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Credit Default Swaps






Credit Default Swaps: The Future of America

Stephen McGill



This paper explores three books and over ten published articles that report on results from research conducted online (internet) and off-line (non-internet) of the effect of credit default swaps on the network infrastructure of which the central basis of the economy is based. Furthermore, it explores the hyper-active relationship between the common user and the business entities that provide a reassurance that the credit worthiness of individual CDO’s (Collateralized Debt Obligations) fulfill basic requirements for measurement. The articles vary in their exploration of the common good from CDO’s Credit Default Swaps: An Introduction which describes the function of credit default swaps as “A CDS contract can be used as a hedge or insurance policy against the default of a bond or loan. An individual or company that is exposed to a lot of credit risk can shift some of that risk by buying protection in a CDS contract” (Pinsent, 2013). Which delivers a shorthanded description of an otherwise complicated topic more clearly defined in Credit Default Swaps: Your Complete, Step-by-Step Guide to Trading Credit Default Swaps as “an agreement where the one person will compensate the other in the event of a default, or other credit event” (Adams, 2013). This paper is broken down into chapter sections while interjecting additional research materials within the sections.

Keywords: credit, default, Credit Default Swaps, Risk, Collateralized debt obligations



In 1933 a bill was passed that separated investment and commercial banks. The Glass-Steagall Act called for the complete separation of the risk associated with investments and the holding of assets associated with commercial banks. Essentially it has been credited with steering the United States into the most prosperous years in recent history. However, much like during any period of success the rich wanted to get richer thus starting in the 1980’s a group of bank leaders began lobbying Congress to repeal the act. In 1999 led by U.S. Senate member Phil Gramm (Texas) a superseding bill was passed called the Gramm-Leach-Bliley Act.

How is this important to how Credit Default Swaps originated? Why would an Act force such a reaction of “The Republicans made me do it” (Chittum, 2013) from President Bill Clinton in 2013?

It wasn’t just President Clinton who thought it was a good idea. In order for it to be signed into law it had to be passed by both Congress and the Senate.

To understand the way in which the economy works we must first incorporate a certain ground rule structure. To establish this structure we must first examine the hypothesis and what are assumptions are. The overall hypothesis pre-research from the group included such statements as “credit default swaps ruined the economy” and “they must make it impossible to establish real credit.” Additionally, why choose a topic that has a reputation as porous as that of credit default swaps?

When we initially chose the topic we established a thorough game plan that included chucks of work being separated by person. For example, the history of credit default swaps was assigned to an individual in order to not invalidate the research of another individual. We carefully examined all of the sections in question, assigned them buy importance and allowed for research to take place without an agenda.

What we present to you now is an unbiased account of what credit default swaps are and what opportunities there are for the economy of not just the United States but the world.



A credit default swap (CDS) is a means to transfer credit exposure for commercial loans and to free up regulatory capital in commercial banks. Credit default swaps allow the risk to transfer to a third party if default were to occur. It is similar to insurance because it provides the buyer of the contract, who often (but not always) owns the underlying credit, with protection against default, a credit rating downgrade, or another negative “credit event”. The seller of the contract assumes the credit risk that the buyer does not wish to shoulder in exchange for a periodic protection fee similar to an insurance premium, and is obligated to pay only if a negative credit event happens. The buyer of a credit default swap will gain protection or earn a profit when the issuer has a negative credit event. If this happens the party that sold the credit protection and who has assumed all the risk must deliver the value principal and interest payments that would have been paid to the protection buyer (Pinsent, Credit Default Swaps: An Introduction).

Credit default swaps were first created in the early 1990’s. In 1989 Exxon was faced with the Valdez oil spill and wanted a five billion dollar line of credit to cover potential damages, for this five billion dollar line of credit they turned to J.P. Morgan. J.P. Morgan did not want to turn down Exxon because they were an old client that was in good standing but knew the amount requested was quite large and did not want to risk all of their reserve cash if they would default. In 1994 a J.P. Morgan swaps team member suggested the idea of selling the credit risk to the European Bank of Reconstruction and Development so if Exxon were to default, the European Bank of Reconstruction and Development would be on the hook for it and in return would receive a fee from J.P. Morgan. Exxon would get its credit line and J.P. Morgan could keep their relationship with Exxon. (Romm, JP Morgan Invented Credit Default Swaps).


1990’s– CDS were created via the reversal of the Glass-Steagall Act (1999)

Late 1990’s-CDS were starting to be sold for corporate and municipal bonds.

2000– CDS market was about $900 billion with limited number of parties involved.

Early 2000s– More and more parties joined the CDS market for both sellers and buyers which made it more difficult to determine the financial strength of the sellers of protection. CDS were starting to be issued for Structured Investment Vehicles. Speculation became rampant, such that seller and buys of CDS were not owners of the underlying asset and were actually betting on the possibility of a credit event of an asset.

2007- Credit default swaps had a notional value of $45 trillion where corporate bonds, municipal bonds and structured investment vehicles market were less than $25 trillion. Which means that at least $20 trillion were bets and were not owned by either party of the CDS contract.


In 2007 subprime mortgage problems had started to expose the problems in the CDS market. When the subprime mortgages and other CDOs had valuation issues and many defaults, the CDS seller of protection realized that the CDS tied to them would require substantial payments.

Insurance companies would enter into a CDS as a seller of protection, however the risk of payment unknowingly increases when the CDS were related to securities such as CDOs. ABS and MBS, which are full of structural problems, but were offered as secure investments.

Speculation entered the credit default swap market in three forms, using structured investment vehicles (ABS, CSDO, MBS, SIV) securities as the underlying asset, CDS were created for parties without and connection to the underlying asset and the development of a secondary market for the credit default swaps (Zabel, Credit Default Swaps).


In 2007 many large financial institutions that were greatly invested in mortgage-backed securities began to fall apart, a high number of the institutions owned credit default swaps on their subprime securities. The swaps that did not payout forced the financial institutions to lower their asset values, which caused it all to fail even more. The subprime mortgages problems had started to expose the problems in the CDS market. When the subprime mortgages and other CDOs had all of the valuation issues and many defaults, the credit default swap seller of protection realized that the CDS tied to them would require substantial payments.  What makes the mortgage crisis different from a potential credit default swap crisis is that you can follow a mortgage deep enough and you will come to a house. If the borrower defaults on the loan the bank is still able to possess the house and regain some of the funds lost by selling the house. With credit default swaps, they are based on actions, such as a bank failing, not a tangible asset like a house. Because of this, if they fail to pay, finding a source of capital to cover the credit default swap is very difficult.

The speculators would try to improve their own returns by either buying a credit default swap on bonds that they do not own, or selling the credit default swaps to others. An investment firm is able to go out and buy a credit default swap on corporate bonds that it does not own and then if the company defaults, the investment firm can collect the value of the credit default swap without the risk of losing money on the bonds. As an example, it is like buying life insurance on a man that lives down the block whom you have never met. You receive the payout if he dies but you are not directly impacted by his death. If you are a seller of a credit default swap you are guaranteed to receive money every year because they buyer has to pay you a premium (Speculating with Credit Default Swaps, 2012).

The speculators would use leverage with credit default swaps too. They would do this because they would want a steady income but do not have much to put out. For example, a hedge fund manager wants to boost the fund’s returns for its investors and he decides that selling credit default swaps is they right way to go to bring in the steady money. The hedge fund manager only has $1,000,000 in assets and the manager decides to sell credit default swaps to investors who are looking to hedge $100,000,000 worth of bonds. In the credit default swap agreement, the bond investor agrees to pay a spread of 3 percent ($3,000,000) every year to buy the credit default swaps. This gives the hedge fund manager a great return because the fund will receive $300,000,000 each year, which is a 300% return on investment. The big problem is that if the company on which the credit default swaps is written defaults, the hedge fund manager will owe the buyer of the credit defaults $100,000,000 and he only has $1,000,000. So if the company defaults, the hedge fund manager would also end up defaulting. With that leverage the hedge fund manager is able to make profits off of $100,000,000 while only having $1,000,000 in the fund (Speculating with Credit Default Swaps, 2012).


Credit default swaps were not regulated until 2010 when the Dodd–Frank Wall Street Reform and Consumer Protection Act was put into place.  Title VII of the act states that, “The Dodd-Frank Act divides regulatory authority over swap agreements between the CFTC and SEC. The SEC has regulatory authority over “security-based swaps,” which are defined as swaps based on a single security or loan or a narrow-based group or index of, or events relating to a single issuer or issuers of securities in a narrow-based security index…The CFTC has primary regulatory authority over all other swaps, such as energy and agricultural swaps. The CFTC and SEC share authority over “mixed swaps,” which are security-based swaps that also have a commodity component.”

