1 In the ordinary, Silicon Valley finds next big thing (The New York Times) Square’s tie-up with Starbucks may be this year’s most important venture capital deal. The deal not only has the potential to change the way people pay for coffee and everything else, it also shows how small innovation applied to everyday tasks may be the next new thing for venture capital. Call it the rise of the ordinary innovators.
Under the deal announced last week, Square, the mobile payments device start-up, will process debit and credit card transactions for the coffee shop chain, whose customers will be able to use Square’s payment mobile phone app at participating stores. As part of the deal, Starbucks will invest $25 million in Square and Starbucks’s chief executive, Howard Schultz, will join the Square board.
It may sound boring, but the mobile payment sector is hot. The basic idea is to use your mobile device to pay for everything. Merchants can get in the game, too. Many of these companies aim to process all transactions, but Square’s business model is built on a basic premise: pushing payment devices to businesses that have had difficulty using credit cards. Not surprisingly, the food trucks and taxis of the world love this product. But the ease of use and Square’s flat fee of 2.75 percent of the total charge have hastened the product’s spread to other merchants. Square was begun in October 2010 and is already processing over $6 billion in payments on an annualized basis.
2 Schools pass debt to next gen (The New York Times) The deleveraging of America is well under way, as individuals and companies recover from the excess borrowing that helped to produce the boom and left many people vulnerable when the bust arrived. Household debt is down nearly $900 billion over the last four years, partly from repayments and partly from defaults.
For borrowing $105 million in 2011, taxpayers — or perhaps it would be more accurate to say the children and grandchildren of today’s taxpayers — will pay $877 million in interest between 2033 and 2051. The tax revolt that began with Proposition 13 in 1978 has made it harder and harder to finance education or other local government services. Assorted propositions approved by voters have made it very difficult to raise taxes at all.
According to a Thomson Reuters database, school districts issued nearly $4 billion in such bonds last year, and have sold almost $3 billion more this year. School districts’ logic for borrowing for construction projects always was that those who benefit should pay for a construction project. In the case of the Poway bond, however, it is at least possible that it will be the children of today’s students who end up paying the bill. By then, many of these school buildings may be obsolete, or at least in need of another refurbishing.
3 Lost decade looms for euro zone (The New York Times) The euro zone is hurtling back into recession, economists declared after official figures this week portrayed a shrinking economy. But by some measures the downturn has been under way for years. With the exception of Germany, none of Europe’s biggest economies have returned to the level of economic output they had at the beginning of 2008, before the subprime mortgage crisis in the US spread across the Atlantic, according to calculations by two US economists, Peter Rupert and Thomas F Cooley.
The figures suggest that Europe is already well into what could become a lost decade — a period of pernicious stagnation and wasted potential that could have lasting effects on ordinary citizens. Economic growth not realized represents investments in education that were never made, research that was never financed, businesses that failed and careers that ended too early or never got off the ground.
4 Facebook stock plunges (San Francisco Chronicle) Facebook's stock plunged to a new low Thursday as some of the social networking leader's early backers got their first chance to sell their shares since the company's initial public offering went awry. Analysts interpreted the unusually high trading volume as a clear sign that at least a few of the insiders were seizing on a fresh selling opportunity. That is stirring a debate over whether they're simply locking in long-awaited gains on investments made many years ago or bailing out of a company that has lost its luster.
The shares have plunged by nearly 50% amid concerns about whether Facebook is destined to become a passing fancy and worries about whether it will be able to sell more advertising on mobile devices as users gravitate there. Facebook' stock traded as low as $19.69 before bouncing back slightly.
Most painful read of the day
'Kill us too, please' (Johannesburg Times) "Kill us too, please, abelungu [whites]." These were the words of a miner wounded when the police opened fire on thousands of strikers at Lonmin's platinum mine in Marikana, outside Rustenburg, as he hurled insults at the police - and urged them to finish him off. The extremely tense week-long stand-off between police and striking workers at the mine in North West ended in just over two minutes of bloodshed when the police opened fire with semi-automatic assault rifles and pistols.
After the police operation, which lasted for about 15 minutes, at least 18 striking workers lay dead or wounded, covered in blood and dust, in the open veld near the notorious Marikana Hill. Ten other people, including two policemen, have been killed in violence at the mine since the weekend. President Jacob Zuma last night expressed sadness and alarm at the bloodshed, which started shortly after police advanced on the hill to disarm the strikers.
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