By Kathleen Pearson

So you made it through law school finals and headed home for the holidays.  Congratulations!  The only problem now is that your CSO (and everyone else for that matter) keeps telling you that you need to “network.”  Whether you have a job lined up or not, that word keeps buzzing around like an annoying gnat.  Don’t they know you are wiped out and the mere thought of having to do something else is going to send you right over to the edge?? 

“Networking” has become one of those insidious corporate buzz words that seems to be the panacea of all problems anyone might ever face. Because it has an official name, it seems unattainable by anyone that is not a perfect conversationalist or social butterfly. The word itself now seems filled with an undercurrent of wanting to get something from the other person – i.e. a job.  That’s a lot of pressure for both you and the other person!

Relax.  The holidays should not be filled with even more pressure and tasks.  It should be about having fun, reconnecting with old friends and family, and making new connections with interesting people.  Instead of focusing on networking, focus on connecting.

Just in case you have forgotten, here is a quick reminder of how to connect with others and have fun over the holidays:

1. Go to a holiday party with friends and family. 
2. Talk about your experiences in law school with friends and family
3. Ask your friends and family what they have been up to
4. Meet new people at the party and ask them about their interests
5. Tell the new people about yourself and your interests
6. Promise to keep in touch with the people you just talked to!

By James Bowden

The United States’ political system is controlled by two major political parties, one generally politically liberal and one generally politically conservative. That is the way we think of the political policy-making process: the left and the right fight for enactment of their policies and, ever so rarely, compromise. Query: what if the actual conflict implicit in the U.S. political and policy-making process wasn’t the conflict between right or left, or rural versus urban, or racial, or any of the main dichotomies that we use to try to make sense of policy making. Here’s the surprise: the main conflict is really generational. Presented in customary bullet-point format for your perusal:

• The Wealth Gap. Forget the 1% versus the 99%. Even the fact that the top 1% of wage earners own more of the nation’s financial wealth than the bottom 50%, or that in 2007 the top 1% of all income earners in the U.S. made 23.5% of all income, more than the entire bottom 50%. The starkest statistic is the difference between the change in wealth of the old and the new generations over the past several decades. Since 1984, older people have seen a 42% increase in their net wealth while their younger counterparts have experienced a 68% decrease. I sure hope they aren’t planning to take it all with them. 
• Debt and Taxes. For the past decade, tax increases have been the most-hated villain in Washington. Really, it goes back further than that. Since 1986, maximum marginal tax rates have been historically low, particularly compared to what the Greatest Generation paid. Over the same period, the U.S. debt has increased seven fold. The average baby boomer was between 22 and 40 in 1986; their prime income earning years have overlapped with an uninterrupted period of historically low taxation, over which period public debt exploded. Now the baby boomers are cashing out – the first of the baby boomers became eligible for Medicare and Social Security in 2011. They are retiring, and won’t be paying in anymore. Guess who picks up the tab by default? 
• The Fiscal Battle. We saw a battle over raising the debt ceiling this summer, and are facing sequestration if the “supercommittee” that resulted from the compromise fails to agree on cuts to federal spending in excess of $1 trillion. What is on the chopping block? The big losers are defense (which is a large employer of younger workers), education (which is supposed to provide the younger generation with opportunities), and spending on programs designed to reduce unemployment (which, as discussed below, effects the younger generation inordinately). What are the sacred cows? The spending items that are bringing the committee to loggerheads are entitlement programs like Social Security and Medicare (which benefit the older generation effectively exclusively) and the possibility of raising taxes (which, as discussed above, has the effect of benefiting the older generation). 
• The Cost of Success. The saying goes that there are two kinds of good debt – debt the incurrence of which produces a positive net change in wealth. One is a mortgage and the other is student debt. The saying is getting pretty difficult to stand behind these days. Grad PLUS loans are not dischargeable in bankruptcy and guaranteed by the most credit-worthy institution in the world – the full faith and credit of the United States of America. They carry an interest rate of 8.5%. The interest rate on the last car I bought was 7.1%. That means that in 2007 a non-dischargeable, absolutely guaranteed debt carried an interest rate 140 basis points higher that a dischargeable loan secured by a depreciating asset which was likely underwater the moment it rolled off the car lot. Since then, it has gotten worse – most interest rates have dipped over the past few years, but student loan rates are fixed. A person’s cost of capital for a fancy new car is lower than for an education, and the average indebtedness of a law school grad is $100,000, which buys a pretty fancy car. Or two. Or three. That is insanity. 
• The Tyranny of High Expectations. Just like every generation [allegedly] works to pass a better world on to their children, each generation is expected to make good use of the benefits they receive from the generation that went before them. I never thought I would do this, but I am going to paraphrase Cracked.com: members of the young generation were told they needed to go to school and work hard so they didn’t have to flip burgers. Now that the younger generation has gone to school and worked hard, the economy is feeble, the impact of unemployment inordinately falls on them (young adults age 20-24 have an unemployment rate of 14% compared to 9% for the population overall and 7% for people over 55), and they are being criticized as entitled for … you guessed it: not wanting to flip burgers.

