13 posts tagged

Business and Economics

What to read #7: Money

Money: An Unofficial Biography of Money by Felix Martin

Restored by restorephotos.io

When I was 15, I received a¬†gift from my best friend, Max‚ÄĒa¬†book that would shape my understanding of¬†money. From that day on, my friends knew that books were the¬†way to¬†my heart.

Yap Island’s Unique Currency: Giant Stones and a Trust-Based Economy

In the remote Yap Island, found a hundred years ago, an extraordinary monetary system thrived. The inhabitants used enormous coin-like stones with holes in the center, known as Rai stones, as a form of currency. These stones were immovable, some as large as cars, and were quarried from distant islands and transported with great effort.

What made this system work was an intricate web of trust and communal understanding. Ownership of the stones could change without them physically moving. If someone wished to buy something, like 10 kilograms of fish, they would simply declare the transfer of ownership to the fisherman. Everyone in the community would acknowledge the new ownership and the transaction was complete.

The stones didn’t even need to be seen to hold value. In one legendary tale, a Rai stone was lost at sea during transport, but the community continued to recognize its value, and it remained part of the island’s currency system.

This unique approach to money, rooted in social trust and shared belief, challenges conventional economic thinking and provides a fascinating glimpse into how value can be ascribed and exchanged in diverse cultures.

The Birth of Forwards and Futures: Lyon, 1535

In the bustling market town of Lyon, France, in 1535, an extraordinary transformation was taking place. Amidst the cacophony of sellers peddling meats, fruits, and tools, one man stood out. He had no physical products, just a fountain pen, paper, and an idea that would revolutionize trading.

This man began selling the future by signing contracts to buy wheat at predefined prices and reselling them at higher rates. This practice, known as Forwards or Futures, was a radical departure from traditional commerce. It attracted attention, skepticism, and eventually imitation. Other traders started following suit, and soon, Lyon’s market was flooded with these future contracts.

The city’s reputation grew, attracting merchants and financiers from far and wide. Banks and financial institutions took notice, and Lyon became a hub for innovation in finance. By the end of the century, it was not only France’s financial center but also the heart of Europe’s burgeoning capital market. The man with the fountain pen had set in motion a wave that would eventually shape modern stock markets.

Eric’s Adventure: Risk, Profit, and the Birth of Joint-Stock Companies

Across the sea, in the small but ambitious trading nation of the Netherlands, a Dutch trader named Eric had a vision. He dreamed of building ships to explore and trade with distant lands, but his ambition was larger than his credit. Banks and friends lent what they could, but it was never enough.

Undeterred, Eric took a novel approach. Instead of seeking credit, he asked investors to buy a share of his profits. This was a new concept, and it attracted adventurous and like-minded individuals who saw the potential in overseas trade.

Eric’s first voyage was a resounding success, bringing in profits that exceeded all expectations. Word spread quickly, and more people clamored to invest in Eric’s next expedition. His fleet grew, and so did his reputation.

However, managing the growing number of investors became a Herculean task. There were disputes over ownership, profits, and investment terms. The government, too, struggled to track who owned what and how much tax was due.

The¬†solution was as¬†innovative as¬†Eric‚Äôs trading model‚ÄĒa¬†centralized exchange where shares in¬†his ventures, and¬†those of¬†his competitors, could be bought and¬†sold. This was the¬†genesis of¬†the¬†joint-stock company and¬†the¬†stock market, concepts that would define global commerce for¬†centuries to¬†come.

With each new voyage, risks and rewards were shared among an ever-growing pool of investors. The idea spread across Europe, laying the groundwork for modern corporations and investment structures. Eric’s vision had not only opened new trade routes but also charted a course for the future of business and finance.

John Law: The Gambler Who Shaped France’s Monetary System

John Law, a charismatic Scotsman, was a gambler, banker, and economist whose ideas would leave an indelible mark on France’s monetary system. Sentenced to death in Britain for killing a man in a duel, Law escaped to Europe, where his financial acumen caught the attention of France’s regent.

France was in financial ruin after years of war, and Law proposed a radical solution: replace gold and silver with paper money backed by land. He believed this would stimulate the economy and reduce the national debt.

In 1716, Law founded the Banque Générale, issuing paper money that could be exchanged for coins. His ideas were initially successful, and Law’s influence grew. He took over the Mississippi Company, controlling French trade with the Americas, and his paper money fueled a speculative bubble.

However, Law’s success was short-lived. Doubts about the real value of the paper money led to a loss of confidence, and the bubble burst. Law was forced to flee France in disgrace, his innovations leading to financial chaos.

