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Is This Really a Thing?
34 minutes | 3 months ago
Are Meme Stocks Really a Thing?
GameStop and AMC made national headlines for unexpected reasons as retail investors from social media website Reddit began feverishly scooping up shares in each company. While the resulting drama caused wild swings in stock prices and scrutiny against some online trading platforms, the long term impacts remain to be seen. Did “Redditors” usher in a new era of retail stock trading? Or are these so-called meme stocks just another example of financial history repeating itself? Featured Guests Garrett Cummings – President, UCF Young Investors Club Josh Miranda – Communications & Marketing Coordinator, UCF College of Business Kevin Mullally, Ph.D. – Assistant Professor of Finance, UCF College of Business Episode Highlights 1:04 – Introduction 2:48 – Why would anyone invest in GameStop? 7:22 – What led to the media spotlight on $GME? 12:37 – Who is the group driving the run on GameStop stock? 14:27 – Is this a legitimate area of finance research? 16:37 – Historical similarities 20:12 – How is this run on $GME going to end? 22:08 – What’s the future for meme stocks as a whole? 28:27 – Will this still be a story a year from now? 31:33 – Dean Jarley’s final thoughts Episode Transcription Paul Jarley: Remember the E-Trade Baby? E-Trade Baby: A lot of people are like, “Isn’t it difficult to invest in the markets?” And I’m like, “Not if you’re using E-trade. Making a big investment is as easy as a single click.” Boom. I just bought some stocks. Paul Jarley: I think he was the first meme investor. He didn’t last long. E-Trade Baby: Wait, why is this line going down? Oh God, it just dropped 400 points. This is not happening. Dear Lord, I made a horrible, horrible mistake. **** Paul Jarley: Or maybe he just moved onto the social media site, Reddit [crosstalk 00:00:31] and lost hundreds of thousands of dollars trading stock in GameStop. Turns out he’s just one of many. E-Trade Baby: Take it back. Sell, sell, sell, sell, sell. Too late. It’s all gone. Paul Jarley: This show is all about separating hype from fundamental change. I’m Paul Jarley, Dean of the College of Business here at UCF. I’ve got lots of questions. To get answers, I’m talking to people with interesting insights into the future of business. Have you ever wondered, “Is this really a thing?” Onto our show. Paul Jarley: So GameStop has obviously been in the news a lot over the last week, and to help me understand what’s going on here, I’ve convened a panel of experts. Kevin Mullally is an assistant professor in our finance department. Garrett Cummings is the president of our student investment club and a finance major. And I pulled in our own Josh Miranda, who knows a little bit about viral marketing and maybe viral finance to have a conversation about GameStop and its short-term and long-term implications. But I want to start out with a story. When I first came to UCF, one of the first groups I met with were some executives at EA sports. Paul Jarley: And they said to me, “We know right now we’re a company that puts the $60 box in a GameStop for people to purchase, but we know that’s about to go away. We know that a few years from now, we will have developed into something like iTunes, where people electronically download whatever the game is into their console. And we think after that, we will become a company that offers various components of games that people can download and create their own game. And we want to understand that consumer more and what aspects of the games they like and dislike, so that we can meet that market demand when it comes.” Now, I raise that story because that was 10 years ago, and EA sports knew GameStop was dead then. So when I first heard the stories about GameStop, I have to admit my first reaction was, “Wow, they’re still around? Why would anybody invest in GameStop?” Is there a legitimate reason to believe that GameStop has a future? Kevin, do you want to kick us off? I’ll pick on you first. Kevin Mullally: Yeah, absolutely. So I did a bit of researching that question myself, actually, kind of thinking the same thing, because as you guys probably know, at certain points during this whole incident, GameStop was actually more valuable as a company, as a going entity than was Best Buy. And again, my reaction is the same as yours. Paul Jarley: Or Delta Airlines, I think I read somewhere. Kevin Mullally: Correct, correct. So all kinds of crazy mis-valuations, very clearly. And so I looked back into the history of it, and kind of the thing that has come out is that there are actually quite a few people that were long in GameStop, even sort of middle of 2019. Paul Jarley: Explain long, Kevin, for our listeners. Kevin Mullally: Oh, I’m sorry. So they had established a position where they had held a good number of shares in that company. So they were investors in that firm mid 2019, early 2020, well in advance of any of this taking place. In the argument, one of the most famous guys that had established a pretty sizeable position in GameStop was Michael Burry, who listeners may be familiar with from the movie The Big Short. He was kind of one of the guys that very famously predicted that the housing market was going to collapse. And his argument for investing in GameStop was basically that it had been mismanaged, that they had a whole bunch of cash on their books, that they had been making a bunch of bad acquisitions, and just generally had poor management and a lot of managerial turnover at that time as well. Kevin Mullally: And his argument was that, “Look, hey, if we can get these guys to buy back their shares, we can take cash off the books and deploy that more efficiently in the market. It’s going to make the firm more valuable and the shares more valuable.” And so that was the argument for it, is that they had a lot of cash on the books. We can basically just kind of skim this thing down and take that cash and make it more valuable elsewhere. And so that was the argument for him and then several other hedge fund investors who came in later on as well to try to establish, to take some control over that firm. So the argument was potential, basically. Paul Jarley: Okay. So that cash had built up over a number of years? Kevin Mullally: That’s my understanding. Paul Jarley: Okay, because I doubt they even own the real estate they’re in, right? I mean, I think there’s probably little asset there. Kevin Mullally: Yeah, that’s probably true. What I definitely know is that the number that I saw as far as their cash holdings was like $500 million. Paul Jarley: Wow. Kevin Mullally: So a very sizeable amount of cash that they were just basically sitting on, or misusing in many cases. Paul Jarley: Well, because here’s one of the first questions I would have for our two younger colleagues who are here on this podcast. Josh, when’s the last time you set foot in a GameStop? I know you’re a gamer. Josh Miranda: I mean … so the difference in setting foot in a GameStop, maybe a little bit more recently, but actually buying something from a GameStop? It has been quite some time. It’s just most game consoles nowadays, the new ones don’t even have disc drives, so you can just download the games directly from the vendors, from the publishers. So why leave your house to check out what’s out there when you can just download it? Paul Jarley: Garrett. How about you? Have you ever set foot in a GameStop? Garrett Cummings: Yeah, it’s been a very long time, I must say. And being a brick and mortar company, you got to sell the best. With everything moving online, GameStop is definitely not the first place I think of when I want to download a new video game. Paul Jarley: Right, they’re in a space where you can download things directly located in shopping malls. Could there be a company in a worse position than GameStop? It’s kind of hard to imagine, really. So it’s not surprising, I think, that some hedge funds started shorting it. Kevin, would you mind explaining shorting for our listeners? Kevin Mullally: Absolutely. Yeah. So this is a pretty common thing that hedge funds do. So when you short a stock, what you are doing is you are borrowing those shares from somebody else in the market. You are taking them and you are selling them, in a sense, and then hoping that the stock will fall so that you can later go back and buy them to replace what you’ve borrowed, and thus you win, you make money if those shares fall. The risk, of course, is that they could also go up, and if they go up, your risk is unlimited. They could go up to infinity, theoretically, and you would lose a whole bunch of money or all of your money. Paul Jarley: Now, just so I understand the scope of the potential loss here for the market, you can’t short more shares than are in circulation though, can you? Is it the number in circulation or is it the number authorized? Kevin Mullally: So one of the impetuses for these, for the sort of Redditors to buying GameStop and begin squeezing these guys is the fact that the short interest was actually above the shares outstanding. In aggregate … not a single trader of course, but in aggregate, I want to say the number was 138%. So they had shorted 138% of all shares outstanding. And so the issue there becomes that clearly everybody can’t buy back the shares they’ve shorted at one time. So if you start to see the stock price increase, some people are going to be hung out to dry because they will not be able to buy those shares back to cover their position. And so it obviously can get a bit more technical when you start differentiating between shares outstanding and then the shares that are actually available to be traded. The term would be float. Paul Jarley: Yeah. Kevin Mullally: But long story short, yes, there was an issue here that the amount of shorting that was going on exceeded the amount of shares that were able to be traded or available to be traded. Paul Jarley: And this got some hedge firms, as I understand it, in trouble. The question I had there is it surprises me that a hedge fund would have a significant percentage of its portfolio in a short position with a particular company. Is that unusual? Kevin Mullally: It’s actually not that unusual. And the reason is if you think about sort of investing, one of the things that we would teach our students right off the bat is that diversification is done to eliminate firm specific risk. Paul Jarley: Right. Kevin Mullally: You hold a diversified portfolio to get rid of that. Paul Jarley: Yep. Kevin Mullally: Now, if you’re holding a diversified portfolio and you’re not really taking any firm specific risks, it’s also difficult to generate abnormal returns. You’re in essence holding the market. And so if you’re a hedge fund and you’ve got five or 10 really great ideas, one way that you can generate abnormal returns is by basically going all in on those five or 10 ideas, especially in the case of short campaigns. And so it’s actually not as abnormal as you would expect. That’s just one of the things these guys do. They’re very, in many cases, high risk vehicles for investment, and that’s what they do. They just take on these very concentrated bets because they believe in them or they believe they can influence the outcomes or other things like that. Paul Jarley: Garrett, do you have any GameStop stock? Garrett Cummings: No, it’s kind of interesting though. The stock itself met our criteria perfectly around the $30 mark. And an idea that we’re teaching, I remember this is something called volatility contraction, meaning that we’re not buying when a stock is bouncing around from $20 to $40 in big swings. Looking for when a stock really settles down in a period of five days to a few weeks within the context of an uptrend. And so we teach our members to buy when the stock makes a new high after it’s consolidated for a period of time in a very tight manner. And what this allows us to do, it allows us to take a decent sized position in a stock, like Kevin was mentioning, but because the volatility of the stock has dried up, it allows us to keep our risk for a stop-loss very close behind it. And so a few of my friends followed this trade, actually. And so they had 30 or 40% of their accounts in this trade when it broke out with a portfolio risk of only about 0.8% roughly behind it. And so did it meet their criteria? Yes, but sadly, because of the fundamental idea, I didn’t believe in GameStop at all. I succumb to more of the fundamental side, and I did not take the trade myself. Paul Jarley: Did you have some friends who got rich? Garrett Cummings: I’d had a few friends that made about 40 to 60 grand, so not a million dollars stories, but definitely enough to pay off any debts outstanding, especially at our age. And yeah, they did very well on it. Paul Jarley: So why didn’t GameStop use this as an event to raise even more cash? Kevin, maybe you answered that early, but do you have a sense of why they didn’t do that? Kevin Mullally: Yeah, so that’s actually one of the long term implications of this whole incident that I think is the most interesting. So there are a couple of reasons, practically. One, it’s obviously hard to do a seasoned equity issue that quickly. And then the second is more just from an investor’s perspective. So sort of my non-technical description of this whole thing would be that it felt like musical chairs to me. Who’s going to be the last person standing, that’s holding the stock? Paul Jarley: And you don’t want it to be you, right? Kevin Mullally: No. No, absolutely not. And so typically what’s going to happen here is with these equity issues, they’re going to be underwritten by an investment bank, and the first sales are going to go out to institutions and stuff like that. And what institution in its right mind is buying GameStop at 300 bucks a share? What is your expected return in that world if you’ve made 300 bucks for this? And so I suspect that there’s some of that going on as well, is that they just know that this is not really viable. They could do an equity issue, but they’re not getting $300 a share for that. Paul Jarley: Yeah. So who are these Reddit people? Give me some insights here. Are these guys in people’s basements? Josh, you want to weigh in here – Josh Miranda: Yeah, so – Paul Jarley: As a reader of Reddit. Josh Miranda: Yeah, so I mean a lot of my work is kind of in digital media and marketing and communications. So I kind of end up spending a good chunk of my personal and professional life kind of following these trends, these social media communities, if you will. And this subreddit is what it’s called, and this one is called wall street bets. This has been around for several years, as a matter of fact. There’s something like, I think, tens of thousands, or even hundreds of thousands of people who frequent this subreddit to some degree. And the idea being is that they kind of treat Wall Street a little bit more like a casino, and they make a show of some of their buys and some of their losses. Josh Miranda: I mean, they have their own language for the way they describe some of the trades they make and for the losses that they have. And a lot of it kind of surrounds the way a meme can go viral, for example, and this whole GameStop thing has kind of happened the same way, where you have people who are blindly investing in GameStop just because of the herd mentality. And then they’re posting about their, “Hey, I lost $20,000, I lost $30,000,” and they get a whole bunch of upvotes on their post and the community cheers them on. It’s really … it’s kind of fascinating. Paul Jarley: Is this where the term meme stock comes from? Is that where this – Josh Miranda: This is exactly where … yes. Paul Jarley: You’re paying a lot for that fame. Josh Miranda: Yes, yes. I believe this community is the one that kind of coined the term meme stock. And it’s right there along with the likes of AMC, with Blackberry, companies who similarly you may not think would be doing too well. Paul Jarley: Kevin, is this a legitimate area of research in finance? Kevin Mullally: Absolutely. So this is actually kind of well-timed. We had a seminar speaker here a few weeks ago who presented a paper on Robinhood, and basically talked about retail trading and how Robinhood has facilitated in that and what the effects are. And in essence, this has become a really … this is a really extreme example of his paper, but basically what he saying is that retail traders, people on Robinhood, this kind of demographic of trader essentially buy stocks sort of ignorantly. They just buy whatever is going up or going down and then they just lose their lunch. The stocks that they buy go down quite significantly, five or 10% over the next 20 days. And so, yeah, this notion of how retail trading could affect the market and the propensity of people to be trading over Robinhood and things like that is definitely important, especially given the fact that retail trading has become bigger now, with Robinhood and the sort of commission-free trading and that type of thing. It’s definitely getting to be a more economically significant portion of the market. Josh Miranda: Yeah. If I can jump in there, it’s kind of been fascinating to watch it from the lens of this Reddit community, because they quickly turned against Robinhood once they started limiting trading of some of these so-called meme stocks, GameStop, AMC, and they almost took on this sort of David and Goliath sort of mentality. We got to stick it to the man. We’re going to stop using Robin hood. We’re going to leave them negative reviews on the app store. And it’s just been interesting to see the way that herd mentality has really driven so many of these key decisions and financial decisions for a lot of these people. Paul Jarley: Do we have any estimates of how many people we’re talking about here? Josh Miranda: You mean on the community or how many – Paul Jarley: Yeah. Well in the description we’re talking about it. I’m going to be a little blunt here, the number of stupid investors that appear to be out there. Josh Miranda: Sure. Well, so on the front page of this subreddit, it lists 8.6 million degenerates, is what they call themselves, and that’s people who are registered as part of that community. So it’s a lot of people who are at least following this. Paul Jarley: Now Garrett, do you have any sense of that just from – Garrett Cummings: Yeah. I’m very proud of the American people for getting back into the marketplace. The number of investors has been on decline since ’08 for a little bit, and it really … I’ve done a lot of studying of the market history. And it really does feel like we’re back in the roaring ’20s a little bit, back when the American people did take a big passion in the stock market. And me being a young, passionate person myself about it, I really hope it’s opened people’s eyes to saying, “Wow, even if I would have just invested $100 in this company, and I did it at the proper time with low risk, I could’ve had a very nice rainy day fund off of that.” And so to me, it’s inspirational. We’re taking down the barrier of the big guy versus the small guy. Garrett Cummings: The information out there moves so fast, and the fact that this little Reddit page of Wall Street users was able to find out, “Wow, this stock is 140% short interest, let’s run this sucker through the roof.” The fact that they were able to do their due diligence, even though there are a lot of crazy people out there who just go with the herd mentality, the fact that they came out with that information when no other fund or hedge fund easily could have done the same thing or found it, I think that speaks volumes, that the playing field between institutional and retail investors is narrowing at a very rapid rate. Paul Jarley: Yeah. Is it an American phenomenon though? Or is it a worldwide phenomenon? Does anybody have a sense of that? Josh Miranda: I know I’ve seen specific commenters, just kind of browsing through the threads, so I mean there are people from other countries. I don’t know if they’re the ones actually making the spend here, but I mean there are people who frequent this website who aren’t from the states. Paul Jarley: Where are we now with GameStop and that story? I thought it was down to about $90 a share. Is that the last I saw? Is it down below that? Kevin Mullally: It really depends when you check. It changes every 30 seconds. It’s pretty hypnotic to watch. It’s 61 right now. Paul Jarley: 61? Kevin Mullally: Yeah. Paul Jarley: So are we near the end of the story, do you think? Garrett Cummings: Personally, I think this is something we’ve seen time and time again, if you’ve paid attention to market history. In the early 1900s, you had the Northern Pacific Railroad had a similar phenomenon. It was $150 a share, short interest was through the roof and a group of traders decided to take advantage of it. And the stock, in one day, went all the way up to a thousand dollars a share before coming all the way back down to $350 a share. You’ve had these boom and busts all throughout history. You had the tulip craze, the South Sea bubble, the .com bubble. So it’s all sorts of things. And usually when a trip … and most recently in the cannabis sector about three years ago, you had [inaudible 00:19:14] rate go from $30 all the way up to $300 a share. So usually when you get these type of moves and they’re round trip, if you did not lock in any profit, I think it’s a very excellent time to go ahead and head for the exit door. The easy money was made on the way up and now it’s just very similar to catching a falling knife. Paul Jarley: So Garrett, I have to admit, it’s kind of refreshing to have a young guy tell an old guy like me to try to remember history here, because it repeats itself regularly. Garrett Cummings: Yeah. I get a lot of jokes with my friends, because I’ve read Peter Lynch’s old books, [inaudible 00:19:47], The Old Market Wizard’s books and so on. And a guy named Jesse Livermore said it best: “Human nature is not going to change. So as long as the markets are dictated by human nature, only the names are going to change. You’re eventually going to see a similar bubble situation elsewhere and if you call it a bubble, it can be scary. But if you call it an opportunity, you can catch on the way up if you find a low risk entry and do very well for yourself.” Paul Jarley: So Kevin, how do you think the GameStop story’s going to end? Is somebody going to buy them? Are they going to go out of business? What’s going to go on there? Kevin Mullally: I’m not sure. I mean, I think they clearly have to evolve. I mean that seems obvious, that the brick and mortar or video game sales is not really a sustainable operation. In terms of the trading, I’m not sure. I actually think that this could be a more regular event, and I think data’s coming out … when I was kind of reading about this this morning, a lot of data’s coming out that maybe this wasn’t really the retail versus Wall Street kind of thing that it was pitched to be, that one of the main guys in Reddit was a guy who worked for Mass Mutual and is an actual broker. And there’s questions now about how legal his actions were. Paul Jarley: I was just going to ask that. Was that legal? Kevin Mullally: Yeah, so there’s quite a bit going on here. And a story came out yesterday that said that this Sendvest Investment, which is a hedge fund, they made $700 million off of this. So it’s not even obvious to me that this is a retail versus Wall Street thing. And the funny thing is, is that this is social media, and maybe the medium by which this is taking places a bit different, but this has been kind of a tactic hedge funds have used for a really long time with trying to get stocks to move in the direction that they want. When a hedge fund does a short campaign, they often do media events about it and they do press releases and they accuse the firm of doing things that are not so great and that kind of thing. Kevin Mullally: So this idea of trying to get some collective action on a stock isn’t really new either. And I’ll be curious to see if later we find out that there was a bit more on the hedge fund side and the institution side, sort of poking the bear on this one a bit. So I don’t think that this will be the last time we see something like this. And I’ll be very curious if we get more information that reveals that this was not just Redditors who are mad at the stock market or mad at Wall Street sort of fueling this run. Paul Jarley: How about meme stocks generally? Josh mentioned here, which if I understood Josh, was people sort of bragging about their losses. Josh Miranda: Yes. And I mean, correct me if I’m wrong, I’m not as much the finance guy as much as I am kind of the media guy, but I had personally never heard of mass amounts of people bragging about all the money that they were losing. This community specifically refers to it as loss porn, is what they call it. And it’s people who just kind of celebrate people who’ve lost all this money from making stupid decisions and kind of laugh about it collectively. Paul Jarley: Although we don’t know if they really lost money though. We just know they created a meme. Josh Miranda: They show their portfolio. Paul Jarley: Oh really? Josh Miranda: So from everything that they’ve provided, it’s like, “Here’s my portfolio. I lost a lot of money.” Garrett Cummings: Now if I could touch on the psychology behind that, there’s a guy named Ed Sakota, and he’s quoted as saying, “Everyone gets what they want from the market,” and how the market is subconsciously engraved in how they perform in their trading. And so some people are just purely in it for the adrenaline and the thrill and the gambling. And I think that’s where you see a lot of those people on Wall Street Bets. It’s just subconsciously in their mind that they’re going to lose in the marketplace and just don’t do anything to change it. Paul Jarley: Are we going to see government regulation here, Kevin? Kevin Mullally: You know, I think the thing where you could see it as certainly this notion of Robinhood shutting down trading, or only allowing people to close out their positions. I mean, I do think that there’s something to that. It’s an interesting question of what the … of course it always comes down to what your belief about the government’s role is ultimately. There doesn’t appear to be a clear right or wrong answer to me here. Of course on the one side you’ve got these people who are saying, “Hey, we know what we’re doing. We know what we’re getting into and we’re adults and we should be able to do this,” and on the other side the government’s saying, “Well, maybe, maybe not, because some of you are going to lose your lunch on this one as well.” Kevin Mullally: So I’m not sure. I think what’s going to come out of it is probably more transparency about why that decision was made. And I think clearer rules about when these companies and these brokerages and things like that can actually halt trading, because Robinhood is taking the brunt of this, but other brokerages just at things like increased margin requirements and just made the trading more costly. And I think just more transparency on those rules, the specific terms by which or on which trading would halt, I think will be that the most likely outcome in my mind. Paul Jarley: What do you think, Garrett? Garrett Cummings: Personally, if anything comes back to say that retail investors should not be able to [inaudible 00:24:53] maneuver, and in the name of secretly protecting the “hedge funds” that they get messed over, I would find that pretty messed up pretty much, because the market’s supposed to be free. You take your bet and if you lose, you take it like a man and you move on to the next trade. That’s how it’s been since the stock market began. You saw it in 1929 when people got burnt, but guess what? We didn’t change regulation just because people had their feelings hurt. Now, I would definitely love to see more details about Robinhood and how this affects the brokerage side. Did they act within their guidelines in the name of “protecting the investor”? And even if that’s the case, I don’t think they should have the right to infringe on a free market. Garrett Cummings: If someone wants to buy or sell something and there’s shares available for it or not available, they should really honestly get what’s coming to them, because that’s how they learn. And in 2015, I blew my stock account pretty heavily. I took it from about $20,000 down to $2000. And you know what, that’s part of the game. If you don’t know how to play the game, the game is going to teach you the rules. And the people who did get burned by this, they’re going to learn the rules very fast. And the people who are prosperous from this, I hope they have the rules and don’t go into something else and give away all their gains. Kevin Mullally: There’s another side to that story though, that would be the argument in favor of some sort of regulation, which is just how we want an efficient capital market, because we have to remember that the trading and the sort of return generation is a consequence of the market, not the goal. Paul Jarley: That would be nice, and I agree with that, Kevin. Kevin Mullally: You know what I mean? So if you take a step back and you think about what the purpose is of the market to begin with, the entire purpose is to match savers and spenders. Paul Jarley: Yeah. Kevin Mullally: Right. And so if you get into this situation where you have a market that is clearly not efficient, like on no planet can you possibly justify GameStop at $300 or $400 a share. Paul Jarley: No. Kevin Mullally: Then you get into the concern that Dean Jarley brought up at the beginning of this podcast, which is why didn’t some firms issue stock during this time? And the answer is GameStop clearly is not going to get 300 bucks a share, but AMC did. They did issue stock during this time. And the concern then becomes if that capital is going to a company that’s overvalued like AMC or GameStop, it’s not going to somebody else who has a legitimately viable project that they could pursue. And so the reason why efficient capital markets are important is because we want spenders to be able to finance projects that will grow our economy. And so that’s the other justification for having at least a conversation about regulation, is not just winners and losers in the market, but it’s the economy as a whole and how the market facilitates economic growth. Paul Jarley: Because losing trust in that market would be a really bad thing. Kevin Mullally: Absolutely. Garrett Cummings: I would arguably say though, that judgment and value is subjective. When you have a stock that’s close to 140% short interest, and you know that, wow, if we can get a short squeeze or this thing could run and these short positions can not cover in time, you can either see it as wow, the stock’s at $30 a share, or we can see it as the fact that people on Wall Street Bets and other institutions saw that wow, this thing’s 140% shorted, we can run this through the roof and make a killing, just like the old commodity rates back in the early 1900s. Paul Jarley: But I believe that brought regulation, did it not? To commodity markets? Garrett Cummings: No [crosstalk 00:28:11] lock limit down inside the commodities markets to this day. You don’t have organized … they limit the amount you can buy that to try and prevent that. Paul Jarley: Yeah, yeah. Garrett Cummings: But it still can happen where you get lot limit up and lot limit down, and if you’re on the wrong side of that trade, it can be a nasty little spill. Paul Jarley: So is this going to be a story a year from now? I’m going to ask each of you. Are we still going to be talking about meme stocks and things like maybe GameStop maneuvers going forward? Or is this transitory? Kevin Mullally: I mean, if these Redditors are bragging about losing $20,000 or $30,000, it doesn’t seem like that’s a sustainable future. Paul Jarley: Not in my checkbook. Kevin Mullally: They’re going to run out of money at some point. Paul Jarley: That’s what I thought too, Kevin. How about you, Garrett? Garrett Cummings: I don’t think it’s going to be GameStop and AMC, but like I previously said, only the names are going to change. So human emotion and nature loves putting bubbles that we’ve seen throughout history. And so you’re going to just have something else out that goes from a dollar to $50, kind of like NEO went from $4 up to almost $50. You’re always going to find explosive stocks in the market, and that’s exactly what we’re trying to teach our members is okay, how can we identify these opportunities with a small amount of risk and get into them, take our money, and get out before the bubble bursts, essentially? Paul Jarley: Garrett, you got any interest in going into a PhD program in behavioral finance? Garrett Cummings: Not really. I’ve just done a lot of studying, and it kind of gets back to what I was saying about Ed Sakota. You get what you want out of the market. So the difference bettwen a losing investor and a winning investor is the losing investors who got their tail handed to them are not going to find what they need to do to win. Myself, I can’t pull it up here on the podcast, but I’ve taken my trading to the level of building a full data Excel sheet that updates live time. And that way I’m having every tool at my ability I need to feel out the market, be able to place the proper bets when I need to. And ultimately it’s a spreadsheet on how to manage my risk while maximizing return. Paul Jarley: Josh, what do you think? Is this the latest social media craze and it’s all going to go away, or where are we here? Josh Miranda: You know, I think that might be a little part of it, but it’s like anything. When you have a lot of people who are putting a lot on the line to really do much of anything, that kind of becomes a news story. And when you have millions of people who are on this subreddit, who are even just … even if they’re just monitoring what’s going on, that in and of itself becomes the story. I know now some of these Redditors are focused on driving up some cryptocurrency. Doge coin is one of them. And so it seems like … again, I’m not the finance guy, but it seems like they’re just going to move on to the next thing, and then onto the next thing. And might they be able to make waves somewhere with some stock or some crypto? Perhaps, but it’s clear that these people are just … they’re still going and this community doesn’t seem to be going anywhere. So if they make another headline somewhere along the way, I wouldn’t be surprised. Paul Jarley: I would just like to take the opportunity to point out that more than two years ago, we decided that Bitcoin is not a thing, at least as a currency. And it continues to exhibit volatility, which makes that impractical. Josh Miranda: That’s fair. That’s fair. A thing or not a thing though, somebody out there is making money on it, I guess. Paul Jarley: It’s my podcast, so I get to go last. Let’s start with the thing I’m most sure about. GameStop is not a thing. There was a reason so many investors were shorting it and I don’t see the company making a major turnaround, at least not the GameStop we know. It may serve a niche market in a nostalgia space or as a secondary seller of older equipment and games to parents buying their kids their first video games. But for the most part, the world has passed GameStop by. I’m not investing in it. As Garrett mentioned, bubbles happen from time to time, and some people will lose their shirts. In a twisted display of macho investing, some of these traders will want to post about it online and claim they’re tough enough to take it. But unless they have unlimited lines of credit, serial meme investors aren’t really going to be a thing for very long. Paul Jarley: Even the E-Trade babies run ended relatively quickly. I suspect meme stocks won’t be a thing for very long either. Chalk it up to a few people getting their 15 minutes of fame. Not a thing, just [inaudible 00:32:41]. Here’s what I think is the real story. Social media gave retail investors a way to coordinate their behavior and maybe influence the market outcome in a way that was impossible in the past. Perhaps a stick it to the man or let’s burn it all down motive played a role with the Reddit group of investors, who see the system is rigged, and were willing to risk losses just to make a point. But ultimately, these retail traders were just participating in the very thing they’re protesting against. Historically, coordinated action by the masses to change market outcomes has been viewed pretty dimly by governments. Paul Jarley: When manufacturing workers organized in the early 20th century to fight back against what they saw as an unjust wage system, the government took pretty strong action. Add the likelihood that some institutional investors may have participated in the Reddit GameStop action, and are certainly thinking about how to weaponize efforts like this for their own benefit in the future. And I suspect government interest in curbing this kind of behavior in the name of protecting efficient markets is sure to arise if we see a few more repeats of the Reddit GameStop story. What do you think? Check us out online and share your thoughts at business.ucf.edu/podcast. You can also find extended interviews with our guests and notes from the show. Special thanks to my producer, Josh Miranda, and the whole team at the office of outreach and engagement here at the UCF College of Business. And thank you for listening. Until next time, charge on. Listen to all episodes of “Is This Really a Thing?” at business.ucf.edu/podcast.