By James Bowden

Welcome back, monetary policy sports fans. In round one, the U.S. clobbered the E.U. with its enlightened monetary and fiscal policies. But what about the political institutions that underlie the decisions that our combatants made when confronted by crises? Let’s take the gloves off and find out:

• Fiscal integration doesn’t work without political integration. The European Union is effectively a treaty system connecting the participating countries in an agreement to share a currency and not take on more than a certain percentage of GDP in debt, with one central bank. The United States is a politically and fiscally integrated federation of states, with one central bank. The difference is stark. Because the nations that make up the Eurozone have differing fiscal, political and social policies and positions, the only unifying factor is their currency – so if Greece’s economy falls apart, each individual nation has to perform its own risk assessment as to whether assistance is warranted. Conversely, if, say, Idaho’s failing economy was rending the social fabric of its communities, the United States would not seriously consider the possibility of doing nothing. That puts the U.S. on the board with one. 
• The Eurozone has no effective built-in checks and balances.  You know those wonderful, self-equalizing checks and balances that you learned about in grade school? The ones that balance competing interests of majority rule with individual liberty, the power of coequal branches of government, and the relationship between the states and the federal government? Yeah, the Eurozone doesn’t really have those. Since the only unifying factor is currency, the financial well-being of the constituents are directly tied to the whims of the economic center of gravity, which is Germany – an economy featuring a robust manufacturing industry, a trade surplus, and a borderline-psychotic fear of inflation. Beware, smaller European economies with real estate and tourism based economies, because the folks holding the purse strings don’t have the same interests that you do. Look at it in a constitutional sense: the U.S. apportions legislative power in a bicameral system, allocating representation by population in the House of Representatives and by equal representation per state in the Senate, with majority rule in each chamber (sort of). The Eurozone system effectively operates on a system that would be similar to California and New York making all monetary decisions for the country, and each state trying to maintain a functioning economy and government in the middle – unless the issue required unanimity, in which case Rhode Island could hold up the policy making process completely at its whim. Doesn’t sound very democratic, does it? Hurray for democracy, and hurray for the U.S.A. We win this one. 
• It isn’t your tax rate; it’s your tax collection rate. I know that Americans hate taxes, and the only good taxes are no taxes (or, alternatively, the taxes someone else pays that you get the benefit of). But the U.S. actually has an excellent collection rate; despite the relative rarity of audits and enforcement action, almost all taxes due are collected. Fraud is exceedingly rare. In Greece, tax evasion is a national pastime. No kidding – leading up to their collapse, the Greeks collected somewhere around 66% of the total taxes legally due. That’s a 33% evasion rate, and a 100% inability on the part of the government to realistically project the level of debt that the country’s economy can realistically service. Maybe it isn’t a question of law – maybe it is an issue with implementation, but either way Greece was doing it wrong. So that’s a big thumbs up to the U.S. tax system. Rare praise, I know.
  

By James Bowden

It appears that the Eurozone may have, at least temporarily, staved off the possibility of rapidly collapsing into a debt-lined, lava-filled hole in the earth with a new, comprehensive strategy to deal with the mounting E.U. debt crisis. I thought this would be a perfect opportunity to look at some of the differences between the U.S.’s and the European Union’s fiscal, political and legal systems to illustrate why the same financial crisis has led to such different results, in convenient bullet-point format: 

By  James Bowden

Pop Quiz: does a hotel blatantly oppress an individual or a group’s right to freedom of speech by canceling a contract with an anti-Islamic organization seeking to hold a conference on the basis that it may cause interruptions to the hotel’s business? 

a)       No.

b)       Yes

c)       Both A and B

d)       Wait, what? 

