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Up is steeper than down
David Post • June 29, 2011
Why is the slope up a hill steeper than the slope down a hill? Seems like it should be the same, but it never is.
Everyone knows that it’s easier to ride a bicycle downhill than to ride it uphill, or to fall into a hole than to climb out.
The economy works the same way. If a $1,000 investment drops to $800, that’s a 20% decline. But for it to go back up to $1,000, that’s a 25% increase. You see, the climb back up is steeper than the drop down.
Remember the good old days when things seemed to be going great and the Fed would increase interest rates to slow the economy down? Or a big increase in jobs would send the stock market down because it was worried that too many buyers would cause inflation.
The economy seems to be counter-intuitive. Good is bad, and bad is good.
For example, the decline in housing prices has virtually crippled the economy, but it’s a good time to buy.
Banks are in trouble. With zillions of dollars of bad loans on their books and with housing values – their primary collateral – continuing to fall, banks are scared to make loans. Murphy’s Law says, “If anything can go wrong, it will.” Murphy’s Law of Banking stings even more: “If you qualify for a loan, you don’t need it.”
For years, economists complained that Americans “didn’t save enough.” We spent all of our money. That was a bad, but it made the economy grow, so it was a good. Credit card debt soared which was bad, but the stuff we bought made the economy grow, so that was good.
Today, we’re nervous about what tomorrow’s economy is going to do or look like, so we are changing our behavior. Now, Americans are saving more which is good, but by spending less the economy won’t grow, so that’s bad. We are paying down that mountain of credit card debt, which is good, but that money isn’t being used to buy the stuff that new jobs would make, so it’s bad.
The Japanese are very frugal people and famous for saving. That’s good, we were told. We should be more like them. But the Japanese economy has been in a funk for more than 25 years. Its stock market average was 10,000 in 1984 and after a blip, is still 10,000 while the US stock market is ten times higher than in was 25 years ago.
Do we really want to be like the Japanese?
The 2012 presidential campaign has begun, and until the election, the political rhetoric is going to be all about jobs. The political parties will blame each other, but more importantly, both will make promises they can’t keep.
During each decade from 1950 until 2000, the US created on average approximately 150,000 new jobs per month. From 2000 until 2007, US job growth was about half that, or 80,000 new jobs per month (despite huge tax cuts, but we won’t go there). Then, during the Great Recession of 2008 and 2009, the country lost 8.5 million jobs.
Do the math If we can start growing jobs at the rate we did from 1950 until 2000, that’s a 5 year climb to get back to 2007 employment levels. And that’s before a single new job is created. But what if the job growth rate from 2000 through 2007 is the new normal? In that case, climbing out of this ditch and getting back to even ground will take almost 9 years.
What about all this whining about the loss of manufacturing jobs? The US is already the most productive country on the earth. Most countries aren’t even close to American productivity. Each US worker produces 7 times more a Chinese worker and 13 times more than workers in India. As US workers become more productive every year, fewer people produce more. Increased productivity is good, right? But it means fewer jobs, so that’s bad.
It’s deeper than that. We don’t make shoes and shirts anymore. That stuff was easy. Today, we make satellites and electronic components, the hard stuff which requires more educated workers than it did to make shirts.
The presidential campaign will be fought with quick and easy sound bites. The problem is that these issues have no quick or easy answers. What politicians do know is that tearing things down is easier than building them back up.
Up is steeper than down. Go figure. How does anyone make an A in economics when the right answer might be wrong and the wrong answer might be right?
GBA Honors Long-Standing Georgetown Store, The Phoenix
Bridget Belfield • June 15, 2011
The Georgetown Business Association is honoring one of Georgetown’s oldest family owned and operated establishments, The Phoenix. The store opened in 1955 when Betty and Bill Hayes arrived home from a trip to Mexico, laden down with unique and vibrant folk sculptures, art, jewelry and clothing. They compiled their treasures and thus The Phoenix was born. Over the years the store evolved under the new ownership of Betty and Bill’s son and his wife, John and Sharon Hays. Along with their daughter, Samantha, the Hays have incorporated an international collection of popular women’s clothing designers, Mexican-inspired silver and gold jewelry and other artisan crafts collected from the family’s travels to Zambia, Thailand, Mexico and other various countries.