Yet, despite the catastrophic end, Law’s ideas were ahead of their time. He foresaw the potential of a centralized banking system, fiat currency, and the complex interplay of economics and psychology. His story is a cautionary tale about innovation, ambition, and the fragile nature of economic systems, but also a testament to the power of ideas to shape history.

These expanded sections provide a more comprehensive view of the unique currency system of Yap Island and the complex story of John Law. By delving into the details, the narrative paints a vivid picture of these historical phenomena, offering readers a deeper understanding of the diverse and often surprising world of money.

Beyond the Stories: A Rich Exploration of Money

‚ÄúMoney: An¬†Unofficial Biography of¬†Money‚ÄĚ by¬†Felix Martin goes beyond the¬†fascinating stories of¬†Yap Island, Lyon, Eric‚Äôs adventures, and¬†John Law. It dives into the¬†complexities of¬†debt, the¬†art of¬†printing money (seigniorage), the¬†ideologies of¬†capitalism and¬†communism, the¬†evolution from the¬†gold standard to¬†fiat currency, and¬†the¬†prominence of¬†the¬†U.S. dollar.

This article was edited by¬†ChatGPT, which assisted me in¬†crafting the¬†storytelling, paraphrasing sentences, and¬†verifying facts from both the¬†book ‚ÄúMoney: An¬†Unofficial Biography of¬†Money‚ÄĚ by¬†Felix Martin and¬†my own memory. The¬†collaboration has helped shape a¬†more engaging and¬†accurate representation of¬†the¬†book‚Äôs rich exploration of¬†money and¬†its multifaceted history.

2023   Books   Business and Economics   english

Dress code for Diplotamic meetings

Rules:

The suit is only dark blue or dark gray. Black is allowed only at evening events with the black-tie dress code, as well as at funerals and weddings.
The¬†jacket is single-breasted, with two or¬†three buttons. Length ‚ÄĒ up to¬†the¬†middle of¬†the¬†palm of¬†a¬†freely hanging hand. The¬†fabric is solid, dense, without iridescence (chameleon effect), and¬†gloss.
Trousers of a classic cut, with arrows. The length is up to the middle of the heel with one front fold above the shoe.
The shirt is white, plain, opaque (not transparent), and without pockets. Cuffs with one or two buttons are acceptable, but French cuffs are preferable, with medium-sized cufflinks of laconic shapes. The cuff should peek out from under the jacket by 1-1.5 cm.
The tie without glossy gloss, plain, muted colors (dark red, dark blue, dark gray, graphite). Small geometric patterns or contrasting stripes are acceptable. The tie should not be too wide, and its knot should not be too large. The length should reach the middle of the belt.
The belt is only made of smooth matte leather with a classic laconic buckle. The color of the belt matches the color of the shoes.
Shoes ‚ÄĒ oxfords or¬†derbies made of¬†smooth matte black leather. Brown shoes are only allowed in¬†the¬†heat. The¬†sole is thin, the¬†heel is 3-5 cm.
Socks up to the middle of the calf, are selected in the color of shoes or trousers. White or multicolored socks are not allowed.

These are generally accepted rules. But some politicians deviate from the rules and add their own corporate identity: Trump wears a bright red tie and printed socks; Putin most likely has higher heels. Macron sometimes wears a turtleneck under the jacket. Canadian leader Trudo wears socks with ducks and star wars. Some civilizations are also wearing traditional costumes, e. g., the Saudi Arabian prince wears a thawb (or dishdasha).

The¬†suits are meaningful. For¬†example, Marcon wears a¬†turtleneck under the¬†jacket if he expects changes from the¬†politician‚Äôs decision. The¬†clumsy oversized non-ironed costume can mean that person does not¬†care about the¬†public¬†‚Äď Trump is one of¬†them. Obama, at¬†the¬†conference against terrorists, wore a¬†beige suit, that seemed too informal in¬†a¬†context of¬†a¬†speech on¬†such a¬†serious issue. A¬†light suid is only used at¬†weddings and¬†on¬†the¬†beach.

Brands:
Putin wears Brioni and¬†Kiton (4000-8000‚ā¨). Macron wears a¬†local brand, Jonas et Cie, for¬†just 380‚ā¨. Biden wore Ralph Lauren at¬†the¬†inauguration. Hart Schaffner Marx and¬†Hickey Freeman produce suits for¬†presidents for¬†3000-5000‚ā¨. So, the¬†price of¬†the¬†suit may be any: 400‚ā¨, 3000‚ā¨, 8000‚ā¨¬†and¬†higher.

Source: RBC.ru

2022   Business and Economics   english

How to afford the best stuff and not to loose money.