For credit default swaps that means, “CDS are now subject to clearing, trading, and reporting requirements with exemptions based on the nature of the parties themselves and the purpose of the trade. One of the most controversial provisions of the legislation, the so-called swaps “push-out” rule, which requires systemically significant financial institutions to transfer their swap trading into separately capitalized affiliates, does not apply to centrally cleared CDS”(Koszeg, The Evolution of Credit Default Swaps).


Probably the most noted name in the credit default swap industry is that of American International Group Inc. (AIG) No doubt that name muttered in the same sentence as credit default swaps sends chills up most people’s spine. But, is it the term credit default swap that harbors the bad taste or actually AIG.

The business of credit default swaps did not start with AIG, in fact it is actually very hard to pin-point when the first CDS was issued. On February 6, 2012 in a PBS Frontline interview, Martin Smith interviewed former JP Morgan investor Terri Duhon. During the interview Duhon reveals information about JP Morgan’s role in credit default swaps that started in the 1990’s.

Duhon started in 1994 working at the Interest Rate Swaps trading desk before being beckoned to run/start-up Morgan’s Exotic Credit Derivative Trading Book. Morgan broke ground in this new market after receiving approval from the Feds to move full steam ahead with these over the counter transactions. Prior to taking the plunge in the exotic credit derivative market, JP Morgan tested the water via single name swaps, “…in which the underlying instrument is a reference obligation, or a bond of a particular issuer or reference entity”(Brown, 2014). Some of their names included IBM, Walmart, and Exon. Both methods allowed JP Morgan to assume more risk by transferring some of it off their books.

In her interview Duhon details the struggle JP Morgan experienced with federal regulators in the 1990’s.  She points out the difference between regulatory capital and economic capital. One of the key drivers of this question of change was the mandate that regulators required a flat amount of capital to be held without looking at the credit worthiness of the portfolio. This mandate cultivated in JP Morgan the belief the banks could do more with the capital they had if they could change the amount of risk on their books. In order do this and be competitive banks would need to assume more risk, but credit default swaps would allow them to transfer some of the risk off their books.

This would then leave room for less capital holding requirements and more ability to approve loans. Eventually credit default swaps became a hot market and the risks that banks, specifically JP Morgan, were being asked to assume were too great. With this knowledge it was in 2001 per Duhon that JP Morgan chase noticed questionable portfolio’s specifically those that were subprime. Based on the realization JP Morgan revamped how it dealt with transferring risk but it did not leave the credit swap market. In fact, in 2012 JP Morgan chase released a statement “…that the bank could lose $3 billion or more from bad bets on credit derivatives” (Businessweek, 2013). Facing this threat JP Morgan turned to Blue Mountain Capital.

Blue Mountain Capital was founded in 2003 by Andrew Feldstein (form managing director and head of structured credit at JP Morgan), “…JPMorgan hired him in 1992 to help the bank develop a business in credit default swaps”, and Stephen Siderow (Harrington, 2012). In fact many of Blue Mountains key employees have ties to JP Morgan. Blue Mountain Capital came to rescue of JP Morgan in 2012 when JP Morgan found itself deeply invested in the IG9 Index. Because of JP Morgan’s saturation on this index, prices were driven down and other investment groups such as Saba Capital Management, and BlueCrest Capital Management acted upon the depressed price.

When things started to awry Blue Mount Capital stepped in to save the bank and its investments. JP Morgan turned to Blue Mountain Capital because of its “arbitrage strategy” it uses when trading credit swaps. Thus Blue Capital Management was in a better position in 2012 than most firms. Blue Mountain Capital was able to “…take the bank out of a large chunk of its losing bets without tipping off other investors” (Harrington, 2012). In more recent news BlueCrest Capital Management, started by another former JP Morgan employee in 2000, has fallen on hard time. It is currently losing investors and managing partners.

The most recent managing partner Leda Braga left in September 2014 to start her own firm as reported by Bloomberg in September 2014. Braga publicly states that BlueTrend, the hedge fund she managed “…saw assets plunge by half in the past year, suffered investment losses of 11.5 percent last year and had its management fee cut in August by 50 basis points to 1.5 percent” (Westbrook, 2014). Above details how credit default swaps are subjective. Are they truly bad for the economy or are they only trouble when banks and investment firm mismanage them? As we continue our research into the good and the bad of credit default swaps, we have to touch on AIG and their impact on these swaps.

We cannot address credit default swaps without discussing AIG. With a name synonymous with greed, in 2008 AIG became will know by tax payers and consumers. In 2008 the US Government took control over AIG with an $85 billion bailout. Before the 2008 crisis and bail out “…AIG was considered a financial fortress: it boasted a high stock valuation, an AAA credit rating (heavily used in the firm’s marketing which suggested that it would stand behind its commitments to customers) and was led by a chief executive, Hank Greenberg”(T.E., 2013). It was with this reputation that AIG was able to amass such a huge stake in credit derivatives. No one batted an eye. That is until AIG was unable to meet the payout demands. But concerns of AIG and its investments seem to have started prior to 2008. A 2005 Businessweek article reports that on March 30, 2005, “…AIG acknowledged that it had improperly accounted for the reinsurance transaction to bolster reserves, and detailed numerous other examples of problematic accounting” (AIG, 2005). Additionally it was found that AIG inflated its net worth by nearly $1.7 billion. Now keep in mind that this was in 2005, before tax payers funded its bailout.

Furthermore, in 2005 it was unearthed that transactions one thought to be independent were in fact deals that were made with companies that were owned by AIG. These transactions allowed [AIG] to claim gains without actually selling the bonds, misclassified losses; and questionable estimates on deferred acquisition costs (AIG, 2005). There were also glaring conflicts of interest as many companies that AIG dealt with were companies in which executive sat on the boards or owned large percentage of AIG stock. Two examples are Starr International Co. and C.V Starr and Co. This led to executive decisions on who received bonuses and how much to managing AIG earnings. There were also transactions in the form of charitable donations that enticed powerful influencers to sit on the board, as well as strategic placing of executives and board members. Corruption was deeply imbedded at AIG.

Revealing AIG as a corrupted entity makes their inability to payout claims less about their role in credits derivative, but more about the greed the exuded from the firm. After receiving billions on bailout from the American tax payers, AIG continues to operate. In 2013 AIG had fully repaid its bailout and returned to a private sector firm. The once assumed hedge fund attached to an insurance firm is not operating without its “…buccaneering financial-products unit” (America’s, 2013). Since 2009 AIG has worked to cut staff, sell off units to fund its bailout, and to rebuild its reputation and rebrand itself. In return AIG is seeing low margins of return, but is in the right position to once again thrive per its CEO Bob Benmosche who took over the company in 2009.

Mr. Benmosche has boasted hefty goals of doubling that margin to 10% by 2015. AIG still finds itself with a chunk of credit derivatives so it would appear as if they have not completely exited the market.  The difference this go around is the removal of conflicts of interest and greedy executives. The company seems to be working more above the board.

We have looked at how credit default swaps were used to simply not transfer risk from books of lenders, but used to the point where credit ratings and risk were no longer a factor. Firms were looking to make a quick buck on both sides of the aisle. Firms such as AIG were wagering that borrowers would not default and lenders were wagering the same. This misuse of credit swaps aided in subprime lending. Suddenly firms were assuming more risk than they would have and judgment went out the window. On the flip side, credit default swaps can be used to encourage more lending and stimulate the economy when used responsibility. It is not the actual swap that is bad, but rather how they are overused and exploited.

Sovereign Credit Default Swaps

Credit default swaps not only insure debt that is held in the private sector, but also in the public sector. Credit default swaps that are backing countries debt are called sovereign credit default swaps, or shortened to Sovereign CDS or SCDS. Just like credit default spreads and the price of CDS is an indicator of an investments riskiness, the credit default swap spreads between counties is a huge indicator of the riskiness of different countries debt, and therefore also of the financial stability of the country. Essentially every country has SCDS insuring its debt.  Individuals, private companies and other countries can hold debt of sovereign nations and it is the investors’ decision, not the borrowing country, to choose to insure that debt with sovereign credit default swaps. So despite the controversy over CDS and SCDS any country with debt has the potential to have SCDS insuring their debt. This can be a good thing for investors and economists because it allows the many SCDSs to be compared and for investment decisions to be made accordingly.