As a “founding father” of Georgetown BID and past board member of GBA, John Hays has always played a prominent role in the community. Hays may have even settled a longtime feud between the GBA and CAG, suggesting that instead of competing, the two associations should work harmoniously together in order to better the community and those who both work and live within Georgetown.
The Hays family has kept The Phoenix thriving and full of life over the past 55 years by always moving and growing and most importantly, absolutely loving what they do. With John in charge of buying the folk art and jewelry, his daughter Samantha as a buyer for the women’s clothing, and wife Sharon taking over the finances, The Phoenix is a well-oiled machine.
As for where the store may be in another 55 years down the road, “It’s up to the next generation,” Hays says. And with four grandchildren, two local to the area, there is certainly another generation standing by in the wings. But Hays isn’t pressuring, simply providing the opportunity. Whether they chose to convert the store into a McDonalds or keep it intact, Hays trusts that all will work out. John Hays’ secret to success? “Enjoy it!” [gallery ids="99980,99981,99982,99983,99984" nav="thumbs"]
Farewell Free Sightseeing
Samantha Hungerford • June 2, 2011
As the cradle of U.S. politics, the whole of DC is biding its time and bracing itself for the imminent government shutdown. Although there’s still a chance to avoid the freeze, the odds are slim that Congress will be able to reach a consensus on the allocation of the 2011 federal budget before Friday’s midnight deadline. While it’s clear that a shutdown is looming around the corner, in these days of fractured parties it’s still uncertain how long it would last and how exactly it would affect the lives of DC residents.
Most noticeably, DC’s trash collection, street sweeping services, libraries and the DMV would close. Museums such as the different branches of the Smithsonian Institution along the Mall and the National Zoo would also shut down. Luckily, the animals in the zoo would continue to be cared for, fed and guarded during the shutdown, and private museums such as the Newseum would remain open.
It is currently unsure whether or not the National Cherry Blossom Festival would continue – festival organizers are trying to come up with a plan that will allow the events, such as Saturday’s parade, to take place as planned. Without federal funding, however, the festival must support its own cost of operations.
Because this shutdown is happening during tax season, it will have a larger impact on the IRS than shutdowns have in the past. The IRS will run on minimum staff for the duration of the suspension, meaning that tax returns filed online would be filled but those sent via snail-mail would remain unopened for an indefinite period of time. This does not mean, however, that you can file your taxes late without getting fined – they’re still due April 18.
Money and services from Medicare, Medicaid, Social Security and the Veteran’s Administration would be given out to those who were receiving assistance before the shutdown. Because of trimmed-back staff, however, new requests to these programs could go unanswered and become backlogged until the governmental hiatus is lifted. A backlog of federal loans could also occur. The Federal Housing Administration stated that federal home loan guarantees would be withheld and it is likely that requests for federals student loans would be postponed as well. Federal funding for unemployment programs could be stopped, leaving state governments to continue providing support for the unemployed on their own. Similarly, the shutdown could delay grants for research and police training.
The police forces that have already been trained would, however, continue to perform their duties as will jail systems and the court system although some cases, such as those concerning child support or bankruptcy, may be stalled. Agencies that protect homeland security such as the U.S. Coast Guard and security guards at airports would also continue their work, although many of their workers would have to go unpaid. Individuals trying to get new passports would also be affected, as they would have to wait until the shutdown ended to register for one.
Government websites that aren’t “essential” wouldn’t be updated, possibly because government workers in “unnecessary” positions would get an unexpected vacation as they wouldn’t have to go to work during the shutdown. They also, unfortunately, wouldn’t get paid for the duration of time that the hiatus lasts. After the 1995 shutdown these workers were reimbursed, but it’s still unclear whether or not that would happen at this time.