I love buying premium products. I buy everything I need and¬†I afford any hobbies I want. But¬†I don‚Äôt become poor after purchasing all of¬†this stuff. And¬†most of¬†the¬†time I only pay 20-30% of¬†the¬†item‚Äôs price. How can I afford to¬†buy an¬†iPhone for¬†300‚ā¨? How do I get money after buying an¬†expensive camera? Let‚Äôs learn about depreciation.

When you buy stuff, look at 3 things: a lifetime of a product, It is hard to break, for how much will I be able to sell this stuff in the future?

Buy 1-year-old stuff

I don‚Äôt buy new iPhones, Macbooks, cameras, or¬†bikes (i hope soon I will add cars here). Instead, I buy 1-year-old items. For¬†example, I bought iPhone 11 pro 256 GB just for¬†600‚ā¨, while the¬†12th was priced at¬†1200‚ā¨. This iPhone was in¬†perfect condition and¬†was just 6 months old. I keep it already for¬†2 years and¬†I can sell it for¬†450‚ā¨¬†(Sep 2022). However, I broke Face-Id while swimming and¬†now I have to¬†give a¬†discount and¬†sell it for¬†300‚ā¨. The¬†total cost of¬†an¬†iPhone usage was 300‚ā¨, or¬†150‚ā¨¬†per¬†year or¬†12.5‚ā¨¬†per¬†month.

Some people sell their 1-year-old phones to¬†buy new ones. They sell it for¬†50%-70% of¬†the¬†price. That means, that to¬†have a¬†new iPhone each year, a¬†person should pay a¬†difference of¬†600‚ā¨¬†between the¬†initial price and¬†selling price, or¬†50‚ā¨¬†per¬†month. But¬†if you wanna have the¬†previous model and¬†keep it for¬†2 years, the¬†monthly payment is just 12.5‚ā¨. It is 4 times cheaper to¬†have the¬†previous model. If you keep the¬†old model for¬†a¬†longer time, maybe you can even pay 10‚ā¨¬†per¬†month. To¬†clarify, it does not¬†mean that you pay someone¬†‚ā¨¬†each month, it just shows how much value the¬†phone loses every month.

Depreciation is the¬†value, that an¬†item loses each month or¬†year. It is also treated as¬†the¬†real cost of¬†usage of¬†a¬†good. In¬†theory, you should take the¬†price of¬†a¬†good when you bought it and¬†the¬†selling price after the¬†expected time of¬†usage. Then you subtract these prices and¬†divide them by¬†the¬†number of¬†years or¬†months that you plan to¬†use that stuff. For¬†an¬†iPhone 14, it will be (1200-600)/3 = 200‚ā¨¬†per¬†year if we assume that we use a¬†1200‚ā¨¬†iPhone for¬†3 years and¬†sell it for¬†600‚ā¨.

Depreciation can be counted linearly, or more complicated. For easiness, assume that in the first year the item loses the same cost as in the next 2 years combined.

Used items are Inflation-free. That means if the¬†price for¬†new models goes up, the¬†used items will cost the¬†same as¬†before. It is just a¬†rule. For¬†example, in¬†Russia, there is huge inflation in¬†cars. The¬†previous models of¬†a¬†car cost 100k‚ā¨ 1 year ago, the¬†new model cost 300k‚ā¨ due to¬†the¬†import restrictions. We could imagine, that if these cars still have the¬†same engine and¬†interior, the¬†price for¬†the¬†one-year-old car should also rise dramatically. However, it is not¬†the¬†case. For¬†example, the¬†used Audi Q7 of¬†2020 with 50k km costs 70k‚ā¨, while the¬†new one of¬†2022 costs 250k‚ā¨. The¬†only difference between them is the¬†small adjustment in¬†the¬†exterior and¬†interior.

Different countries have different prices. For¬†example, I bought a¬†used camera, Sony a7 II for¬†just 570‚ā¨. When I came to¬†Russia, it appeared that I can sell it for¬†1.2k‚ā¨. So, I can sell it here and¬†get a¬†600‚ā¨¬†profit. It is known as¬†Arbitrage. It is when you profit from the¬†difference in¬†prices without risk.

Buy high quality

Don’t buy low quality. Such items are easy to break, and their lifetime is short. You will not be able to sell it, so you just throw it in the rubbish bin after some time. Keep in mind that cheap low quality items are sometimes made with the child force and in poor worker conditions. And by buying and throwing the bad quality items in the rubbish bin, you are polluting nature.

High-quality items last long, show prestige and are beautiful and comfortable.