Europe’s Financial Crisis

For the most part SCDS have been used successfully by investors with very few noteworthy incidences. However they played a major role in the current European Financial Crisis. There are many factors that lead to the recent financial crisis in Europe; however, credit default swaps played the largest roll in the fall of Greece’s Economy and the financial stability of Greece’s investors. Europe’s economy was already facing hardships throughout the continent when Greece ran into trouble, with Spain, Italy, Ireland and Portugal economies in the worst state.

When Greece decided to switched to the euro in 2001, it was expected that it would change the financial future of the country (Dellas, and Tavlas). At the time Greece was already living beyond its means, it had little growth, several exchange rate crisis, double digit inflation rates and racked up large amounts of debt in the 1980’s and 1990’s (Dellas, and Tavlas). It was hoped that many of these issues would be fixed after switching denominations and therefor required to meet a 3 % of GDP cap on borrowing (Peachey, 2012). For about eight years it appeared that the transition was mostly successful, however Greece did continued to rack up large amounts of debt. Greece failed to meet the maximum 3% debt to GDP ratio and instead concealed much of what they were borrowing. In 2009 when George Papandreou took office he and his staff quickly discovered discrepancies between previous administrations claims and the actual current state of Greece’s financial situation. George Papandreou announced in autumn of that year that the 2009 fiscal deficit would be 12.7 percent of GDP, doubling previous predictions (Dellas and Tavlas, 2013).

In addition to the large amount of debt, Greece did not have a strong monetary policy in place. When it came to light just how bad the Greece financial situation was Greece was pressured by other countries, many of which had large amounts of funds invested in Greece pressured them to take action, in the form of a debt restructuring.

After seeing the additional disaster caused by credit default swaps in the United States during our recession, Europe became concerned with what would happen if their countries that were suffering financial started to default on their loans, such as the large, risky loans owed by Greece. Investors had largely viewed these loans as very secure, because it was suspected that if they could not pay then other European countries would step in (Dellas and Tavias, 2013).

Just like the American Government stepped in with “too big to fail” companies in America during our recent recession. In response to this concern, and in an attempt to avoid defaulting and therefor having CDS called upon to pay for Greece’s debt, attempts were made to restructure the debt. This was unsuccessful and ultimately backfired, investors lost confidence because of this restructuring. Many investors viewed this attempt to avoid defaulting and avoid CDS payouts, as a sign that CDS would not be paid. This actually decreased trust in Greece’s economy even further. Many investors thought that if Greece did default that CDS would not be paid, so investments stopped almost completely. Lack of further investments created the tipping point that finally caused Greece to default on its loans.

In May of 2010, the International Monetary Fund, or IMF, agreed to a 143 billion dollar (110€) bailout plan. In 2012 a second bail out of 130€ was needed (Peachey, 2012). This large amount was not enough and in March of 2012, in the largest default in history, Greece finally defaulted on its bonds (“The Wait is Over,” 2012). The majority of investors agreed to trade in their short term bonds for longer term ones with less than half of the face value, and in addition this triggered costly CDS payouts. “Holders of €152 billion of the €177 billion of sovereign bonds issued under Greek law signed up to the swap” (“The Wait is Over,” 2012). Those remaining investors that were against the bond-swap, amount €9 billion and the remaining investors that did not respond will be forced to except the swap (“The Wait is Over,” 2012).  The Economist (2012) reported in their article “The Wait is Over” the following figures for the CDS Payouts:

“The national value of Greek sovereign bonds insured by CDSs [was] around $69 billion, according to DTCC, a data repository. But banks and hedge funds have offsetting exposures, having issued some CDS insurance contracts and bought others. Once these wash out, the net exposure to a Greek default is a more modest €3.2 billion.”

Because defaults on sovereign debt are relatively rare officials and investors considered Greece’s default on its debt the first test of Sovereign credit default swaps on sovereign bonds. This is really a test of the resilience of the financial system and to see how effective SCDS are in creating increased stability and recovery.

Naked Credit Default Swaps

Credit default swaps can be either naked or covered. Naked credit default swaps are a type of speculation where an investor bets on the likelihood of a default on a debt that he does not own. In the paper thus far we have mostly talked about covered credit default swaps, where an investor holds the bonds that they are insuring against default.  For example, leading up to Greece’s default speculators betting on Greece defaulting increased, these bets took the form of naked credit default swaps, because the speculators did not hold Grecian bonds.

It is important to make the distinction at this time because policy-makers attempted to restructure in a way that would not cause payouts on naked credit default swaps as well as the previously mentioned covered credit default swaps. Policy-makers were mostly successful because the default was considered voluntary.

In December of 2011, the European Union voted to ban naked credit default swaps for sovereign debt. The new ban has been controversial. Some say that naked credit default swaps are an effective hedging tool and others say that it spreads risk un-necessarily. The latter uses Greece as an example, as it is believed that financial situation would have been made considerably worse if SCDS payouts increased by billions of dollars because they were made to both covered and naked credit default swap holders.

A Pattern

The roll of credit default swaps in Greece’s crisis closely mimicked what happened during the American recession. Because so much of Greece’s debt was owned by other countries, when they started to default on their loans other countries’ economies was affected as well. This domino effect between countries was very similar to the domino effect between large finical businesses that we saw in the US. The bailouts to Greece also mimicked the bailouts made to large companies by the American Government, however this time the bailouts were coming from the IMF through which the whole world paid for Greece’s debt.

Where Greece is now

            The Debt Crisis is still not really over, but there are signs that Greece has started to recover. For example, they minted billions of euros worth of bonds in April of 2014, with a 4.75% yield, that investors quickly grabbed up (Sanati, 2014). However, while this should have been a sign that the crisis was coming to an end Greece, and much of Europe, is still dangerously massive amounts of debt. Only time will tell if Europe is out of the clear, or if this is just a breathing point before another economic.

Fortune magazine reporter Cyrus Sanati summarized the state of the Greek economy in April of 2014 as:

“The Greek economy is in shambles, and the only reason it hasn’t defaulted on its debt for a third time is the European Central Bank’s low interest rate policy and the 240 billion euros in aid that have flowed into the nation’s coffers from the International Monetary Fund and the European Union over the last four years.”


Sovereign CDS Summary

While the crisis in Greece too many may seem like an example that CDS are not good for the economy, that is not the case, there were many other problems with Greece’s finances all of which can be boiled down into two major categories, a lack of transparency and too much debt. Greece hid so much of their debt for so long that investors were unaware of how risky the debt that they were buying was. In addition they believed that Greece would be bailed out by the IMF and other European nations, which it was but Greece’s investors still took massive losses on their investments.

This is very similar to what happed in the US with CDSs, except in the U.S. investors were unaware because companies were not required to report CDSs. CDS were a major motivating factor to restructuring the Greece’s debt because many people believed that they could not be paid and would therefore shatter investor confidence throughout Europe, or that paying such a large sum would equally damage the economy.

No one can say what would have happened if different actions were taken in this situation, but we can conclude that CDS were not a contributor to the original problem. In the end CDS worked just the way that they are supposed to, they spread out the risk, and when cashed in the spread out the cost.


The role in the economy that credit default swaps played cannot be overstated. The market is saturated with a movable blocks of CDO’s that have been bundled by banks to sell to Wall Street. Without a real rating assigned to the CDO the risk could outweigh the reward to the traders and the market could be frozen in an asset versus liabilities quandary. At their basic structure the market in question is based on a faith much like that of religion. Using the religious analogy we can use the symbolic bible as a way of affirming our belief.

Some people believe that every word written in the bible is fact just like in market when Moody’s or Standard and Poor grade a CDO at AAA. The concept reaffirms our faith in the religion of money. It indicates to the buyer that there is validity to their assumption. Now when we introduce the ability to hedge a bet, also known as a credit default swap against the rating we are essentially stating that while the CDO is AAA rated we also want to have a set of protections if it does fail. Once again this provides the buyer with a level of security to their investment. A level of security that is only allowed when you are awarded the opportunity to purchase a set of protections against your investment.

While the insurance companies that sell credit default swaps are only selling a policy on insurance it is extremely important that they hold the money from the insurance policy for the lifetime of the policy. Much like a bank there can be a run on the policy which could decimate the liquidity of an insurance company. Much like what occurred with AIG. When CDO’s were bundled and the well was poisoned they did not have enough liquidity to pay the promised amounts for the policy.