Some things, however, would remain the same. Public schools, for instance, would continue all of their services including providing lunches for students. NASA would continue to prepare for the April 29 launch of Endeavour, the military would continue to perform its duties unfazed and the U.S. Postal Service, true to form, would carry on delivering the mail.
For the Love of Fashion
Sitting smiling, talking on the phone at a desk in the back of Saks Jandel amid racks of stunning Armani creations, Harriet Kassman seems to have shaken off much of the heartbreak the last few months have thrown her way. Flipping through papers
with hot-pink nails that match her lipstick, the Washington legend, renowned for dressing area celebrities and politicians for the last 35 years, looks comfortable amid the luxury labels. Though perhaps not quite as comfortable as she would have looked a year ago, among her own hand-picked designer goodies.
“I’ve come full circle, I’m right where I’ve started from,” says Kassman, looking around Saks Jandel.
Kassman worked at the high-end clothing store for two years when it opened in 1975, but then set out on her own adventure. In 1977 the spunky grandmother, standing just a shade over five feet tall, opened her namesake luxury store: Harriet Kassman.
For 35 years she did business that seemed more like pleasure: perhaps a cool aunt helping to dress friends and family in garments that happened to be stunning couture. But in September of this year, the crumpling economy got the better of Kassman’s revenue stream, and she had to shut the doors. “I didn’t just open a store, I put my whole heart and soul in it,” says Kassman, stopping smiling for a moment, “and when you lose it it’s like losing part of yourself.” Though understandably deeply affected
by the loss of her beloved store, Kassman refuses to wallow. She allows herself only a few moments sadness to ponder the year’s events, a solemn reflection not at all bogged down by self pity. “I’ve learned over the past couple months that you’ve got to go on, that you cant just live in the past.”
And boy has she lived by those words. Instead of moping about past misfortunes, Kassman
has thrown herself into a new venture: consultant for her onetime rival Saks Jandel. The owner of Saks Jandel, Peter Marx, is the same age as Kassman’s middle son Nicholas,
who worked with his mom at the boutique since graduating college. “He’s such a nice human being,” Kassman says fondly of Marx. When he heard that Kassman’s store would be closing, he did something many people would never have even considered. “He walked up to my store and said ‘what can I do to help?’” says Kassman, “And you never hear that from people.” Marx’s generosity
has given the 88-year-old Kassman a new lease on her lifetime in fashion, something
she is deeply invested in.
Kassman’s career in fashion began in her home town of Daytona Beach, FL. Then twenty years old, she began a lifetime among famous designers in her father’s dress shop, and in the intervening decades her desire to work in fashion hasn’t wavered one bit. “Some people just work at their job, and other people have a passion,” says Kassman, looking around at designers whose names have become something like family: “I have a passion. Where it came from, I don’t know, it doesn’t matter. But I like it.” Her love of beautiful clothes has lasted for nearly seventy years, and not even the economic collapse forcing Kassman to shutter the doors on her beloved store has dimmed that passion.
So now Kassman lends her expertise to another renowned boutique in D.C., and so far is loving it.
“I’m so pleased when somebody walks out in something that’s beautiful, and they love it and they get compliments on it,” says the effervescent grandmother of seven, looking around at the Vera Wang bridal boutique in Saks Jandel. Adorned with two long rows of frothy tulle confections and stunning lace numbers in white, ivory and cream, this is one of the most high-end rooms in the store.
But, insists Kassman, there is something at Saks Jandel to fit every price range. “I mean, you can spend $5,000 if you like, but you can also spend $200,” she insists, pointing out lovely autumn cashmere pieces that are a priced quite reasonably. Citing quality as one of the premier factors in deciding which brands to buy, Saks Jandel focuses on stocking beautiful clothes of exceptional quality, regardless of the number on the price tag.
Kassman’s boutique featured many of the same designers as Saks Jandel, and many of the clients she worked with have now come to do business at Peter Marx’s store, which Kassman couldn’t be more pleased about. Pulling a stunning red Valentino cocktail dress off the rack, Kassman looks right at home. It would be unfathomable for her to consider retiring: she simply has too much fun in fashion.