29 minutes | 4 months ago
Will the Economy Fully Recover in 2021?
After one of the deepest recessions in history, the U.S. economy still has roughly 10 million fewer jobs than before the COVID-19 pandemic began. While some say the economy is improving faster than expected and has seen significant growth in recent months, it could be some time before the U.S. returns to pre-pandemic highs. What will drive the economy back into recovery? And can it happen before 2022? Sean Snaith, Director of UCF’s Institute for Economic Forecasting, explains his timeline and predictions for complete economic recovery. Featured Guests Sean Snaith – Director, UCF Institute for Economic Forecasting Episode Highlights 0:45 – Sean Snaith introduction 1:31 – Just how bad did it get in 2020? 4:54 – How Sean Snaith describes the economy today 7:01 – The U.S. government’s response 9:46 – Will new stimulus packages be effective? 11:41 – How did Florida fare compared to the U.S. economy? 16:06 – The future of the U.S. and Florida economies 18:18 – Economic recommendations for the Biden Administration 22:48 – New taxes? 25:21 – Are the “Roaring ’20s” going to be a thing? 26:54 – Paul Jarley’s final thoughts Episode Transcription Paul Jarley: So between now and election, what do you think, the economy going to have a recession? Yes? No? Why? Glenn Hubbard: On balance, I don’t think we’re at the cusp of a recession. John Solow: I absolutely agree with Glenn’s take on what things are doing now. Paul Jarley: No, I think the short answer is no, there’s not going to be a recession before the 2020 election or in 2020 at all, I think. Sami Alpanda: I agree with almost everything that has been said so far. Paul Jarley: Turns out they were all wrong. This year was all about separating hype from fundamental change. I’m Paul Jarley, Dean of the College of Business here at UCF. I’ve got lots of questions. To get answers, I’m talking to people with interesting insights into the future of business. Have you ever wondered, is this really a thing? Onto our show. Paul Jarley: 2020 threw everyone a curve ball. That recession, well, it turned out to be a thing. Is 2021 the return of prosperity? Will the economy go on a run like it did in the 1920s? I sat down with our resident expert, Dr. Sean Snaith, he’s the director of our Institute for Economic Forecasting. Listen in. Well, thanks for joining me today, Sean. Sean Snaith: Pleasure. Paul Jarley: We’ve got a lot to cover. I’m going to ask you to be the ghost of economy past, present, and future, if you don’t mind. And let’s start out with the past. Back in 2019, I hosted a panel of people, including Glenn Hubbard at that time and asked them whether a recession in 2020 was possible and all of them to a person and you as well said, no chance, right? Paul Jarley: The economy was really humming. When I asked them what they were concerned about, frankly, they had trouble coming up with anything and then March of 2020 happened. So how bad did it get in 2020? Sean Snaith: Well, at least I’m in good company in being wrong, I suppose. And I don’t know if I’m the ghost or I’m haunted by my past forecast, but I don’t think, two things, that I don’t think anyone saw coming. One is a pandemic, global pandemic out of China. That’s one thing. This is … Paul Jarley: That’s the exogenous shock. Sean Snaith: That’s the exogenous part. And so this stuff happens. Now, could that in and of itself have triggered a recession? Maybe. Paul Jarley: Maybe. Sean Snaith: Maybe. But it was the endogenous part or the policy response to it that really put us into the historic downturn. And that was the decision in March and April to lock down, quote unquote non-essential sectors of our economy. And that was instantaneous recession. I mean, just add water, just add bad public policy and there you go, that’s a command economy. The government says you don’t make anything. You can still make things. And I mean, it was deep and it was instantaneous and there was no uncertainty about the fact that we were in recession. Paul Jarley: Has it been the most uneven economy? I don’t know that much about the history of this, but I mean, clearly there have been big winners and losers in this. So there are some parts of the economy that did gangbusters, right? Our friends in Lakeland, Publix did really well during this period. Sean Snaith: Well, yeah and I played a large role in that. That was for years been my sort of social activity was making up the excuse to go to Publix to get out of the house. But there were huge winners during this and again, chosen by the government by and large. If you had a nail salon, you were a loser. If you were selling groceries, you were a huge winner. If you were selling goods and services online, you were a huge winner. Paul Jarley: If you required a crowd to be successful, you were a loser. That was sort of the rule, quite frankly. And instead if you were selling something that people could enjoy by themselves in general, you were a winner, I suppose a part of this, but I can’t think of another recession I could summarize that succinctly. Go ahead. Quite frankly, can you, I mean- Sean Snaith: I mean, this is unique. I mean, and again, typically, you may have an exogenous shock that can knock the economy off its tracks and precipitate a recession, but generally there’s some internal weakness already in place. Paul Jarley: Oil in the ’70s, probably the best example, right? Sean Snaith: That was a huge shock a couple of times. And oil was far more important to the economy back then than it is today in terms of how much oil we use to produce GDP. But this was just unprecedented and like I said, I just couldn’t believe what was being done under the guise of public health. Paul Jarley: So how would you describe the economy now< today? Sean Snaith: I think, we’re in the midst of a pretty solid recovery. And again, this is because of the nature of this recession and its uniqueness, typically, there’s a psychology involved with recession and accenting recession and confidence has to build. And, it’s a more gradual process, typically. Everyone knew why the economy was in recession. It wasn’t because the economy was in poor shape. It was because the government shut it down. Sean Snaith: And that’s why the panel of economists in 2019 said everything was fine. And that was true through much of February, the economy was in fantastic shape, maybe the best I’d ever seen, in terms of the labor market, for sure. And so, in order to get out of recession, it was pretty easy to do. Sean Snaith: And the big thing was to let the economy open up again, tell them all, that millennia you can have shoppers there. And all of a sudden we’re selling retail goods again, that weren’t being sold for several months. And people that were furloughed were being, at least part of them were being called back. So, we saw in the third quarter of 2020, a really large, almost 34% increase in GDP growth at an annual rate that was after the second quarter’s contraction, historic of 31%. Sean Snaith: We just got a report this morning in the fourth quarter, the first take on GDP growth. And it came in at 4%. So we’re continuing in a recovery. It hasn’t been officially declared. I think the MBER who weighed in very early on when the recession began, will likely declare I think May, but May or June of 2020 is to when we hit the bottom and began this recovery process. And I think most of the data while it’s not final, supports that. Paul Jarley: Let’s talk about government response for a little bit. So we’re talking about our third fiscal stimulus package, if I got my numbers right, I think. The Biden administration is talking about their third in year judgment. How effective were the first two and how necessary is the third one? Sean Snaith: I think the first one, again, we threw in a matter of weeks, close to 40 million people out of work, I mean, just, the labor market doesn’t function like that under normal circumstances. It lags behind the economy and unemployment rises gradually. It doesn’t spike. And so that money was needed. Unfortunately, I mean, it happened pretty rapidly by DC terms, $2.2 trillion, passed and signed in a matter of weeks, that’s a record as well, but we traded off sort of precision for speed. And so people were getting checks quite frankly, that didn’t need those checks. Paul Jarley: My father who passed away got one. Sean Snaith: And there’s plenty of examples of that, but that’s a different kind of mistake, but I mean, giving it to somebody who’s been working through the entire pandemic and hasn’t seen any loss. Paul Jarley: It was a blunt tool, right? An immediate blunt tool. Sean Snaith: And so that helped, but it wasn’t enough of course, because the economy’s still, really didn’t recover until we opened things up. Paul Jarley: Well, I have to put this in perspective, maybe for people who don’t follow this as much as you and I do, right? In 2019, the economy was $22 trillion give or take, right? So a $2 million or $2 trillion package is little under 10%. Sean Snaith: I mean, it’s fairly big, much larger than our collective response to the great recession after 2008, 2009. And the total response, which was, I think about 1.6 or 1.8 trillion, it took about 16 months to be kind of rolled out and implemented piecemeal, right? Paul Jarley: And spent. Sean Snaith: And spent. So this was very quick, very large and necessary because of what had happened with the shutdowns. Now, had we not shut down everything and let people make their own decisions, and, maybe do public health measures, masks, social distancing, washing your hands, sanitizing, common air, but let the economy continue to function, I think we would have seen maybe a recession, certainly nothing on the magnitude of what we went through. Paul Jarley: The second stimulus is really just rolling out now, how effective do you think it will be? Sean Snaith: Well, the second one, a little bit smaller. It will help. Again, I think the big thing is, is the economy’s reopening. Consumers are spending again, a lot of pent up demand from this recession. We’ve got the vaccines through the approval process and manufactured and being administered. So as we proceed through 2021, that fear factor is going to go down. Sean Snaith: The ability to be in larger crowds should be increasingly possible as we go through 2021. So, that’s really going to be more important than any stimulus. And so this 1.9 trillion that’s being discussed now probably is overkill where we are in the recovery, but if they’re going to do something, let’s take the time and target it to those who need it. Paul Jarley: I mean, so I can see extended unemployment insurance benefits for people who are still out of work, right? Rather than just mailing checks to people. Sean Snaith: Willy nilly. This shut down and this recession has really disproportionately hurt lower income households. I mean, like no other. Paul Jarley: Service industry people, right? Sean Snaith: Service industry people. I mean, obviously here with tourism being such a large sector, tens of thousands of people lost their jobs in tourism and related businesses. Those are the people that have not gone back to work. These are the people that are still unemployed. These are the people that need help, not people that have been lucky enough to work throughout the entire pandemic. Paul Jarley: So did Florida do worse than the US economy as a whole? Sean Snaith: Yeah. Well, the contraction in state GDP, I think- Paul Jarley: On percentage terms. Sean Snaith: … in percentage terms, I think we’re projecting about 6% versus 3.5% nationally. So and again- Paul Jarley: This is bad, basically. Sean Snaith: And it makes sense because the devastation to tourism. I mean, Orlando International Airport, passenger traffic was down 97% year over year in March and April. I mean, that’s effectively shutting it down. And then we had the major theme parks closed and people weren’t going to the beaches and spring break was viewed as evil for different reasons this year than it usually is. It was going to be this huge, super spreading event, right? Super spreaders. So Florida took it really on the chin and tourism is still climbing its way out of that very deep hole, but the rest of the economy, certainly didn’t fare as badly. Paul Jarley: Do you think this next stimulus package will pass? Do you think Congress will do something? Sean Snaith: I’m curious if there’s been pushback because one thing I’ve observed, at least recently in politics is that when it comes to the Democratic Party, there are no deserters. They sort of march and vote in lockstep and maybe somebody will pay a little lip service here and there, but you don’t have people voting against the party very much. Sean Snaith: And so they’ve got, majority’s albeit slimmer than they did in 2008. So it’s interesting to see some pushback and, it may be the nature of the executive office not being as forceful perhaps that there’s a little more pushback. But I think something will come through. 1.9 trillion, almost the same size as the package we did back when the economy was contracting 31% at a time when the economy is six months into recovery, it seems a little late in the game to be spending that kind of money. Sean Snaith: And then, we were talking about before we began recording, yelling at kids that are on my lawn. I’ve been doing the economic equivalent of that for about 10 years about the national debt. Paul Jarley: Well, I’m right there with you, brother. We’re probably the only two people who talk about this regularly. Sean Snaith: And it’s true 27.6 trillion right now. If this goes through, let’s just say a trillion dollars that plus still a reduced tax revenue, I mean, we’re going to be pushing $30 trillion, but certainly by the end of 2022, at this pace, balanced budgets, surpluses, budgets at all, I mean, who needs them? We’ve got continuing resolutions to fund everything, no debate over priorities. No, it’s just spend away. But I’ll say the same thing about the debt. You can’t run up debt like this forever. Sean Snaith: We can’t have a climbing debt to GDP ratio without a day of reckoning at some point. I mean, we’ve been lucky. I don’t know if it’s lucky. I mean, we’ve been enabled. Paul Jarley: Well, interest rates have been so low for so long. Sean Snaith: Well, that’s it. And so there’s been no short-term pain from all this borrowing, but interest rates aren’t going to be low forever. Now, they might be for five more years, they might be for 10 more years. But if we keep adding to that debt and interest rates start to rise, then the burden of that debt’s going to rise right along with it. And we don’t have wiggle room in the federal budget. I mean, most of the federal budget is non-discretionary spending, mandated entitlements and can’t be touched. The discretionary stuff, oh, less defense, more educated. This is nickel dime stuff when you’re looking at a debt approaching $30 trillion. Paul Jarley: So let’s go on to the future. Then when does the economy recover to pre pandemic levels? What’s your best guess on that? Both nationally and in Florida. Sean Snaith: Well, I think in the aggregate, if you’re looking at total payrolls, your total jobs in the economy, I think by the end of 2021, we should be back to where we were in terms of payroll levels. The unemployment rate, probably not down to the same levels by then, but I think into 2022, again, assuming that this recovery progresses and there’s not another policy shock or a viral shock, but with tourism lagging, right, I mean that- Paul Jarley: I think Florida will come out a little later. Sean Snaith: I think we’re into 2022 before tourism sort of gets back. But the data thus far is encouraging on that front. Passenger traffic over the holiday season in Orlando was the largest in the nation, down still 42% year over year. But, again, as we discussed earlier, it was down 97% in March and April. So, that bounce back is really pre vaccine, right? Nobody had the vaccine for the most part, or very few people did by the time the holiday season rolled around, this was just people saying, I see what it is. Sean Snaith: We know what risks are, I’m traveling, and as the vaccine is administered more widely, then I think that tourism accelerates as that takes place. So I think, by the time we get to summer, it may not be exactly where we were in the summer of 2019, but I think we’ll be 75 to 80%. Paul Jarley: So if you’re the Biden administration, what do you do? Sean Snaith: Well, take it easy on executive orders. No, I think they’re going to need to do some, they’ll do some stimulus. I would say again, let’s make it targeted to those that really need it to the individuals and the businesses that were damaged the most by these lockdowns in this COVID-19 recession. And then, take the foot off the gas and let’s see how 2021 plays itself out because I do think the pent up demand is still out there. Sean Snaith: It hasn’t been fully vented and as 2021 rolls on, and people start to go do things in crowds and travel and all these things that have been curtailed, you’re going to see a lot of growth in consumer spending. I mean, if you look at the upper rungs of the household income ladder, that spending is way down still, compared to where we were pre pandemic. And that’s because those households are the ones most likely to go spend two weeks in Aruba or go out. Paul Jarley: Most discretionary experience-based spending, right? Sean Snaith: Exactly. Paul Jarley: We talked about it. Sean Snaith: And so that has not been uncorked yet, so that’s still coming. I think housing is a pretty solid driver of the economy, not just here in Florida, but nationally, and I think will continue to be. It was unusual, although it’s not late cycle anymore, but pre COVID 19, there was a booming or building boom in housing taking place. And that was at the tail end of that expansion. Sean Snaith: Usually construction booms at the beginning of an expansion. So we had this late expansion wind from construction and that breeze is still blowing. And I think, continues through 2021 and probably a couple of years beyond. Paul Jarley: Do you think there’ll be a tax increase? Sean Snaith: Well, the tax cut and jobs act, I think some elements of that are going to go. It’s always easy to just say, well, we’re going to tax corporations more and just, pretend that there’s some extra-terrestrials- Paul Jarley: That pay that tax. Sean Snaith: Yeah. That pay that tax, that it isn’t really us paying it, but it’s confusing enough to most people that they think that they’re not paying it. So, I think you’ll see that, always fashionable to tax the rich. So, those high- Paul Jarley: Find is over $400000. Is that the current proposal, I think. Sean Snaith: Well, it depends on where you live and if you have kids. So I think taxes are going up and so that will have a dampening impact on the economy going forward. I think the economy, because of the COVID thing’s got some momentum here as we recover from that. Paul Jarley: So it may not be a bad time in the short term, [crosstalk 00:21:49], right? Sean Snaith: Yeah. But what I would expect to see, and I don’t know if it will be in this administration, but at some point there are going to be new taxes implemented. And I think, again, back to this 20, 28, 27 and a half trillion dollar debt and growing, it’s got to be paid for somehow. There’s growth taxes, I think, your 401k might suddenly be subject to a charge or a withdrawal processing privilege fee, financial transaction taxes, we’ll get those GameStop Redditors, we’ll make them pay a tax every time they try to buy. And I think in the medium run, that’s likely to be the case. Paul Jarley: Is it politically or economically viable though to create a new set of taxes that would actually put the federal budget in balance? You go back to pre ’20 spending, 2020 spending. Sean Snaith: Well, again- Paul Jarley: Because there’s two ways out of this, right? We either cut spending and get back into a balanced budget or a surplus situation. Or not unlike UCF, we can try to grow our way out of this. Sean Snaith: Well, there are limits to enrollment and the best of growth that we could expect would be insufficient to deal with the debt that we have. And we’re not- Paul Jarley: 5%. I mean, 5% would be historical. Sean Snaith: It would be historic. It would need to sustain that. And even then would still have to make some decisions, but what’s not been addressed are entitlement programs. Those taxes have been tweaked a little bit, the income limits have been pushed up. I think that’ll be part of that puzzle. Paul Jarley: Retirement ages might go up as well. I could see that happening. Sean Snaith: And again, as I get closer to eligibility, my opinion changes a little bit. Dammit, I want my social security, but it was originally not meant to be a 35 year defined benefit pension from the government. This was to keep the elderly, many of whom fought in the great wars and supported those efforts and, lived through the depression and, work to make our country great. And to make sure they didn’t end their lives in poverty. Sean Snaith: And so the eligibility age at the time it was, the program was created, was older than the life expectancy. And so that hasn’t changed much in terms of eligibility age, but life expectancy has gone up significantly. And so that’s why people are at the social security trough for much longer than historically was the case. Sean Snaith: Anytime you try and touch social security, you’re pushing grandma off the cliff in a wheelchair, the AARB, Jack boots come out after. I think there’s a realization, finally dawning here that we’re in trouble with this program as it is, the status quo is non-sustainable. Paul Jarley: So last question, is the roaring ’20s going to be a thing? Sean Snaith: It was for two months. The first two months was the best of times. Paul Jarley: Can we have another decade long run? Sean Snaith: I’m not sure. I think that there’s significant damage from this recession. I said, well, the aggregate, we might get back to the numbers in a year, year and a half, there’s still going to be losses that don’t get- Paul Jarley: Persist. Sean Snaith: And particularly small businesses. Paul Jarley: No doubt. Sean Snaith: Many did not make it through the lockdown itself, many limped on for awhile, but will not survive 2021. And so those folks, those resources have to be sort of redeployed. I’m a bit concerned about policy. I mean, it seems like we’re slipping back towards, sort of policies that do have a downward impact on economic growth. Sean Snaith: A lot of the Obama, Biden type ideas are sort of being rolled out again. And I think a lot of that is what kept the economy from really bouncing back more strongly after the great recession. And so, again, I don’t know, I have to wait and see what actually happens and what gets passed, but what’s being discussed seems awful familiar. Paul Jarley: Thanks, Sean. Sean Snaith: Thank you for having me. Paul Jarley: It’s my podcast. So I get to go last. The Spanish flu gave a way to the roaring ’20s. Will history repeat itself? Pent up demand is most certainly a thing. People have been cooped up in their houses for a long time. And when this pandemic ends, they’re going to want to party and travel. Some of this will result in a shift in consumer spending away from goods and towards entertainment and experiences, but on balance, I think a pretty big bump is coming. Paul Jarley: But for all this to happen, the pandemic has to end. We can talk stimulus packages all we want, and some money is certainly needed, but the best stimulus package in my mind is the one that puts as many needles of the vaccine into people’s arms as quickly as humanly possible. It is ultimately consumers, not the government that will drive this rebound and to do that, people are going to have to feel safe going out again. Paul Jarley: Will this lead to a decade long expansion? I doubt it. We’ve got a big bill to pay. Tax increases are probably in our future, and this will slow economic growth some, but the roaring ’20s were mainly fueled by technological innovation as the electrification of America and the rise of mass production opened up new markets and fueled job and income growth. Paul Jarley: Maybe we’ll see a number of innovations hit the market in the post pandemic world, but I doubt they will replicate what happened in the 1920s. That said, predicting the future is a risky business. And right now, just returning to business as usual seems like reason enough to celebrate. What do you think? Paul Jarley: Check us out online and share your thoughts at business.ucf.edu/podcast. You can also find extended interviews with our guests and notes from the show. Special thanks to my producer, Josh Miranda, and the whole team at the Office of Outreach and Engagement here at the UCF College of Business. And thank you for listening, until next time charge on. Listen to all episodes of “Is This Really a Thing?” at business.ucf.edu/podcast.
30 minutes | 6 months ago
Is Virtual Selling Really a Thing?