As a society we should not allow companies to hedge bets and then when they lose and cannot pay they get rewarded from the government in terms of a bailout. When this kind of response is made to companies they are encouraged to continue the activities of earnestly acquiring contracts while leaving pennies on the dollar in regards to holding in case the policy is needed to be paid on.

In an ideal scenario the Company (AIG) would have been allowed to fail but when the Stock Market drops as drastically as on September 29, 2008 (777 points) too big to fail enters the frame. Unfortunately for the American people decisions were made that they might not have agreed with but in the world today too big to fail ends with a bailout not a bankruptcy.

However, when we include the interconnection of U.S. Companies to the international market we begin to see the infrastructure of a world economy that nearly dilutes politics due to its ability to affect every aspect of the way people live. For example, when a large corporation decides to exit a market (internationally) due to its lack of ability to shore up credit from U.S. banks it could potentially leave a large number of unemployed within the host country. Statistically when people are employed crime is lowered. In 2003 in a research paper called The Relationship between Crime and Employment author Matthew D. Melick defines the correlation within the context of argument as that of “common theory in public policymaking is that

higher unemployment causes higher (crime) rates” (Melick, 2013).

So we aren’t just talking about the ability for Company A to hedge a bet, we are talking about the ability for CDO’s to be traded with all of the faith that can be found within the rating system that is respected by the U.S. and subsequently the trader/ buyer of the CDO itself.

Unless we (United States citizens) defiantly argue against the ability for banks to bundle our home loans into CDO’s we will continue to see the complete dismantling of wealth distribution throughout society. Where the top 1% are awarded a vast majority of the wealth available and the rest of us are fighting for the crumbs that they have left over.

Credit default swaps are not the enemy. Credit default swaps allow for an investor to purchase insurance on their investment. The real enemy here is the companies that were allowed to continue within the framework of using the money that they should have held from the policy itself and awarded large sums of money in the shape of bonuses to CEO’s that dealt in predatory lending. Essentially, do not lump a solid policy within the system with poorly run companies because they are not the same thing and should not be categorized as such.




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Westbrook, J., Kishan, S., & Fortado, L. (2014). BlueCrest Exit Shows Turmoil at Platt’s Hedge

Fund. Retrieved November 22, 2014, from

Zabel, R. (2008, September 1). Credit Default Swaps History: From Protection to Speculation.

Retrieved December 1, 2014, from







Please reference my LinkedIn page for any questions about my career or new developments. ->





After the Breakup: the troubled alliance between Volkswagen and Suzuki

What was the rationale for the partnership between Volkswagen and Suzuki?

Stephen McGill

            In the business world the way in which Companies negotiate with each other is truly how they are culturally. For example, if Company A attempts to subvert information from Company B during negotiates than Company A could potentially dirty the water for future negotiations with Companies outside of their local circle. If a business is in a robust but limited saturation competitive market they cannot afford to jettison their image for a slight advantage during negotiations.

In the case of Volkswagen and Suzuki their rationale for the partnership was remarkably straight forward, “Volkswagen agreed to provide its larger vehicle technologies with Suzuki; Suzuki, in turn, agreed to provide Volkswagen access to its small-displacement motors and Indian presence” (Deresky 2014, pg. IC-13).

In ideal partnerships both sides receive a valued item within the agreement. From Volkswagen’s perspective they sought out the ability to enter the Indian market. Why was the Indian market so attractive to them?  In early 2014 The Wall Street journal published an article called GM, Ford struggle to crack India’s car market, in which they stated “The South Asian nation is expected to become the third largest car market in the world in the next five years behind China and the U.S. But U.S. auto makers have been struggling with debt and a slowdown at home, and they haven’t been as good as the Japanese and Koreans at offering the right products to India’s booming middle class, analysts and industry executives say” (Choudhury, S., & Bennett, J. 2014).

If negotiations would have gone well with Suzuki the Indian market could have been shared and the total cost of the alliance would have paid for itself via the total number of cars sold within a given period of time.

Given that both Companies represented success within their own niche market it would only make sense that the Companies would desire a partnership. Some partnerships lead to inflated costs due to corporate buyout rates and basic overhead costs but in the example of Volkswagen and Suzuki the shared agreement would have allowed both Companies to prosper by only given a small portion of themselves up.


Analyze the reasons for the break-up of the Volkswagen and Suzuki partnership


            Partnership agreements can have breakdown points at any time during negotiation. In the case of Volkswagen and Suzuki the communication within the oral agreement and the basic language of the written agreement created tension between the two companies. With one Company deciding to forgo the percentage of buyout. “Suzuki wants to buy back all the 19.9% of its shares that VW currently owns and that if the German automaker does not comply, Suzuki will seek mediation” (Faroq, 2011).

            Communicating with your business partner can be an extremely difficult process if the businesses have fundamental communication differences. In the case of Suzuki and Volkswagen many discussions and plans were put together but an overall lack of empathy on either part was found. For example, “We’ve known that Suzuki is a notoriously independent company with a chairman who is not going to bend over backwards to cooperate.  Volkswagen is better off focusing on a non-Suzuki-based strategy for India and Indonesia” (quote derived via Ashvin Chotai, a London-based managing director at Intelligence Automotive Asia Ltd., citation as follows: Mukai, 2011).

Although the communication piece is very important in the case of Suzuki and Volkswagen it was a complete lack of transparency within each company that dissuaded the other. Why for example, would Volkswagen share its larger vehicle technology to Suzuki before Suzuki granted them access to the Indian market? It was essentially a game of both sides being scared that the other wasn’t going to fulfill their end of the bargain and who could blame them? Both companies had ahold of markets and technology that they held precious. If either side decided to share with third parties that information that they had gained it could have led to a complete meltdown of the technology or location of business.

Even their individual company goals were full of secretive language and across the pond thinking. For example, Volkswagen stated that they “aimed to be the most successful and fascinating automakers in the world by 2018” (Deresky 2014, pg IC-16).

In the end the real reason that they could not get on the same page can be categorized by the power play between the two companies. On one hand Osamu Suzuki stated that a mistaken impression that “Suzuki is placed under their (Volkswagen) umbrella” (Deresky, 2014, pg. IC-19)


What role does culture play in a trans-border /transcontinental alliances?

Culture played a rather large role in the negotiation process as Japanese owners versus German owners have completely opposing cultural backgrounds. In the Japanese culture for example “Japan is a highly structured and traditional society. Great importance is placed on loyalty, politeness, personal responsibility and on everyone working together for the good of the larger group. Education, ambition, hard work, patience and determination are held in the highest regard. The crime rate is one of the lowest in the world” (Japan Cultural Etiquette, 2014).

While the Japanese place a large weight on politeness, togetherness and education the Germans’ have a bit of a dissimilar style of negotiation as they “Can be considered the masters of planning. This is a culture that prizes forward thinking and knowing what they will be doing at a specific time on a specific day. The German thought process is extremely thorough, with each aspect of a project being examined in great detail. Careful planning, in one’s business and personal life, provides a sense of security. Most aspects of German living and working are defined and regulated by structure, for example, through laws, rules, and procedures, which are evident in all economic, political and even social spheres” (German Cultural Etiquette, 2014).

Now that we have established the two cultures we can find the points in which they clashed. In the Japanese culture politeness is honored and respect is one of the more important rules of the game. However, the Germans want to discuss the fine tuning of the project which could come off as a bit intrusive to a Japanese negotiator. Additionally the German Company makes decisions seemingly a lot quicker than the Japanese company. While the German based company Volkswagen would plan the work and follow through with the execution of the plan, the Japanese company would want a slower more thorough approach to decision making.

Furthermore, Suzuki thought that engaging with Fiat in regards to engine research was a reasonable way of performing data collection and Volkswagen viewed that as a complete “breach of contract” (Deresky 2014, pg. IC-21).  If Suzuki would have communicated with Volkswagen, in regards to the trip itself, there may have not been a break-up of the partnership to start with. With open lines of communication and a clear/ concise communication plan between the companies they could have saved the opportunity cost that was lost with the filing and mitigation of said lawsuit.

Was this simply a cultural misstep as Suzuki viewed the business relationship as more of a loose controlled partnership or was it as stated from Mr. Suzuki himself when he stated “(about Volkswagen technology) if we are short of any technology, we have an option to ask other companies with which we benefit from technological exchanges” (Deresky, 2014, pg. IC-19).


