6A – Identifying Opportunities in Economic & Regulatory Trends

Economic Trends

1. The cost to being luggage on you with you when flying on a plane has been increasing for many years and shows no signs of stopping. I personally have noticed this trend and then just found a Times article about the trend. According to statistics published by the Bureau of Transportation  15 largest airlines collected baggage fees totaling $3.5 billion and $2.6 billion worth of ticket change fees. The opportunity I see is for a way to ship customers luggage from their departure point to their destination, door to door, without use of the airlines. Shipping customers luggage could easily be done for a much cheaper fee than airlines charge though it could take several days. The potential customer would be people who were traveling and did not want to pay the high airline luggage fee. This would be a medium difficult opportunity to take advantage of, I feel it would not be very hard to develop a shipping system. The hardest part would be spreading knowledge about the service and convincing customers to be willing to possibly have to ship luggage a day or two in advance.

I believe I saw this opportunity because my family travels a lot and iv seen how luggage fees can add up very quickly. Especially if a person traveling has multiple bags they would have to pay for this service could save them a lot of money.

2. A recent trend is the use of artificial intelligence to replace human workers. In this example we will look specifically at using them to pick and choose stocks replacing a job formerly done by humans. I found out about this trend in a fortune finance article about Black Rock one of the worlds leading money management companies firing 40 employees in favor of trading algorithms. This trend is predicted to continue with up to 10% of the finance work force expected to be replaced by computers. The opportunity here is these systems to replace workers must be built, updated, and maintained so that they can be used by the large finance companies. The customer for this product would be large financial institutions. This would be a very difficult opportunity to take advantage of. Creating the software would be alot of work followed by having to sell it to a huge company. However difficult this opportunity might be to take of advantage of it could also be very profitable.

I noticed this opportunity because computer science is my major so I am automatically drawn to anything related to computers. I have also worked with computer scientists who have worked in finance before and found it to be very profitable.

Regulatory Changes

1. In the United States of America if you meet certain conditions such as being under a certain yearly salary, if you work for more than 40 hours a week you qualify for overtime pay. Overtime pay is 1.5x whatever normal pay is for that worker. This can be very expensive for companies who need employees to put in extra hours. Before 2017 the maximum yearly salary to qualify was $23,660 but it has now doubled to $47,476. This is great news if you are an employee in that range who will now receive extra pay but bad news for businesses that will now experience a higher cost of labor. This leaves opportunity for a company that connects temp workers with businesses. Obviously temp agencies already exist but this agency could specifically focus on providing skilled workers to do projects that would otherwise have existing employees working overtime. There are two customers in this scenario, one the temp worker who uses our service to find work. The second is the business which uses the service so it does not have to pay employees 1.5x there normal salary. I do not believe this would be a very difficult opportunity to take advantage of. However, it would require looking into the rules and regulations surrounding temp work.

I was googling for various new regulations to get ideas for a business. I cam across this change and it occurred to me how this could affect small business owners that are already on a small profit margin. I remember hearing some small - medium size business owners complain when Obama care was implemented because there profit margin was not high enough to take on that expense. When I saw this change I was reminded of that and thought of the negative consequences this might have.

2. President Trump has voiced his desire to repeal the Dodd-Frank act which was passed in 2010, in the wake of the financial collapse, to reduce risks taken by financial institutions and predatory loaning practices. Without this law in place financial institutions could revert to many of the same practices that led to the crash of the financial markets a decade ago. This made me think of a business who protects individuals from being taken advantage of. To often people blindly trust there bank, or money management institution and even if they get an explanation of where there money is going they don't understand. This business would help people understand where there money is going when they give it to financial institutions and be able to talk to the institutions on behalf of the individual and actually understand what they are saying. Then they would go back to the individual and explain to them in simple terms where there money is going and if the institution is following safe practices. The customer would be individuals dealing with financial institutions. This would be a difficult opportunity, firstly because I know very little about finance. But also because you have to convince people to trust you over large well known names. It would also be difficult because it goes against the wishes of the financial institutions which have massive amounts of money and power.

I thought of this opportunity because I watched the Big Short last night, it is about the financial collapse and the irresponsible practices of financial institutions. These companies require regulation because they don't care about the individual they only care about profit margin. If there will not be regulation to watch and make sure they act in the customers best interest perhaps customers will be willing to pay someone else to watch them.