It’s hard to imagine a virtual Tupperware party. Sales presentations are trickier with the move to increased online communication. Gone (for now) are the days of making small talk with prospective clients in the hallway and capturing their undivided attention face-to-face. Now that life has gone virtual, is it really possible for sales professionals to channel their charisma and build rapport through video calls? Do customers respond the same way to virtual selling tactics? Or should salespeople be expecting lower commissions until they can meet in person? Featured Guests Kathleen Lima – Sales Manager, Gartner Keith Lubner – Chief Business Strategist, Sales Gravy Episode Highlights 1:47 – What is virtual selling and how does it work? 6:35 – B2B vs. B2C – Who virtual selling is really for 12:34 – The biggest barriers to overcome 16:50 – Is virtual selling just a “young people’s” game? 23:09 – What students can learn from virtual selling 26:16 – Final thoughts from Keith and Kathleen 28:12 – Paul Jarley’s final thoughts Episode Transcription Paul Jarley: Remember the door-to-door Salesman? Salesman: Good morning, madam. Homeowner: Good morning. I’m afraid I don’t want them. Salesman: You’ve been selected for a special introductory offer, madam. Announcer: Using one of the many tricks to interest you, he’ll keep talking, exaggerating. Paul Jarley: My sense is he got largely replaced by the robocall. Robo Caller: Hi, I’m calling from vehicle servicing to reach out regarding the factory warranty on your vehicle. Our records indicate it’s past the coverage expiration [crosstalk 00:00:24] the vehicle you want to sell is actually still eligible for a warranty. Paul Jarley: But if there isn’t enough to be annoyed about in 2020, now we have this. Zoom Caller: Can anyone hear me? Zoom Caller: We can hear you. Zoom Caller: Hello. Zoom Caller: Yeah. We can hear you. We can all hear you. Zoom Caller: I’m sorry. Just before we begin, can I just go to the bathroom quickly? Zoom Caller: I’m just going to go ahead. Paul Jarley: Does anybody really need Zoom call salespeople? Really? Paul Jarley: This show is all about separating hype from fundamental change. I’m Paul Jarley, Dean of the College of Business here at UCF. I’ve got lots of questions. To get answers, I’m talking to people with interesting insights into the future of business. Have you ever wondered, is this really a thing? Onto our show. Paul Jarley: Necessity really is the mother of invention. Case in point, how do you sell people stuff if lockdown orders and social distancing norms mean you can’t meet with potential customers in person? Answer? Virtual selling. Google it and you’ll see how many YouTube videos you can find featuring people who are now positioning themselves as virtual selling experts. YouTube is the happy home of many a modern-day snake oil salesman. So I wanted to talk to a few sales experts and get their take on virtual selling and whether I need to incorporate this into the business school curriculum. Listen in. Paul Jarley: So what the heck is virtual selling and how does it differ from other forms of selling? Kathleen Lima: Virtual selling in general is a way to communicate using digital platforms and technology in order to still be able to do business. Paul Jarley: Kathleen Lima is a sales manager at Gartner, and more importantly, a graduate of our professional selling program. Kathleen Lima: It’s something that at Gartner we do a lot in our mid-sized channel. We do almost full virtual selling. We’ve always been doing that. In the field we’ve been much more face-to-face and local, but in general, to me, virtual selling is very much just using digital platforms in order to still build relationships with clients and to get business done. Paul Jarley: Keith, are we on TikTok? Zoom? What are we on? Keith Lubner: So interesting. No. Paul Jarley: Keith Lubner is chief business strategist at Sales Gravy. Keith Lubner: You think about it, virtual selling is… We’ve been doing selling this way since the dawn of time, since smoke signals basically when you really think back on it. We’ve been selling virtually and… It’s not like all these virtual platforms are anything new. We’ve been using it for years. It just so happened that now we’ve been forced into this in a really profound way. So how it’s vastly different though from face-to-face selling is it’s basically selling without all your senses. Think about it. When you’re face-to-face, you have that you can read people. You can pick up on their mannerisms. Everything is normal in that environment, from things like the audio or the lighting or how they look. And when you move into a virtual world, you have to be really intentional now, whereas before you didn’t have to be intentional about all of these senses. You have to be intentional about how your audio sounds. Keith Lubner: And the reason you want to do that is on the other end you don’t want to create a lot of… And we talk about this in the book that Jeb Blount, our founder, wrote. We talk about how, if we don’t normalize the environment for people going from in-person to virtual, that we’re creating all of these processes in the brain that will create a lot of what we call cognitive load. And when that happens, you slow down and you don’t have great interactions. So you have to be really intentional about all these things to make the environment seem normal so that you minimize those processes that are kicking off in somebody else’s brain. That’s where it’s vastly different because in person you take it for granted. You just do it. It’s natural for every single human to have a face-to-face meeting. You’re not thinking about the lighting. You’re not thinking about anything like that. Now you have to. Paul Jarley: Neither of you may be old enough to know this, but there’s a really famous United commercial, probably from the… I’m going to guess the eighties. Where the guy comes in to the office and he says, “Our oldest client fired me today.” He said, “We didn’t know who he was anymore. We meet with our customers on the phone. We send faxes.” And he hands out plane tickets to everybody in the room, telling them they’re going to go meet their clients face-to-face. I think that commercial won hundreds of awards. Keith Lubner: I remember that commercial. [crosstalk 00:05:18]. Paul Jarley: Yeah. Bill Steiger’s old enough to know who those people are. Keith Lubner: I remember that one. Paul Jarley: So is that the old school version of virtual selling? On the phone? Fax? Kathleen Lima: I think so. I know when I even started doing virtual selling, we didn’t really use video whatsoever. And that was the norm because that was the culture and the norm. We just did conference calls. Now, it is much more important than ever to do video. We have gone almost full video in any meeting we have now with client or internal, we are almost full video, which is different. Kathleen Lima: And two, it’s even more important now to build that rapport. Because a lot of times, when you… At least when we were virtual selling before, we had a 30 minute time slot, we had specific things we had to get done. You check all the boxes, you go through. And now this is the normal. So you have to be able to build those relationships and know who your customers are to your point and not forget who they are. But you have to be able to do it without being able to go to lunch with them or sit across the desk from them and walk into their office and talk about your families as you’re walking through the hallways. You just don’t have that anymore. So rapport is even more important. Paul Jarley: Is this used largely in B2B sales situations or are there B2C applications as well? Keith Lubner: From what we’re seeing it’s largely B2B. And people are really struggling with how do they… And I hear this a lot from folks that are just superstars in sales. And the superstars in sales… What Kathleen was getting at was so true. They had this innate ability just to build rapport. They were brilliant at it in person. And all of a sudden they’re like a fish out of water, basically, when they come into the virtual world. They’re struggling mightily, mightily, mightily with that. So when we think about selling in this new paradigm, it goes back to the things I was talking about earlier, as far as normalizing the environment. Because building rapport and normalizing the environment is so, so darn important now. Keith Lubner: And it’s really important for those people that just… They innately knew how to do it before and now they’re in this world where they have no idea how to do it and they just struggle. So we’re the same way. We teach a lot of classes on this and we’re telling people at all times, “Always be video ready.” We call it BVR. “Be video ready.” Yourself. Because you want to try to make that connection with someone. And the only way you truly can read someone or make that connection is if they’re also on video, because then you can pick up on all the non-verbal communication that they’re giving you, which is normally what they would do in person. And that’s where people are struggling. They’re struggling with, how do they do that? How do they interact that way? How do they handle all that? Kathleen Lima: Yeah. And in terms of B2B versus B2C, at least in our research, it says that by 2025, 80% of B2B sales interactions between suppliers and buyers will occur in digital channels. I think it’s possible to do B2C. I think it might be a little bit different than B2B. Paul Jarley: Yeah. Here’s why I’m asking, Kathleen. I assume… Maybe wrongly, so help me out here, that in most of those B2B sales situations, you already have some relationship with that customer. Because here’s the thing. From a B2C standpoint, I’m not accepting a Zoom call as a consumer. I’m on Zoom enough. You’re just not getting me there. So it’s hard for me to understand virtual cold calls. I just don’t really see that as something that’s likely to be a thing. Is it? Kathleen Lima: It’s interesting because I just had this happen to me on the other side, where I had someone prospect into me from B2C perspective. Paul Jarley: Really? Kathleen Lima: So what people are doing that seems to work is… You’re right. Am I going to, if I was in a B2C organization, just set up a Zoom meeting and call someone and hope that they’ll talk to me in video? They’d tell me to get lost. But people are actually utilizing from a B2C perspective LinkedIn a lot more and other platforms to build those relationships and make them more warm leads and then ask, “Hey, are you open to having a meeting about that?” And then if you’re open to meeting as a consumer, that’s when they can send a Zoom meeting. And at least for me, I might at least pick up and listen, because now it’s something we’ve already been talking. We’ve been messaging on LinkedIn. We’ve been having conversations. And it feels much more real versus if someone just sent me a Zoom cold call of some sort. I absolutely would not pick up. Paul Jarley: Keith, do you have thoughts on that? Keith Lubner: A hundred percent. You’re absolutely right. Here at our company, we’re teaching a lot of sales professionals day in and day out. And what we’re seeing is absolutely people are utilizing… They’re utilizing LinkedIn. They’re utilizing other platforms as well. We’re seeing more and more of these social platforms coming into the business space actually. Here’s what they’re also doing. They’re taking all of these different modes of communication… And really all these modes of communication fall into really two buckets. Synchronous and asynchronous modes. Bi-directional and one way. And what they’re doing is they’re blending them into their processes. So they’re blending a phone call. They’re blending texts. They’re blending video messaging, which is really starting to come out really strong these days, as far as making connections. They’re actually utilizing video messaging through the social platforms and through other apps to make those connections that they normally couldn’t make. Keith Lubner: And it’s not as dramatic as it would be to just send somebody a virtual link to a Zoom meeting or any other platform and say, “Come on, let’s get on that.” But it’s a way of somebody to see, even from a prospecting perspective, to see the person, to see the enthusiasm, to read their mannerisms, whatever the case may be, in a really non-threatening way. And that is opening the door to actually getting them onto a virtual meeting. So this blending all of these approaches is really the key as people move forward. It’s really the key of true productivity. It’s how they use something like video and they insert it into where would normally maybe do an in-person. And how do they use the phone effectively and how they tie texting into all this. Now, they’ve been doing that in a way, but now what we’re doing is we’re bringing virtual technologies really to the forefront in this blending concept. Paul Jarley: Yeah. This is going to get me in trouble, but I’ve seen my wife do some of this. On Facebook Live where they’ll have opened demonstration sessions and sell products that way. It’s intriguing to see how that’s worked. But that’s a form of virtual selling as well. Keith Lubner: Yeah. Paul Jarley: If I think about it that way. I’m not sure I know what Tupperware’s doing these days, but I wouldn’t be surprised if they had a similar approach to that going forward. So talk a little bit about what the main barriers are here to overcome. You touched on it a little bit, particularly with respect to senses, but what other barriers are there? Keith Lubner: Sure. Well, psychologically people feel threatened when you move them out of their safety zone. And their safety zone has always been in person. Think about those superstar sales people I was talking about earlier. Their safety zone is when they’re in person with somebody and they’re going face-to-face. And that’s most people. And as soon as you start to bring somebody out of their safety zone, as soon as you start to touch on that safety bias that their brains inherently create for themselves, they immediately feel uncomfortable. They feel vulnerable. Keith Lubner: And that’s exactly what’s happening when you bring somebody into a virtual world. Because quite frankly, the camera can be intimidating. And people feel threatened. They feel it’s different. They’re looking for something that’s wrong in the environment, not something that’s right in the environment. So when they move into a virtual world, they’re not saying, “Hey, this is the best thing! I can’t wait to do that!” What they’re thinking is, “Oh, man, this is going to make me uncomfortable. And I don’t want to feel uncomfortable.” Keith Lubner: So the barrier is psychological right there. And the barrier is getting them to understand that it’s okay. Now, when they come in, the other barrier is the environment that they’re in has to be set up so it mimics or duplicates what an in-person world would look like. And that goes back to little things like lighting, little things like audio, little things like where the camera angle is at. Things like that now matter because of the moving somebody out of their safety zone into this world. And when you make them feel comfortable, then those barriers go down. When they don’t feel comfortable, fight or flight kicks in. They’re either going to fight it day in and day out, or they’re going to run for the hills. Paul Jarley: I would guess that it would just be easier to say no to you on Zoom or virtually than it would be in person. Is that true? Keith Lubner: It is. Paul Jarley: Yeah? Keith Lubner: It is. Look in the bottom right hand corner of every Zoom meeting. It’s, “Leave meeting,” or, “Turn video off.” Look how easy it is for somebody to disengage. So one of the challenges we’re finding and we’re teaching people on this is how do you keep the attention levels high on these meetings? How do you collaborate? How do you keep them engaged in these meetings when clearly they have these very immediate options? And clearly sometimes you can see that they’re multitasking. Kathleen Lima: Video is key for all of this, because to your point, yes, is it easier to say no? Virtually, yes. However, if you’re on video and you’re still looking at someone face-to-face, it’s still pretty difficult. And the size of the room makes a difference. If you have 20 people and you’re doing a demonstration, that’s very different than if you are selling to a C-level executive and maybe one or two other people in that virtual room. It’s just more interactive. So you have to plan ahead of it might sound great if someone says, “I want to bring my entire team,” but it might not be the best move for you if it becomes a situation where there’s too large of a number and because of that it’s not interactive and people shut off their video and start doing other things. Kathleen Lima: It’s funny. Burnout is absolutely a thing. And that’s something for my team specifically we consistently talk about and try to avoid as much as possible. The default for meetings, if you’re going to be doing them virtually, are 30 minute meetings. It’s just the default. It’s just what we’re used to. That’s not necessarily the most productive use of time because between rapport, between everything, just getting to know these clients, you don’t really get to the meat of the meeting by the time it’s over. So it could seem like it’s less efficient. So we always try to make our meetings an hour. We still try to space out our meetings. We don’t want to go back-to-back. To be able to get up, walk around, just like you’d be getting in your car, except for now it’s 30 seconds to a minute. So it could be exhausting. You have to be very, very clear on your schedule so you don’t get burned out. Paul Jarley: Are some people better at this than others? Is this a young people’s game? Kathleen Lima: In general, it is people who have grown up in this environment. So UCF in general, we’ve all had some sort of digital class. We’re used to that. And when we go to, like I said, where you [crosstalk 00:17:10] Paul Jarley: That doesn’t mean the faculty member’s good at it though. Kathleen Lima: I remember I was in a class with 1200 students and you know what? It worked out fine. Paul Jarley: You learn a little bit what not to do too, right? Sometimes. Kathleen Lima: You learn what to do, what not to do and all that. So we start in a channel where it’s mostly digital regardless. So a lot of the people on my team who I have hired are people from that channel. I have promoted them into the large enterprise organization and they are fantastic at this. This is no different for them at all. Versus others who come from outside who have a lot of field sales experience and a lot of in-person experience, they’re incredible at sales, but it was a much, much bigger shift for them. Versus here, it’s just like we’re back in Fort Myers. We’re just doing everything on video. So it’s just more of creating that culture of what you’re used to and making it the norm. Eventually we’re all going to have to be there, but for people who already have that training, it’s very easy to move into this fully virtual world. Paul Jarley: Keith, is that true? Can you not teach old dogs new tricks? Keith Lubner: I would agree, absolutely. Here’s the thing. If there’s a good side, if there’s a silver lining to the pandemic, the silver lining is that it’s forcing people to accelerate their acceptance of technology and to adapt to all of it and to flex to it. So it’s forcing generations that maybe would not accept this, would maybe say, “Uh, I’m just going to do my things my way all the time.” It’s forcing those generations to catch up if you will. Paul Jarley: I don’t know, Keith, Josh is trying to get me to go on TikTok and do some things and I’m really resisting this idea. Keith Lubner: It’s funny that you say that. A recent class that I taught, one of the participants asked me about these platforms and they said, “Is TikTok going to be… Is that a platform we should look at?” And our first tendency is to laugh about that. When you really think about it, it’s something that we just have to have our eyes on because it could maybe someday do what LinkedIn did. LinkedIn years ago was just a repository for your credentials like a CV. And now it’s a platform for communicating and utilizing it in the sales process. Paul Jarley: Yeah. But I’m a 61 year old guy and I realized that being on Instagram would just be creepy. I’m not sure TikTok would be any better. Keith Lubner: Well, I’m not too far behind you, I’ll tell you that. But my point is it accelerates… In some realms we’re never going to do those things. But in others, it’s accelerating… Even in our generation, it’s accelerating it. And I look across… my kids are in they’re in their twenties and they pick up this technology a lot easier. Now what’s interesting is this is where cross generations can train each other. Whereas we can train them on utilizing all these different modes of communication, the phone and all of that, where they have never been exposed to that because they’re primarily growing up in a world where texting is the mode of communication. So we can play off one another really well in these environments. Paul Jarley: I would agree that I think that the acceptance of virtual forms of communication are way up, that the pandemic has actually forced that. That will continue in some form. But I do wonder whether virtual selling will have staying power past the pandemic or not. What do you think? Has it just become part of the mix? Keith Lubner: Yes. Paul Jarley: Because here’s the thing. If you’re willing to come visit me, you’re showing more effort, I’m going to pay more attention to you. Keith Lubner: It’s going to be part of the mix. The pendulum has swung all the way across to now just completely virtual and it will swing back. And when it swings back, it’s not going to swing all the way back where we’re not doing virtual anymore. It’s going to swing back to some point in the middle where there’s a happy blend of efficiency. And the happy blend of efficiency will be… You’ll include virtual techniques in there and you’ll use it, like I said before, very tactically and strategically within your sales process. That’s where it’s going to be utilized. It’s not going to be all in one way, all in the other. And I crave, just like everybody else, I crave some in-person environments for training and all of that. We all do. But we know we’re going to be blending both as we move forward for a long, long period of time. Paul Jarley: Kathleen? Kathleen Lima: I agree. And I do think too, it will depend on the industry and what you’re selling. If it’s something that’s very tangible, it might make sense to go in person to actually show the product itself, to be able to show all of the different features and functionalities. If it’s not as tangible, virtual selling might become more so. Yes, we’re still going to do in-person absolutely and I would be remiss if I said we’re not. But if you can show features and functionalities and it’s just not as tangible, it might change the sales process itself of when we are qualifying, “Do we do more virtual and then perhaps in the beginning do more face-to-face? Or at the end do more face-to-face?” It’ll change the process itself. Paul Jarley: Or more virtual workshops around the product. Kathleen Lima: Exactly. Something where if you’re still doing… Let’s say the education process. You can do that virtually, because now we’ve seen, it’s been proven, that it can work. Because we’re still selling, the world is still selling, and it’s shown that it’s worked. So we can incorporate that into our sales process where before that would absolutely have not been a thing. We would have gone into the office and done all of those lunch and learns in person. Paul Jarley: Yeah. Let me take you in just a little bit of a different direction since I have you here. And I’m a Dean with a bunch of students… Well, I graduate 2000 a year. And these aren’t the easiest times for them. I’m wondering if you could talk a little bit about what students, particularly who are trying to build relationships and secure internships and jobs going forward, what can they learn from virtual selling that they might be able to apply to help them build relationships and get to where they want to go? Keith Lubner: I’m right there with you. I have college freshman. So I ponder this often. And I think what they can learn from all of this is that you need to meet people how they want to be met. And if you meet people, if they need to be met virtually, you meet them virtually. If you need to meet people in person, in person. If they want to be met with through texting or email or whatever mode of communication, your ability to adapt and be flexible to those people is really critical. Keith Lubner: Especially my daughter, she’s learning that she has to understand that flexibility. Because some people will want that in person and other people won’t. And I’m hoping I’m answering your question appropriately. Because I’m thinking with regard to my daughter and how she’s interacting. She’s starting to make friends and she’s starting to go through that whole process there. It’s really difficult for them right now because they’re trying to balance these modes of communication and they’re a little confused as to how to do it and how to build relationships. But I think if they can get it down and they can meet people, like I said, where they want to be met, that will help them in whatever career they go into, whether it’s selling or whatever. Paul Jarley: Kathleen? Kathleen Lima: Yeah. I completely agree. In general, students are… I would assume, tell me if I’m wrong. They are adapting to this new world. [crosstalk 00:25:10] Paul Jarley: Well, some of them are, some of them aren’t, to be quite honest about it. Kathleen Lima: Yeah, yeah. It’s definitely new. I would think from both a personal and a business perspective, there’s been a lot of different changes. And I do think it will become a bit of the new normal. And I feel like the longer this goes on, the more students will begin to adapt. And to your question around how can we help them and is this something we should do, I do think having some sort of training right from the get-go would make this more normal for them. And if it’s more normal for them, then they adapt quicker. And if they adapt quicker, it helps overall. It helps from their own mental health. It helps from their skillset. It helps from just development. If we can adapt and assume that this is going to be somewhat of the new norm and then from there adjust accordingly, especially from an education and training perspective. Paul Jarley: That’s a great segue to my final question. Kathleen Lima: I planned it. Paul Jarley: Thank you. Is virtual selling going to be a thing five years from now? Yes or no, and what will it look like? Kathleen? Kathleen Lima: I’d say yes. 100% yes. The world in general is moving more digital with or without this pandemic. Obviously this has really made this more escalated more quickly. But yes, I do think it is here to stay. I would absolutely advise to incorporate this somehow into lessons, into the business school, whatever needs to happen to help students adapt quicker so they are much more successful when they go into the business world. Paul Jarley: Keith? Keith Lubner: 100%. Absolutely yes. Five years, ten years, it’s going to be part of just our DNA of how we do things. I think we’re going to see a shift, even a faster shift, into direct messaging through different apps as well and how we’re communicating that way. All of that’s moving and those that can adapt to that, embrace it if you will, will thrive. Keith Lubner: When you think about just some basic stuff around training people, for instance, companies are now looking at the bottom line savings that they can take on with training people virtually. That’s going to continue to increase as time goes on as well. They’re not going to shift all the way back to bringing all of their people in from all over the country for training events because it’s a very high expense. What they’re going to do is they’re going to look at how can they leverage virtual and train people virtually and minimize the expenses, but get the outcomes that they’re looking to get from a training? And that’s just one example. I think over five years, you’re going to see more and more examples of where people are going to weave this into their processes and make it a normal process. Paul Jarley: It’s my podcast. So I get to go last. This discussion left me wanting more. So I consulted my resident expert, Dr. Bill Steiger. Bill is the director of our professional selling program. He wrote back this. “Virtual communication is the thing. Virtual selling is a subset of virtual communication and likely the most significant change in the sales process since cell phones.” Paul Jarley: Bill’s point is if a new way of communication develops, you can rest assured somebody is going to try to sell you something using that new platform. In that sense, virtual selling is a thing because virtual communication has become a thing. For virtual selling to become a big thing, customers will have to embrace it. As Keith said, Keith Lubner: “You need to meet people how they want to be met.” Paul Jarley: And I’m not sure why customers would prefer this method. Is it a more convenient form of buying for the customer? It certainly saves the seller travel costs, but I’m not sure it’s more convenient for the consumer. Does it represent an easy way to get information they need without having to suffer the whole sales pitch? This got touched on a bit when Kathleen noted, Kathleen Lima: You’re now on the computer. We can go through and start looking up answers right on the spot and we can pivot a lot quicker. Paul Jarley: If virtual selling is going to be a thing, it’s going to need to be a customer thing, not a sales thing. But my guess is that virtual selling is going to be much more limited in scope once things open up again. It might form a chapter in a book on sales, but I doubt it will be a whole new curriculum. What do you think? Paul Jarley: Check us out online and share your thoughts at business.ucf.edu/podcast. You can also find extended interviews with our guests and notes from the show. Special thanks to my producer, Josh Miranda, and the whole team at the Office of Outreach and Engagement here at the UCF College of Business. And thank you for listening. Until next time, charge on. Listen to all episodes of “Is This Really a Thing?” at business.ucf.edu/podcast.
30 minutes | 7 months ago
Is Working From Home Really a Thing?