Do you agree with critics who felt that cultural differences were a reason for the breakup of the alliance between Volkswagen and Suzuki? What could the companies have done to avoid these problems?


Personally, I do not agree that cultural differences were the reason for the breakup of the deal itself. It is my belief that the Companies themselves did not weight the cost/ benefit of such an endeavor before embarking on it. Individually their thoughts of success differ so drastically that they cannot even agree on what success would look like. Additionally, their ability to communicate was volatile not due to a cultural difference but due to the two companies not engaging with each other fairly. I understand that some companies communicate in ways that may seem abrupt or disjointed to others but it is the job or obligation of the CEO to interpret the communication style of their potential partner before engaging in negotiations with them.

Simply put the two companies did not do their homework. They both are to blame for the collapse of the partnership because they performed very little in terms of relationship building and I blame both of them for that. I blame Suzuki for dealing with Fiat instead of Volkswagen and not communicating to Volkswagen the reasoning behind it and I additionally blame Volkswagen for intentionally slowing down the process of data sharing.  It without question that they both acted in a way that was completely inappropriate in the world of large business. In no way would this type of behavior be accepted if they were both startup companies. Imagine the complete dismay of a potential customer at a local convenience store. The clerk stands behind the counter and fails to engage the potential customer. If that type of behavior was tolerated by the customer than the behavior could continue however if the customer complained than either there would be a corrective action by the management staff or the entire business would fail based on word of mouth.

Each engagement that either of these companies embarks on must be treated with the utmost respect as their shareholders expect a significant return on their investments each and every year. These engagements and speculations are measured directly by the overall worth of the company and while their value is shown as favorable their stock price raises. For example, when the partnership was initially shared with the public both companies looked favorable to the marketplace. Which meant their total earning potential of vehicles sold could have surpassed that of Toyota, 3.265 million and 1.15 million in the first half of 2009” (Deresky 2014, pg. IC-17).

The way in which the two companies could have overcome their differences should have been hammered out in the first conversations that the companies had when they initially discussed the coupling. They should have planned out their communication strategies and how and in which ways they would share information. Ideally, each milestone would be assigned with a specific date of accomplishment and benchmarking. They should have been completely transparent in their dealings and explained their individual points of view before final negotiations took place. Additionally, they should have taken the time to get to know the true stakeholders in the dealings. In this example, I would argue that they true stakeholders were the final consumers of their products. Furthermore I would have encouraged both companies to be completely forthright in their ideal goals and a shared ideal of what each step of success would look like.

With the total assets that both companies held it would have been extremely difficult to complete an asset alignment chart but that could have possibly been a way to show the openness of their negotiation. For example, the engine technology that was sought after could have been delivered at a given schedule if all the milestones were met. This kind of milestone charting can be very effective when dealing with small and big businesses.


What challenges would be in store for both the companies, now that the partnership is terminated? What should each company do now?


Going forward each company should perform their own SWAT (Strengths, weaknesses, opportunities and threats) analysis. For example, learning from ones missteps in regards to the negotiations between the two companies could be beneficial to future negotiations. In the case of Suzuki, they could learn to work on their overall communication skills and plan around their long voids of communication with either automated or third party reminders that they need to re-engage with their partners. Additionally, Volkswagen needs to find their own way into the Indian market via a shared interest with another company. Or Volkswagen can continue to perform well in the markets that they are in and chalk this experience up as a lesson learned.

The overall handling on both sides of the aisle are to blame here and both companies should perform their own after action review in regards to their shortcomings.



Business etiquette. (2014, September 12). Retrieved October 4, 2014, from


Choudhury, S., & Bennett, J. (2014, March 24). GM, Ford struggle to Crack India’s Car Market.

Retrieved October 2, 2014, from


Deresky, H. (2014). Communicating across cultures. In International management: Managing

across borders and cultures : Text and cases (8th ed., pp IC-13, IC-17, IC-21). Boston:


Faroq, N. (2011, November 18). VW Refuses to Let Go of Suzuki Shares. Retrieved October 4,

2014, from



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Mukai, A. (2011, September 12). Suzuki Seeks ‘Divorce’ From Volkswagen as Their 20-Month

Alliance Crumbles. Retrieved October 4, 2014, from

Too Big to Ignore



This paper explores three books and four published articles that report on results from research conducted online (internet) and off-line (non-internet) of the effect of big data on the network infrastructure of which the common internet platform is based. Furthermore, it explores the hyper-active relationship between the common user and the business entities that provide user content. The articles vary in their exploration of the common good from IBM’s Understanding Big Data which describes big data as “applying to information that can’t be processed or analyzed using traditional processes or tools.” (Zikopolous, Eaton, DeRoos, Deutsch & Lapis, 2013). Which delivers a shorthanded description of an otherwise complicated topic more clearly defined in Too Big To Ignore as “Everything is data. There’s even data about data, hence the term Metadata.” (Simon, 2013) This paper is broken down into chapter sections while interjecting additional research materials within the sections.

Keywords: data, big data, business data, communications data, understanding data


Too Big To Ignore: The Business Case for Big Data

            In The Dream Machine, J.C.R. Licklider is described as “the All-American Boy- Tall, blond and good looking, (essentially) good at everything he tried (Waldrop, 2001, p. 1). In 1962, the man heretofore described as he requested as “Lick” through a series of memos at M.I.T. discussed what he coined as a “Galactic Network” concept.  It was through his memos that he described “a globally interconnected set of computers through which everyone could use to access data and programs” (p. 23). Over fifty years later, his memos have expanded to an exchange in information that even the most robust thinker couldn’t have expected. The rampant use of the network we now call “the internet” has been accelerated so quickly that the data that these TCP/IP rotations create has become a large pool from which data can be pulled and categorized. Those categorized data segments are what the mass populace describes as “Big Data.”

Chapter 1: Data 101 and the Data Deluge

            In chapter 1 Phil Simon (2013) describes the “evolution between the enterprise data and the arrival of the data deluge” (p. 29). How that statement translates to the personal interpreter can differ in many cases, however, the basic way in which big data is viewed at the business level occurs via structured segments and augmented by means of three categories: structured, semi-structured, and unstructured. While each of these categories enables the data analyst to view the data from an opulent position, it also stands to reason that the holder of such data carries the keys to their own customer base and potential customer bases across the board.

The overall structure of how that data is sorted and catalogued leads to a more important set of rules which include: how that data is shared, to whom that data is shared, the vested interest in the consumer of protecting their data, and how the security measures of the company can lead to spillage.

How we use big data can still be a challenge to some people but a few local communities have discovered a way of using smartphones to gather useful information. The results yielded a report in potholes that recorded 155,333 bumps whereas before the technology was shared potholes were left largely unreported. Now not all bumps were potholes but the data that was collected was far greater than that without (p. 7).

The Wall Street Journal has also recently reported progressive data that has been found to assist Human Resources personnel in finding better employees via analytical tools that gauge the longevity of an individual hire (p.9).

Chapter 2: Demystifying Big Data

            Chapter 2 attempts to ease the technological aspects of big data towards a more non-technical conversation. This conversation steers closer to another three-tiered approach by defining the data deluge into categories of:

1.)    Volume

2.)    Variety

3.)    Velocity

With the three categories of data deluge set into place we can look at the data through the lens of the depth of the data ranges and the increasing speed of data. Why and how that would be effective can most aptly be defined by Gartner employee, Douglas Laney, who first wrote of the defining sets in 2001 (Simon, p. 49). However, the basis for how the categories are separated creates a bit of an issue with other companies who, instead of acknowledging Laney’s definition, decided to define their own categories. These categories differ now from company to company with the single display of solidarity, essentially they are all built on the three categories that Laney described.

Other topics in this chapter include the ways in which big data can define or re-define your agenda in the marketplace. For example, Netflix Corporation attempted to create a branch of its company for DVD delivery called Qwikster (Woo, 2011). Although the idea for separation would seem beneficial to the overall growth of the company, it was soon discovered that through social media channels the change would not be accepted by the common customer. The charge was therefore revoked.

Chapter 3: The Elements of Persuasion: Big Data Techniques

      The elements of Chapter 3 deal exclusively with the ways that individual fields and sub-fields in big data are examined. In other words, how techniques like statistical methods, data visualization, automation, semantics, and predictive analytics are achieved using both sophisticated tools and largely uncomplicated procedures that can gather and sort data quickly.