Also buy new

Not¬†every item can be bought or¬†used. Don‚Äôt buy used headphones, parachutes, or¬†stuff you know nothing about. For¬†example, I want to¬†buy a¬†bike for¬†2.8k‚ā¨. It is expensive. I could probably find the¬†one-year-old bike, but¬†I don‚Äôt know how to¬†check the¬†bike for¬†quality, or¬†I don‚Äôt want to¬†change the¬†details. In¬†such situations, I can either hire a¬†professional or¬†ask a¬†friend for¬†help. Or¬†just buy a¬†new one. The¬†bike, for¬†example, has a¬†lifetime of¬†7 years on¬†average, and¬†then the¬†depreciation will be 2800/7 = 400‚ā¨. Of¬†course, a¬†bike can be sold even for¬†1000‚ā¨¬†in¬†7 years, because we can change details and¬†make repairments each year, but¬†let‚Äôs assume that we do nothing. So, the¬†cost of¬†a¬†bike will be 33‚ā¨¬†per¬†month. It is not¬†too much for¬†high quality.

What about fashion

Fashion is complicated. The¬†fashion houses know that people want to¬†be trendy, and¬†the¬†style changes each half a¬†year. I don‚Äôt know if it is a¬†good idea to¬†buy used clothes, but¬†it is a¬†good idea to¬†buy expensive classical outfits. For¬†men it is easy¬†‚Äď just buy suits for¬†2k‚ā¨ each and¬†use them for¬†a¬†decade. Buy good shirts, t-shirts, and¬†8 pairs of¬†shoes for¬†different events. The¬†men‚Äôs classics change too slowly. There are also trendy casual outfits that should be changed more often.

For¬†women, it does not¬†work. Fashion for¬†women is much more important. It is a¬†way to¬†show her status and¬†prove to¬†herself that she is the¬†most beautiful. However, some brands like Burberry don‚Äôt change their fashion style too often. Gucci can also be worn for¬†a¬†quite long time. I recommend not¬†buying the¬†brand stuff, but¬†quality stuff. Don‚Äôt be a¬†crank and¬†don‚Äôt buy an¬†item with huge brand logos. Instead, buy something attractive. You will never find a¬†brand on¬†a¬†5k‚ā¨ dress and¬†suit.

When buying new clothes, remember how can you combine them with other clothes or¬†whether you already have enough outfits for¬†some occasions. Maybe you just need to¬†buy high-quality t-shirts instead of¬†20 t-shirts with cheap prints. I have an¬†excel file, where I put all the¬†wardrobe items in¬†my Austrian house. It appeared that I have items, that costs 6000‚ā¨¬†in¬†total. But¬†I have only a¬†few things that cost more than 100‚ā¨. I understood that I have too many cheap clothes up to¬†25‚ā¨. And¬†the¬†thing is that I wear such clothes for¬†1 or¬†2 years. The¬†expensive items, however, I wear for¬†a¬†much longer time. I also found out that I have 5 suits, and¬†4 of¬†them cost less than 200‚ā¨¬†each.

I hope, after reading this article, you will buy quality stuff for lower prices and will afford anything you want.

2022   Business and Economics   english   Investment

Business plan: why espresso is so expensive

(the prices are being updated as well as information till 15th September) Let’s say, we open a coffee shop on the street, where we sell only espresso. How much should the price be? And what difficulties will we face when opening?

One-time purchase

  • Coffee machine¬†‚Äď 15000‚ā¨
  • furniture¬†‚Äď 5000‚ā¨
  • tools and¬†accessories¬†‚Äď 500‚ā¨
  • brand development¬†‚Äď 1000‚ā¨
  • card terminal¬†‚Äď 50‚ā¨
  • certificate and¬†legal procedures

Monthly purchase

  • Rent¬†‚Äď 1000‚ā¨
  • Electricity¬†‚Äď 1000‚ā¨
  • Employees¬†‚Äď 5700‚ā¨
  • cleaning, accountant, lawyer, insurance¬†‚Äď 500‚ā¨

Per-cup purchase

  • disposable cup¬†‚Äď 0.1‚ā¨
  • coffee beans¬†‚Äď 0.4‚ā¨
  • card commission¬†‚Äď 2%

Certification

To sell Coffee, you need approval from the state. In Vienna, it is WKO (Wirtschaftskammer Organisation, or economic chamber in English). By the way, you don’t need it if you sell beverages in cans or bottles and if you sell simple food, like sandwiches, but you can only have max of 8 guests inside of a cafe. Not our case.

Rent

We rent a¬†coffee shop on¬†the¬†ground floor of¬†the¬†shopping street. Let‚Äôs say we pay 1000‚ā¨¬†for¬†20 m2 and¬†expect to¬†have 15 customers per¬†hour on¬†average. You may also find an¬†already equipped coffee shop and¬†just pay an¬†aufl√∂sung (price for¬†the¬†furniture and¬†equipment).