“When the clock runs down, you’re finished,” says Kassman, smiling around, “But I’m not finished.”
Business Ins & Outs
Lisa Gillespie • May 31, 2011
Reiss Limited at 1254 Wisconsin Avenue, which originally replaced Armani Exchange in 2007, has closed. Though the UK-based clothing line was worn by Kate Middleton, Duchess of Cambridge, when she met the Obamas at Buckingham Palace, Georgetowners will no longer be strutting the streets in this apparel unless they order it online.
Another one bites the dust at the Georgetown Park mall: The National Pinball Museum, which opened in December 2010, will be closed in two months. The museum received a letter May 18 from the mall owner Vornado Realty telling the non-profit that its lease would expire in 60 days. The move, though a surprise to the museum, was within the legal boundaries of its lease. Admission was originally set at $20, but it’s now down to $3. Get your fill of these national treasures before it closes!
Serendipity 3 opened over Memorial Day weekend, in the former spot of Nathans at M and Wisconsin. The original New York restaurant, opened in 1954, has famous dishes such as foot-long hotdogs and decandent sundaes, and the D.C. store will feature D.C.-exclusive dishes.
Though Dean and Deluca at Potomac and M St. has been around for 17 years, there’s recently been a new element mixing things up: Janie Mathieson. She’s been in the restaurant business for a while; before she came to work at Dean and Deluca she worked for a year as the manager at husband, Jonathan Krinn’s three-star restaurant, Inox. Before that, she was at 2941, where her husband was also the head chef. She was drawn to Georgetown and Dean and Deluca because she wanted to find something different and new to work on.
“I first found out about Dean and Deluca when I was living in New York,” she said. “It was the place to be and shop. Now, adding the catering side, we take that great product and prepare it and bring it to people. It’s a true match.”
Mathieson brings with her a history of hospitality that she has grown into a blooming catering business for Dean and Deluca. “It’s a new business we’re developing. We do a lot of outreach to businesses and knocking on people’s doors.” She attends a lot of networking events, from BID and GBA meetings, to society affairs. With two children, ages four and seven, she has a busy life. And as she says, no day is ever the same as catering director. “It gives me a good balance. I get to go home and be a mom and then come here and put on great events for people. This is the opportunity to build a business.”
The Business of Being in Business
Ari Post • May 23, 2011
The financial recession of the late 2000s found the stock market plummeting to near-record lows and real estate frozen. Housing foreclosures and a disturbing rise in small business failures pockmarked the economic landscape. Businesses that had comfortably kept their doors open for decades were going under. Entrepreneurs were suffering the full brunt of financial strife. It has been said that this recession was just short of a depression, that no industry was spared. It is now March 2010. Many economists still consider the country well in the midst of this great recession.
Now is a great time to start a business.
So submits Jack Garson, author of “How To Build A Business And Sell It For Millions.” Founder and head of business and real estate practice for Garson & Claxton LLC, a member of the Washington Airports Authority board of directors and with a veritable laundry list of professional accomplishments, Mr. Garson has credentials that dwarf most in his field. For all his success, his office is nonetheless unimposing — if spacious — and welcomes guests comfortably, without a looming intimidation. The first thing he does after shaking my hand is to offer me an espresso. Whirling clockwise in his chair, he gets to work. The espresso machine is closer to his desk than his computer.
“I’ve only been to Europe once,” he says. “We went to Paris. And my favorite thing was stopping for espresso. Everywhere. I was drinking them all day.”
Mr. Garson, an outed workaholic, is someone who has clearly made his quirks work in his favor. As he hands me the ambrosial caffeine bomb, he proudly exclaims that he knew he was going to be a lawyer since he was 13 years old. By the time he graduated law school, he had already worked as a law clerk for 2 years and found himself supervising men years above him. He knows how to take the bull by the horns, and according to him, now is the time to do it.
Given the recent economic climate, there has been a shortage of investment capital, resulting in few sales of businesses. Those that have been selling are going for exceedingly low prices. However, private equity firms, those in the business-buying profession, are starting to gear up again.