The subtext “big overview” (Simon, p. 79) details the three key points that big data delivers to business:

1.)    A better way to understand the past

2.)    A better way to understand the present

3.)    A better way to understand the future.

Chapter 3 includes a scenario stemming from a theoretical CEO of Applebee’s who read some scathing reviews of his restaurant on (p. 95). Although the data could provide a potential opportunity for improvement, there were a number of restaurants in the review area and the review was not specific. Without the help of data analytics software, no effective action could take place in this scenario.

Also a “gang of four” is mentioned in the big data field (p. 99). This gang reaches astronomical big data collection points:

1.)    Amazon: 160 million products on its website; 300 million customers on file.

2.)    Apple: 25 billion application downloads

3.)    Facebook: 1 billion users; over 1 billion pieces of shared content per day.

4.)    Google: 34,000 searches per second.

Chapter 4: Big Data Solutions

With a large amount of unstructured data we have come to a point in society in which companies can create entire business models on applications, technologies, and web services that actively attempt to sort the data. Technologies such as Hadoop, NoSQL, and Co-Lumnar databases can fill important needs within the market. The market, however, does not know how to incorporate collected data into their business model. IBM, for example, uses the database software Hadoop to sort their data (Zikopolous, Eaton, DeRoos, Deutsch, & Lapis, 2013, p.73).

While some of these data collection companies and software programs have components that people find extremely helpful, they are also “anything but perfect” (Simon, p. 121). Programs like Hadoop have a heightened potential for data spillage due to consolidating most of the data into one environment. In other words, because the technology is changing so quickly there are no unique procedures for how to police the standards for the process. Collectively, these new data sorting systems have become a recognized aspect of the new normal. This standard practice now includes the range, depth and width required to sort through the plethora of data needed for business focus.

While chapter 1 and 2 focused on how big data doesn’t like to play well with others chapter 4 spends most of the time explaining how there are a number of services available to sort and pull information from your data. A process that can both be expensive and time consuming however extremely beneficial for the overall growth of your company.

Chapter 5: Case Studies: The Big Rewards of Big Data

      In a basic reward system a cookie is given to a participant at the end of a long maze. The cookie is seen as a benefit to the individual or team that acquires the knowledge to solve the maze. With that in mind we enter a phase of data that was best described by Charles Darwin’s quote, “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change” (Simon, p.143).

There is a company, founded in 2006, that targets web measurements. The company is relatively small, with 250 or so employees. The company analyzes more than 300 billion observations of media consumption. (p. 142). The company was ranked #46 on Forbes’ list of most innovative companies. The company in question is Quantcast. What they do is analyze and sell a predictive model of pulls from a web audience. For example, if you purchased ad space on a specific website via their operational tools, significant gains could be made from utilizing their collected data. They are essentially focusing the efforts of your voice into one specialized arena for large gains.

Also mentioned in this chapter are Hadoop, which has been used to measure healthcare efficiency, and NASA, which has acquired over 100 terabytes of data from its missions (p. 153).

Chapter 6: Taking the Big Plunge

The big data train is moving out of the station and if you do not organize your business in a way that you can catch it, you may end out being left in the dark. A reasonable approach would be to continuously add data to your database and pull out information that could be useful to your operation. For example, if your objectives are to be successful in the restaurant business, understanding your predicted customer base for any particular day could be highly useful for staffing and inventory purposes. Primarily, chapter six deals with the importance and challenges of incorporating business goals with big data results.

Big data is a big commitment. You must strive to push forward at every turn. Businessmen must accept the fact that with the power of technology business can strive, but if you put minimal effort into any aspect of the business (big data included) then your corporation will struggle. Implementing big data software into your organization in a gradual manner will result in a healthy business model, whether your organization has three dollars in assets or three million. Adapting to a model that uses data tracking is essential to growth in this new generation.

Chapter 7: Big Data: Big Issues and Big Problems

While big data has the potential to push business to the next level, it also has the potential to be ethically unsound. This occurs when a data collection site creates tracking modules on customers. There are many security concerns when it comes to big data. For example, the department store Target had a huge data spillage in 2013 which potentially leaked over 70 million customer’s personal information (Fung, 2014).

While a large spillage like that at Target can affect millions of people, the alternative may include a non-desirable state in which your data is not held. Therefore your experience is hindered by a perpetual “beginning questionnaire” type state. Thus we must ask ourselves if the ease of which our personal information is passed is worth the price of possible spillage.

Of course the other fear is that mobile computing will completely phase out a mass of occupations that deal directly with the manual workforce. For example, typists (in the traditional sense) are being phased out, replaced instead by network engineers and a relatively new class of “knowledge workers” (Simon, p. 192). In general the fear that comes from big data is balanced by the privacy and security that businesses place on their information on their clientele.

In a world that Apple IPhone customers can download more than 600,000 unique application programs via the AppStore the security of the interface becomes increasingly important. (p.187). While Apple IPhones have an increased security risk with a large number of people “jail breaking” them, Apple attempts to create applications that only work within the active network thus it encourages people to use their phone as intended, in a non-jail broken state.

Chapter 8: Looking Forward: The Future of Big Data

One way that big data can change the way in which people spend their time shopping is by revolutionizing the consumable goods market at the grocery store. For example, if an individual selects a certain brand of cookie but switches to a cookie with less sugar, the company may respond by manufacturing more sugar-free products. Similarly, if the same complaint for a stoplight has been made via an open forum or discussion board, then the city might look towards remedying the problem.

The overall challenges that big data presents also uniformly pale in comparison to the benefits of which real change can be made. If homeowners lack the initiative to vacuum their homes, then the market could react by offering consumers practical cleaning solutions based on the data collected.

Furthermore, a society without using big data would lose out on potential gains via batting a blind eye at an otherwise gold mine. In an expansion to the basic realm of thinking we can also equate the research that most companies perform on food, film, or drugs all lead to big data. Most movie studios test their films with numerous audience members of differing background. They then require the viewers to fill out comment cards and base their opinions on how to either re-cut or market the film. There have been films that have been completely re-shot based on the initial viewers. That being said we should all be continuously scanning and examining the data that we surround ourselves with every day.

With economic pressures on both sides of the political aisle, it seems completely logical that the benefits of big data far outweigh the potential loss of privacy that those outraged describe. With a wide array of political activists screaming for tighter budgets and change to the status quo, we may end out dealing in a big data world whether we like it or not.  Essentially, the “government should innovate; our politicians shouldn’t need the excuse of shrinking budgets to embrace new technologies and Big Data” (Simon, p. 214).


Phil Simon, Author

Phil Simon holds a Bachelor’s of Arts degree from Carnegie Mellon University and a Master’s degree from Cornell University. Mr. Simon is a highly regarded public speaker who has also written six management books including The Age of the Platform which explores how Amazon, Facebook, and Google have redefined business. In 2014, he published The Visual Organization: Data Visualization, Big Data, and the Quest for Better Decisions. It explores how decision can be made using tools for discovery within the landscape of the data that is collected.

He is self-described as “a sought-after speaker and recognized authority on technology, trends, and management” (

His contributions can be found in a number of news magazines, including Business Weekly and Forbes. He is also featured as a consultant to a number of Fortune 500 companies. His consulting fees can be found on his website (

On social media platforms, Mr. Simon can be found on both LinkedIn (under his full name) and on Twitter using the handle @philsimon.



Fung, B. (2014). The Target hack gets worse: Phone numbers, addresses of up to 70 million

            customers leaked. The Washington Post. Retrieved on June 3, 2014 from:


Simon, P. (2013). Too big to ignore: The business case for big data. Hoboken, NJ: John Wiley

& Sons, Inc.

Waldrop, M.M. (2001). The dream machine: J.C.R. Licklider and the revolution that made

computing personal. New York, NY: Penguin Putnam, Inc.

Woo, S. (2011). Under fire, Netflix rewinds DVD plan. The Wall Street Journal. Retrieved on

June 3, 2014 from:


Zikopolous, P., Eaton, C., DeRoos, D., Deutsch, T., & Lapis, G. (2013). Understanding big data:

            Analytics for enterprise class Hadoop and streaming data. New York, NY: McGraw-Hill

Companies, Inc.