If only one employee works in a coffee shop, you don’t need a toilet by the law. Baristas can work at different time and then they will be treated as one employee in WC questions.

The place should have clean water, a sink, air conditioning, heating, and low humidity. If humidity is high, the beans can become bad. If there will not be air conditioning or heating, the employee will not be able to work in a coffee shop by the law. For example, in the UK when the temperature is less than 16 degrees celsius the employee is not allowed to work. In Austria, I found only the maximal allowed temperature of 32.5 degrees. And we will have to pay the employee even though that the shop is closed.

We also need to take insurance that covers all the things inside, especially the coffee machine.

Electricity

Based on¬†https://www.statista.com/statistics/1271527/austria-monthly-wholesale-electricity-price/Statista, the¬†price for¬†1 Megawatt was 359$ on¬†July 2022, while before it was just 30-50‚ā¨. The¬†high prices for¬†electricity are compensated by¬†lower rent prices as¬†well as¬†governmental help.

Coffee machine

The¬†coffee machine is the¬†most expensive stuff inside of¬†a¬†coffee shop and¬†is as¬†important as¬†beans. There are two main brands¬†‚Äď La Cimbali, La Marzocco. both of¬†them cost from 10000‚ā¨¬†to¬†15000‚ā¨. La Marzocco is more traditional, while La Cimbali tries to¬†implement new technologies in¬†the¬†coffee machine. La Marzocco attracts coffee lovers, and¬†they are ready to¬†pay a¬†premium for¬†coffee made in¬†this machine.

read about the difference between La Marzocco and La Cimbali

Why is it so expensive? This is due to¬†the¬†pressing mechanism. By¬†the¬†way, Espresso got the¬†name from ‚Äúpress‚ÄĚ, the¬†process of¬†pressing the¬†ground coffee and¬†water flowing through it. The¬†pressure a¬†coffee machine can do and¬†the¬†boiling process is the¬†most important in¬†coffee brewing. The¬†machines are made out of¬†thick metal, which makes cleaning easy. These machines last for¬†decades (in¬†the¬†museum of¬†Salzburg I have seen the¬†model of¬†the¬†1950th that can still work well).

Therefore, the¬†price of¬†the¬†used coffee machine is still high. For¬†example, a¬†woman sells La Marzocco Ep for¬†5900‚ā¨, that she bought in¬†2017 while the¬†new costs¬†‚ā¨11900. Ps., this model is not¬†produced anymore, and¬†I found only one seller. For¬†such a¬†price, you may buy better models of¬†La Marzocco.

To¬†count the¬†price of¬†usage of¬†a¬†coffee machine or¬†depreciation, we subtract the¬†selling price from buying price, for¬†example, 15000‚ā¨-10000‚ā¨= 5000‚ā¨, and¬†divide the¬†years that we use the¬†machine. Let‚Äôs say, 5 years. 5000‚ā¨/5 years = 1000‚ā¨, or¬†83‚ā¨¬†per¬†month.

additional coffee machines

Some people like Moka, the 50$ pot with 2 separate levels: water and ground coffee on the lower level. The pot is boiling on the stove. The brown liquid goes to the higher level, which is Moka coffee. When the higher level of a pot is full, the coffee is ready to be served in cups. I, personally, don’t like such a coffee due to the lack of foam and too huge amount of water per gram of coffee. Italians love it and drink it every breakfast instead of tea.

Coffee beans

  • Price of¬†arabica¬†‚Äď 40‚ā¨¬†per¬†kilo
  • 10g for¬†each portion, or¬†0.40‚ā¨

For coffee shops, we use the finest coffee beans. Usually, they are not sold to households, but to coffee shops.
For each espresso, we need 10 grams of ground coffee.

Coffee beans can be kept 4 months after roasting, later they lose their taste.

Tip: Portuguese love espresso that is made of¬†ground coffee that is left after making the¬†first espresso. They think that there is less caffeine inside this coffee. They ask to¬†pour the¬†coffee into the¬†second cup. For¬†the¬†barista, it costs just a¬†second cup (0.10‚ā¨) and¬†hot water. The¬†used ground coffee will be anyways in¬†the¬†bin. You may either set a¬†small price for¬†such coffee or¬†even give it for¬†free to¬†get loyal customers.

We don’t count sugar and cinnamon, they cost just a cent per cup.