As employees continue to work from home, leases are running out and corporate office space is in jeopardy. Managers around the world have to decide if it’s more efficient to keep their offices open, downsize, or go entirely remote. Seven months into this pandemic, the question remains… is working from home really going to stick? How is the commercial real estate industry handling the move to remote work spaces? Can professionals truly replicate the “sense of space” that comes with collaborating in person… from home? And five years from now, what will the typical workday look like? Featured Guests Steve Garrity – Vice President, Highwoods Properties Nick Poole – Managing Director, JLL Yvonne Baker – Regional Managing Partner, Franklin Street Bill Moss – Director, Dr. P. Phillips Institute for Research and Education in Real Estate at UCF Episode Highlights 2:34 – The state of commercial real estate pre-COVID 4:25 – The rise of the open offices 9:19 – How the pandemic is changing office space 12:07 – The importance of “a sense of space” in collaborative work 13:44 – How working from home affects company culture 18:30 – Will companies downsize their offices? Eliminate them entirely? 23:04 – Permanent fixes for temporary problems 25:27 – Will everyone be back in the office in two years? 28:01 – Dean Jarley’s final thoughts Episode Transcription Spooky Voice: Submitted for your approval: a man gets up every day… he gets dressed, he drives to work, he interacts with 10,000 students. Paul Jarley: Well, hello there. Welcome to The College of Business. Spooky Voice: The year is 2020 and Dean Paul Jarley has entered … Paul Jarley: Hello? Is anybody here? Spooky Voice: The Twilight Zone. Paul Jarley: Tina? Tiff? Josh? Anybody here? Paul Jarley: This show is all about separating hype from fundamental change. I’m Paul Jarley, dean of The College of Business, here at UCF. I’ve got lots of questions. Paul Jarley: To get answers, I’m talking to people with interesting insights into the future of business. Have you ever wondered, is this really a thing? On to our show. Paul Jarley: Seven months into this pandemic and the UCF College of Business is largely empty. Office occupancy can’t be greater than 10%. Many of my employees don’t want to return to work. They tell me they can get their work done from home, just fine. Paul Jarley: It makes me wonder what I should do with all this space, but I have to admit, I’m not really sure what I’d turn it into. Maybe an apartment for me, so I never have to leave work? Perhaps dorms for students? Maybe, I could lease it all out to Amazon as warehousing space? I’m not really sure. Paul Jarley: To help me think about the future of office space, I’ve assembled a panel of experts. Listen in. Paul Jarley: If anybody can remember what life was like before March, could you talk a little bit about what the trends in class A office space has been, over the last few years? What have been the major trends that you are all seeing? Paul Jarley: Bill, do you want to kick us off? Bill Moss: So, everything was fine while I was still in the industry at CBRE. Since I left, it’s all gone haywire. Paul Jarley: Bill Moss was the managing partner of CBRE. It’s the largest commercial real estate brokerage company here in central Florida. Paul Jarley: These days, he’s the director of the Dr. P. Phillips Institute for Research and Education in Real Estate at UCF. Bill Moss: Maybe Steve could kick things off with really, what he sees from the front lines, maybe over the last couple of years, but certainly since March as well. Paul Jarley: Yeah Steve, chime in. Steve Garrity: Yeah, I’d love to. Thank you, Bill. Paul Jarley: Steve Garrity is vice president of Highwoods Properties, a real estate investment trust. He’s in charge of acquisitions and development for the company’s Orlando division. Steve Garrity: Certainly on your watch and before COVID, the economy was humming. We were all enjoying vacancies going down. Our occupancy was certainly going up and quality of our customers was improving. Reno rates were increasing. Steve Garrity: Before COVID, class A office space was under 10%. Before COVID, we were very confident and excited about the future, before March 17th. Nick Poole: Yeah, I’m happy to add to that. Paul Jarley: Nick Poole is managing director at JLL, the second largest real estate brokerage firm in the world. Nick is also a graduate of our real estate master’s program at UCF. Nick Poole: As a disclaimer, typically, I’m working with more of the user and the tenant. Nick Poole: Yvonne and Steve are more so working on the ownership side, or landlord side, but just maybe a couple things about space design, because I’m sure it’s going to come up a little later in this conversation, working from home, or de-densification. Nick Poole: I can tell you that the trend over the last 10 years has been, for companies to move towards a more open, more efficient space design. The result of that is that, space per square, per employee has been driven down, right? Paul Jarley: Yeah. Nick Poole: Some of the most aggressive build-outs that we’ve been seeing, whether that’s call center, or whether that’s open technology bench type seating, those would probably allow for less than 100 square feet per person. Nick Poole: In Orlando, what we were seeing a lot of, pre-COVID was, the move to a more open plan, some place where companies could maximize their efficiencies and put more people into less space, ultimately. Nick Poole: There was a whole variety of different factors that came along with that. Did they have enough parking to accommodate the densification? Did they have enough open and collaborative areas to encourage collaboration and communication for their employees? That type of thing. Nick Poole: But, there was a lot of emphasis on that, pre-COVID. Obviously that’s going to be a big question about what’s going on, moving forward. Paul Jarley: Yeah Nick, I would think so. I will tell you though and if I remember right, Bill was an early mover on this in his own office at the time, but I know we’ve done this in some offices at UCF and in general, people hated it. They hated the open design, particularly the older employees. Nick Poole: I would tell you that, depending on your industry, there’s mixed reviews about whether, or not folks like the open office. I do think a lot of it depends on your industry for one, and obviously your age and demographic probably comes into play as well. Nick Poole: But, I can certainly tell you, when we were out representing, call it Fortune 500s, or even local companies, when they were looking for space, the trend up into the beginning of this year was, we’re looking for open plan, we’re looking for lots of light, we’re looking for exposed brick and beams, some type of industrial feel, something a little bit different, creative. All of those things were of uber importance, before this pandemic. Paul Jarley: Why did industry play a role, Nick? Can you give me an example? Nick Poole: Sure. Like a technology company for instance. The technology companies value the ability to be in an open bull pen type setting, where they are working in small teams or groups, and they’re able to talk to the folks across the desk from them, or they can pick up their laptop and move into a conferencing area, where they can have a training team of call it 10, 15, 20 people all together in a seating area, versus being in a private office like I’m in right now, with my door closed, and not being able to go out and communicate or collaborate with those folks. Nick Poole: In my position, as a broker in a real estate industry, I work on a team. I’ve got four or five other folks. I’ve got a brokerage administrator that helps, and we’ve got a research and marketing team as well. Nick Poole: I will tell you that, I think our productivity was better when we were open and together and around each other, where we could hear each other’s conversations, build on those things, were more aware of what was going on around us. I think in that instance, it actually helped, and probably helped our team be more productive. Nick Poole: There’s an argument whether, or not that carries over across the number of industries, but there is a time and a place for it, for sure. Paul Jarley: Yvonne, what trends had you been seeing? Yvonne Baker: I think it would be very similar to what Steve and Nick have pointed out. Paul Jarley: Yvonne Baker is regional managing partner at Franklin Street, a real estate firm based in Florida. She too is a graduate of our master’s in real estate program. Yvonne Baker: On the landlord side, we definitely saw every client that came through here wanted an open plan. I think that historically, what we saw through different periods of time is, office buildings would be built based on how a developer wanted a building to be built. The developer would say, “Hey, here’s this really cool office building, tenants. Come lease what I have built for you.” Not a whole lot of consideration given specifically to what the tenants wanted. Yvonne Baker: Then, we’ve gone into a period of where the tenants have said, “This is what I want, Mr. Developer.” They’re developing buildings in that way. I think with this pandemic, we’re going to see a bit more of a shift, which is where the employees are saying, “Mr. Employer, tenant, this is how I want to work in my office space. We’re going to see a whole lot more flexibility in how office space is used. Yvonne Baker: We did a pretty large renewal for a law firm in our office building and they went some open and then left a lot of private offices for the senior attorneys in place, but with a completely cool, updated, open ceilings feel to everything. It was a lot of flexibility in how the spaces are being built now. I think we’re going to see even more flexibility as we go forward. Paul Jarley: I guess if I think about the pandemic and the fact that I hear a lot these days, people questioning whether, or not they need office space anymore. I think really, the underlying question is, what’s the value proposition of having an office? Steve Garrity: If you don’t mind, this is Steve. Paul Jarley: Yeah, go ahead. Yeah Steve, yeah. Steve Garrity: I think Nick and Yvonne pointed it out clearly. It’s the thirst, the desire for collaboration. There’s a lot of value associated with getting humans, workers together. I think that’s why the drive has been towards having an open plan, is really for collaboration. Steve Garrity: In doing so, the increase in technology that’s occurred, just over the past eight months, many companies have really shifted their gear towards higher technology and better communication. But the desire to really be together and collaborate I think is a big thing. Steve Garrity: Yvonne pointed out the flexibility and the efficiency. There are some limitations certainly, working from home. I think we’re all experiencing it as we speak, in that it’s again, lonely, so the collaboration doesn’t occur as easily as it should. It’s a new way of language and working that we’re all getting used to, but there is fatigue associated with it. The dust hasn’t settled. Steve Garrity: I think we’re all learning through this COVID time, but I think to answer your question, it’s really human nature to want to be with others, so we can collaborate and really add value to the company. Paul Jarley: Other people have thoughts on that? Yvonne Baker: Yeah, I’ll jump in there. Consistently, we were seeing that our firm relies on the collaboration as Steve said, critically important, like in a sales brokerage operation, but also having the innovation together, having those accidental bump in meetings in the hallway. Yvonne Baker: We work in a completely open environment here at Franklin Street. We have two private offices. In building a firm, it was critical for us to be open, so that we could hear each other, understand how we could team with each other, collaborate with each other, pass business around to each other, and seize opportunities sitting in the office together. Yvonne Baker: That is gone, those accidental meetings in the hallways, when people aren’t together. That’s been our big part. At this point in our office, we have just two people who aren’t back in the office and pretty much everyone is back in the office at least four days a week, because everyone wanted to get back together, worked much more efficiently together, but still had that flexibility to work from home every now and then when we want to and not be afraid of that and not thinking that somebody thinks you’re not working. Yvonne Baker: We now understand that people are working at home for heads down, task-oriented work, and coming into the office for more of that collaboration. Paul Jarley: Yeah, I think that’s an important distinction Yvonne. I do think … Well, to Steve’s point, I think we’ve all experienced Zoom exhaustion. At least I used to have a break, because I would have to walk from one place, to another to have a meeting. Now, I just have them back, to back, to back. Paul Jarley: I think it’s also really difficult to have productive informal conversations via Zoom. Nick Poole: Yeah, agreed. Yeah, I think the thought is that, physical space, you need it, in order to get your people together, right? That’s where the social interaction, the communication, collaboration, all of your information flow is going to occur. Even more so in our industries, mentoring is a big deal. Mentoring and the ability to train somebody, I think is way more difficult to do over a Zoom, or some type of social media type setting. Nick Poole: Whereas, sitting down with somebody, going out to lunch with somebody, having physical conversations with somebody, watching over their shoulder, on the job type training, those are really important. Nick Poole: I think it’s not only important for the development of a person within your organization, but it’s a contributor to establishing a company culture. I think that is what most large, Fortune 500s are concerned about, with allowing their people to work from home all the time, or going completely work from home. Nick Poole: The company culture is necessary to foster innovation, but more so, it’s important to retain your employees and also recruit other professionals. If a company is going to grow and if that’s their desire, to grow, whether it’s revenues, or as a company as a whole, recruitment is necessary. I think that will be the silver lining of having physical space at some level. Paul Jarley: Nick, that’s the thing I worry about the most, here at the university, that the longer the faculty and staff are working from home, even though they’re all really trying to get their jobs done as best that they can, that they’re going to lose touch with the mission. Paul Jarley: Universities are really special places, that involve a lot of that kind of social interaction. I am concerned the more they’re removed from that, the more difficult it is to maintain the culture and sense of purpose that people have. Nick Poole: Look, it’s not just universities, right? I jotted down a couple notes here too, just some research that we put out. A few firms that we’ve interviewed, Goldman and Sachs, Morgan Stanley, Netflix, Facebook, Google, they have all commented back that their respective firms plan to have the majority of their employees continue to work out of physical offices. Nick Poole: That runs the gamut, financial, technology, some that have been around for a long time, others that are new firms. There’s mixed emotions about that, but I think as we’ve gone into the 6th and 7th and 8th month of COVID, people are realizing that, it is an important thing to continue to have, at least on some level. Nick Poole: A lot of these firms are going back with the majority of their employees expected to come back into the workforce as well, and work out of a private office. Paul Jarley: Is it really then, in your minds, just overcoming the fear factor? Do you think once fear of COVID declines, that we’ll see people flock back to the office? Nick Poole: My personal opinion is, our offices have been open since the second week of June, limited capacity, starting at 25%, up to 50%. Now, we have a seat for every one of our producers and admin staff, if they want to come in and work from the office. Nick Poole: I’ve been doing it since early June, and I can tell you from my own personal opinion, I don’t have a problem with coming into the office and working here. I feel just as safe working here, as I would out of my house. I walk to lunch. I go have lunch. I do a lot of those things, with precautions. Being spaced out, with a mask, all of those things that we’re doing. Nick Poole: I think folks that have been given the option to work from home, who haven’t experienced that yet, or like my mom and dad, who live up in Maryland and don’t have the option to go out and travel around, there is this pent up … I don’t know if it’s frustration, or concern, or fear that, you can’t just go out and do those things any longer. I do think that’s contributing a lot to it. Paul Jarley: Other people’s thoughts? Yvonne Baker: To tag onto that, the inconsistent messaging that we get through the media is a concern to a number of people, the few people especially that haven’t come back into our office. They’re just very uncertain as to, do the HEPA filters really work? Do the HEPA filters don’t work? It’s like every day, it’s a different story. Yvonne Baker: Are we supposed to be sheltering in place? Are we not supposed to be sheltering in place? Just the inconsistent messaging makes certain people who are already uncomfortable or confused, peg that on as an additional reason not to come in. They don’t know, so they’re not coming in. Yvonne Baker: I think that inconsistency is the part to play with a few of the people that we have. Paul Jarley: Yeah, I’ll tell you Yvonne, here, and I don’t mean to make light of this, but there’s hardly anybody in the middle. There are people who think it’s the flu and there are people who think it’s the zombie apocalypse. Yeah, hardly anybody in the middle. Yvonne Baker: Yes. Steve Garrity: Yeah, I think it’s heightened when we travel, also. We’ve been up to Massachusetts a couple times, and Colorado a couple times over the past eight months and it’s heightened. It seems like an obvious, so when you go to some other areas and you’re walking the beach and you see people wearing masks when no one’s around and you see people jogging and riding bicycles with masks on … Steve Garrity: A policeman pulled my wife and I over in a small town, in Cape Cod, because we weren’t wearing a mask while we were riding our bicycles, so I think the … this is just a temporary thing. It’s going to get over. We’ll get over it. Not sure how long. No one knows. It might be 12 months, it might be 24 months, it might be longer. It’s hard to say, but it’s a temporary thing. Steve Garrity: I do think there’s a thirst and a desire for people to interact and get together and communicate. I think once we get over a vaccine and having it safe for people to come back, they’ll certainly come back, but I don’t think until then. Bill Moss: Can I ask a question, and maybe this would be for Nick as far as, I think everybody sees the benefit of having employees be able to come to an office. Could you see in the future, when renewals come up, are that 50,000 square foot tenant saying, “We see the benefit of a workplace that people can come to, but we don’t need a seat for everybody, so we’re going to lease 20,000 square feet. We’ll have room for people in the office, but we would expect that work from home thing to continue”? Nick Poole: Yeah, I think it’s probable that it will happen in some form or fashion, for sure. Nick Poole: A couple stats that I threw out here, prior to the pandemic, our research tells us that approximately 10% of professional and business services employees worked primarily from home. Nick Poole: JLL’s research tells us that we expect white collar employees working primarily from home will more than double as a result of this pandemic. We anticipate that’ll be somewhere around 25% of white collar employees working from home, primarily from home. Nick Poole: I could also tell you that, a couple other statistics that I jotted down, US occupancy, US office occupancy, office in particular dropped by 28.9 million square feet in the third quarter. That was even a bigger number than the previous record of 23.2 million square feet in Q2 of 2009, after the financial crisis. Nick Poole: You’re right though, there’s tons of vacant space right now, where companies are saying, “Am I going to continue to pay for this space? Do I need to downsize this space? Should I consider sub-leasing it, or trying to terminate it?” Nick Poole: As a result, sub-lease availability in the third quarter increased to 124 million square feet, across the United States. That’s exceeding any of the records that were established back in the dotcoms. That is happening, and it’s happening in a big way. I think that everybody is going to be forced to consider allowing a portion of their workforce to continue to work from home. We anticipate that, that’ll grow. Nick Poole: The other thing that’s changing though, back to that densification comment that I made earlier is that, you can’t put the same level amount of people into the office, or most companies are projecting that they won’t, if given the option, because they don’t want to push that many people into a small space. They’re got to space them out. They’ve got to de-densify as a result of the square footage per employee is expected to grow, and floor plans are going to change. Nick Poole: I think that they’ll start to counterbalance themselves a little bit. You’ve got some people working from home, you’ve got an increase is space per person. I anticipate there will be some type of counterbalance there, and I think that’s the path forward, at least for now. Paul Jarley: Is this going to be a boon for space design consultants? Are they a thing? Nick Poole: Yeah, they’re a thing. Yes. Yes and no. Yes and no. I think there will be a rollback of densification in our industry as a whole. That’s going to take 180, where companies are rethinking the way that they pack people into space, for sure. Nick Poole: I still think that there will be some emphasis on open and collaboration spaces, or maybe private offices that some people will call huddle rooms, that you can use in a number of different flexible ways. Nick Poole: But, I think your question was, is this going to be a boon for people to go in and redo spaces, or re-plan spaces. Paul Jarley: Yeah. Nick Poole: Yes and no. I think what’s going to happen, at least over the next year or two is that, all of this plethora of sublet spaces, or companies that have elected to terminate leases early, or just vacating space all together, they are going to provide some nice options in the market, where you’ve got furnished, wired, basically ready to go, what we call plug and play in the industry type solutions for companies. Nick Poole: If a company doesn’t want to have to commit to a long five, seven, 10 year type of conventional office lease term, their own money to make the space different, they are going to have a big variety of options out there in the marketplace if they wanted to sublet, or take over somebody else’s space. Nick Poole: We’re already seeing it. The activity that we do have is, on low capital type of moves or relocations in the space that’s more or less built out to a good standard, or something that they could use. Some of them already have the furniture in place. Nick Poole: Companies are giving up space, others are coming in and taking over that space, as opposed to doing a brand new build-out on a long-term lease, because there’s just less flexibility and more cost involved. Paul Jarley: That way, they can see how the world is really going to change over the next couple of years. Nick Poole: Yeah. Steve Garrity: Yeah, it’s probably safe to say companies are hesitant in spending too much money, or any money for that matter, of retrofitting their existing space. They are reacting and addressing their short-term needs, knowing that they can address their long-term needs once there’s some clarity with this COVID. Steve Garrity: The good thing is, I believe, in the office world in Orlando, we had not been overbuilt before COVID. It was very disciplined, so consequently, the sub-lease space that Nick is referring to in my opinion, as it increases, it’s really not going to be dramatically impactful. There will be some options for customers and tenants to enjoy, no doubt, but I don’t think it’s really going to move the needle, assuming that companies are going to be reinventing themselves and creating additional companies that we haven’t even heard of just yet, because of the pandemic that we’re in. Steve Garrity: Consequently, I think they’ll be leasing more space, de-densifying if you will. That open floor plan is critical, but I do think it’s promising and we will recover, like we recover from a lot of things. The question is, when will we start to meaningfully recover? That’s really unknown. Steve Garrity: I think we’re just right now, people are reacting and adjusting to this transition period, which we’re in. But, the good news also is, it’s accelerating many other things, accelerating companies that are currently … we’ve already seen before COVID, but we’re seeing it even more so, companies that are in the high tax states, that really have now accelerated their decisions to really consider moving out of those states, moving into a state like Florida and other places that they can enjoy cost cutting efforts that they’ve always gravitated towards. Paul Jarley: All right, so I’m going to ask you each a final question. I’m going to start with you, Yvonne. Is everybody going to be back in their office two years from now, or not? What do you think? Yvonne Baker: We’re here now, and I think that many people will be back in. I think that we are absolutely moving to a more flexible work environment, going forward. I think we’re going to see great changes and they’re going to be exceptionally positive. I’m really excited about what the future holds. Paul Jarley: Nick, what do you think? Nick Poole: Our general consensus is that, office occupancy today is somewhere probably in that 20% to 30% range, depending on where you’re at. We see this growing to call it 40% to 50% by the third quarter of next year. End of the year, 2021, it’s probably in that 75% to 80% range, but the trend, depending on some type of vaccination schedule will certainly put people back into the office. I believe if it’s 12 months, 18 months, it will occur. Nick Poole: I do think that this is temporary and I do think that we’ve worked the way that we’ve worked for years, and years, and years. We’ve got to get back to that at some level. Paul Jarley: Thanks Nick. Steve? Steve Garrity: No, I’d agree. I’d say we’re heading in that direction right now. Companies are coming back to the office, which is great. We’re seeing our buildings more and more full as the days go on. We’re an example of that, but now, we’re going to be … We’re currently alternating our occupancy, but we’re encouraging people if they would like, during the time that they’re supposed to be working from home, they want to come into the office, they’re certainly welcome to. Steve Garrity: I think that trend is certainly happening, and I think it’s going to … Just the desire and the thirst to collaborate will be satisfied in ’21. Paul Jarley: Bill, I’m going to give you the last word on this, my friend. Bill Moss: Well, I would concur with what Yvonne and Nick and Steve have said. Yes, there will be more employees back in class A, or class B office space going forward. I think Yvonne set the bar pretty low, when she said there were four cars in the parking lot of a 200,000 square foot office building in South Park, so that being said, I think yes. I think there will be more employees. I do think, and Steve and Yvonne and Nick are closer than I am, but I think a lot of companies are going to spend a good deal of time, looking at how much space they actually need. Paul Jarley: It’s my podcast, so I get to go last. Paul Jarley: The death of the office has been greatly exaggerated. Few of us have homes that are set up for work and school for the entire family. Besides, that much togetherness just isn’t a good thing. We’re social creatures, who crave authentic, serendipitous interaction and collaboration with a broad range of people. Paul Jarley: Much of that interaction occurs at work. If you don’t buy that, buy this. People working from home will not get promoted at the same rate as people who are working in the office. Out of sight, out of mind. Paul Jarley: For these reasons, people will undoubtedly be back in their offices in less than two years. My guess is, in less than one year. What the office looks like and how frequently they use it, well, that might be a different story. With personal space being at a premium, I don’t see hoteling or big open floor plans being the trend of the day. Paul Jarley: People are going to want their own office, even if they’re not in it every day. They are going to want that office to provide them protection from viruses and other threats. They’re still going to be able to want to Zoom or work from home on occasion, to get stuff done. Paul Jarley: Greater variety in office space is likely to be the new trend, not working from home. What do you think? Paul Jarley: Check us out online and share your thoughts at business.ucf.edu/podcast. You can also find extended interviews with our guests and notes from the show. Paul Jarley: Special thanks to my producer, Josh Miranda and the whole team at the Office of Outreach and Engagement, here at the UCF College of Business, and thank you, for listening. Paul Jarley: Until next time, charge on. Listen to all episodes of “Is This Really a Thing?” at business.ucf.edu/podcast.
32 minutes | 7 months ago
Sports Without Fans: Can They Really Stay a Thing?