Duct Taped Marketing book review

Duct Tape Marketing

When starting any new business the main objective is to acquire an ability to find an audience. While that audience might have deep pockets without a basic marketing plan and a clear direction you may end out being left behind in a market that you failed to exploit. For example, during the initial phase you may want to consider a focusing your attention towards a specific kind or type of client, a client that would be ideal for your business, a client that would be perfectly suited toward your product or service. You may also want to consider attention grabbing headlines on your site. A recommended site for any small business that is offered for very little cost is WordPress. WordPress consists of a large number of templates that most small businesses can easily manipulate, however since WordPress is very popular your challenge would be how you would customize the product in a way that is both attention grabbing and content rich.

While the images that you display on the website might get a client to peruse the site you will also have to pay particular attention towards your content as well. Writing Blogs that feature your products or company will allow for a vested interest in your product leading towards a relationship with other social media sites which could include Facebook, Twitter, Tumblr, etc.

You also will want to pay particular attention to how your site is navigated and in which way your site is being found through google searches. Finding your keywords or key terms is an inexpensive way to help people with a road map to your product. Once your site can be found via search engine optimization it is critical that your site has some kind of content which may include Blogs, testimonials, newsletter sign-up sheets, and your core marketing message. For example, if you are marketing your product towards a higher class of business then you may want to consider marketing in an arena that higher class individuals would frequent. You, for example, wouldn’t want to run an advertisement in Mad Magazine if you were selling high end cigars. You would probably consider a higher class of publication, one that targets an older, wealthier clientele.

You may also want to consider using tools such as google analytics in order to track the traffic that is on your site. You could then turn around and incorporate postings during your specific sites heavy traffic times. This could also potentially make for a good time to post google coupons or specials linking your website to a coupon book or
Another tool that can be quiet useful is that of review writing. If you want to get your site off the ground you may want to spend a lot of time writing reviews and zeroing in on how your business is seen by the public. That being said answering questions about your business on your website could lead to a lot less questions and a lot less confusion in the long run. Many businesses find themselves answering the same question over and over again which leads to frustration in the business.

You may also want to encourage your entire staff to get involved in the day to day marketing via allotting portions of the newsletter to individual teams. Having an allotted portion of the newsletter assigned to a particular team or group allows ownership of said portion and empowers the employee or team to have a voice in the business. Also, including pictures or activities with your clients within the newsletter is also advisable. This creates a two tiered approach to the business newsletter, it engages not only the employees that helped create it but also most clients would search for their own picture or article written about them to share with their friends.

Networking is another key ingredient in starting a business. You may want to surround yourself with people that are like minded or people that have successful businesses already running. A mentor or mentorship program is also advisable, but the most important item in regards to a marketing plan is that of a budget and systematic plan. Ideally, that budget would include a plan and calendar which includes possible contingencies and milestone markers. Without a single sourced direction a business can find itself confused by its direction and without a road map towards success.


The strengths of Duct Tape Marketing are seeded directly into the amount of sheer data that the book covers. With its approach towards a very clumsy website design feature such as WordPress it creates an almost cookie cutter approach to building a website. While WordPress has its value in the market place I would argue that unless you are computer savvy you may end out becoming extremely frustrated with WordPress. I have personally worked extensively with WordPress and find it rather frustrating myself. Essentially what WordPress does is create a template that is a very basic design and allows you to slide content into these very small windows, that is unless you purchase the extended model of the product. Honestly, you are better off hiring a third party to design your site with an original design instead of attempting to base your site off of very pedestrian software.

Also, the idea that you need to create some kind of imprint with Twitter or Facebook doesn’t seem necessary to me in certain businesses. For example, if you were selling Taco’s out of a Taco truck you wouldn’t necessarily need to spend all of you time creating a Facebook page and tweeting out your location. Location, as in real estate, would still be the most important feature. Say for example, you are parked directly outside of a construction zone and the construction workers could visibly see your truck at that point if given that you are there only option it wouldn’t necessarily necessitate a full blown website, Facebook and Twitter page. Although, communicating with your potential clients may end out being a more personal experience in this case as a lot of moveable food servicing enterprises have been entering the market via invitation rather than the more direct model or business creation.

As it states at the beginning of the book you need to know who your audience is and what they are looking for. I am not convinced that people go on Facebook to purchase a car. Most people find the most convenient location with the cheapest price and the least sleazy salespeople. While this book would attempt to convince you that most people should be involved with social media I would argue that in some, very specific industries, that spending a lot of time in social media might end out being a burden to your bottom line.

Also the idea that writing reviews in order to get others to review your business seems a bit overzealous. For example, if you owned a software company you would probably receive more gains to your traffic on your site if you in fact wrote reviews for other software but you may end being in direct completion with the site that you have reviewed which could create a turf war between the two companies. That being said you may end out in a two sided argument with a company that has a big head start in the market that you are attempting to enter.

I do, however, agree that creating original content within your website is paramount when starting a business that deals with that technology. For example, if you are selling some kind of computer software such video compression than you would have to show how your product worked via video links. The theory that special links and coupons could be used to encourage marketing feedback could be found advantageous to many small businesses but could be quiet laborious to setup and may not be found to be fruitful.

One of the more difficult points that the book attempts to convey is that of shared effort when it comes to marketing. While this seems like a rather simplistic task, it could become a rather complex issue when attempting to implement the policy within a business. The sheer volume of time it would take for the role players within a business to spend time marketing may end out taking away from their primary goal of creating voluminous transactions within the company. A better approach might be to create a warm and inviting working condition that would create a sense of community within the organization. That sense of community would make its way outside of the company or product line which would in turn be your word of mouth marketing which seems to be missing from the book itself.

Business advice for small businesses

List of advice for your small business:


1.) If you have extremely high turnover with employees than it might be you and not the employees.

2.) If all of your employees complain about you than it might be you.

3.) If distributors force product on you blindly without your consent than you deserve to lose money.

4.) If you don’t pay your taxes, you deserve to have a lien placed on your business.

5.) If there is no standard operating procedure for the job requirement than you cannot enforce rules that are made up on the spot.

6.) You cannot accuse people of stealing via rumors and not fact.

7.) You cannot use facebook friendships as a way to charge employees with not have integrity.

8.) You cannot respond to yelp reviewers by threatening them.

9.) You cannot bad mouth employees in front of other employees.

10.) You cannot deduct hours from workers on their timecards because you don’t believe that they were working that hard during that time.


Review of Series Finale of Dexter







When I first discovered Dexter I thought I had found the holy grail of television shows that I could sink my teeth into. I loved the dual relationship that Dexter felt within himself. I bought all of the dark passenger stuff. I felt sorry for Dexter as he traveled throughout his day attempting to connect with other human beings. Ten days a year (before my morning coffee) I feel the same way. I bought all of the nonsense about Lumen (Julia Stiles) a few years ago. I even bought the story line where one of the characters was dead for 90 percent of the season which in and of itself should have kept me away. I celebrated a small victory for mankind when John Lithgow entered the Dexter world (season 4). I believe that season 4, with the death of Rita (spoiler alert of four years ago) the show peaked. After season 4 the series took a nose-dive into a large pool full of herpes infested sharks. The characters were poorly drawn out and the storylines were awful. I am not sure how their writing staff got paid for these years. Showtime should pull those checks because on more than a few occasions the show was un-watchable.

While I have/ had my reservations about the show I continued to watch it every week. I watched it hoping that somehow the ship would auto-correct, that somehow the Dexter world would make sense and they would go back to the source material of Jeff Lindsey but for some reason they kept plugging away at nonsense storylines and completely absurd dialogue.






Another reason that I felt distance from the show is the character Deb. I never enjoyed or found any connection to the character Deb. I also think that the actress that plays Deb (Jennifer Carpenter) is dog faced and makes me want to vomit. Her voice sounds like nails on a chalk board and her down syndrome type facial expressions exude an inner disappointment in me that honestly makes me want to throw her off a bridge in a bag full of tar.

Her conversations with Dexter, at times, have been written with a sincere tone but J-Carpenter delivers them with all the humanity of Darth Vader at a cast party for Mad Men. Needless to say I think that J-Carp should have her ticket to Hollywood revoked and should be waiting tables at a Ruby Tuesday’s in Omaha.

Pull the air tube out of her mouth please.









With all of that being said, I still watched the show. I still waited for a new episode with all of the fervor of one of Pavlov’s dogs, seemingly drooling on myself.

One week I would be engaged with the show and the next week I would feel completely disconnected from it.

When Deb finally found out that Dexter was a serial killer her reaction was completely unconvincing as she worked with some weird private investigator. Somehow she pushed her nonsense crap acting onto the screen (yes, I am still angry at her crap acting) and eye raped me for the entire run of the show.