Cups

We don‚Äôt have sitting places. We could use the¬†bar table as¬†in¬†Italy, but¬†we have only disposable (1-time use) cups for¬†simplicity. The¬†average price of¬†bio cups is 10 cents. If you want to¬†have your cups, use 10 cents as¬†the¬†price for¬†cleaning, and¬†use of¬†a¬†cup, which includes the¬†price of¬†buying the¬†cup (e.¬†g., porcelain espresso cup for¬†9‚ā¨¬†each), the¬†risk of¬†breaking and¬†stealing.

We expect 1 customer every 4 minutes (15 cups per hour). We are open daily from 8 am to 9 pm (13 hours per day). 13 hours * 30 calendar days = 390 hours, or 5850 cups per month.

Employees

Baristas are paid hourly. They come 30 min before opening and¬†leave 30 min after closing. They clean stuff and¬†count the¬†inventory. It is 15 hours per¬†day. A¬†person can‚Äôt work more than 8.5 hours a¬†day in¬†Austria and¬†must not¬†work more than 40 hours per¬†week (I‚Äôll check this information). We need 4 baristas¬†‚Äď 2 for¬†work days and¬†2 for¬†weekends.

Tip: the less a person earns, the less % of taxes are to be paid in Austria. This is due to the progressive taxes.

First, we pay for¬†social contributions, which is nearly 18%. If a¬†person earns 18000‚ā¨¬†of¬†earnings, then an¬†employer pays 3500 of¬†social contributions, you pay 21866$ gross. We pay taxes from income¬†‚Äď contributions, 18000-3500 = 14500. Then we deduct 11000 of¬†non-taxable amount 14500-11000 = 3500 and¬†take 20% of¬†taxes which is 700‚ā¨. But¬†taxes are deducted from the¬†income of¬†a¬†person, not¬†from your payments. The¬†real income of¬†a¬†person will be nearly 17300‚ā¨.

In¬†our example, we pay for¬†7-hour work for¬†each worker. All of¬†them work for¬†the¬†salary for¬†barista, which is 12‚ā¨¬†per¬†hour. It totals 7*12 = 84‚ā¨¬†per¬†day or¬†1680‚ā¨¬†per¬†month for¬†work-day baristas and¬†672‚ā¨¬†for¬†weekend baristas.

We pay 2040‚ā¨¬†and¬†816‚ā¨¬†to¬†baristas. In¬†total, it is 2040*2 + 816*2 = 5712‚ā¨¬†per¬†month.

Count

Fixed costs per¬†month: Rent (2000‚ā¨) + cost of¬†use of¬†the¬†Coffee machine (83‚ā¨) + Salaries (5712‚ā¨) + other costs (600‚ā¨) = 8400‚ā¨¬†approximately per¬†month

For simplicity, we count furniture in rent, tools, accessories, and payment terminals in other costs

Variable costs per¬†cup = beans (0.4‚ā¨) + cups (0.1‚ā¨) + terminal use.

We also need to¬†pay VAT if we earn more than 30000‚ā¨¬†in¬†profit. The¬†VAT is the¬†tax per¬†selling of¬†an¬†item, which totals 20% of¬†the¬†final price. But¬†we don‚Äôt pay so much. We deduct 20% from the¬†goods that we have bought¬†‚Äď 20% from beans and¬†cups, or¬†10 cents. In¬†the¬†EU the¬†majority of¬†the¬†goods produced and¬†sold over EU are tax-deductible, even the¬†coffee machine is tax-deductible, it is 16.6‚ā¨¬†per¬†month. The¬†same with the¬†rent, however, if you buy a¬†place, it is an¬†investment, that is not¬†tax deductible.

To¬†get the¬†break-even, 5850cups*(price*(1-terminal commission(2%))-variable cost(0.5‚ā¨))¬†‚Äď fixed costs(8400‚ā¨) = 0. To¬†find the¬†price I created an¬†online program:

I found that with the¬†price of¬†2‚ā¨¬†we are break even and¬†even make revenue of¬†141$.
We pay pay taxes from profit, 23.1%. Our profit is 108‚ā¨.

open a program. Change the number and find the best prices and amount of cups to be sold

As¬†you have seen, the¬†coffee shop cannot sell espresso for¬†less than 2‚ā¨. The¬†next time you go to¬†the¬†coffee shop keep it in¬†mind.

2022   Business and Economics   Business Plan   Coffee   english

Educational Advertising

Educational advertising brings value to a person. The reader learns, explores new themes, and obtains new values. Let’s see an example:

Alex wants to buy coffee beans. Alex knows nothing about coffee beans. Alex does the next actions:

  1. He googles “how to choose a coffee.
  2. Alex opens the most relevant blog.
  3. He reads the article, for example this one.
  4. Alex reads about roasting, types of beans, such as Robusta and Arabica, tastes, and storing a coffee.
  5. Alex clicks on a suggested article about choosing coffee producers.
  6. He finds the best coffee and a producer based on his preferences, even without tasting it.