Equity firms buy a business, add to the executive team, beef up sales and revenue, and resell. Then they do it again.
“They want to build up the profitability,” says Garson, “and then flip them. They’re gonna start selling the businesses they’re buying today in three years, and they’re gonna make a ton of money, because they’re buying dirt cheap right now. And they’re gonna tell all of the world how much money they made, because they want to attract more investors.” This in turn will attract a flood of investment into the industry. Because money rotates.
In the last decade, money has bounced from stocks, to real estate, to cash and treasury bonds. “And one of the next places money is going to migrate to is businesses,” says Mr. Garson. “It’s like gold prices tripling, and everyone starts buying gold. People are going to make a fortune buying businesses, and that will attract a lot of money to this asset class. And all those people out there with funds of money are gonna pour their money into it. So, today is a great time to start a business if you have an eye towards converging with selling it in three to five years.”
However, Mr. Garson’s book does not just deal with building and selling a business in today’s financial market. Far more universal, the book is a guideline of advisory self-assessments, insider tips and premeditated judgment calls that any business owner will have to make throughout his career, in good times and bad. It shows a business owner how to keep an eye on the ball at all times, even while juggling prospective buyers and developing human resources. All of Mr. Garson’s advice is punctuated with stories from the field. Whereas many books of this genre tend to be academically formulated, Mr. Garson’s book is sharp, frank, and to the point — not to mention quite readable. This book has been written from the trenches.
“I’ve been in the room when a business has gone out of business because someone has ignored good advice,” says Mr. Garson. “I’ve been in the room when someone has gotten a hundred million dollar check. And I was also in the room for three years before that, and I saw every decision that led to both of those outcomes. I’m writing about real life successes and failures.”
Chapters discuss a variety of succinct topics from common business pitfalls and financial forecasting to government relations — a vital chapter for the Washington entrepreneur. Every one of these points is accented with hard-boiled, true-life anecdotes. “I have made mental notes of all these things for 25 years. There are lessons I learned 25 years ago that are in this book. And I couldn’t keep it in. I had to share it.”
The advantage of the Washington area is not lost on Mr. Garson, a Maryland native. The local economy is vibrant. Where D.C. has always had an anchor in the federal government, “we’re really seeing a lot more of the financial world shift down here,” he says. “A lot of the U.S. is shifting down here”
As a board member of the Metropolitan Washington Airports Authority, Mr. Garson has witnessed international flights that previously flew exclusively to New York now landing at National or Dulles. The national news has also been relocating a significant portion of their daily filming to the area. “We’ve always been the political capital of the country,” he says, “but we’re starting to have dibs on a portion of the financial capital. And that’s a tremendous benefit that we have.”
Mr. Garson understands the start-up business. He knows where the mistakes lie, and he is weary of the sore spots. “There’s a lot of rigorous analysis clashing with a lot of dreams,” he says. Mr. Garson balances a tender sympathy for the dreamer with the cold, hard pragmatism of profitability. He should know. He’s among the sect. This book is his dream.
“I always wanted to write. But I wanted to write fiction, I wanted to write the great American novel. I didn’t want to write a business book. But this is what I knew. You have to write from what you know.” And Mr. Garson certainly knows the business of being in business.
More trouble for Georgetown Park?
The financial troubles of the Shops at Georgetown Park just seem to be getting worse.
The Washington Business Journal reports that the scheduled June 3 auction date for the mall, the second attempt to sell it in a month, was again postponed by Capmark Finance LLC, the lender in charge of unloading the luckless property on a buyer after it foreclosed the property in April. Capmark cited a need to market the property more aggressively before it went to auction. Commercial real estate agency Jones Lang LaSalle will spearhead the effort to entice more potential buyers.
The mall’s owner, developer Herb Miller, had worked for years to make it profitable by establishing a department store anchor tenant to lure smaller tenants into setting up shop there. However, several national retailers, most recently Bloomingdale’s, have been spooked by the litigation Miller has been enduring for almost a decade with rival developer Anthony Lanier. At the time of foreclosure, over half of the mall’s tenant space remained unclaimed.