As cardboard cutouts occupy the stands at stadiums across the country, sports leagues and teams are dealing with a massive blow to their bottom line. If fans are stuck watching the game from home, it begs the question… how long can sports really be financially viable? Can exclusive, virtual experiences fill the budgetary void left by the absence of ticket sales? Or can the leagues just shoulder the economic consequences until stadiums and arenas are back at full capacity? Featured Guests Brian Wright – General Manager, San Antonio Spurs Shelly Wilkes – Senior Vice President, Orlando Magic Jon Alba – Sports Reporter/Anchor, Spectrum Sports – News 13 Episode Highlights 2:00 – What’s missing from sports in the pandemic 4:27 – The media landscape for sports in 2020 5:56 – How the NBA is doing during COVID-19 7:16 – What the future could hold for sports 9:54 – A new model for sports monetization 13:01 – Media owned sports leagues? 19:50 – Will there be fans in the building next season? 26:23 – Final thoughts from the panel 30:06 – Dean Jarley’s final thoughts Episode Transcription Jon Alba: The pitcher for the Washington Nationals just knocked this out of the park when he said that sports are like the reward of a functioning society. Jon Alba: [crosstalk 00:00:08]. Jon Alba: Mr President. Paul Jarley: If you watched the presidential debate like I did, you might think, well, we don’t deserve sports at all. This show is all about separating height from fundamental change. I’m Paul Jarley, Dean of the College of Business here at UCF. I’ve got lots of questions. To get answers, I’m talking to people with interesting insights into the future of business. Have you ever wondered, is this really a thing? Onto our show. Paul Jarley: Life, for me, had a glimmer of normalcy with this. Paul Jarley: First, it was Korean baseball. Then it was MLS, followed by the NHL, and the NBA. They all started in bubbles. Major League Baseball returned to play in their regular venues, but all these restarts were missing one thing, spectators. The seats were empty. We’ve seen some baby steps towards the return of paying customers and seats in football but the question remains, how long can sports really be a thing if the stadiums are, well, mostly empty? Paul Jarley: Luckily, I know people on the inside who can help us understand what’s going on in sports today. How long this disruption might last and how sports might look different going forward. Listen in. Paul Jarley: Is the current arrangement sustainable financially? How long can the leagues operate without spectators before this becomes a real financial problem? Shelly Wilkes: Well, I can jump in. Paul Jarley: Shelly Wilkes is a graduate of the DeVos Sports Business Management Program here in the college, and was the president of the Lakeland Magic. Now, she’s a senior VP for the parent club, the Orlando Magic. Shelly Wilkes: I think this is not really sustainable. I don’t think it’s sustainable from a society standpoint or a team ownership standpoint. I think that we, as sports leagues, really bring fans together, we bring communities together that’s really what we build our businesses upon, is how do we bring a group of people together to cheer for one common cause. I think that in the short term, everyone understands where we are as a country, where we are as a world with the pandemic. We’re making changes and sacrifices where necessary so that we can continue the game on the field or on the courts. I think everyone wants sports to come back in its entirety. We want to have arenas full. Shelly Wilkes: I mean, you’re seeing even the games that are happening from the NBA standpoint in the bubble. I actually listened to a lot of interviews with the players and though I think everyone’s happy to be playing, it’s not sustainable. You’re missing a sense of energy, you’re missing a sense of comradery and community with the way it’s currently established. Financially, I also don’t think it’s sustainable in the long-term. I know in the NBA, Adam silver has said a few different times that our current financial model has about 40% of our revenues coming from ticket sales and people in the building. So, financially, definitely not a long-term option for us. Jon Alba: I think one of the biggest things that has to be considered in this is the return on investment that media partners are then going to get. Paul Jarley: Jon Alba gives us the media angle under discussion. He’s a sports reporter and anchor for Spectrum Sports on News 13, here in Orlando. Jon Alba: When we had the beginning of this pandemic and there were no sports, there was obviously quite a thirst from spectators. So, they’d be desperate to watch anything. We remember NASCAR went the route of having the iRacing, the electronic racing that fans were turning in, in droves just to watch. Where now… Kind of what Shelly was saying, where you have 40% of the NBA league model set up on spectators actually being in attendance for. Jon Alba: Well, in the last 10 years, 20 years especially, we’ve seen these huge media rights deals become the main proprietor and driver of these gigantic league revenues that we see. If the media partners aren’t feeling like they’re getting a return on investment, I don’t see how any way there would be any sustainability without fans in the stands. Paul Jarley: Jon, if I can follow up on that. First, let me admit to watching Korean baseball games- Jon Alba: There you go. Paul Jarley: … six o’clock in the morning. Life was desperate for a while. But, is viewership up or down for the leagues? I haven’t actually followed that. Jon Alba: I think it’s a case-by-case thing where you will see there’s an immediate payoff for some, and then it slowly drags off, whereas some other leagues may not necessarily be experiencing that. The content right now, that people are most interested in, is national news and national news is doing record numbers for a variety of reasons right now. I think that, that has maybe slowed down some sports, but there are also other sports who are thriving tremendously at this time. Right now, especially referring to the NBA, they’ve got a chance to grab a ton of eyes as they march towards the NBA finals here. Brian Wright: Yeah. I think, as John mentioned, there’s a certain target demographic where ratings are doing extremely well. Paul Jarley: Brian Wright is the general manager of the San Antonio Spurs. In fact, he’s the youngest GM in the NBA. He’s a graduate of our DeVos Program and is the youngest alumni ever inducted in the College of Business Hall of Fame at UCF. Brian Wright: I think the NBA has been the most viewed television program, broadcast and cable among adults, 1849 on 20 of the 25 nights of playoff coverage so far. Obviously, it’s at a point in time when we started in the summer where historically, television viewership rates are at a lower place than when they are at other points in time. I think it’s really done well, but again, I think the entire pandemic has disrupted our way of life as a society and it’s disrupted the sports industry. Brian Wright: I think from that, you’ll see some things that, obviously, to Shelly and Jon’s point, need to change in order for the model to be sustainable. But that disruption probably caused us to look at how we provide content to our fans, to our media partners, et cetera, that create a unique and different experience for those that may not be in the building. And I think there’s a ton to be learned there/ Paul Jarley: Let me play with some alternative versions of the future, if you don’t mind, and tell me whether I’m nuts or not. Let’s go there for a minute. Paul Jarley: The bubbles seem to work in the sense that they protect the players from the virus, they’re able to sustain the game. Could you imagine traveling bubbles where the teams and the leagues go from city to city perhaps where the virus is low and would have fans there? I’m taking the example of… I know they do this in rugby, some, and I know they do it in lacrosse where the entire league will go to a particular venue and they will make it a carnival atmosphere for the weekend, and they’ll play a variety of games there. Majorly, baseball is doing something sort of similar without the fans for the playoffs. Anybody think that’s a workable idea? Shelly Wilkes: I think that in the short-term, as a short-term solution, getting to the next phase of what’s playing in a pandemic looks like, I certainly think that, that is probably one of the many options on the table. Again, Jon mentioned this too, I think in the long-term when we go back to the sustainability model of leagues, we do have a lot of revenue and ticket sales but we have a lot of revenue and partnership deals. And when you don’t have people in your stance and you’re not able to take care of your partners within the building with the rights that they have purchased, whatever those marketing rights may be, I think you’re setting yourself up for failure in the long-term again. Based on not having your home game experience, your home right experiences, I just… I think it’s long-term sustainable. I think that it, again, could be a short-term solution to get us past the pandemic, but I can’t imagine that’s going to be something that could live on for years. Shelly Wilkes: To Brian’s point, it could be something when we talk about spreading the game. I mean, not in a bubble format, but you could almost say that that’s what we do on the international scale on the NBA is we take a couple of teams over to Europe or over to China, and we play in a couple of different cities and in that kind of festival atmosphere, and that’s really for fan building and sand growth. So, not in the bubble atmosphere, but kind of the same model of bringing the sport to different places. But in the pandemic and how we really solve for where we are, I just don’t think that that would be a sustainable model for teams or for leagues. Paul Jarley: What would be hard to do over 82 games, but if you’re playing an 18 game schedule like the NFL, I don’t know. Jon Alba: Well, allow me to kind of play devil’s advocate here as the one who covers the sport rather than working on the inside of it. Maybe it comes down to the point where you have to reconsider what your model is for profiting and for how you distribute your money. The reality is, in a lot of sports… I’m not necessarily saying the NBA because I do think the NBA is a relatively affordable fan experience, but there are a lot of sports where you go to a Major League Baseball game, there’s 81 home games a year for a team and the average day at the ballpark for a single person is going to run you well over a 100 bucks if not more, whereas the original model used to be sustainable in that it costs you maybe a grand total of 20 bucks to go to a ball game. Jon Alba: The average fan has been out priced. So, they’re consuming the sports in a different way where now you get your big TV at home, you got your smartphone, there are different ways they can consume it without having to spend all that money to go to the ballpark, to go to the stadium, to go to the arena. I covered the combat sports industry pretty in depth, including WWE, which has rented out Amway Center here in Orlando for- Paul Jarley: Good example. Jon Alba: … a two months day, and they ended up putting all these video screens, even five times more than what the NBA had going. By doing that, they have saved… And I’m not exaggerating when I’m saying this, they’ve saved tens of millions of dollars on production costs that they may reevaluate once things start to become “normal”, where they don’t have to go on the road as much and spend all those production costs because they know that fans can consume the content in a different way and they can cut back on traveling. Paul Jarley: Brian, thoughts? Brian Wright: I’m kind of like you, I always just think of why not. Having a regional type of setup, like you mentioned, I think the difficulty with that comes with logistics and costs and how often… How long are you in each city? How many games are you playing? That type of thing. But I do think, just from a plank standpoint, if you look at the performances in the bubble, it’s been an unbelievable playoff run for a magnitude reasons. I think you do start to ask yourself, well, what’s different? What’s changed? What’s caused it to go so well? For the games to be so good, for it to be so competitive. Is it about travel? Is it about rest? Is it… There are a lot of different things that you can factor in, and the one thing you know that you want back are the fans in the building for that energy and environment. Brian Wright: But I do think there’s a lot of things that you can learn from that five years from now may alter the way that the game is produced or where… How it looks. Some of that, to what you mentioned, could be a cost issue, and also how long are we in this type of pandemic situation. But I do think, again, there’s some learnings that caused you to ask, why not? And then what does… How does that alter the game or the experience for the fans or what have you for the next five to 10 years moving forward. Paul Jarley: Let me go to my craziest thought on this. If we can do this without fans and we can maintain viewership, when will a network say, “Well, this is just a TV show. Why don’t we own it and eliminate the middlemen?”, which would be the leagues. I mean, the WWE model is an interesting one, Jon. Jon Alba: Yeah, [crosstalk 00:13:23]- Paul Jarley: That’s pretty close to it. Jon Alba: … it is pretty close to it. Right now, WWE is in the middle of it’s most lucrative contracts that it’s ever had with Fox Broadcast and with the USA Network and NBCUniversal. But at the end of the day, we are talking about the leagues are the ones that are providing the service and they are so well-established and ingrained in American sports society that we’ve seen networks attempt to have startups, and they just have not been successful, or with new startups. So, I’m not so sure that that’s something that’s on the immediate horizon. Paul Jarley: Anyone else have thoughts about? Shelly Wilkes: I just think that there’s a lot more that goes into the game on the court than the game on the court. I think trying to have a network get into a business that is not really their core business because there are, in Brian’s world alone, just the recruitment of players, the… Keeping people wanting to come to play the cities, which is its own thing, wanting them to be a part of different teams. And maybe in your model there’s not cities, right? There’s broadcast rights and you’re playing for your team regardless of where you live. Shelly Wilkes: But I think that there’s a lot of pieces that go together to create a culture of winning on the basketball court that has nothing to do with the program of the game, the two and a half hour broadcast, right? There’s a lot more pieces of heart of building a team. I struggled with that one a bit as well. It is a crazy idea and I love that you’re thinking outside the box about how we can sustain sports in what could be a longer term situation here. But I do struggle with that one just because of all the other pieces that go into maintaining a sports team. Paul Jarley: Yeah, I’m not sure if that it wouldn’t even come down to financial risk sharing. I mean, that would be a lot to take on, right? As a television entity. I don’t know. Paul Jarley: Yeah. It’s something I… I’m not sure that it’s out of the realm of possibility. I agree with you that I don’t think it’s immediate, but if things continue for a while… Because I’m not sure how much longer this financial sustainability for the leagues is going to be. Paul Jarley: So, when do you think things are going to get back to normal? Anybody got thoughts on that? Jon Alba: That’s a loaded question right there. I think you have to determine what is normal, right? That’s kind of where things start. Jon Alba: I just think this Sean Doolittle, the pitcher for the Washington Nationals, just knocked this out of the park when he said sports are like the reward of a functioning society. And right now, we are just so far from that on so many different levels. You can obviously hope for a vaccine, you can hope for a bunch of other things to fall into place from a health standpoint, but then there are the other things, and we’ve seen how impassioned… Obviously, Brian and Shelly can speak more to this than I can, but the impassion response of these players to what’s happening in American society, I think that’s a real thing and that’s a real tangible effect on their mental psyche. To me, that’s why it’s all the more impressive why you have two teams like the Heat and the Lakers who have managed to get to the NBA finals and make it this far because of the mental toll that this season has taken. So as far as normalcy, I’m really not sure on that. Paul Jarley: Well, it’s a lot easier to control the players than it is the fans. I mean, witness what happened at Florida State a couple of weekends ago, right? Where mask wearing was not common, if I could put it that way. It’s hard for me to imagine, without an effective vaccine, that we’re going to get back to normal anytime soon. Paul Jarley: Anybody else have thoughts on that? Paul Jarley: I think the NBA has got a whole nother season to go through, per example. Shelly Wilkes: Yeah. I think we… I don’t know what normal looks like either, I don’t know when that happens. I mean, you listen to Dr. [Fouche 00:17:44] and he’s telling you end the next year. Then again, it goes back what’s normal, right? Do we want to go back to normal? I know personally, for me, when we just talk about the work world and where we’re at. We’re still working remotely and it’s kind of changed my perspective on the need for a commute every day and rushing out the door with my two daughters, and really kind of accepting that this is okay, and that we can slow down a little bit. So, I think there’s some good that is coming out of this. I think the social justice movement that has been happening, I think, has had so many eyeballs on it because we were speaking earlier about people really paying attention to the news. Shelly Wilkes: There’s not a lot else, they’re home. They’re really paying attention to what’s happening and I think that movement is so powerful because people are paying attention, finally. I think again, do we want to go back to normal? What does normal mean? The… When we get back… When we talked about normal, just in sports and having full arenas with 20,000 fans in the NBA, however many in the NFL day-to-day, I do think we have some time still. Shelly Wilkes: I think we have time. I think even after the vaccine comes out, I think people… There’s going to be just a change in behavior. A comfortability with being around one another, a comfortability of trusting the vaccine and trusting how the medical world is responding. So, I think we’re a solid 9 to 12 months from what we would maybe consider normal. I hope it’s sooner than that. I know the NBA, we’re strongly pushing to play in front of fans and figuring out a way to do that. Whether that’s… If there’s rapid testing opportunities, if there’s shifting how… Capacity levels in buildings, that kind of stuff. So we’re paying very close attention to what college football and the NFL is doing right now, and hopeful that we can find a solution for the 2021 season that allows us to have fans in our buildings. Paul Jarley: Brian, do you see fans in the building in the upcoming season? Brian Wright: We hope, and you see it with the NFL where they’re operating in some places with limited fans, same thing in College. I do think, as Shelly said, that’s the goal. I think we’ll get there. I think the biggest thing, and both Jon and Shelly mentioned it, was you’ve got to define your new normal and that’s everything from experiences to interactions and how the game is played. So, I think as long as you’re open to listening, and I think that’s where the NBA has been far and above a lot of sports leagues is… From everything, from the social justice initiatives to creating a bubble and safe environment to thinking about how we move forward. Great organizations that lead through this situation have to be great listening organizations. What do your fans want to feel comfortable? What do your players need to feel comfortable? What does the environment have to be like to have everybody comfortable, but also create an experience that’s fun and exciting and entertainment for everyone? Brian Wright: So, I think the new normal will start with being a great listening organization and understanding the needs of who you’re serving and building out from there allows us to create what that new normal is. And again, if we think normal will be just going right back to the way it was, I think there’s an opportunity loss to grow. If you look in every industry, disruption is something that changes it for the better, oftentimes, and COVID has definitely been a disruption to this business. Brian Wright: Some of it is definitely negative, but I do think there’ll be some positive things that we can learn from it. Shelly mentioned the remote work and work from home, and what does that allow you to do when you look at hiring talent and bringing people into your organization. If you have remote work, that expands your landscape and pool that you can choose from. So, there are a lot of different things that we will learn from this situation and hopefully come out better, but it starts with being an incredible listening organization and league, and I think to this point, the NBA has done a amazing job at that. Jon Alba: Well, isn’t it amazing too that we’ve packed 20,000 people into arenas and never had hand sanitizing stations before? To me, it’s just even starts with things as remedial as that. Paul Jarley: How do you think, though, it’ll change the fan experience going forward? Brian touched on this a little bit, but if you had two or three things that you might think would fundamentally change going forward, what might it be? Shelly Wilkes: Well, I think you’re seeing it right now. I mean, in Orlando we’ve moved this way and I know a lot of sport teams are moving this way. Just from the ease of food ordering, and delivery to seats, and entering the building with your mobile device versus printing tickets. I think that the technology advances that are going to happen, I think that that alone will increase… I mean, my husband actually works for Disney and Technology, and they’re seeing… Previously before the pandemic, they had mobile food ordering and they had a minimal amount of people, maybe 9% a day, actually utilizing that experience and now it’s over 90%, are mobile ordering from restaurants. That’s how they’re ensuring safety for capacity numbers and food delivery, et cetera. I think that you’ll start to see a much greater technology adoption, which does create a better fan experience from that standpoint. Shelly Wilkes: And then I think, to Brian’s earlier point, we’re figuring out how to include people in the game experience who are not actually in the building. I think the WWE has done a fantastic job of that. The NBA has done a great job from the bubble, and I think that we will start to innovate and find new ways to expand the game experience outside of those 18,000 people that are at a game. I think all of those advances will be hugely rewarding for the teams and for the fans as part of the experience. But I’m sure that this is going to have a long-term ripple effect for those positive advances as well. Paul Jarley: Does that also provide new revenue stream opportunities for you? Shelly Wilkes: Absolutely, I mean- Paul Jarley: With those new forms of engagement. Shelly Wilkes: … yeah. Even if you think about what the league has done with the virtual fans experience. That was a new partner with Michelob ULTRA, they were not a partner of the league. They came on board for that experience. Microsoft came on board and launched that experience within this past six months. So, you’re already seeing, at the league level, how there are business opportunities and business advances because of that. Paul Jarley: Jon, how do you think sports coverage will change going forward? Do you think there are impacts there? Jon Alba: Yeah. I think one thing that we’re seeing now is virtual coverage is significantly easier to do than what some others had maybe asserted beforehand. I can even speak personally, the idea of doing a virtual interview for a story that I was putting together would have been absolute last case scenario, if not impossible when putting together pieces whereas now, that’s a very real alternative that I would say has become the norm, more than anything else in this period. Jon Alba: I could definitely see that opening up a whole new can of worms in terms of who gets access to sporting events because with that, you can now credential bloggers. You could credential people who don’t consistently cover an NBA franchise. Maybe that’s for better, maybe that’s for worse, I’m not really sure how I feel about that, but it definitely creates more accessibility in that regard. But on the flip side of that, I can say that being in a locker room, covering players after games, you pick up on things that maybe the person on the Zoom call wouldn’t be able to pick up on. Whether it’s body language or you hear something, and as a reporter your job is to be that mediator, to provide that link between consumer and product. So, I could see there being some pretty radical changes in that regard. Paul Jarley: All right then. One last question. I’m going to ask each of you answer this. Is sports without spectators still going to be a thing two years from now? Yes or no? And why. Jon Alba: What’s funny is I feel like when you have dissenters, people who are like, “Well, let’s be cautious. Let’s be careful”, then you get this whole backlash of, how dare you not be optimistic, how dare you assert that. But I think we’ll have spectators back within the next… I think the timeframe that Shelley gave is perfect, 9 to 12 months. To what degree, I’m not entirely sure. Jon Alba: I think the more fascinating aspect of all of this will be to see how teams and franchises and entities adapt and bring in these new business models that present sports in a way that we haven’t been familiar with in the past, whether that’s in-person, whether that’s virtually, whether it’s from a media coverage standpoint, and see how we continue to evolve because sports and sports coverage and sports presentation have evolved so much in the last 10, 15 years as is. So, for as terrible as the circumstances have been, maybe it will provide some pretty cool opportunities going forward. Paul Jarley: Shelly. Shelly Wilkes: Yeah, it’s my business to be optimistic in this. So, I strongly believe we will have full arenas in two years. I think we will inch our way there over the next 12 months and figure out what’s going to be the safest for our players, our fans, our staff. But I absolutely have to believe that in two years we will be playing in front of spectators and that the sports industry will come back. It’s historically been the thing that brings people back together after tragedy and after issues that have happened in our communities, and we will be there once we’re able to do that as well. Paul Jarley: Brian, you get the last word, my friend, Brian Wright: Well, Shelly was ahead of me in the divorce program so I’m just going to follow her lead. Brian Wright: I’m an eternal optimist as well. So, I do believe that it will happen, but I also believe that we’ll come out better because I think we’re going to have a newfound appreciation for the fan that does not enter the building. What does their experience look like on a daily basis? How are they interacting with your team, your brand as you build out moving forward? And I think that’s only going to make the power of sports, the leagues and the teams that much stronger. Brian Wright: We’ll understand digital better, we’ll understand virtual fan experiences a lot better. I think how we come out of this on the back end will be that much different. Shelly has always been a leader, so I’ll just continue to follow Shelly’s lead on the optimism. But I do think we will get fans back in the building, and I do think this will create an opportunity for us to build a whole new fan experience that maybe we hadn’t captured prior to the pandemic. Paul Jarley: Well, thank you all for participating. Paul Jarley: Brian, you have a future in politics. If that’s the way that you want to go, my friend, but I kind of already knew that. Paul Jarley: Shelly, I think you hit on the key point here. Consumers are going to decide this, not the leagues. Shelly Wilkes: Yep. Exactly. Paul Jarley: I mean, they’ve got to feel safe coming back in huge numbers. That’s going to be the key. It’s kind of hard to know when that will actually be, but I certainly look forward to the day when I can travel to Lakeland for watching my Tigers spring training games. Can’t come soon enough. Paul Jarley: Hopefully things get back to normal here within the next year. But I do think it’s going to be a year, I do. Paul Jarley: It’s my podcast, so I get to go last. I think I may have asked the wrong question today. My dad was a Detroit Tiger fan for 83 years. He was a fan long before he was a spectator. In fact, I think he probably only attended a dozen games in his entire life. The Tigers, for him, were Ernie Harwell’s voice on the radio. He listened to every game, every season. He, of course, was not alone. The pandemic has made it painfully clear that there has always been more fans than spectators. Paul Jarley: Brian used the phrase virtual fan. I know that’s code for how to monetize the fan base, but I’m still not exactly sure I know how the virtual offense experience will be different than my dad’s or the typical television viewer. During this weird year of 2020, it certainly includes fans on electronic screens at NBA and MLS tournament games, but I doubt that’ll last longer than the day stadiums are back to full capacity. If the virtual fan is a long-term thing, they are probably shelling out money for some new subscription service, a social media platform, or maybe both. Paul Jarley: Maybe 10 years from now, we’ll see 2020 as the birth of the virtual fan and a shift in the revenue base for sports leagues, or just maybe we’ll be back to increasing ticket prices at stadiums filled to capacity. What do you think? Check us out online and share your thoughts at business.ucf.edu/podcast. Paul Jarley: You can also find extended interviews with our guests and notes from the show. Special thanks to my producer, Josh Miranda, and the whole team at the Office of Outreach & Engagement here at the UCF College of Business. And thank you for listening. Until next time, charge on. Listen to all episodes of “Is This Really a Thing?” at business.ucf.edu/podcast.
36 minutes | 8 months ago
Can a COVID Cough Drop Really End the Pandemic?