Alex finds out that he can buy these coffee beans in a shop that runs this blog. Alex trusts the coffee shop website because the website educated him. Moreover, Alex sees that the guys in this coffee shop know the business and know everything about coffee. Alex is loyal to them and is ready to buy a product. Even if the price is higher.

The coffee shop could also show their expenses. The customer then understands a fair price for coffee and sees how much the company profits from it. If the customer, Alex, got from the blog precious information, he will reward the company with this profit (margin). And Alex will continue buying from this coffee shop if the company brings him more and more value.

Alex will recommend your blog to friends or educate them himself, and he will more probably give a link to your website. Alex will not recommend some bullsh*t; that is why the product that the company sells must have a high quality. Otherwise, Alex is scammed.

The blog and articles are assets of a company. A blog is a property that belongs to a company. Articles can also be posted on foreign resources, such as business journals (in Russia: vc.ru or Journal.tinkoff.ru), personal blogs (to be paid), or social networks: YouTube, Instagram, TikTok, Telegram, etc.

blogs and articles are powerful tools to attract customers. In my projects, I use articles as the primary source of attracting customers, investors, and employees. For example, I posted an article about bicycle lockers and in 1 week, I got 7.5k views, 100 likes, and 100 comments. I made new connections with 3 interesting people in Austria and got 5 contacts of people interested to help in a project and help with production. I also made a survey in this article, in which 500 people participated. I understood the demand and price for a parking spot in a given sample. I paid nothing for this blog but spent 4 hours of my life.

Youtube videos are also assets. Videos require more time and equipment. It is harder to link to a video, and the information from the video is harder to access. For example, you want to compare 2 coffee beans. You are interested in the type of coffee, size, and taste. You can easily find it in a table in a text, but if you watch a video, you search for a timestamp where the table is shown. To find information about taste, you should listen to a whole video or a fragment that you also have to find. But the video gives you a picture: a cup in which you pour a coffee, a foam from coffee, the foam elasticity, videos from picturesque places where the coffee was taken, and the roasting process.

Videos are great to show the process of production or properties, and use of a product. for example, seven miles coffee shop shows educational videos of how to brew coffee, recipes, competitions, and funny videos. They sell coffee beans online and sell coffee drinks in cafés. They have 150k subscribers, and I am sure they don’t spend too much money on ads.

Videos get old fast. In¬†4-6 years, the¬†videos become old, and¬†just a¬†few people will watch them¬†‚Äď there are competition and¬†design trend changes. With a¬†blog, it is easier¬†‚Äď you may edit text and¬†add fresh information. In¬†a¬†blog, you may also change the¬†design theme¬†‚Äď just make some changes in¬†a¬†code, and¬†that‚Äôs it.

why not use ads

Ads are also powerful. However, an advertisement mainly works if a company has enough money to provide many ads and show them constantly on different sources. If a company stops the ad campaign, the new customers will stop coming, and the existing customers will leave. Profit in companies that rely primarily on ads and don’t have a brand, like Coca-Cola, will be small or even a loss. Let’s see 2 examples:

T-Mobile is a¬†cellular carrier, that decided to¬†enter the¬†Austrian market. Austria already had a¬†market leader¬†‚Äď A1. T-Mobile had to¬†enter the¬†market fast and¬†take a¬†huge market share. Marketologists decided to¬†attract people from Vienna, the¬†capital of¬†Austria, by¬†showing ads offline in¬†a¬†city.

Marketologist placed ads on all available banners in Vienna: on houses, highways, train stations, and even banners on trams. There were no banners left so A1 could not post ads anywhere in a city. The ads were shown for 2 weeks everywhere, and in the next weeks, the number of banners was decreasing. Everyone knew about T-mobile after this campaign, and thousands of people became customers of T-Mobile.

The company spent millions of dollars on such an advertisement. Nowadays, the company does not make too many ads and I have even forgotten about T-Mobile, and only after meeting with a marketing specialist from T-Mobile I learned about that case. That means, that ads should stay everywhere to remember a brand.

Casper Sleep company that produces matrasses and sells them online never made a profit. However, Casper Sleep went to IPO on NASDAQ, and the market capitalization was at a max of one billion dollars. Casper sold matrasses via Instagram ads and other sources (as well as any other company).

To acquire one customer, the company pays hundreds of dollars, and with all the costs, they sell mattresses at a loss. The idea was to make a brand like Coca-Cola, but it did not happen. Investors understood that such business did not work and sold their shares. As a result, a company was delisted from NASDAQ, with market capitalisation of 280m$.