Lanier, credited with revitalizing Cady’s Alley a block west of the mall, is known for creating European-style projects that encourage pedestrian traffic. If he is able to get his hands on the Georgetown Park property, he is expected to apply a similar vision to the struggling mall.
Ward 2 Sees $103 Million in Fiscal Spending
-Critics continuously slam Mayor Adrian Fenty for favoring prosperous neighborhoods when allocating fiscal spending, yet recent Washington Post data shows Fenty has poured a substantial amount of money into many of the poorer communities over the past 3 years.
According to the Post, “Records show, for example, that predominantly black Ward 5 received more school construction funds — $152 million — than any other ward in fiscal 2008 and 2009…Wards 8 and 2 followed with $117 million and $103 million, respectively, crushing the idea that when it comes to school construction, wards were favored by class and race.”
Georgetown, which is located in Ward 2, has seen Fenty allocate $1 million a year on the Circulator bus service, $23 million to rebuild the burned-down library and $30 million to help fix Hardy Middle School.
Chadwicks: A Sense of Home in a Busy City
Emma Leavy • December 8, 2010
Chadwicks is a true neighborhood saloon, with the tradition, clientele, and warmth to prove it. It’s the type of local restaurant that chains attempt to emulate with manufactured charm. Yet, upon walking through Chadwicks’ doors, you gain a sense that it’s the real deal. From the homemade paper snowflakes dangling merrily above the bar, to its welcoming wait staff, the restaurant exudes the affable atmosphere one looks for in such an establishment.
Since 1967, when Chadwicks first opened, Georgetown has transformed into a bustling college town—home to affluent politicians and busy streets crowded with restaurants and designer clothing stores. Despite the frenzied evolution, Chadwicks has remained frozen in time, a beloved reminder of the past.
Tom Russo, owner of the Georgetown institution, is a proud part of its rich history. He first worked there during his undergraduate studies at Georgetown University. Russo’s face broke into a nostalgic grin as he revealed, “I’m a Hoya,” and it was easy to imagine him as a Chadwicks regular during his college years.
Beginning as a bus boy, Russo climbed his way through the ranks. After completing business school, he returned to his old haunt and eventually became a partner in 1986. As he puts it, he simply “fell in love with a girl, fell in love with the city, and stayed here.”
Over the years, Russo has watched the Georgetown neighborhood grow, but he remains at ease in his second home because, as he says, “Chadwicks is a place I would like to hang out in.”
In the last 25 years, competition has exploded in Georgetown. Russo laments how DC tourists often avoid local restaurants in favor chain names they recognize. Were it not for Chadwicks’ loyal patronage, it would be unable to compete. Fortunately, the familiar environment attracts plenty of locals, who order the same burger they’ve been enjoying for years.
Whereas restaurant chains rely on a center of operations located in some far-flung city, Chadwicks lacks these bureaucratic hang-ups. The saloon’s strength lies in its ability to provide the same quality and service it has for years. This constancy is not lost on Georgetowners, who can appreciate seasoned charm.
Chadwicks serves an assortment of classic American food, and is well known for its burger. Russo relates how lost souls wander in for the first time in 40 years to inquire if it still serves its famous clam chowder (The answer is a resounding yes, by the way.). Running from 4 to 7 on weekdays, the bar’s Happy Hour specials are favorites with professionals and students alike. What’s more, every Saturday and Sunday Chadwicks features a champagne breakfast, where the bubbly is unlimited, and the burritos are massive.
For the entire hour I sat with Russo, he greeted every lunch guest by name. His manner is impressively genuine as he asks each one, “How are you?”
The restaurant has no robotic hostess uttering her practiced, impersonal greeting. Guests here are met with a sincerity that Russo notes, “makes them feel at home.” It’s that sensation of being warmly received, of a homecoming, that makes Chadwicks unique. [gallery ids="99575,104858" nav="thumbs"]