Two researchers at UCF are developing a cough drop that can reduce the spread of COVID-19 by making saliva heavier and stickier – it makes sneeze and cough particles fall rather than float. But is there really a market for such a product? Paul Jarley talks with researchers Michael Kinzel and Kareem Ahmed to find out the science behind the lozenge, how soon it could hit store shelves and the similarities to products you already have around the house. Featured Guests Kareem Ahmed – Assistant Professor, College of Engineering & Computer Science, Department of Mechanical and Aerospace Engineering Michael Kinzel – Assistant Professor, College of Engineering & Computer Science, Department of Mechanical and Aerospace Engineering Cameron Ford – Director, UCF Center for Entrepreneurial Leadership Michael Pape – Dr. Phillips Entrepreneur in Residence; Lecturer, Management Episode Highlights 0:49 – The origin of the COVID-19 cough drop idea 2:58 – How mechanical engineers got into cough drops 5:18 – How can the COVID cough drop make it to stores? 7:58 – Legal hurdles for the COVID cough drop 11:53 – Who is the target audience for this? 16:27 – How long will it take to get to market? 25:42 – …Ketchup? 28:48 – What are the learning lessons for students? 33:07 – Final thoughts from Paul Jarley, Cameron Ford and Michael Pape Click to listen to the extended “geek” edition of this episode or visit business.ucf.edu/podcast! Episode Transcription Paul Jarley: 2020 has been the year of the coronavirus, and big money is being put in to find a vaccine. But what if I told you that the spread of COVID isn’t a medical problem, but rather an engineering one. And that two UCF Aerospace Engineers might have a simple, low-cost solution. Would you invest in their project? Paul Jarley: This show is all about separating hype from fundamental change. I’m Paul Jarley, Dean of the College of Business here at UCF. I’ve got lots of questions. To get answers, I’m talking to people with interesting insights into the future of business. Have you ever wondered, is this really a thing? Onto our show. Paul Jarley: Ideas come from unexpected places. Listen to Michael Kinzel, assistant professor of mechanical and aerospace engineering at UCF. Explain the origin of the idea for a COVID cough drop. Michael Kinzel: It was kind of funny, right? My wife was arguing with one of our neighbors on Facebook, about aerosols and how far they can kind of pass from one person to another. And one of the things about aerosols is they’re very small, and if you cough, for example, at that time, they were showing that… Actually not cough, sneeze, if you sneeze, they were showing that these aerosols can travel at 27 feet. My wife was arguing with neighbors like, “Hey, you need to be careful as you go by somebody, maybe move out of the sidewalk.” Because of these aerosols. And it drove me to think, how do you make these… What do we do in engineering to make things not form aerosols? Michael Kinzel: And one of the things that drives that is underlying fluid dynamics processes that associated with how thick your fluid is. So for example, if you think about trying to make small droplets out of oil, it’s a lot more difficult than making small droplets out of water, or even on the other end alcohol. So this is kind of driving, it was kind of, how do you get to a scenario where you don’t enable droplets to travel 27 feet? And if you make them large, they’re no longer aerosols and they have a tendency to fall. So one way to potentially enable that is by making a lozenge that actually alters your saliva. So that it behaves or has a tendency to form these large droplets that don’t persist for very long distances. Paul Jarley: Okay. So first, Michael, your wife has strange conversations with neighbors. Michael Kinzel: Oh yeah, she is. She argues with her neighbors all the time on Facebook. Paul Jarley: I assume at some point you brought in Kareem on this. Paul Jarley: Kareem Ahmed, is director of the propulsing and energy research lab at UCF. And like Michael, he’s an assistant professor in mechanical and aerospace engineering. Paul Jarley: Kareem, what did you think about this? Kareem Ahmed: I mean, so we do biofuels research and the alteration of the saliva is a similar reminiscent sort of effect that we study with biofuels where change viscosity and surface tension. And yeah, I mean, that’s the thoughts back then, where it’s a fluid dynamic problem. It’s similar to the expulsion that you have from an engine, same principle that has happening here. It’s just a lower force. And by having this different properties, if your saliva using a loss [inaudible 00:00:03:49], so it impacts its atomization process. So it’s a basic simple principle actually. Paul Jarley: So why didn’t anybody think of this before? Kareem Ahmed: Well, it’s just because there isn’t a need for something like this. I think here it’s when you’re bound to the closures and the pandemic and thinking outside the box, why isn’t anybody doing this? Well, first is, I mean, we are human, right? So we want to drink water. We don’t want to have a foreign saliva altering object in our mouth. Kareem Ahmed: And in this case, it’s sort of a need, it’s the same thing like the face mask. We don’t want our face mask on our nose and mouth, but it’s a need right now. And I think that’s why nobody thought of it is because of this. Michael Kinzel: I was going to add that people had in the past thought about almost like a nebulizer that focused on the lungs, but nobody’s ever focused on the mouth. So, that’s I think are the unique aspect that we’re doing, and it seems to be pretty effective. Paul Jarley: Is this a potential solution for things other than COVID? Michael Kinzel: Oh, most certainly. Like colds, flus, I think in terms of a longterm application, yeah. Like if somebody has a flu, you may prescribe them some, not prescribed them, you may have them take these lozenge and they’ll have a less chance to transmit flu to one person. Paul Jarley: You touched on another one of my questions here, Michael. So this would be an over-the-counter product? Michael Kinzel: This is kind of where we have kind of a, we’re in a little bit of a bind because when we talk to FDA, they say, “As long as we don’t make a specific claim that this product…” Like if we don’t have a specific claim, we do not need FDA approval, hence it’s over-the-counter. It’s not even an FDA approved treatment, which is the same for a mask, by the way, it’s not FDA approved either because they haven’t done all the clinical studies. Michael Kinzel: In fact, I think a couple of years ago they found that dental floss wasn’t FDA approved to improve your teeth health, but that approval process gives you kind of like buy-in or added, it essentially it gives you more, yes, the FDA says that this actually functions. And in either case, I think it would be over-the-counter because it’s non medicinal. But I think maybe one question is, do we go after FDA approval to be able to make a specific claim on transmission reduction of things like COVID? Paul Jarley: But what about the additives that changed the viscosity of the saliva, or are there any hurdles there? I mean, what are you adding to it? Michael Kinzel: These are just over-the-counter, kind of like food grade thickeners, things that you would put in your, like in cooking. For example- Paul Jarley: Can I have a little flour- Michael Kinzel: Not flour, but like cornstarch and so forth. Paul Jarley: Okay. Michael Kinzel: And things that are… We’re trying to refine our ingredients so that it doesn’t, one that it stays, so it still functions in the context of a lozenge or some other treatment and to making it as comfortable as possible. I don’t know if you have any other comments, Kareem. Kareem Ahmed: Yeah. I mean, they’re just off the shelf ingredients that just simply alter your saliva and things like peanut flour, for example, but the alter is the saliva and it makes it highly viscous and reduces your optimization process from a sneeze or a cough, or even a loud speaking. So things of that nature that you could use, you could go exotic with formulated formulas, but for now it’s organic based off the shelf components. It’s like you’re chewing on a piece of bread, it affects your saliva in the absorption and it’s viscosity, so that’s the same principle. Paul Jarley: You might remember Mike Pape from our earlier podcast on, “Starting a business without any money.” He is the Dr. Phillips entrepreneur in residence, and professor of practice in the College of Business. Dr. Pape, do you have any take on the FDA component on this? Michael Pape: Yes. For the FDA, you can use the ingredients called GRAS. G-R-A-S, Generally Regarded as Safe. So if you use those types of ingredients, they mentioned the cornstarch, yeah, I mean, you could do that in a product than do it over-the-counter, and marketed in such a way that it has appeal to some customer segment. Paul Jarley: Well, it would seem like time is of the essence here. I mean, we’d all like to think that there’s going to be some solutions to this COVID virus soon. Is the FDA process a lengthy one, Dr. Pape? Would it take them a long time? Michael Pape: Well, I don’t know if you wouldn’t necessarily have go through that route. You can just use a GRAS ingredient and you can then market it from as you desire. I guess the thing here is, at least from hearing the conversation, what I’ve heard is cough drop, but it really wouldn’t be a cough drop because cough drops, they have menthol in them and it’s derivatives, which are analgesics, which suppress the cough reflex. Michael Pape: So those are very different things. Even those can be ingredients that you don’t necessarily have that FDA approval of, because they’re so used and they’re generic in nature, but this one looks like a saliva viscosity enhancer. However, you’d want to market that for somebody. That’s what it is. Michael Kinzel: Yeah. It’s essentially a confection. I would call it a confection, it’s not really a cough drop of- Michael Pape: There we go. Okay. Michael Kinzel: Most people think of… Well, when I say confection, not everybody knows what a confection is. So the media use cough drops as the generic term. Michael Pape: Yeah, I know. There’s one thing that… Because this is about different solutions. And then there’s the face mask, there’s the face shield, there’s the distancing. And I think everybody would agree that they’re like three leaky buckets for these aerosols and for respiratory droplets and by squishy three buckets together that have holes in it, maybe you can reduce the leakage. Michael Pape: And it looks like this would fit in the category where it’d be a fourth item if you will, that could reduce the leakage. So there might be a case there, but when I think about the solution, yes, you could this confectionary idea. I get it, but you can also reduce the droplets if you will. And it wouldn’t necessarily be viscosity, but you could do it by, I don’t know, I guess drawing out people’s mouth. Kareem Ahmed: One of the ingredients actually, and Mike was going to touch on it. We do have a ginger that does tend to do that, reduce your saliva production. Michael Pape: I’ll give you a recommendation for that. Paul and I, are big baseball fans. And we used to buy, I am sure, and just like he did, like I did, we would go buy Topps baseball cards every week, hoping there were Detroit tigers in there. And they would have this bad piece of gum, and we thought it was sent from heaven. When we chew it, and it would go stale in about a minute and dry out your mouth. Paul Jarley: It was terrible. Michael Pape: It was terrible. But we would chew it, and licked through the cards. It was the best clean ever. Kareem Ahmed: The cards smell great. Michael Pape: Right, it did. But those are just different solutions, but that same idea of trying to put it in with the current regime of reduction of respiratory droplets and aerosols. Paul Jarley: Mike, I think your card point is kind of relevant here because one of the questions I had is, why would I buy it? Because honestly I’m protecting others, not myself. Michael Kinzel: Personally, I think that that’s the biggest hurdle we have. And because of that, I do not think it’s… I think that there’s probably a few different market or markets to hit and it wouldn’t be the general market, the general person. It might be kind of like, I kind of tried to classify them in my own words, but kind of like a regulated workforce. So you think of like the healthcare, military and elderly homes. People where you have to, places where they have to be together, but they could actually demand, “Hey, you need to take these things and it’ll help reduce spread of disease and so forth.” It seems like the obvious first market to hit. Paul Jarley: Or how about college students to show up on campus. Michael Kinzel: I think that it would be really hard to [crosstalk 00:12:56]. Paul Jarley: Yeah. Cameron, what do you think? Paul Jarley: Cameron Ford is an associate professor in our management department, and is the founding director of the UCF Center for Entrepreneurial Leadership. Paul Jarley: What do you think about that problem? Yeah. Cameron Ford: Well, first off, I think this is a really interesting kind of creative solution in that it is, he came up with an analogy in between the aerosols, from the sneezing and everything like that, to these viscosity issues you guys deal with in your engineering research. So making that connection is one of the things I really enjoy seeing people do, and using one thing as an analogy for something else and then thinking for brand new solutions. That was a really cool aspect of your story. Cameron Ford: I think, I’m always looking at use scenarios for something like this, and trying to figure out whether if the solution by itself can address a problem or maybe in combination with something else. So, one thing I’m thinking about as I’m listening to you guys, is whether this is an ingredient that might be combined with something else, like a decongestant or something like that, that people might take as a better version of whatever it is they’re using to deal with like a common cold or something like that. Cameron Ford: The other thing I was thinking of doing by itself, or specific use scenarios. And who would be the 100 most desperate people to use something like this. I’m trying to think of, I don’t know, meat processing plants, places like that. Paul Jarley: For someone who has someone- Cameron Ford: Like Paul’s kind of thinking where it’s kind of high incident rates where maybe an employer could enforce utilization and it would solve their problem- Paul Jarley: Or a susceptible family member maybe, Cameron? Cameron Ford: Yeah. Something like that, maybe. Paul Jarley: That would be another category I thought about. Michael Kinzel: Yeah. Cameron Ford: The people are trying to either, in the global way of thinking about this kind of, and people are buying something or either trying to achieve a positive outcome or avoid a negative outcome. This is clearly a scenario where you’re trying to help people avoid negative outcomes. So getting your relatives sick, getting a child sick, getting a coworker sick, those would be the kinds of scenarios. So what are the worst ones of those that you can imagine, and then maybe focus on those. Michael Pape: Yeah. I agree with Cameron. There’s a product market fit issue, and Michael mentioned that. And the idea is who would be an early adopter of this? It wouldn’t be for the masses. It doesn’t seem like you’re going to pop one of these in your mouth before you go into public, to protect other people. Michael Pape: But if you have an acute situation with the relative, I’ll give you an example. Like my mom, she’s 87, she’s in a senior living facility and that senior living facility, it’s up in Michigan, they have a gazebo out there. You have to rent the space for an hour. Family members walk around on the lawn to sit out there in chairs that are far apart and they got to be masked, but you could see using and mandating something like this be used in the senior living facility, and family members utilizing it. If it can be acted on quickly, I think they could possibly mandate something like that. Cameron Ford: Yeah. To piggyback on Mike, I would suggest that there’s places where the use of this might be mandated for some kind of broader benefit for a population of people that are maybe in a prison or in a nursing home or other high incident places that might be a good way of doing it. Because to Paul’s earlier point, this isn’t something would probably be real pleasant to consume. So it might be better to have it in an environment where they’re doing it for some other reason. Paul Jarley: So gentlemen, how long do you think it will take you to get into market? Michael and Kareem. Michael Kinzel: Yeah. One of the things that we were… So our goal was to get it to market as fast as possible. So our initial thinking was, “Okay, why don’t we hit up the companies already developing lozenges or other kinds of things like the Nicorette gum.” But we have not had much success going with a licensing option with that, which would be licensing out our technology to one of these larger corporations. Michael Kinzel: So we’re still trying to do that. And we feel like if we could get it licensed, they could get out to market very quickly because it’s really not that complicated of a feat. But what we’re doing now is trying on our own and exploring options to get funding, to push it out to market, but then it has other issues. Because we have to worry about getting it into supermarkets or getting it purchased by like the elderly homes or healthcare companies, right? It’s a lot more complicated when you pushing things out to marketing, and getting buy-in and so forth. We really were hoping the licensing option would have worked, but I don’t know if maybe we’ve missed, we haven’t hit the right companies interested in it so far. Paul Jarley: Is this an idea you can patent? Michael Kinzel: Yeah. It is patentable. Yeah, that’s bottom line. Paul Jarley: Michael and Cameron, you got any potential partners in mind for these guys? Cameron Ford: I was wondering if you’ve spoken to any food co-packers or other food manufacturing outfits that might be able to work with. Michael Kinzel: We’ve mostly spoke to a lot of the big pharmaceutical companies like Bayer, Johnson & Johnson, GSK, a few other companies. And I don’t know, maybe we’re hitting the wrong routes, but we didn’t get any interest from them. But we also tried like with Ricola, but we have not hit up some of the… I think probably the best one is that, I forget what it’s called Melendez or the one that owns Halls and Nabisco. They might be another one to hit up, but yeah. Cameron Ford: I was wondering about some food co-packing companies that may have excess capacity and might be able to give you a fairly good rate for manufacturing, to what were you talking about, but then you would have to put up money to make that happen. Michael Kinzel: So that is, literally this week we’re putting in, we’re trying to get find ways to fund this and we’re exploring options of getting investments, but we’re also exploring government SBIR routes as well. And I think once we… If we’re able to get funds through that, that might be, I think that’s an excellent idea. When you say a co-packing, I guess I’m not completely clear what these kinds of- Michael Pape: Well, this is Michael. Kareem, correct me if you see it differently, but there are plenty of places that make, let’s say vitamins or various things, and they do the packaging. So all you do is you set up an agreement with them, and if these are just off the shelf kind of ingredients, they can make Primal pills, they can pump these out. And they can sell them under private label. You can put your own label on there, it looks like it’s coming from your own company. And it would be a marketing play, basically. Michael Pape: And you would just have to market appropriately. You could do that online. You might have some boots on the ground that could go to senior living facilities in the area, and get some validation from them. And then you’re on your way. And you just put on your website, you would put the data that you have generated in the lab instead of a white paper, and that would be your basis for marketing. Michael Kinzel: I got you. Yeah, I did see these, I didn’t know what they were called, but that does make it practical from a startup point of view, I think- Michael Pape: They’re like outsource manufacturer. Michael Kinzel: Yeah, it’s- Cameron Ford: Now, would you be able to make batches of this in a home kitchen or a small commercial kitchen? Michael Pape: You’re thinking farmers market, like I was thinking? Cameron Ford: Well, kind of. I mean, this is the kind of thing where they, you can legally manufacture food in a home setting under a craft food arrangement, and then you could take boxes of these things to various kinds of places like Mike has described, and see what people think. Do they taste so nasty they would never want to use them? Do they see some value? It would give you a lower risk way of seeing how people respond to the product before you put a bunch of money in to manufacturing a whole ton of it, and then having it end up in your garage. Michael Kinzel: Yeah. They are easy to make. The problem that we always have with the, it’s not nasty, but for example, we can make a new batch. I mean, I made a few batches of [inaudible 00:21:39] in it. It took about an hour each. It’s not overly time consuming, it’s just getting the ingredients correct. Michael Kinzel: And I think the other thing we’re trying to work through is testing. How do we make and test, make and test, make and test as fast as possible? Because we have our testing equipment that we have, but it could take a while. So we’re trying to refine that process, develop a very fast development than test type methodology. I don’t think that it will cost more than a [inaudible 00:22:15]. I mean, the ingredients are not exotic. We have even flexibility in the ingredients, so we could kind of switch some of the ingredients up. I mean like Kareem said, “It’s like ginger, cornstarch.” And how do you make it in the context of a lozenge that they still remain effective. Paul Jarley: So how much would they cost? Michael Kinzel: I mean, when I make it in my home, it costs $2 and I make a hundred of them. Paul Jarley: Cameron And Michael, what other thoughts do you have for these two? Michael Pape: I mean, if you can make them, we’ve had plenty of people who is, Cameron said, “Take foodstuffs and make it.” And now, go to a farmers market, they’ll get customer feedback. But if you can make these ginger and cornstarch, I know it sounds like an Asian stir fry, but those are simple enough ingredients to utilize and begin to see what people would be interested in. Michael Pape: The data that you have to generate, because it’s primarily would be a marketing play. You wouldn’t have to have this in a publication ready type data and all. That’d be more like a white paper, but it was done by real life scientists, but it wouldn’t be some sort of peer reviewed thing at all. It would be enough to be able to show this on a website. It’s a bit populous, it might be. You might recoil from that, but the fact of the matter is there’s different types of science for different types of products in order to get some traction. Michael Kinzel: I mean, just a quick question there. If we were going after data, I mean, our data currently is like how far droplets traveling and what’s your exposure level at various distances, it’s very detailed data. And what I feel like you’re going after is more, either data associated with taste or is it data associated with transmission rate. Michael Pape: No. That transmission rates would be too tough, but I think what you’re saying is about the projection. Let’s say of these… We talk about having maybe the money slide, the money slide is one where people see and they go, “Oh, I’ve got to have that.” If you had a money graph, which is you show plus and minus a couple of three ingredients, most people can read the graph that you showed the projectile is reduced significantly. That’s what you go into, particularly with healthcare professionals. And they might say, “Hey, I like this. We have family members coming in, we’re going to have them try it.” Michael Kinzel: Can I show you our potentially money graph? Michael Pape: Sure. Michael Kinzel: Processed aerosols coming from a sneeze. This is a sneeze at the mask, and this is our ingredient or lozenge ingredients. And then this is a droplet projectiles. I would say that the lighter the color, the further in time it is. So this is a droplet that after like half a second. Michael Pape: Yeah. There you go, Michael. This is the first page of the web of your website. Paul Jarley: Yeah. I wonder how much the lodging guys are dismissing you because they’re not used to talking to engineers. Michael Kinzel: Well, there’s not enough money in it, Paul. Paul Jarley: Yeah. I know. Michael Kinzel: There’s not enough money. Paul Jarley: Markets- Michael Kinzel: It’d be a low margin kind of thing and it’s just not worth, it’s not opportunity cost for them. Paul Jarley: Yeah. Cameron Ford: One thing you might want to look into is there’s a recent, I believe it was MIT in Oxford came up with a new way of classifying situations with regard to their risk of COVID transfer. And they looked at volume of speech as one of the variables. So they had being silent, a normal conversation or speaking loudly or singing along with all the other factors that we’re used to talking about. Cameron Ford: I’m just wondering if using a lozenge, if you were in those kinds of higher volume settings might lower the risk because they used the kind of a green, yellow, red kind of stoplight kind of analogy to show which situations are safe and which were highly risky. You might be able to take a lot of yellow situations and make them green using a lozenge like this. Michael Kinzel: Oh yeah, definitely. It basically makes your saliva in a way, like ketchup. Cameron Ford: Nice. Michael Kinzel: When you pour ketchup, it doesn’t- Cameron Ford: I wouldn’t put that in the marketing [crosstalk 00:26:42]. Paul Jarley: I didn’t know if you’re selling it there. Yeah. I’m not sure you’re selling that. Cameron Ford: Well, the things why they couldn’t get across that Mike and I really work hard with our students on. The methods that we advocate are really trying to get people to mitigate risks at every step in the process, by thinking about things that they don’t know yet and figuring out what’s the sort of least, the lowest commitment way in terms of resource expenditures, so we can utilize to figure that out. Cameron Ford: So that’s why we’re talking about making small batches in your kitchen, taking those out and actually showing them to people, getting them to taste them and see if they can tolerate that. Show them this money slide and see if they get excited. There’s a lot of things you could do that would cost little to no money to learn a lot more about the potential attractiveness this might have for different consumers. And that’ll allow you to make more well-reasoned investment decisions, both in terms of time and money moving forward with this. So this is great stuff. Paul Jarley: But it’s a very cheap solution, right guys? So it’s really about finding, in my mind, where the risk and the price point maybe kind of match. Michael Pape: Yeah. It’s complimentary to current methodologies, the current approaches, the mask, the shield, the distancing. It’s just another one, it’s the three or four leaky buckets. None of those are perfect, but just smash them together, it can hold more water. Man, you guys, people, if they saw this kind of thing, you really would be all over the news, it’d be crazy because it’s simple to understand. Michael Kinzel: Yeah. Michael Pape: And the news agencies are looking for real life sciences to talk about stuff. You might be able to get some real traction. Even with this, I have to say. Paul Jarley: You got to get Dr. Fauci to take one [crosstalk 00:28:36]. You got one influencer here, we got to get to him. He can’t throw a baseball. Michael Kinzel: Yeah, we saw that. Paul Jarley: We definitely said… So I’d interested to hear from Michael and Kareem, what do you think the learning lessons are for students here on your journey so far, what would you tell them? Michael Kinzel: Never stopped thinking about what you’re doing and applying it to the real world. Sometimes you get wrapped under the axle on just details of flow. And I think it’s kind of cool to think of outside the box and apply what you learn. So Kareem and I both do aircraft almost exclusively, right? And what you learn in the context of an aircraft could be very applicable to almost any field. Paul Jarley: Oh, handing them out on airplanes might be an interesting thing. Michael Kinzel: Yeah. The airplanes would be a definite… Those are lists that we have kind of running airlines in our kind of like second approach. Paul Jarley: Other thoughts for students? I’m sorry, gentlemen, I kind of cut you off. Cameron and Mike, any thoughts on that? Cameron Ford: This a good example of the uncertainties that you face. There’s a lot of different possibilities, so taking a batch of these and visiting with various options you have here, would give you a lot of insight on who got excited and who would be most likely to use it. And you could lean into those enthusiastic people. Paul Jarley: Mike [crosstalk 00:30:08] to follow up? Michael Pape: Yeah. So many times I’m in the technical side of things. If you produce a patent in the academic setting, it’s a lot of times it’s a solution looking for a problem. And then it’s very difficult to think commercial, when you’re getting your PhD or you’re working on your manuscripts and all of that. But here’s one, because this has been so much in front of everybody’s space, which is intriguing, with the COVID. That you guys automatically took something from one field, fluid dynamics and applied it to our current problem. Michael Pape: And the entire scientific community, people who never thought they’d be working in biology or in viruses have completely switched over, and are finding some way to attack this virus. And you guys did it simply because it was really right in front of your faces. And that’s a lesson is trying to expose yourself to what is going on in the world. And you’ll find these ways that will guide your research into a commercial vein perhaps. And that can be really powerful. Paul Jarley: Kareem and Michael, how much more time are you willing to put into this project? What would make you stop, what would make you continue to go forward with it? Michael Kinzel: If we can’t get money, it’s going to be really hard to really push out as a product. But I like the thinking that you’re saying on terms of just doing a little bit more research on, and looking a little bit more into some of the details to better potentially license. I think if we had more information and we get to continue to hit up licensing firms, that seems like, we’re still going to push that at least for the next year, if we’re able to get money in terms of… Michael Kinzel: The other thing is, is do we get money from the government? That seems like an obvious one we’re going to push forward until we stopped getting money through this SBIR route. I don’t know how much I want to go into looking at foreign investors from other ends. I think if it fell right in front of me, I will do it. But I don’t know if I want to really push hard on that end and going to trade shows and these sorts of things. I mean, but we do have students and researchers that work with us that might be willing to do that. So I guess it’s not just us, it’s a whole team of people that are potentially pushing this. Paul Jarley: Kareem, any other thoughts on that? Kareem Ahmed: I think, like you mentioned, that time commitment is always a challenge for this because it’s not our main core focus- Paul Jarley: Yeah, it’s not your day job, right? Kareem Ahmed: Exactly. And I think that’s one of the things that is hindering us from moving this as quickly as we can primarily, because of that. So would we find a path where we completely take this and forget our day job, it’s a little bit challenging at least it takes off, right? Paul Jarley: So Cameron and Mike, I’m going to put you on the spot here. Do they have a thing? Cameron Ford: Well, I would encourage them to think more about the demand side and the customers you might go talk to, rather than the supply side, in terms of doing more research and kind of tweaking it in the lab. If you can drive to the airport, you can drive to a cruise ship port, there’s people you could talk very locally who would help you understand whether anybody’s excited about this. You might even be able to get a senior design student team involved in maybe going out and doing some of that legwork. Cameron Ford: As I look at all these markets, I think it could be a thing. I think of probably a small to medium sized thing. It seems like this would be a very nichey kind of application, but I could definitely see there being some merit in some of these scenarios. Paul Jarley: Mike. Michael Pape: I don’t think it’s a thing yet. There needs to be product market- Paul Jarley: It’s my podcast, so I get to go last. When I was at the university of Kentucky, I remember having a conversation with the Dean of engineering, where he claimed that all innovation occurred in the lab. I disagreed, and told him that innovation came from customer need. Mike Pape, said it best during this podcast. Frequently inventors have solutions looking for problems. One of the beauties of having engineers and scientists work with business folks is that they can help them find the right match. It’s why we’re so big on having business and engineering students work together in the college of business. Paul Jarley: COVID is most definitely a problem. It has wreaked havoc with public health and the economy, but the COVID cough drop. Isn’t a solution for someone who has COVID, it’s a way to mitigate the spread of the virus to others, much like a mask. The key question is, whose problem does that solve? Maybe people who have loved ones, who are more likely to develop serious health problems than the virus, would purchase the cough drop to protect them, or companies that are trying to convince people that it’s safe to interact with their business might buy the cough drop in bulk and pass it out to people on airlines or cruise ships or at amusement parks or at sporting events. Paul Jarley: But compliance with the cough drop taking would be tougher to monitor than wearing a mask. And the expense for mass gatherings could become pretty significant. Might the COVID cough drop find a niche market? Maybe, but I doubt it’s going to be the next big thing in defense against the virus. What do you think? Paul Jarley: If you’re really geeky, and want to hear the extended conversation we had about the COVID cough drop, check out the show notes for this episode at business.ucf.edu/podcast. You can also find extended interviews with our guests, and notes from the show. Special thanks to my producer, Josh Miranda, and the whole team at the office of outreach and engagement here at the UCF College of Business. And thank you for listening until next time, charge on. Listen to all episodes of “Is This Really a Thing?” at business.ucf.edu/podcast.
7 minutes | a year ago
Is The Invitational Your Thing?
As the name explains, The Invitational is the UCF College of Business’ invite-only career fair, designed to connect top business students with employers and college partners seeking to fill internships within their organization. In this episode, Paul Jarley speaks with employers and recruiters to learn the best tactics to help you find your dream job. Featured Guests Amanda Valiente – Eli Lilly Mateo Perez – Enterprise Rent-A-Car Brittney Brown – City Furniture Dylan D’Orazio – Gartner Episode Transcription Episode transcription coming soon! Listen to all episodes of “Is This Really a Thing?” at business.ucf.edu/podcast.