Needless to say, in the series finale the story was so forced and unnecessarily trite that once the last screen flashed I yelled out “well that was bullshit.”

Every Dexter fan should want to grab a protest sign and cancel their Showtime. The show limped its way into its finale with talks of moving to Argentina (cliche). It is one of the biggest cop outs for a show going into the series finale to move away. Why can’t there be another option? Why couldn’t the writers think of anything else rather than “I have an idea, he moves away into hiding” and all of the other writers are like “Johnny, that is brilliant. He moves away and he has a long beard at the end.”

Dexter could have been a classic show made for an intelligent audience but instead it turned into a bag of showtime crap covered in egg shells and shame.

Shame on you Showtime. Shame on you producers of Dexter.

Sneak peak

Here is a sneak peak at a book I have been working on:

I imagine that at some point in the future I will forget all about her. I doubt it though.  Until that point I will be stuck day-dreaming about touching her hands. Her hands were small but plump.  Her hands and feet were the only items that were plump on her.  When she smiled I would drown in her happiness.  I would lose myself in a sensationalized version of our lives together. In my mind we were Bonnie and Clyde. I wanted her to love me. I wanted to feel like her smile was designed specifically for me.  I doubt it though.

My day normally begins at 0645; I am stating military time because I find it more convenient than writing out PM or AM. In my opinion both AM and PM usage should be disregarded.  My alarm carries a soothing but firm tone, one in which I feel welcomes me to a new day without any kind of judgment.  What I mean by that is that my alarm clock signifies the life that I want to live not the life I currently live.

My first name is Bert. It is not short for Robert or Roberto. I was literally named Bert. I hate it.  Bert is not a name for a distinguished gentleman. No one ever introduces the Duke of Earl and then says “oh, yes that is Duke Bert.”

While my first name represents a Greek tragedy my last name leaves just as much to be desired.  My last name is Henson. Yes, my name is Bert Henson. You might be saying to yourself “how is the name Bert Henson such a bad name?” While initially the name seems reasonable the character of Bert on Sesame Street was created by Frank Oz and Jim Henson. When people marry those two ideals they come up with an amazing assortment of jokes. It is not that I mind jokes. What really bothers me is repetition.

I have been introduced to people at parties in the following way “this is Bert, like the guy on Sesame Street.” Do you know how upsetting it can be to be associated with children’s programming your entire life? It unpleasant to say the least.

Despite my name I still moved forward in my life and attended a middling University right after High School. My college of choice was Washington State University; a University that is known for its partying. I was never invited to those parties.  I spent four years in a dorm room. One year with Calvin, who pealed skin off of his feet and then would eat the skin. That was interesting.  Two years with Joshua, who chained smoked and had an extremely respectable arsenal of male sexual partners that visited seemingly every day. In my senior year I had a split living situation for half of the year I lived with my girlfriend named April who was extremely attractive and subsequently left me for Joshua who miraculously turned bi-sexual for her. The second half of my senior year I lived with a friend named Shawn. Shawn was a sixth year senior who on the day of graduation had received three completely different Bachelor’s degrees.  Shawn went to medical school after undergraduate. He now performs rhinoplasty on celebrities and enjoys karate. You might have seen him on tv.

After I graduated with a Bachelor’s degree in English I was not sure what to do with myself.  I attempted to speak to my Father about it but he was a third shift Boeing worker who had not slept regularly in six years. Needless to say he was a walking zombie. His eyes were always blood shot and he seemed to always have a complete disconnection from people he spoke with. During one summer I asked him how he was and he answered “green.”

I finally realized that people who graduate college with a degree in English are either going to be extremely well-written while filling out their unemployment application or need to achieve a Master’s degree. I took the GRE and applied to University of Washington in Seattle.  My parents wanted me to be closer to them and since my family home is located in Auburn it seemed like a logical choice. For the next two years of my life I lived in a studio apartment in Seattle. My studio apartment nearly cost as much as the full amount of financial aid I was receiving. Subsequently I had to work a part-time job for the campus as an academic advisor. It was a struggle but after two years I owed the government nearly one-hundred thousand dollars but had a piece of paper that stated Master’s degree.

While I was in graduate school I met a young lady named Sandy who broke my heart in two. I wore a lot of black after we broke up. I also wrote a ton of poetry that seemed as though a young thirteen year old girl wrote it.

After graduate school I applied to the school board and ended out teaching 8th grade English in a Junior High School in Federal Way. On my teacher’s salary, if I lived at the poverty level, I should be able to pay off my college loans in twenty-six and a half years.  That is if I stay single and decide to never have children. I have never been truly happy.


Teaching 8th grade English is a lot like being a zoo keeper. I corral the herd to sit at their seats while I take attendance. I put some vocabulary words on the board and I give them a test every Friday.  More specifically, on Monday we discuss twenty words. On Tuesday we take a quiz on the words. On Wednesday we have a word find/ puzzle with the words. On Thursday we write short stories with the words and on Friday we test. I have now been performing these same tasks for five years. Meanwhile, I find myself chipping away literally dollars at a time at my student loans. I still feel as though I am suffocating under a mountain of debt. I once had a dream about the debt chasing me as I was running after an attractive woman. I am sure that the dream was a direct reflection of my life. I am chasing some kind of happiness but I can’t find it without being out from under the debt of my past.

I take special interest in some students; that is if the student shows talent in writing or is some kind of sports hero for the school.  It is not exactly special interest it is more of an actual conversation. I am sure, in a way, I am turning into my father which is extremely disappointing. On the surface I should be pleased with what life has dealt me. On the surface I should be happy with the new girl that I met online but I carry a dark cloud with me.

The dark cloud usually rears its head when I think that happiness might be around the corner. How does the dark cloud manifest itself? I will give you an example, I found twenty dollars in my dress pants one day, I was extremely happy about having what I considered a free twenty in my life. Three hours later my cat died. I had that cat for ten years. I loved that cat.

“Mr. Henson?” April Smelling asked while attempting to hand me a piece of paper.

“Yes, April?”


For the few that are unaware, I have been to Iraq four times. I don’t say that as a badge of honor or some kind of accomplishment because it really isn’t an accomplishment, it is essentially the results of either good decisions or bad decisions that I have made in my life.

Initially I joined the military because I was in a marriage that I was not happy with and I projected out the future and it looked bleak. I joined in July of 2001. I subsequently was in basic training on September 11th, 2001.

In 2003 I was sent to Iraq; twice. Once at the beginning of the year and than again towards the end of the year. I finally got out of the Army (or so I thought), in 2005. In 2007 I was called back in via a strange loophole that somehow forced me into the US Army reserves and I was sent to Iraq again.

I returned from Iraq (number 3) in 2008 and than in 2011 I joined a contracting company and went to Iraq for the fourth time.

Now onto the bigger point.


During my last deployment I worked night shift. I would spend hours in the middle of a large office listening to the nonsense bickering of a few people. I would normally let them ramble on because it kept me awake. On my time off I would watch clips on youtube or buy bootleg movies. On occasion the internet would carry enough signal to stream television shows off of hulu or netflix. Although, for the most part those sites were blocked.

The sleeping arrangements were a bit odd as we were issued rooms in large trailers with a shared bathroom. While we had our own rooms it was comparable to a small bedroom size. I had a desk, a chair, a wall locker and a bed. My only entertainment was my computer and kindle.

The smell that brings me back to my deployment (number 4) was the putrid odor of human feces being pumped out of the large bins. The smell was completely unique and stomach turning.

On occasion I think about the nine months that I spent on my last deployment. I think about how for about an hour a day I would find happiness in a book or while watching a television show.

On a particularly sad day I sauntered over to my room (trailer) with a gloomy almost suicidal weight on my shoulders. I searched for something/ anything to make me happy. I searched through all of my books and all of my bootleg dvds. I needed something to pull me out of the state I was in. I needed the burden of my life to be released. I just wanted to be away from everything. When I finally found something to watch I hoped that it would pull me out of the dark cloud and it did. This video made me forget about the feces smell and my bum knee. It made me feel like I could keep going. I know it is silly but for one brief three minute window there was no Iraq and I was whole again.

Sometimes you get to meet cool people

Here is quite possibly the worst picture of me but an awesome picture of me with MARC MARON…… Who is Marc Maron? Only one of the best podcast hosts of all time. He is also a great comedian and knew some other great comedians that I loved like Sam Kinison and Bill Hicks.


Stephen McGill (me) and Marc Maron