2022   advertisement   Business and Economics   english   web

Business cards

Save contacts

If you visit events or¬†talk to¬†new people, you need to¬†leave contacts. The¬†most popular ways are to¬†show a¬†QR for¬†LinkedIn or¬†Instagram, tell a¬†phone number, or¬†give a¬†business card. From my experience, When I write a¬†phone number, I have only time to¬†write the¬†name and¬†the¬†name of¬†the¬†organization¬†‚Äď it takes 1 minute to¬†do the¬†whole process, It may sound a¬†little, but¬†when you talk with 40 people on¬†one event, these 40 minutes become tremendous.

I had a¬†problem at¬†a¬†summit in¬†St.Gallen with the¬†LinkedIn QR code¬†‚Äď I did not¬†find how to¬†open it. I spent 2 minutes with a¬†person trying to¬†understand where the¬†QR code was¬†‚Äď in¬†the¬†end, we just changed the¬†phone numbers (we could also find the¬†names on¬†Linkedin, but¬†we did not¬†do it). And¬†also, people have a¬†thousand connections on¬†Linkedin, so your contact will be one of¬†the¬†thousands of¬†similar contacts. But¬†I still think that LinkedIn is the¬†best social business network.

Business cards are the¬†easiest way to¬†show leave contacts. Within 5 seconds, the¬†business card is in¬†your interlocutor‚Äôs hands (companion‚Äôs). Also, millennials and¬†older people use business cards by¬†default¬†‚Äď they expect to¬†get the¬†business card from you. That is why I use business cards.

Old card

The¬†first 100 business cards I made when I was 16, I was making a¬†project coldcaller.ru. I wrote in¬†Russian: ‚Äúhello! I am Daniill Kovekh, a¬†Founder of¬†Coldcaller.ru‚ÄĚ, my phone number and¬†a¬†corporate email. I put a¬†QR code linked to¬†a¬†website on¬†the¬†other side. I used a¬†white background and¬†black text. I used capital letters without serifs (grotesques) that were tall and¬†narrow. I used the¬†mid-price matte paper so that I could write on¬†it.

New card

In¬†April, I made 150 business cards with a¬†new design. These business cards are personal and¬†for¬†universal use. I pointed out the¬†name of¬†a¬†blog as¬†a¬†header. This is the¬†primary information because, in¬†a¬†blog, a¬†person finds all the¬†links he can be interested in¬†‚Äď CV, Linkedin, Projects, and¬†the¬†art shop. I don‚Äôt need QR on¬†a¬†business card because Koveh.com is easy to¬†write and¬†remember.

I wrote my email daniil@koveh.com on¬†one side. I didn‚Äôt add the¬†telephone number¬†‚Äď first, I have different phone numbers: 2 phone numbers in¬†Russia and¬†two phone numbers in¬†Austria, and¬†soon, 1 in¬†America. So, mentioning any will not¬†mean that I respond from the¬†telephone. The¬†email, as¬†well as¬†the¬†domain koveh.com, remains unchanged forever. Moreover, I don‚Äôt want to¬†give my telephone number to¬†everyone, and¬†it should remain private.

I mentioned skills: Art, Architecture, Finances, Investing, Data science. I also mentioned that I know 3 languages: English, Russian, and¬†German. I am not¬†planning to¬†learn new languages to¬†a¬†high level, so the¬†information will be actual for¬†a¬†long time. I also wrote consulting and¬†projects, because I create my projects (AKA startups, but¬†I don‚Äôt like this word, It is now a¬†synonym for¬†‚Äúlooser‚ÄĚ), and¬†make consultations on¬†Investments, Marketing in¬†the¬†real estate market, and¬†I am planning to¬†consult about Architecture, Construction, and¬†Urban Planning, as¬†well as¬†investments in¬†Art, Wine, and¬†Real Estate.

To make a business card interesting, I made an infinite stripe of skills I offer. The idea is that these skills are infinite, but later I decided to end with the starting word so that it looks like a separate printing or a pattern.

The¬†words in¬†the¬†middle are huge; the¬†margin from the¬†borders compensates for¬†the¬†size. I Increased the¬†letter-spacing because the¬†letter ‚ÄúV‚ÄĚ has too much white space at¬†the¬†bottom. I chose the¬†serif fonts¬†‚Äď they are easy to¬†read.
The¬†letters also remind me of¬†Russia, especially the¬†letter ‚ÄúM‚ÄĚ reminds me of¬†Moscow. The¬†letter is unique because it has two different serifs: Linear serif and¬†curved serif.

Unfortunately, I ordered an American card size, that is longer than the standard credit-card size.

2022   Business and Economics   english
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