23 minutes | a year ago
Is Sean Snaith Really a Thing? – Florida’s Economy in 2020
A media darling of sorts, UCF economist Sean Snaith’s presentations across Central Florida tend to be an 80/20 mix of economic forecasting and comedy sketches. But the Director of the UCF Institute for Economic Forecasting means business – his forecasts have been named one of the nation’s most accurate. This episode takes a “behind-the-scenes” look at Snaith’s forecasting methods while exploring his thoughts on the state of the Florida economy in 2020. Featured Guests Sean Snaith – Director, UCF Institute for Economic Forecasting Erika Hodges – Director, Communications & Marketing, UCF College of Business Jessica Dourney – Assistant Director, Outreach & Engagement, UCF College of Business Episode Highlights 1:48 – Paul Jarley introduces Sean Snaith 2:37 – What the Florida economy is going through 3:28 – Commentary from the “Mean Girls” 4:14 – Florida’s housing market 07:04 – Sean Snaith: “King of the Nerds” 11:09 – Growth by industry in Florida 15:06 – Job and population growth in the state 17:01 – Questions from the audience 21:30 – Paul Jarley’s final thoughts Episode Transcription Paul Jarley: Sean Snaith is central Florida’s favorite economic forecaster. Sean has been named one of the nation’s most accurate forecasters by Bloomberg News and as appeared on pretty much every media outlet from the Wall Street Journal to the BBC. But he has some very strange hobbies. Sean Snaith: If you’ve heard me speak over the years, you know I have an affinity for SkyMall. Paul Jarley: You remember SkyMall, It’s the defunct inflight shopping catalog that survives on the internet. Well, Sean, he might just be their biggest fan. Sean Snaith: The Dean called it a fetish, I think, last year, which, that sounds a little dirty. Paul Jarley: He’s also a bit of a diva who dreams of becoming a viral internet sensation? Sean Snaith: So, everybody can’t be a social influencer though. I mean, I think that’s where they all want to be. I do too. Quite frankly, I’ve got 1300 on Twitter. I don’t know what I can offer to them, but. Paul Jarley: And he hates being handled, especially by the college’s so called mean girls. Sean Snaith: There’s a group of, largely women, in the college of business and there’ll be shaking you down for money here at the end of the event, but I like to refer to them collectively as the mean girls and they sort of followed me since middle school and they make fun of my clothing and my glasses and things like that. Speaker 3: I don’t know if you’ve seen his PowerPoint slides, but we think they date back to the mid 1980s. Paul Jarley: Is Sean Snaith really worth all this trouble? Are those forecasts right? Or do those mean girls have a point? Speaker 4: That is so fetch. Speaker 5: Gretchen, stop trying to make fetch happen. It’s not going to happen. Paul Jarley: This issue is all about separating hype from fundamental change. I’m Paul Jarley, Dean of the College of Business here at UCF, I’ve got lots of questions. To get answers, I’m talking to people with interesting insights into the future of business. Have you ever wondered, is this really a thing? Onto our show. Paul Jarley: This podcast is a condensed version of a talk Sean gave at our recent Dean Speaker Series, where he provided his economic forecast for both the US and Florida economies. Since Sean had already weighed in on the US economy as part of our podcast on whether the 2020 recession is really a thing, we focused today’s show on his predictions for the Florida economy. We’re calling this the mean girl edition because I’ve given the team the opportunity to take you behind the scenes and play some of Sean’s comments into context. Listen in. Sean Snaith: No, no wohoos. Nope. Well thank you for coming out. I see a lot of familiar faces, all members of the greater Orlando masochist club apparently. But welcome back and happy new year. I appreciate you getting up early to listen to my nonsense here for a little while. But we just released our Florida Metro forecast and I sort of recounted my youth, growing up, literally, physically, I was always kind of tall and in order to get tall you have to grow. Sometimes that occurred in big spurts and it caused me a great pain in my knees. Right? Like I would get these lumps and it just hurt because of the growth plates or whatever. I’m not a real doctor, but the condition is called Osgood Schlatter disease. So I think what Florida is going through right now is an economic version of Osgood Schlatter, growing pains. Our two achy knees are the housing market and our transportation infrastructure and they’re not unrelated. Paul Jarley: We begin our mean girl commentary with Jess and Erika. They work with Sean on a regular basis and they’ve got some stories to tell about our favorite economist. Jessica Dourney: His wardrobe is either, I woke up, I’m going to speak at a presentation dressed to the nines with a suit and tie, or it’s Birkenstocks on with socks, cargo shorts and an old tee shirt from North Dakota where he’s from. Or where he lived. Erika Hodges: He likes a good crowd. To his credit he definitely, he draws a pretty good crowd on his own. But yeah, he is aware of how many people are in the room, and he asks about that often. Jessica Dourney: Well, he’s also been called the silver fox before. Paul Jarley: Jess and Erika are two of the original college of business mean girls. Back to the presentation. Sean Snaith: So the housing market, things are going great in the sense that prices continue to rise at a pace more than twice overall inflation. You can see sales here above where they were at the height of the housing bubble. Median prices continue to rise. They’re higher than they were at the height of the housing bubble. So this is a pretty, pretty solid housing market. Sales continue to rise year over year. Prices, you can see, statewide up almost 4% year over year. Again, is this another housing bubble? I get this question and we’ve probably addressed it the past three years and I’m going to give you the same answer. No, it’s not a housing bubble this time around. I mean I know Florida, man you can’t put it past them to do it to themself again. Sean Snaith: But a 3.6 months of inventory, and I don’t know if my colleagues in the real estate school would agree with me, but I think six to nine months depends when you talk to, of inventory, is a balanced housing market. So anything less than that, six months of inventory is what the realtors in the room would call a sellers market, to what the economics professors would call a shortage. In markets where there’s a shortage, what happens to price? Yeah, that’s right. You didn’t know there was a quiz there was. The bigger the shorters, the faster prices rise. So if you look around the state at different metropolitan areas, Tampa’s a good example, their inventories under three months, and they have some of the fastest price appreciation in the state. So there is a real shortage in the housing market. Sean Snaith: The other thing that’s absent this time around that was there in 2004/05/06 that really fed the beast, if you will, is easy money. You cannot just walk in and get a mortgage the way you could in 2005 without a job, without assets, without anything. So in absence of that easy finance and in light of the fact that we do have a real shortage, the price appreciation that we’re observing to me is not something that’s alarming. It’s just a sign of an absence of supply. Sean Snaith: Here in Orlando, it’s even worse. 2.6 months of inventory. Population growth remains very strong. Economic growth, job growth, all very strong in Orlando. It is one of the fastest growing job markets in the country, certainly in the fastest in the state of Florida. That continues to put upward pressure on prices. This low inventory. We have an influx of population. We saw from Puerto Rico, the wake of fiscal economic crisis compounded by Hurricane Maria, and now they had an earthquake. Geez, I don’t know how Puerto Rico got God mad, but some something’s not right. But I wouldn’t be surprised to see another influx, in the wake of this latest natural disaster. Paul Jarley: Jess and Erika, there’s some of Sean’s toughest critics, but it’s all in good fun and they try not to hurt his overly sensitive feelings. Jessica Dourney: When we had the AUBER conference, we went to Medieval Times and he was
13 minutes | a year ago
Is a 2020 Recession Really a Thing?
In the midst of the longest economic recovery in American history, the big question is when the next recession will hit. With unemployment reaching record lows, job growth skyrocketing and consumer confidence at an all-time high, some economists see no end in sight for the expansion that began in 2009. On the other hand, manufacturing is at a 10-year low while the U.S.-China trade war continues. Can the U.S. really avoid a recession in 2020? Or is the bubble about to pop? Featured Guests Glenn Hubbard ’79 – Economist; Chairman of the Board, MetLife Inc. Sean Snaith – Director, UCF Institute for Economic Forecasting John Solow – Kenneth White and James Xander Professor in Economics, UCF College of Business Sami Alpanda – Associate Professor, Economics, UCF College of Business Episode Highlights 0:48 – What’s most likely to cause a recession? 2:38 – Where the U.S. economy currently stands 4:29 – Thoughts from a microeconomist 6:20 – How consumers play into today’s economy 9:06 – The role of political tension in the economy 11:18 – Paul Jarley’s final thoughts Episode Transcription Transcription coming soon! Listen to all episodes of “Is This Really a Thing?” at business.ucf.edu/podcast.
50 minutes | a year ago
Is Change Management Really a Thing?
A lot of people don’t really like change. But can they be coached or managed through the change process to understand and truly appreciate its benefits in the workplace? Guest host Thad Seymour, Interim President of UCF, introduces a panel of staff members from Addition Financial to discuss their recent re-brand initiative and what they learned from undergoing a massive, company-wide change. Featured Guests Thad Seymour, Ph.D. – Interim President, University of Central Florida Jordan George – Head of Leadership & Talent Development, Addition Financial Christina Lehman – Marketing Manager, Addition Financial Kerby Pickens – Manager of Leadership & Talent Development, Addition Financial Episode Highlights 0:39 – Introduction from UCF Interim President Thad Seymour, Ph.D. 2:26 – The difficulty of change within an organization 8:22 – How to implement change 16:27 – What makes people resistant to change? 19:34 – “How Stella Saved the Farm” 29:20 – Common mistakes to avoid as a leader 40:27 – Addition Financial’s experience with change 46:36 – Thad Seymour’s final thoughts Episode Transcription Jordan George: We’re really excited to dive into this topic around changed management. Something that I know that you have overseen a lot in your time at UCF and certainly we’re experiencing a lot internally right now with the name change from CFE to Addition Financial. Getting ready for an acquisition in the next couple of months here. So as we think about change and how disruptive it can be, why is effective change management so difficult? Paul Jarley: Well, the short answer is people don’t like change. It’s uncomfortable for them. But if you drill down into it, I think it comes down to a few things. If your change is very fundamental, a lot of people came to the organization, they were attracted to it maybe because of a specific mission or set of values or culture that you have. And if they see that change is threatening those things, they can have a very emotional reaction to that. People care deeply about those things. And they feel like they fit in an organization. And if they think that change threatens their fit with the organization, that can be a pretty traumatic experience for them. Paul Jarley: Secondly, organizations develop compensation systems and other kinds of reward systems that are in place to encourage the kinds of behaviors and outcomes that they want. And people know whether they’re winning or losing under those systems. Or perhaps they’ve come to be comfortable with wherever they are kind of in the hierarchy of that system. And if those initially proposed change is going to threaten that they get pretty nervous about that. That’s their livelihood, at one level, and that can be very disconcerting. Another real problem here is generally in a change process, the costs of the change are borne first by people. They’re really well known and they’re at a minimum irritating and maximum kind of threatening to their security. The benefits are all about the future. And those are kind of fuzzy and they’re kind of unknown. Paul Jarley: So unless you have a change that’s being motivated by something that’s really compelling and urgent and threatens the entire organization, and it’s just going to force a change, people tend to focus on the cost side of the change, rather than the benefit side of the change. If you’re a leader in the organization, the hardest thing I think it is for a leader to do is to get people to see a future they have yet to experience. That’s really, really difficult for people. And if they don’t see that future experience as something that’s going to benefit them personally, they’re going to resist it. Jordan George: I like what you said about, we receive the cost of the change before we receive the benefits of the change up front. There’s that initial reaction of seeing what this is taking away or how this is going to make my life more difficult, or how I’m going to have to adjust, even if ultimately the outcome down the road is really going to be a positive one. I remember we went through that a couple of years ago, we went through our core system conversion and everybody who was here then just let out of collective sigh. But it was a really stressful time for a lot of people who had been here for a while, because you’re basically taking the core system that everybody operates on day in and day out, and changing it up. So your day to day is changing, even though the new system was radically better. There were a lot of people who were just really hesitant to let them go. Paul Jarley: Absolutely. I think that happens a great deal. And no leader comes into it to announce a change initiative and says, “We’re going to work less now.” Jordan George: I’ve yet to hear Kevin Miller say that. Paul Jarley: That’s just not how that works. Jordan George: Yeah, right. So Christina, you came in at a time when Dean Jarley was talking about how the culture shift changes and how people as they come into the organization may be attracted to one thing, then that’s changing. And that seems a little threatening. But you’ve come into the organization at a time when we were already changing. You came in right at the height of our brand redesign. So what was that like for you? Christina Lehman: I did. I just started six months ago. So I started here as CFE but entrenched in the middle of this rebrand. I’m not only learning about CFE and me, but then I’m also in the process of who’s Addition Financial and what does that mean for us as an organization because I’m learning two organizations at the same time. But there’s so many people, so many team members in our organization that have been here for so many years. So I can’t even imagine how that change must have been for them. And I think something that makes it easier is just trust. And Kevin Miller is really big on communication, and communicating, and speaking about the change, and he’s wrote so many emails and so many week and x about this, and I think that really helps the growth and understanding of why we did it. Paul Jarley: Well, that’s that’s absolutely true. The first part of any change process is to explain to people why you’re doing it. And honestly, you have to explain that to them until you’re sick of hearing yourself explain that to them. And then you should explain it to them some more. Christina Lehman: Yes. Paul Jarley: That’s just about how that is. The why is really important. And the deeper the kind of change that you’re going to make, the more compelling the why needs to be right. It’s one thing to say we’re going to change how we’re doing certain things. And people might be uncomfortable like that, like with your IT system. At least they knew that the old system might have been terrible, but they understood the rules of engagement with the old system. And now you’re changing the rules of engagement, that’s going to cause some friction. But that’s a very different thing than coming in and to people, “We’re not going to be something different than we were before.” Kerby Pickens: And so, Dean Jarley, change can be seen as something disruptive or something scary. So how do we implement successful change? Paul Jarley: Well, it’s a long process to be quite honest about it. And it’s one that’s fraught with a lot of difficulty, but explaining that need for change is kind of the first step. What’s the compelling reason for the change? And sometimes that coincides with a leadership change. Frankly, that happens a lot. And it can happen for two different kinds of reasons. Sometimes the board will identify a need and understand that they needed a different leader from the kind of leader that they had before in order to implement that kind of change. And it’s not uncommon in that situation for that leader to come from the outside. Sometimes they come from the inside. But it’s almost certainly the case that the new person is the opposite to the last person. I was the opposite of my predecessor and I’ve known Kevin and Joel a little bit. Yeah, not the same guy. We can all agree. They’re just not the same person. I know I interact with both of them very differently. Right. Paul Jarley: If you come from the inside, you said something really important a minute or so ago. People kind of know who you are and there tends to be more of a trust factor associated with that. When you’re a leader and you come in from the outside nobody trusts you. Christina Lehman: Yep. Jordan George: Christina goes, “Yep.” Paul Jarley: Well, that was my situation. So one of the things in that situation that you have to do is you have to borrow somebody else’s trust. And the way that you do that, once you’ve got your idea for change and why it’s important, and you
41 minutes | a year ago
Are Good Deals Really a Thing?
With new technology comes new ways to shop online and find a good deal, but retailers also have new tools at their disposal to charge customers higher prices. “Retail guru” Anand Krishnamoorthy discusses how retailers exploit consumers’ lack of knowledge to charge higher prices and how shoppers can beat retailers at their own game this holiday season (and on Black Friday). Featured Guests Anand Krishnamoorthy – Associate Professor of Marketing, UCF College of Business Episode Highlights 1:10 – Opaque Selling 4:11 – Examples of opaque selling in the marketplace 10:59 – The truth about “list prices” 14:25 – The shopping experience and its influence 19:51 – Price matching 27:52 – The New York Times: Charging more for less? 35:13 – Variable ticket pricing 39:33 – Paul Jarley’s final thoughts Episode Transcription Anand Krishnamoorthy: This is something that many of us on the State side may not be familiar with. Eurowings is a German low cost flyer that doesn’t even tell you what your destination will be, before you pay up. You will not know where you’re flying to until you pay up. Paul Jarley: Here’s a tip for value conscious holiday shoppers everywhere. You probably don’t want to buy two tickets on that airline. This show is all about separating hype from fundamental change. I’m Paul Jarley, Dean of the College of Business here at UCF. I’ve got lots of questions. To get answers, I’m talking to people with interesting insights into the future of business. Have you ever wondered, “Is this really a thing?” Onto our show. Paul Jarley: Everybody knows that person who will go to great lengths to get a deal, but is a deal ever really a deal? We’re bringing back our retail guru, Anand Krishnamoorthyorthy to explain to you that a deal, well, probably isn’t really a thing. With pricing games, there’s always a loser and Anand explains, that’s usually you, listen in. Anand Krishnamoorthy: What I’ll do today is talk about three broad topics in pricing games. The first of which is what we refer to as opaque selling, where product attributes are hidden. Then we’ll talk about where pricing cues are hidden. We’ll start off with something that firms do a lot of, which is cost plus pricing. Some of you are familiar with this term, at least you’ve used it in the past, which is, you figured out your cost, tack on a markup, and then figure out your price based on that. Anand Krishnamoorthy: Many firms practices, but if you ask them, they will not admit to it because it’s a decidedly unsophisticated way to price. So why is it a problem? Let’s start one, you’re pricing based on things that consumers have no idea about. Consumers usually don’t know what a firm’s costs are. Even if they knew, why would you care? Why would a firm’s production process of manufacturing plant factor into how much you’d be willing to pay? Anand Krishnamoorthy: As a way of maybe channeling venture payroll’s book, it’s because costs don’t care about consumer feelings. Costs are based off of things that consumers don’t care about at all. It is consumers wanting benefits, consumers wanting other attributes, et cetera, rather than costs. Anand Krishnamoorthy: To put it another way, if I’m inefficient, and I work for you and I take three days to do a job that you expect done in one, would you pay me three times as much? No. Then why would you expect firms to pay for consumers in terms of costs? Consumers do not want to compensate firms for their ineptitude, why would you expect cost to drive pricing? Anand Krishnamoorthy: So then perhaps better ways to price would be, price based on consumer benefits. That is, figuring out what consumers want, price based off of that. Consumers would want that, ideally. The problem is, consumer benefits are very hard to figure out. In fact, many a time, consumers themselves have to be educated before they can learn the benefits of using products. If it’s hard for one consumer, it’s even harder for so many different types of consumers who want so many different things in products. So then perhaps, the right way to price should be based on what a consumer is willing to pay. Anand Krishnamoorthy: Problem is, you can’t sell everything at an auction. So short of that, how do you figure out what each consumer is willing to pay? And as an example here to the second point, let’s say I know that the people on the left side of the room are willing to pay $50 for something. The people on the right side are willing to pay $70 for something. If I were to charge $50, all of you will buy. But the people on the right have gotten a price cut of $20 when they did not need one. If I charge the price for the people on the right, none of you on the left will buy. Anand Krishnamoorthy: So the idea is to figure out what we can do so that everybody buys, but at different prices based on different tokens of attributes. That is what we refer to as, price discrimination or differential pricing. Understanding what consumer preferences are like and charging different prices based on their willingness to pay. Anand Krishnamoorthy: All right. So three topics I’ll take up here. The first of which is opaque selling. Many of you have experienced this. So a couple of examples to lead you through that. Opaque selling is where some product attributes are hidden from consumers. A common example is Hotwire with its Hot Rate hotel. You see that a number of choices are revealed to you, but, which hotel you’ll be staying at, is not revealed to you. You know the price you’ll be paying you per night. You don’t know, which hotel you’ll be staying at. Anand Krishnamoorthy: This is something that many of us on the State side may not be familiar with. Eurowings is a German low cost flyer that doesn’t even tell you what your destination will be, before you pay up. So you pay up and then you’ll figure out where that destination might be. Just so you know, it flies too many cities in Europe. It’s not just one or two cities. It’s flies to 50 cities in Europe, but you will not know. Their blind booking is where you will not know where you’re flying to until you pay up. Anand Krishnamoorthy: This is not just in airlines. It’s also common with service providers or hotels themselves. And you’ve seen many cases where bed type may not be guaranteed, or the type of room may not be guaranteed, with a rental car it’d be manager’s choice where the manager decides what kind of a car to provide and so on. Anand Krishnamoorthy: Anybody know what this is? So this is a case where what you get in the bag can be one of six different SpongeBob Minifigures. Squidward, different Spongebobs, well Mr. Krabs, what have you. The idea being, you will not know what is in the bag until you pay up and rip up the bag. It’s called a blind bag. You will not know what is in there. It could be one of any six of these. It’s not easy to figure out because these are all common small Lego blocks. You can’t feel and figure out what’s in there. Anand Krishnamoorthy: But if you have a kid, you know that the kid is not going to be happy with any one of these. The kid wants just one of these, perhaps the Squidward, or squiliam, what have you. So then the point is, how does one deal with this? Because are you going to buy hundreds and play the odds? Because they themselves tell you that some of these are ultra rare, mega rare and all that. So it’s next, and your kid wants that, that’s for sure. So how then do you play the game? That is what we call opaque selling, where product attributes are hidden from consumers. Only after you purchase, will you find out what you get in the product. Anand Krishnamoorthy: Usually, it works for what we call deal seekers. That is, if you don’t have strong preferences, that is, if you don’t care about the type of hotel you’ll be staying at, you only care about the price per night, or you only care about free breakfast, et cetera. When you don’t have strong preferences, that’s perhaps when this works. It enables firms to price discriminate. We’ll talk about that a lot in some time. Anand Krishnamoorthy: What are the challenges for consumers and for firms? For consumers, the biggest challenge is one, the satisfaction that is, invariably you buy something that you don’t like after the fact. So let’s say for on Priceline you book a flight and then you find out that it has two layovers in God knows where. So the point is then there’s a lot of dissatisfaction. You don’t get what you had hoped for. Usually, in all of these cases, there is no refund or return. So if you’re unhappy with it, you cannot return the product. Consumers don’t like that kind of uncertainty. Anand Krishnamoorthy: For the firm, a lot of pricing is predicated on product differentiation. That is knowing that one kind of offering is better than another so that it can direct consumers to different types of offerings. Here, since the product is opaque, it’s not differentiated. Anand Krishnamoorthy:
43 minutes | 2 years ago
Billionaires, Border Walls and Self-Driving Trucks: Are They Really a Thing?
