). This statement from the article demonstrates the commitment student-athletes have and why many are arguing for players to receive payment.

Recently some major decisions have been ruled in the O’Bannon v NCAA case. In June of 2014, a federal judge ruled that the NCAA cannot stop players from selling the rights to their names, images, and likenesses. This conclusion hit hard on the NCAA regulations which prohibit student-athletes from receiving anything more than a scholarship. The court suggested an idea that money generated from television contracts be put into a trust fund that college football and basketball athletes would receive after eligibility. The cap for the money would be up to $5,000 a year, and the most a player could make is $20,000 after four years. The NCAA of course disagreed with this statement and fought against it.

On September 30^th, 2015 The Ninth Circuit of Appeals confirmed the districts court decision that the NCAA amateurism rules violated antitrust laws. This of course was a big gain for O’Bannon but was not a complete victory. The court went against the injunction that would have forced universities to pay athletes up to $5,000 dollars a year. However, schools now must cover full cost of attendance, which is food, rent, books, etc., on top of scholarship. An article from Sports Illustrated claimed that Judge Jay Bybee, one of three judges out of the panel, expressed concerns that cash sums past educational expenses would transform NCAA sports into “Minor League” status. However, many still believe the cost of attendance is not enough for college athletes whose universities negotiate billion-dollar TV contracts.

The situation does not end there. Even though O’Bannon did not win the trust fund debate, the Lawsuit is far from over and he is not the only one striking down on the NCAA. Shawne Alston, Martin Jenkins, and two dozen other former and current players argue that the cap of athletic scholarships and cost of attendance are not enough and violate antitrust laws. If the cap was demolished, Universities may be forced to pay student-athletes market price scholarships, which can extend up to seven figures. This litigation will be heard in the U.S. District Court for the Northern District of California soon. That being said, let’s look at the possible financial decisions college athletics and universities would consider if athletes were required to receive money.

To help understand the situation better, I sat down with USC Sports Information Director Jeremy Wu and discussed the conditions that have athletic departments in dismay.

According to Jeremy, the new ruling that declares that Universities must pay full cost of attendance, food, rent, books, and more, is the first strain on schools financially. Some schools already proved this for football, such as USC, but now are required for all sports. Other major and smaller universities are in the process of making this transition.

The money for funding full attendance does come from the ‘billions of dollars’ schools receive from television contracts. But what a lot of people have a hard time understanding is the money received from these contracts are not just supporting football, but an entire athletic program. “A lot of schools even with TV contracts don’t make more money than they lose” Jeremy said, “Even though contracts are huge, such as millions of dollars, funding a full athletic department is a lot and it is covering more than just football, but all the sports”. Jeremy also continued to mention the money generated from TV contracts pays coaching staffs for all teams and buys necessities for the sports.

Before we dig in deeper, here are some interesting facts from the article, Cracking The Cartel, that talks about where the money for athletics is going:

• $156,647 is the median amount a division one school spends on a scholarship football player as of 2013
• $14,979 on a full time non student-athlete
• In 40 States, Football and Basketball head coaches are the highest-paid public employees

The facts above demonstrate the expenses universities spend not only on athletes, but college coaches. If athletes were to receive payments, the money spent on coaches most likely will decrease.

In order for the majority of universities to provide payment for athletes they would have to make some changes that would create a scale-back. The process would start with cutting smaller sports from athletic programs, such as golf or tennis. This leads to job loss not only for the people who coach the sport, but maybe a couple strength coaches, a nutritionist, and perhaps academic advisers.

From the article, Cracking the Cartel, it claimed one reduction in programs would be a drop off in athletic scholarships. Universities provide 85 athletic scholarships for football and that could shrink to 45, just like an NFL team.

Colleges could decide not to try and cut athletic programs all together. The programs who are most likely able to perform this financial event are the so-called Power Five conferences (the ACC, Big Ten, Big 12, Pac-12, and SEC), but even some say it may be too much and schools slowly would drop down to Division II. Jeremy discussed how small schools like South Dakota State, who don’t generate enough money off their athletic programs, would have no choice but give up its sports teams.

Even Title IX plays a heavy role and universities must still obey the rules that are enforced by it. If one women’s sports team is cut, then three men’s teams are cut as well. Title IX provides a unique experience for young female adults to receive an education and achieve an athletic career. Financial struggle to pay athletes would not only take this opportunity away from women, but men as well.

As a student-athlete myself, this situation definitely has me concerned. Though it is apparent that the NCAA needs to make some rule changes, paying college athletes certainly would transform intercollegiate athletics. If universities were to act on the most dramatic possibilities from this event, college athletics as we know it, would cease to exist.