If you went to law school and you answered B or C, you should probably seek a refund of your tuition money. Fact: private persons cannot violate the First Amendment guaranty of freedom of speech. The restriction only applies to state actors. But thank you for playing.

By Kathleen Pearson 

Did you see this article and survey from the ABA Journal last week?  The article asked readers to answer these six questions in the comment section:

1. How long did it take you to get a job in the legal field?
2. Did you get the position you wanted, or did you compromise?
3. How many interviews did you go on?
4. What was your salary range for that first job?
5. Would you recommend attending law school to a recent graduate?
6. What year did you graduate from law school?

By James Bowden

Small businesses are the prime engine for job creation in the United States, and small businesses start with an idea and someone with the guts to put the blood, sweat, and tears into building that idea into a business. Unfortunately, most entrepreneurs start their businesses in a hole when it comes to capital formation. This leads to an unfortunate convergence of two related problems: a need to seek investments from others and an inability to afford good legal advice.

I think that business schools should have a class on practical securities laws for entrepreneurs. Securities laws are complex, often counter-intuitive, and the consequences for finding yourself on the wrong side of them are, well … They’ll put a big damper on a start-up company. So, in the mean time, here are a few tips for entrepreneurs looking to do some capital raising for their small business:

• DO NOT expect venture capital firms or angel investors to be interested if a few hundred thousand dollars is more than enough. Professional investors will not be interested in taking the risk of losing everything in exchange for a percentage return on a few hundred thousand bucks, and the cost of putting the terms on paper will wash out any gains. 
• DO put pen to paper if and when you do receive invested funds. Informality is great for many things, but when you are taking other people’s money it is best to keep a record. Also, if you are wondering whether you should keep the money in a segregated account held in the name of the business, you (a) should definitely do so, and (b) should be dolt slapped for even considering putting the money you raise in a personal account. 
• DO NOT advertise investments in your business on Facebook, Twitter, or any other social media site. Short summary of federal securities laws - offering investment opportunities in a business by internet message qualifies as an offer to sell securities, and securities offerings come in three types: registered, exempt, and illegal. Registered offerings aren’t the domain of start-ups, so don’t worry about those yet. In order to be exempt, offerings have to qualify into certain statutory or rule-based exemptions. Staying within the exemptions offered by federal law means staying small, both in offering size and number of investors solicited, and not engaging in advertising or general solicitation. I’m not aware of any case where an offer to sell securities sent via Facebook status update has been subject to a regulatory action, but this is probably a race you don’t want to win. 
• DO know what you are offering, specifically whether it is equity or debt, and make it very clear to any and all investors. Equity is (generally) a fractional interest in the business as a going concern representing opportunity to participate in the upside benefit of the success of a company, but if the company doesn’t succeed the equity holders get nothing. Debt is an unqualified promise to pay. Both categories come in all different stripes, but the difference between the two is the difference between night and day. Of course, if you are just getting a loan (from a bank, the small business administration, or even your parents), that debt is not a security. Bonds are securities. If you have any question about the difference, ask someone.
• DO provide a write-up of what an investor will be investing in. Describe the business, the management, the market, the geographic area served, etc., etc. Err on the side of disclosure. Make sure all of the facts are correct. Include every bit of information that is necessary to ensure that the information you do include isn’t misleading. Proofread. 
• DO NOT provide promises of future performance. The term sheet, offering memorandum, or whatever you choose to call it should qualify all financial projections and projections of future performance as being subject to factors not in the control of the business, and point out that investments in a start-up business involve a high degree of risk. Investors should know to independently investigate the business, ask questions, and be instructed not to rely on any projections provided by the business, financial or otherwise. 
• DO know what kind of offering you are going to go with. For the most part, small businesses will be starting with small offerings to people they know – also known as “Friends and Family Offerings.”  The tough thing about friends and family is that you probably don’t want money to come between you, even if they are eager to support you. The level of formality of the investment, whether it is phrased as a loan or if you issue stock in the new business, is something that you will need to think carefully about. This may not be legal advice but the sad truth is that many (if not most) entrepreneurial efforts fail, and no one is sure what makes those that do succeed different from those that fail. If telling a friend or family member that they have lost their entire investment isn’t a conversation you think you could have with them it probably isn’t a good idea to ask them to invest in the first place.
  

I think that is a good start.  I'll work on a syllabus if any of the business schools are interested.