Presidential candidates on both sides of the aisle point to a host of different factors for the state of the U.S. economy. With an economic recession on the way, renowned economist Glenn Hubbard joins UCF Business faculty John Solow, Sami Alpanda and Paul Jarley to discuss the hot topic of income inequality and when we can expect the current expansion to hit a wall. Is a recession really on our doorstep? Featured Guests Glenn Hubbard ’79 – Economist; Chairman of the Board, MetLife Inc. John Solow – Kenneth White and James Xander Professor in Economics, UCF College of Business Sami Alpanda – Associate Professor, Economics, UCF College of Business Episode Highlights 1:02 – Guest introductions 3:02 – Rising income inequality 7:24 -Technical disruption in the workplace 15:54 – Politcal response to a changing economy 21:00 – Trade wars 25:35 – Rising healthcare and pharmaceutical costs 29:46 – President Trump, politicians on the economy 33:41 – Questions from the audience 40:48 – Paul Jarley’s final thoughts Episode Transcription Paul Jarley: The economy is a thing. The national election is a thing. But, the stuff politicians talk about on the way to Election Day? Well, those aren’t always things. We’ve assembled a panel of experts. Listen up, people. Paul Jarley: This year was all about separating hype from fundamental change. I’m Paul Jarley, dean of the College of Business here at UCF. I’ve got lots of questions. To get answers, I’m talking to people with interesting insights into the future of business. Have you ever wondered, is this really a thing? On to our show. Paul Jarley: This podcast comes from an event where we were celebrating Glen Hubbard, and his gift to endow a professorship in economics. Listen in. Paul Jarley: I didn’t want to resist the huge opportunity I had today to get together a panel to talk a little bit about the relationship between the economy and the political election that’s coming up. So we’re going to talk a little bit about whether a number of things are sort of a thing, or not in as non-political a way as we can here. Paul Jarley: I have three panelists with me today to help me understand some things. Most of you know Glenn Hubbard. What you may not know is Glenn Hubbard is a graduate of our economics department at UCF. He studied here. He is currently the chairman of the board of MetLife and is the former dean of the Columbia Business School. He is still a professor there, and I like to joke with Glenn, after you’re a dean, the comment that you always make is you get to go back to be part of the problem, right, and then, the part of solution, and he’s enjoying that a great deal. Glenn Hubbard: Totally. Totally. Paul Jarley: Right now. Paul Jarley: Next to Glenn is John Solow. John is new to the college this year. He spent many years at Iowa. In fact, John and I were assistant professors together many, many years ago. And, he sits in the White, Xander endowed Professorship in Economics that Glenn and Glenn’s wife, Constance, has funded. Glenn Hubbard: [inaudible 00:02:01]. Paul Jarley: And, it’s not named after them. It’s named after the two faculty members, who were most influential to Glenn while he was here becoming an economist. That’s really awesome, and we’re really glad to have John with us today. Paul Jarley: My last guest is Sami Alpanda. Sami is an associate professor in the Department of Economics and spent four years? Sami Alpanda: [inaudible 00:02:22] there? Yes. Paul Jarley: Four years at the central Bank of Canada. So I thought he would also bring kind of a really interesting perspective to what we’re going to talk about today. Paul Jarley: And at the end we’ll give you a little time to ask questions. I hope I ask some things that are on your mind, but if not, we’ll give you a little bit of an opportunity to do that. Paul Jarley: I’ve been watching the news, like all of you, and some of the debates and the things that are being brought up. So I’m going to do a little bit of a lightning round with the panel, where I’m going to bring up a particular issue that the politicians have been talking about. And I’m not so interested here in getting a political take on the issue. That’s not what I’m about. Instead, what I’d like that panel to talk about a little bit is, how important is this issue to the economy in the short-term, and the long-term. Paul Jarley: Let’s start out with rising income inequality, particularly at the top. Is it a concern from an economy standpoint? Is it not a concern? What do you think? Glenn Hubbard: To me, the concern in inequality is the bottom, not the top. So I’m extremely worried about the earnings prospects of millions of Americans, who don’t seem to be participating in an economy dominated increasingly by technological change, and globalization. I’m less worried about how many billionaires there are. The only reason that one would be worried about how many billionaires there are is, if you think there somehow monopolizing the political process. You told me there was one billionaire on the stage the other night at the Democratic Party debate, I don’t think he’s the most influential. So I’m more worried about the poor than I am the rich. Paul Jarley: John? John Solow: I think it’s a long-term problem. I agree with Glenn that I’m more concerned about, so what economists call absolute poverty, is the ability of the poor people to have a standard of living that they can … They can support a family, and they can enjoy, rather than the disparity. If everyone were richer so poor people could afford the necessities of life, that would be a good thing, even if there were rich people, people who are richer than that. John Solow: I am concerned about the ability of the very wealthy and the very organized to influence policy. The impact of money on the political process, I think that is causing problems. I think, we’ve just seen a lot of it, and you can argue on both sides of the political spectrum, but there seems to be an awful lot of what we just think of as corruption, wealthy people using the political system to increase their incomes, not to do what’s best for the country as a whole. John Solow: Yes, there’s only one billionaire, that we’re aware of, running during the debates, and there’s obviously a billionaire already running on the other side, but that’s not where I think the problem is. It’s not so much that they hold the offices, but that they pull the strings behind the scenes. Paul Jarley: Sami? Sami Alpanda: I do agree that, in principle, there shouldn’t be a worry that we have more billionaires, or anything like that, but as long as the pie is growing at an enough pace, and that, that pie is being evenly, or at all levels, that growth is being shared. But currently, that’s not the situation. So at the very top, at least in the last 30, 35 years, there has been an increase in the income share of the top 1%, from about 10% to 20% of total income. Sami Alpanda: Now, most of this reflects capital income, especially entrepreneurial income, dividend income, but … And for the top 0.1%, actually, I think the income share of the 0.1% has increased from about 4% to 9%. So this type of economic gains are not being shared, especially in the middle-income categories, and that … In the long run, this is going to be worrisome because it will have political implications. It’s already started to have political implications. Paul Jarley: Sure. Sami Alpanda: And that is a worry. Paul Jarley: Go ahead. Glenn Hubbard: I think these things are all really important. I think your question’s probably one of the biggest long-run questions for our country. I don’t think we live in a world where the system is depriving people of gains from productivity, whoever those people are. I think, we have a lot of Americans, who do not have a marginal product that would lead to the wages that John is describing. Glenn Hubbard: If we want to fix that, and I think it’s critical that we do, we have to use social insurance programs more aggressively than we’re doing today, and we have to decide on our nation’s priorities, is that what we want to do? We’re running a government that’s, principally, about old-age entitlements, things like that, and should we be investing more in working Americans. I think, we should. I think, it’s a huge question. Glenn
39 minutes | 2 years ago
Is Sleeping on it Really a Thing?
Many successful people are sleep deprived, but that doesn't mean coffee and energy drinks are the keys to business success. In fact, these individuals are likely successful despite their lack of sleep — not because of it. Is shaving off a few hours of sleep really worth the extra time? Jeff Gish, Ph.D., Assistant Professor of Management at UCF College of Business, explains how sleep plays a pivotal role in the development of new ideas and business ventures. Featured Guests Jeff Gish - Assistant Professor, Management Episode Highlights 0:46 - Paul Jarley's introductory thoughts 1:39 - The effects of sleep on entrepreneurship 8:58 - How does sleep effect the evaluation of ideas? 17:56 - Jeff Gish's sleep deprivation experiment 23:13 - Solving your sleep equation 25:05 - Questions from the audience Episode Transcription Paul Jarley: Tom Ford, fashion designer, gets three; Donald Trump says he gets three to four; Martha Stewart, under four; Jack Dorsey, founder of Twitter, four to six; Barack Obama, six. Successful people tell us if you want to get ahead, you need to work more and sleep less. It's the price of success, but is it? Paul Jarley: This show is all about separating hype from fundamental change. I'm Paul Jarley, Dean of the College of Business here at UCF. I've got lots of questions. To get answers, I'm talking to people with interesting insights into the future of business. Have you ever wondered, is this really a thing? Onto our show. Paul Jarley: Today's podcast is from a Dean's speaker series talk by Jeff Gish. Jeff is a professor in our management department and is an expert in entrepreneurship. He hasn't just studied it. He's actually lived it. As an entrepreneur, he spent a lot of sleepless hours trying to get his business off the ground. His insights are really meant to be an intervention for my chief of operations, Tiffany Hughes. You all know a Tiffany. She's that person who never sleeps. She sends you calendar requests at three in the morning. She responds to your emails overnight. And she's at work before you are. If you plead with her to stop, she answers you with something like, "I just have to get this done." Mercifully, my Tiffany doesn't really understand Twitter, but does it really need to be this way? Or is this workaholic culture that we're all in just getting in our way? Listen in. Jeff Gish: Let's get into this talk about sleep and entrepreneurship. And I've titled it, money never sleeps, but entrepreneurs should. That's very prescriptive. I hope that you agree by the end of this presentation, and I'd like to start off the talk with this quote from Ben Horowitz. Ben Horowitz is co-founder of Andreessen Horowitz. It's a VC firm over in the West Coast, but he's a former CEO too, a former founder. When he talks about his CEO experience or his founding experience, he says, "When I was a startup CEO, I slept like a baby. I woke up every two hours and cried." I share this quote because it's a little bit funny. It gets people engaged, but it's also very true. I had a business with 57 employees before joining the academic realm, and I felt a lot of pressure when I was an entrepreneur. And this person felt the pressure too, it was hard to sleep. Jeff Gish: And on top of that, you feel like your business is so important. There's this tension in entrepreneurship that your business is so important that how can you sleep when you've got to keep things afloat and keep things moving. Ben Horowitz picks up on that in this quote, and I picked up on this with my coauthors that wrote this paper that was just recently published. Just the fact that entrepreneurs are of this culture that I'll sleep when I die, or sleep is for weaklings. I was a person who touted those messages as a small business entrepreneur.
32 minutes | 2 years ago
Is Failure Really a Thing?
Everyone fails. It is part of life. Rather than pretend it won’t happen, you should count on it. We challenged our students to submit their best failure stories and explain the lesson they learned. Now you get to vote for your favorite. Featured Guests Petrice Cineus, Student Sam Kotenko, Student Kevin Velazquez, Student Episode Highlights 0:38 - Failure Competition Introduction 1:43 - Kevin's failure story 5:54 - Petrice's failure story 16:26 - Sam's failure story 24:48 - Follow-up questions from Dean Jarley Episode Transcription Transcription coming soon. Cast Your Vote! This poll has closed. Listen to all episodes of "Is This Really a Thing?" at business.ucf.edu/podcast.
37 minutes | 2 years ago
Is Open Banking Really a Thing?
With open banking, is technology creating a decentralized future of banking? Smartphone apps like Mint and Personal Capital paved the way for customers to access the entirety of their financial data in one place, but now, major banks are beginning to enter the open banking game. What are the repercussions for traditional banking institutions? What are the benefits and risks for consumers? And is this the beginning of the end of brick and mortar bank branches? Featured Guests Charlie Lai, EVP/CIO, Fairwinds Credit Union Sumit Jha, Co-director, UCF Master of Science in FinTech Christo Pirinsky, Co-director, UCF Master of Science in FinTech Episode Highlights 1:55 - Panelist Introductions 2:55 - What is Open Banking? 9:05 - The current state of Open Banking 19:30 - Is this the end of traditional banking? 25:33 - Questions from the audience What is the single most important problem being solved by open banking and who's problem is it? Will open banking create a larger cybersecurity threat, or reduce the risk? Is ransomware a concern? Why should I hand over my personal data to these FinTech companies without any financial incentive? 33:05 - The biggest threat to Open Banking 36:05 - Dean Jarley's final thoughts Episode Transcription Paul Jarley: George Jetson, a man created in the 1960s to depict what life would be like in 2060. He lives in a city in the clouds. He drives a flying car that neatly folds up into a briefcase that he can carry into work. When he drops his kids off at school, he releases them in a pod that gently guides them to their destination. But when Jane, his wife, wants to go shopping, he tries to give her some cash. She takes his whole wallet. Cash, really? It's 2065 and George is still using cash. Maybe it's because nobody thought banks would innovate, or maybe it's just George's way of trying to control Jane's spending. Either way, it seems woefully out of date. George, my friend, do we have some stuff solutions for you. This show is all about separating hype from fundamental change. I'm Paul Jarley, Dean of the College of Business here at UCF. I've got lots of questions. To get answers, I'm talking to people with interesting insights into the future of business. Have you ever wondered, is this really a thing? On to our show. Paul Jarley: Today's podcast come straight from our Dean's Advisory Board meeting where we spent the afternoon talking about FinTech. The College of Business has partnered with the College of Engineering and Computer Science to launch a master's program in financial technology. Many of our board members have a keen interest in this topic. So we brought together a panel to talk about one of the many innovations in this sector, open banking. Today we're going to talk a little bit about a subject that I don't know very much about. I stumbled upon this a few weeks ago, which is often how we come up with ideas for the podcast, called open banking. And I have three people here who are going to help us understand what open banking is and whether or not it's going to be a thing going forward. So I'm going to ask each of our panelists to start off just by introducing themselves, and I'll start with Christo. Christo? Christo Pirinsky: My name is Christo Pirinsky and I am a professor at the finance department, and I'm also the co-director of the FinTech program that we just launched. Paul Jarley: Sumit? Sumit Jha: Yeah, I'm Sumit Jha. I am professor in the computer science department, and co-director of the FinTech program from computer science, and my area of research is artificial intelligence, and we work on a variety of problems funded by DARPA, National Science Foundation, and a variety of other agencies that do not want to be named. Paul Jarley: Charlie?
36 minutes | 2 years ago
Tory Bruno: Is There Really Money in Space Tourism?
United Launch Alliance CEO Tory Bruno chats with Dean Paul Jarley on the state of space exploration. 50 years after the Apollo 11 moon landing, rocket launch technology has drastically improved and the prospect of commercial space travel is almost top of mind. Can space tourism really become the multi-billion dollar market that some expect it to be? And are Cape Canaveral and the Space Coast ready for the demand? Is space ready to be the final commercial frontier? Featured Guests Tory Bruno - CEO, United Launch Alliance Episode Highlights 3:18 - How Tory Bruno became CEO of United Launch Alliance 5:48 - How United Launch Alliance came to be 8:42 - What's it like being involved in the space industry during such a competitive time? 12:36 - How much cheaper can rocket launches get? 13:34 - What kinds of companies could be most successful in utilizing space travel? 16:33 - When will humans live and work in space? Engage in space tourism? Get to Mars? 21:27 - What's the most important thing to know about the commercialization of space? 23:20 - Questions from the audience: Do you anticipate building things in space to avoid loss during launch? How do you see real property rights being involved in space? What's it like working with Blue Origin on the Vulcan engine? Have there been any attempts to develop insurance for spacecrafts? Does ULA have any plans to develop a heavy lift rocket? Where did you see the space industry headed when you started your career? Can you elaborate on the difference between components vs. propulsion? Why does ULA exist? 34:35 - Dean Paul Jarley's final thoughts Episode Transcription Paul Jarley: There are certain moments in time that stay with you. I remember where I was 50 years ago today. I was 10 years old. I was on the beach at a lake near my hometown, clutching a radio, and listening to mission control. It was 4:18 in the afternoon when Neil Armstrong said- Neil Armstrong: Tranquility Base, here. The eagle has landed. Paul Jarley: The beach erupted in applause. Paul Jarley: This show is all about separating hype from fundamental change. I'm Paul Jarley, Dean of the College of Business here at UCF. I've got lots of questions. To get answers, I'm talking to people with interesting insights into the future of business. Have you ever wondered, "Is this really a thing?" Onto our show. Paul Jarley: The race to the moon was a race to glory that brought a much needed boost to democratic capitalism in its Cold War with totalitarian communism. But this was not the first time a group of explorers had set out for glory and to assert the political power of a government patron. Christopher Columbus comes to mind. There what started out as a search for glory, quickly turned to commercial interests complete with conquistadors searching for gold and pirates looking to steal it. Colonization and wars followed. Will history repeat itself? Is space ready to be the final commercial frontier? If so, can space pirates and colonization be far behind? Listen into my conversation with Tory Bruno. He's CEO of United Launch Alliance. In other words, a rocket man. He spoke to a group of business and engineering students earlier this year in The Exchange. Paul Jarley: So how cool is that? So, for my engineering students, this is The Exchange. And the idea behind The Exchange is that we have a speaker in here every day talking to business students about careers, about their career path. About how they might become part of an industry, if that's what they're interested in doing. And today we have kind of a double purpose. So, for those of you who don't know me, I'm Paul Jarley, I'm Dean of the College of Business here. And my job is largely to think about what the college should look like five yea...
42 minutes | 2 years ago
Is Rebranding Really a Thing?
Some claim a company’s brand is its most valuable asset, while a logo can have a powerful impact on consumer behaviors. Household names like Coca-Cola, Tropicana and Gap are just a few examples of companies that have enjoyed tremendous success and endured rebranding failures. But how much can packaging, imagery and marketing tactics really inject new life into an unchanged product? And will a customer’s relationship with a brand really prevent them from buying into a competitor? Featured Guests Carolyn Massiah - Associate Chair, Department of Marketing, UCF College of Business Episode Highlights 6:33 - What makes up a company's brand 13:58 - Why consumers form relationships with brands 17:55 - Reasons a company would benefit from a rebranding effort 29:11 - Tips to carry out a successful rebrand 40:56 - Dean Paul Jarley's final thoughts Episode Transcription Paul Jarley: FTU became UCF in 1978. Since that time would become the Knights, the Golden Knights, and the Knights again. Kentucky Fried Chicken became KFC in 1991. Backrub became Google in 1997. Deloitte added a green dot in 2003. Tropicana changed the packaging of its orange juice in 2009 and then changed it back. CFE Credit Union became Addition Financial in 2019. In all but the first case, I'm pretty sure some rebranding genius got paid a fortune. But seriously, does any of this really matter? Paul Jarley: This show is all about separating hype from fundamental change. I'm Paul Jarley. Dean of the College of Business here at UCF. I've got lots of questions. To get answers, I'm talking to people with interesting insights into the future of business. Have you ever wondered, "Is this really a thing?" Onto our show. Paul Jarley: I've been known to tell staff in meetings that I'm not the dean of that. It's my way of letting people know that I think their issue isn't worth my time. I hit upon this phrase back in my days at the University of Kentucky. The college had just gone through a rebranding effort, and one of my colleagues didn't like our new stationary. He was refusing to use it, and he wanted me to tell the dean that he should get a pass. After listening to this for 20 minutes I told him that I refuse to be the associate dean of stationary and asked him to get out of my office. The phrase just stuck with me. Paul Jarley: My marketing colleagues, on the other hand, would disagree with me. They think a company's brand is its most important asset and that any rebranding campaign is a process that is fraught with peril, like employees not embracing the change. Meh, maybe. Or maybe it's just a way for consultants to charge big bucks to help you design a new logo that they claim with rival the swoosh and make you the darlings of consumers everywhere. Paul Jarley: A few weeks ago we hosted our last dean speaker series of the academic year, and given that our sponsor, CFE Credit Union, had just changed its name to Addition Financial, we thought it was the perfect time to have Dr. Caroline Massiah address the whole rebranding thing. It was such an engaging discussion that we decided to turn it into our latest podcast. Carolyn Massiah: I'm going to begin with a quick, funny travel story, and it will help us lead into the discussion. Carolyn Massiah: This past weekend I had to go, not had, I wanted to, I went to Boston. My goddaughter got married and, first of all, for those of us in Florida, when we travel anywhere, we forget that the rest of the world doesn't have the same weather all year around, so I experienced three seasons in three days in Boston. Carolyn Massiah: The other thing that happened, we get to the airport to return home and my teenage son and I, my husband was staying behind for business, my teenage son and I, we board the plane.
30 minutes | 2 years ago
Are Smart Cities Really a Thing?
As technology rapidly improves and provides people with a never-ending list of ways to stay connected, those responsible for urban planning are finding new ways to integrate connectedness with essential city services. Cities like Orlando are jumping into the smart city movement with hopes to build a data-driven infrastructure that will support safer, cleaner and more efficient travel and an improved quality of life for the community. However, some are concerned the introduction of smart cities could infringe on citizens' safety, security and privacy. So, is any of this really possible? And is your average resident interested in living in a smart city? Featured Guests: Mike Hess - Smart City Project Director, City of Orlando Craig Ustler - Owner and President, Ustler Development, Inc. Episode Transcription: Paul Jarley: When I worked at the University of Kentucky, I swore I would vote for any politician who could synchronize the stop lights on Harrisburg Road and cut my travel time to and from work. Smart city initiatives promise to make city life more efficient. But are people really willing to give up their privacy on the promise that Big Brother can cut down on their commute time or save them money on their energy bill? And honestly, if smart cities require smart politicians, I'm skeptical. Paul Jarley: This show is all about separating hype from fundamental change. I'm Paul Jarley, Dean of the College of Business here at UCF. I've got lots of questions. To get answers, I'm talking to people with interesting insights into the future of business. Have you ever wondered, is this really a thing? On to our show. Paul Jarley: So about a year ago I was half asleep in a meeting of deans when somebody said the term smart cities and I hadn't heard that before, so I wrote it down and I will have to tell you, my initial thought was, "Dang, those people in Silicon Valley have the best marketers in the world." I mean, who could be against smart cities? Paul Jarley: So I wanted to do some learning about that and what that really means and whether the marketing is far ahead of the reality or not and what it's likely to do to my world and my students' world going forward. So a couple of people have graciously agreed to join me today who have some opinions on it and I'm going to probe their opinions a little bit. Paul Jarley: So, next to me is Craig Ustler. Craig leading the master development team for the Creative Village here in downtown Orlando. He is also co-developing several vertical projects at Creative Village, including a $105 million student housing project that'd better be ready by August 2019, or we will have a lot of homeless students downtown. Paul Jarley: We're also joined by Mike Hess. Mike is the smart city director for the city of Orlando. He's a Leed fellow and mechanical engineer. He was recently brought on board by the city of Orlando to lead off their smart city efforts. He's worked as the VP of smart and sustainable buildings for Panasonic Smart City team. And he has worked on several smart city projects across the US. Paul Jarley: So, let's start at the beginning. What the heck is a smart city? Craig, you want to? Craig Ustler: There's a couple answers. So one is sort of consistent with your experience. It's become a buzzword that is somewhat self-invented through some marketing folks and real estate folks. And it means in theory, this idea that you're going to use data driven or the Internet of Things and whatnot to connect everything and measure it and analyze it and make things more efficient. Craig Ustler: I sort of choose to turn the term and I say cities are smart and suburbs are dumb. I sort of feel like the city by definition is smart,
32 minutes | 2 years ago
Teaching Leadership: Is It Really a Thing?
Some people are born with leadership skills, but that doesn't necessarily mean others can't learn. Dr. James T. Brown packs an impressive 16 years of increasingly responsible leadership positions at NASA and later worked as a consultant and trainer in leadership, project management and decision making before becoming a faculty member at the UCF College of Business. Dr. Brown is simply an expert in leadership training and project management. But does teaching someone what makes a leader mean they can become a leader themselves? Featured Guests: James T. Brown - Lecturer, Integrated Business, UCF College of Business Episode Transcription: Paul Jarley: It's not uncommon to hear people say, "You can't teach leadership. Leaders are born, not made." It's a fair argument. Quality of leadership isn't always something that can be measured. And you just can't expect to become a leader by reading stuff out of a book. After all, you don't become a chef by studying a cookbook. You have to cook. But that doesn't mean theory from the classroom can't be put into practice. Paul Jarley: This show is all about separating hype from fundamental change. I'm Paul Jarley, Dean of the College of Business, here at UCF. I've got lots of questions. To get answers, I'm talking to people with interesting insights into the future of business. Have you ever wondered, "Is this really a thing?" On to our show. Paul Jarley: This episode features one out our Integrated Business faculty. Dr. James T. Brown, is an engineer at heart. He spent more than 15 years at NASA. He later used this experience to offer consulting and training services on leadership, project management, and decision making, to companies both small and large. Every month, we pick one of our faculty members to address a crowd of local business partners and alumni at an event we call The Dean's Speaker Series. This time, we invited Dr. Brown to talk about what makes a good leader, some of the worst pitfalls he's ever seen, and how to avoid some of these missteps. Naturally, we pulled out the best parts, and turned it into a podcast. I hope you enjoy. James T. Brown: Project management is an art. That is why everybody can't do it. I don't care how much process you have, doesn't make a difference. Project management is an art. Just like art, it has principles. Every artist knows what happens when you mix red and yellow. `The principles are there, but the actual application of it is an art. It's very difficult. James T. Brown: There's a little girl. You may have heard of her before. She shows up at the three bears' house. And she says, "Too hot. Too cold. Too hard. Too soft." What is she looking for? Crowd: [crosstalk 00:02:06] James T. Brown: Just right. This is what we're looking for with process. Just right. Can you give me the just right amount of process? And good process is born out of leadership. You get the leadership right, the process will be right. You can't take process and be successful in the absence of leadership. James T. Brown: The reason I wrote a book on program management and not project management is this. Most project failure isn't caused by the project manager. It's caused by the people above them. The people above them are the ones that put the project managers in a position that makes it difficult for them to be successful. So a lot of what I talked about today with leadership, it applies to project managers, but it also applies to those people that are above them. James T. Brown: So this is our, our breakfast menu today. The one that's underlined there, establish accountability and clear direction. That's what I'm going to talk about first. So establish accountability and clear direction. I was in the company headquarters.
18 minutes | 2 years ago
Can You Really Start a Business With no Money?
Starting a business with no money or funding could be easier than you think. Jesse Wolfe, founder and CEO of O'Dang Hummus, got his start at UCF with some big ideas and little capital. Several years later, he's CEO of a multi-million dollar business and has turned the salad dressing industry on its head. But one success story does not mean everyone could do it... Featured Guests: Jesse Wolfe - Founder / President, O'Dang Hummus Cameron Ford - Director, UCF Center for Entrepreneurial Leadership Michael Pape - Dr. Phillips Entrepreneur in Residence; Lecturer, Management Donna Mackenzie - Executive Director, StarterStudio Carol Ann Dykes Logue - Site Manager, UCF Business Incubator Episode Transcription: Voice: "If you build it, he will come." Terence Mann: "He will come, Ray. He will most definitely come." Paul Jarley: That's my favorite line from Field of Dreams. But, what if you can't build it? Jesse Wolfe: It came out to a $700,000, almost a million dollar, order. And they needed them to be about $10 a cart and I could not figure out how to get them below $25 a cart. Paul Jarley: Or, what if they don't come? Cameron Ford: The Google Glass, people started using it out in public and stuff like that, and quickly were scorned as being what were described as Glass-holes. My understanding is they pulled from the market. Paul Jarley: Lean start up offers a different approach, but is it really a thing? Or, is it just academics hyping the scientific method? Paul Jarley: This show is all about separating hype from fundamental change. I'm Paul Jarley, Dean of the College of Business here at UCF. I've got lots of questions. To get answers, I'm talking to people with interesting insights into the future of business. Have you ever wondered, is this really a thing? Onto our show. Paul Jarley: This is how significant businesses started back in the day. Michael Pape: What we were, I'll just say, required to do as an entrepreneur with VCs with trying to get, maybe, economic development funds. Paul Jarley: Yup. Michael Pape: And this was in the biotech space. Paul Jarley: That's Dr. Michael Pape, Professor of Practice here in the College of Business, and Director of our UpStarts program. Michael Pape: So it was a tech-oriented business that I've been involved in, was write the business plan, and I have sat down, myself and with my teams, of writing the 40 to 60 page business plan. The fat startup, if I may define it that way, had you do that. Venture capitalists would request it, and they would want to make sure that you saw the plan from beginning to end. Paul Jarley: Then a funny thing happened starting in the early 1990s. Universities started to develop entrepreneurship programs. They did this partly to serve their economic development missions, partly because donors loved to give money to this cause and partly because more and more students became interested in entrepreneurship as a career path. Paul Jarley: In the early 1990s, ideals spun out of Stanford, with an emphasis on design thinking. Another decade passed and Berkeley started developing what has come to be known as lean start up. It had a coming out party in 2011, with the publication of Eric Riles book by the same name. But, are universities and business schools really the place to start businesses? Paul Jarley: I had my doubts. We excel at getting rule followers great jobs in companies who are looking for functional talent. We really aren't geared up to help people who want to color outside the lines, pursue their crazy dreams,
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