Erin Germain, 34, is a media innovator who gets clients from other innovators. The changing economic landscape has made old media companies fall apart while newer and smaller entrepreneurs profit from each other.

Tuija Pallaste

 

One o’clock Wednesday afternoon Erin Germain, 34, sits on a sunny patio at the campus of University of Southern California. On the table in front of her she has her laptop and a plate of falafel.

Germain is having a meeting. Another two participants are her business partner and a client with whom she plans a video shoot. All three are on their phones miles away from each other wearing earphones.

Germain has one hour to manage her business and have lunch before her lecture at journalism school starts at 2 pm. She is a journalism graduate student who knows for sure that there are job opportunities in her field of study. She is creating those opportunities herself.

 

Media environment is in turmoil and economic situation has long been uncertain and that is exactly why Germain has for two years now ran her own production company called For Example.

“I would not have my business if the current landscape would not be what it is.”

For Example is specializing in producing documentary-style videos for companies and non-profit organizations. “Branded content” it is called. Her videos are beautiful stories of ordinary people sharing their life experiences or attending events.

“For us it works best if there is a good and authentic story that includes the brand,” Germain explains.

Sometimes there is just a story and the brand is integrated into it.

Companies and non-profits use the videos for their PR and marketing. For Example creates ideas, finds the right people and uses its’ distinctive visual style to match clients needs. They have worked for small non-profit campaigns and huge brands like Neutrogena, Lenovo and LEGO.

The idea of documentary-style branded content is Germain’s own. When she started two years ago there were not many companies doing that kind of videos.

Now branded content has became a big trend in the media business along with “native advertisement”. No wonder it has. After many profitable decades the advertisement revenues of traditional media companies dropped in 2010s to the level of 1950s, Brown Institute of Media Innovation counts. Print adds nearly disappeared, and banner advertising turned out to be a poor replica of traditional advertising in the internet.

 

Germain finished her undergraduate studies in media arts 13 years ago when the dot.com bubble had recently burst and many old media companies were losing their wealth. Social media was getting a stronger hold of the media ecosystem.

Germain did not have specific career expectations. “I had no idea what I wanted to do.”

Her uncle had an empty apartment in Chicago. As she was promised a free place to stay she applied for an internship at Oprah Winfrey’s Chicago-based Harpo.

She got in. Harpo is a success story and Germain loved her job at research department, but she missed her family in California. With her work experience at Harpo it wasn’t difficult to get into Los Angeles’ TV industry. She ended up producing reality TV shows, medical shows, travel shows and documentaries, as a freelancer in LA.

“Every three to six months I had a different job.”

She even went to teach English and video production in Ecuador.

“When I was in between jobs, I started to do some thing for non-profits.”

All these works proved to be significant when she finally set up her own company. She had learned to cope the uncertainty and to connect with a lot of different people. Most importantly: she had what good storytelling required.

“I learned how to tell a great story from some of the best people in the industry.

 

First assignments For Example got through a pitching site called Tongal – which itself was a sign of changing media economics. Companies worked on tight marketing budgets and this new internet service helped them to find freelancers and productions companies in a new money-saving way.

Tongal explains its’ idea like this:

“1. Businesses like LEGO post projects to Tongal. 2.Tongal community goes to work generating ideas. 3. Winning ideas are chosen.”

”Tongal community” means professionals interested in sending their work proposals via Tongal to realize a project.

For Example immediately gained success on Tongal. They were chosen to be The Tongaler of the Month in November 2014.

The site ranks the “Tongal community members”, and For Example is currently nr 21 in production (having earned $259,725)

“Tongal allowed me to start” says Germain.

Budgets can still be tight. Germain needs a crew of 2-15 people for the videos.

“On our biggest shoots we have a cameraman, a sound person, a make-up person and a technical person and more.”

“It is always balancing with the budgets. I was working on documentaries where budgets were never big so I know how to do it. We are not relying on special effects but on a good story. A million dollar idea does not work out well with 10,000 dollar budget.

Thanks to her numerous freelance jobs she knew a lot of freelancers.

“I knew good ones that I trusted. If they can not do it they always recommend someone else.”

 

Germain has finished her phone meeting and falafel lunch on the patio.

For Example is a limited liability company and a partnership. One thing Germain did not know when she started: how to ran a business.

“I still have no idea about that side sometimes. I am always learning as I go.”

She asked her college friend to be a co-founder as she had experience of marketing. They both work where their laptops are. Laptops, software and internet connection are all they need. Other technical gear comes from the people they hire.

Germain is often at campus. She got a fellowship to do post-graduate studies and decided to go for it. As an entrepreneur she can arrange her timetables and eventually she would like teach branded content.

“Now everybody is doing it,” she says.